TITLE:  Strand Hunt Construction, Inc., B-292415, September 9, 2003
BNUMBER:  B-292415
DATE:  September 9, 2003
**********************************************************************
Strand Hunt Construction, Inc., B-292415, September 9, 2003

   DOCUMENT FOR PUBLIC RELEASE                                                
The decision issued on the date below was subject to a GAO Protective      
Order.  This redacted version has been approved for public release.        

   Decision
    
Matter of:   Strand Hunt Construction, Inc.
    
File:            B-292415
    
Date:              September 9, 2003
    
Terry R. Marston II, Esq., Marston & Heffernan, for the protester.
David M. Freeman, Esq., Freeman & Watts, for H.C. Price Co., the
intervenor.
Kevin Finnigan, Esq., U.S. Army Corps of Engineers, for the agency.
Paula A. Williams, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
Protest of corrective action taken in response to a post-award
agency-level protest is denied where agency determined that it had made
award on the basis of a technically noncompliant proposal, and that the
solicitation exceeded the agency*s actual minimum needs.  Agency decision
to terminate contract, amend the solicitation and reopen the competition
constitutes reasonable means of correcting the errors in the procurement.
DECISION
    
Strand Hunt Construction, Inc. protests the decision by the United States
Army Corps of Engineers to terminate for convenience Strand*s contract
awarded under solicitation No. DACA85-02-R-0024, amend the RFP and conduct
a new evaluation and make a *best value* determination based on the new
offers.  The Corps*s action is based on its conclusion that corrective
action is required, made in response to an agency-level protest which had
challenged the award on a number of grounds, in particular that the Corps
had waived or relaxed certain solicitation requirements solely for
Strand.  The Corps*s review led it to conclude that Strand*s proposal was
noncompliant with two material RFP technical requirements, and that the
solicitation did not accurately reflect the agency*s actual minimum
needs.  Strand asserts that the Corps lacks a reasonable basis to
terminate its contract and begin the process anew because the firm that
filed the agency-level protest was not prejudiced by the Corps*s actions.
    
We deny the protest.
    
The RFP, issued on October 1, 2002, sought proposals for the design and
construction of the central heat and power plant (CHPP) facility upgrades
at the Clear Air Force Station (AFS) in Alaska.  The CHPP facility
provides heat and electricity through steam turbine generators and its
existing major equipment includes three coal-burning boilers with a
mechanical ash handling system.  The project includes the design and
construction of a one-story building addition to the existing CHPP
facility to house three baghouse collection systems and associated
equipment.  The baghouse system is designed to remove particulate matter
from each of the three existing coal-burning boilers at the CHPP
facility.  RFP amend. 2, S:S: 01010-12, 01010-60.
    
The RFP contemplated award of a fixed-price plus delivery incentive
design/build contract and the proposal schedule included various optional
fixed-price line items.  RFP amend. 2, Proposal Schedule at 1-2, and S:
00800-13.  Award was to be made on a *best value* basis with price and the
non-price factors considered equally important.  The RFP specified that
the work must conform to the detailed performance and prescriptive based
drawings and specifications, including baghouse specifications.  As
relevant here, under the heading *design criteria* the baghouse
specifications required that (1) the maximum net pressure differential
between manifolds (portions) of the baghouse should be 6 inches, and that
(2) the minimum spacing between individual bags within the baghouse
(bag-to-bag clearance) must be 2.5 inches.  RFP amend. 2, P: 2.10.4.a (2)
at S: 01010-62.  While this was not disclosed in the solicitation, the
agency explains that the baghouse specifications were based on baghouses
manufactured by [DELETED] and that many of the requirements were specific
to the [DELETED] baghouse model.  The agency also points out that the RFP
did not state that a brand name (or brand name or equal) acquisition was
contemplated.  Contracting Officer*s Statement at 3.
    
[DELETED] proposals were submitted by the December 3 extended closing
date. 
Of these, [DELETED] offerors, including H.C. Price, proposed a baghouse
manufactured by [DELETED] while Strand*s proposal was based upon a
[DELETED] baghouse model.  After an initial evaluation by the source
selection evaluation board (SSEB), all [DELETED] proposals were included
in the competitive range.  By letters dated December 26, the agency
commenced discussions with each competitive range offeror.  In the letter
to Strand, the agency noted, among other things, that:
    
[t]he baghouse modules included in your proposal do not appear to meet the
RFP requirements, including but not limited to:
                         *          *          *          *          *
.        The normal pressure drop through the baghouses as proposed is
higher than allowed in the RFP, and the guaranteed pressure drop is even
higher.
.        Minimum bag-to-bag clearance is noted as 2*, where the RFP
requires 2.5*.
Agency Report (AR) exh. 36, Letter from the Contracting Officer to Strand,
Dec. 26, 2002, at 4 (emphasis in original).
    
Each competitive range offeror submitted a response to the agency*s
discussion questions by the January 7, 2003 due date.  Strand responded to
the agency*s concerns regarding its proposed baghouse system as follows:
    
.        The expected pressure loss across the baghouse is
[6 inches] during normal operation which is consistent with the
specification.  [DELETED] has allowed
[1 inch] as a margin of safety for making our performance guarantee.
*          *          *          *          *
.        The actual space between support cages is just over
2 inches, but is less than 2.5 inches.  [DELETED] has used this spacing .
. . without having a problem due to bag-to-bag touching . . . [DELETED]
could not adjust this spacing without making major design changes to our
standard design.
AR exh. 36, Response from Strand to Discussion Questions, Jan. 7, 2003, at
20-21.  After reviewing the discussion responses, the agency continued
discussions with the offerors until March 6, after which final proposal
revisions (FPR) were requested and were received on March 7.  As relevant
here, in its FPR Strand continued to offer a baghouse system with a
maximum net pressure differential of 7 inches and bag spacing of 2 inches,
as proposed in its initial proposal referenced above.  Id., Strand FPR,
Mar. 7, 2003, Strand Proposal, at 2 of 15, and 4 of 15.  The final
evaluation results were as follows:
    
[DELETED]
    
AR exh. 30, Source Selection Evaluation Decision, at 7. 
    
The source selection authority (SSA) reviewed the evaluation findings and
determined that [DELETED].  The SSA further determined that [DELETED]. 
Accordingly, the SSA awarded a contract for the base items to Strand
[DELETED].  Id.  After receiving notice of the award, Price then filed a
protest with the agency, which was amended after Price received additional
documents.  Among other things, Price challenged the technical
evaluations, arguing that the Corps *accepted certain deviations from the
RFP requirements* proposed by Strand thereby impermissibly favoring Strand
over Price and the other competitive range offerors.  AR exh. 22, Amended
Agency-Level Protest, Apr. 16, 2003, at 1. 
    
After reviewing the protest, as supplemented, the Corps concluded that it
had improperly waived or relaxed material baghouse specification
requirements for Strand.  Specifically, the agency noted that Strand*s
proposal did not meet the solicitation requirement for maximum net
differential pressure between manifolds of 6 inches or the 2.5 inch
minimum bag-to-bag clearance requirement.  AR exh.1, Contracting Officer*s
Memorandum for Record.  As a result, the Corps determined that it had
erred in accepting Strand*s nonconforming proposal.  Further, in reviewing
the procurement, the agency concluded that the baghouse specification,
which favored a single manufacturer [DELETED] *was, in effect, a
proprietary specification that did not state [the agency*s] minimum needs
and did not give potential proposers an accurate statement of our
requirements.*  Id.  Consequently, because of these defects, the Corps
decided to terminate Strand*s contract and amend the RFP to set forth the
agency*s actual minimum needs.
    
Strand challenges the agency*s actions on several grounds.  Strand
principally objects to the agency*s conclusion that its noncompliance with
the referenced baghouse specifications constitutes a material deviation
from the RFP requirements.  Protester*s Comments at 12.  Strand concedes
that its baghouse system does not meet these specification requirements,
but contends that any differences between the configuration of its
[DELETED] baghouse model and the [DELETED] baghouse are immaterial because
these differences do not affect the nature or the performance of the
baghouse system.  Protest at 10-13.  In its view, the [DELETED] baghouse
is equal to the [DELETED] model in functionality; therefore, Strand
asserts, the differences in the configuration of the two models do not
constitute deviations from the specifications.  Protest at 13-14.  Strand
alternatively contends that even if the agency erred in making award to
Strand, this did not warrant corrective action because there was no
showing of competitive prejudice.  Id.; Protester*s Comments at 12.
    
Contracting officials in negotiated procurements have broad discretion to
take corrective action where the agency determines that such action is
necessary to ensure fair and impartial competition.  Patriot Contract
Servs. LLC et al., B-278276.11 et al., Sept. 22, 1998, 98-2 CPD P: 77 at
4.  We will not object to the specific proposed corrective action, so long
as it is appropriate to remedy the concern that caused the agency to take
corrective action.  Networks Elec. Corp., B-290666.3, Sept. 30, 2002, 2002
CPD P: 173 at 3.  Where an agency has reasonable concerns that there were
errors in the procurement, the agency may take corrective action, even if
it is not certain that a protest of the procurement would be sustained. 
Main Bldg. Maint., Inc., B-279191.3, Aug. 5, 1998, 98-2 CPD P: 47 at 3.
    
The record provides no basis to object to the Corps*s corrective action. 
A proposal that fails to conform to one or more material requirements of
the RFP is technically unacceptable and may not form the basis for award. 
Integrated Sys. Group, B‑272336, B-272336.2, Sept. 27, 1996, 96-2
CPD P: 144 at 6.  Here, the RFP set forth discrete minimum specification
requirements for the baghouse system, which were material terms of the
solicitation.  The RFP informed offerors that all proposed baghouses must
meet the specified design criteria and that the *baghouse arrangement and
installation shall be as shown on the drawings and specified.* 
RFP amend. 2, P: 2.10.4.a.(2), at S: 01010-60.  It is undisputed that the
baghouse system proposed in Strand*s proposal did not satisfy the maximum
net pressure differential and the bag-to-bag clearance requirements of the
design criteria for the baghouse system.  As previously stated, the agency
advised Strand, during written discussions, that its proposed baghouse
system did not meet these design requirements.  Strand is simply incorrect
when it contends that the baghouse specifications that it failed to comply
with in its final proposal were immaterial.  Strand*s proposed [DELETED]
baghouse model, regardless of whether (as Strand insists) it was
functionally equivalent to the [DELETED] baghouse, did not meet two of the
stated design requirements for the baghouse system, and could not do so
without major design changes.  Strand*s response to the agency made it
clear that compliance with these design criteria would necessitate major
design changes to the standard [DELETED] baghouse design.  Strand*s
failure to propose a baghouse system that met these requirements rendered
its proposal noncompliant with material solicitation provisions and, thus,
the proposal could not form a valid basis for award. 
    
The agency*s acceptance of Strand*s noncompliant proposal meant that the
agency waived these design criteria for Strand, which resulted in an
unfair and unequal evaluation.  It is a fundamental principle of federal
procurement that competition must be conducted on an equal basis; that is,
offerors must be treated equally and be provided with a common basis for
the preparation of their proposals.  SWR, Inc.,
B-284075, B-284075.2, Feb. 16, 2000, 2000 CPD P: 43 at 3.  Accordingly,
the Corps reasonably determined that it was necessary to terminate
Strand*s contract in order to correct the improper award.  The protester
nonetheless argues that acceptance of its significantly lower-priced
proposal would not have prejudiced other offerors since its [DELETED]
baghouse model is more expensive than that of the [DELETED] model offered
by the other competitive range offerors.  Protest at 4.  As support,
Strand has provided a cost comparison of the [DELETED] baghouses which
purports to show that the [DELETED] model was higher priced than the
[DELETED] model [DELETED].  Protest, attach. A.
    
We are unpersuaded by Strand*s argument that other offerors were not
prejudiced by the agency*s admittedly improper actions here.  The Corps
found that the RFP specifications exceeded the agency*s actual needs.  As
explained above, the baghouse specifications were based on a baghouse
system designed by [DELETED], and the Corps reports that it had determined
that the agency did not need a [DELETED] baghouse system.  Nor was it
necessary, the agency reports, to require offerors to comply with baghouse
specifications that were based on the [DELETED] baghouse model where its
needs could be met by other equipment.  In this regard, the agency has
identified manufacturers, other than [DELETED], whose baghouse models
would meet the revised RFP requirements and could result in a materially
different competition.  We therefore conclude that acceptance of Strand*s
non-conforming proposal prejudiced offerors who could have proposed other
solutions, potentially at a lower cost, if the competition had not been
improperly restricted.  In sum, we find reasonable the Corps*s corrective
action of amending the RFP to state its actual needs and obtaining revised
proposals from the competitive range offerors based on the revised RFP
requirements.
    
Finally, Strand contends that the corrective action will result in an
impermissible auction.  Since Federal Acquisition Regulation S:
15.306(e)(3) does not prohibit auctions, and where, as here, the
corrective action taken by the agency was not improper, the request for
revised price proposals will not constitute an improper auction.  The
possibility that the contract may not have been awarded based on a fair
determination of the most advantageous proposal has a more harmful effect
on the integrity of the competitive procurement system than the fear of an
auction; the statutory requirements for competition take priority over any
possible regulatory constraints on auction techniques.  Federal Sec. Sys.,
Inc., B-281745.2, Apr. 29, 1999, 99-1 CPD P: 86 at 6.
    
The protest is denied.
    
Anthony H. Gamboa
General Counsel