TITLE:  SMF Systems Technology Corporation, B-292419.3, November 26, 2003
BNUMBER:  B-292419.3
DATE:  November 26, 2003
**********************************************************************
SMF Systems Technology Corporation, B-292419.3, November 26, 2003

   Decision
    
    
Matter of:   SMF Systems Technology Corporation
    
File:            B-292419.3
    
Date:              November 26, 2003
    
William M. Rosen, Esq., for the protester.
Merilee D. Rosenberg, Esq., Philip S. Kauffman, Esq., and Phillipa L.
Anderson, Esq., Department  of Veterans Affairs, for the agency.
Michael R. Golden, Esq., Office of the General Counsel, GAO, participated
in the preparation of the decision.
DIGEST
    
Agency determination, in the face of protester's challenge to selection
decision, to cancel request for quotations for services under the Federal
Supply Schedule (FSS) and to issue an order for services on a
noncompetitive basis because the initial competition allegedly was
contrary to regulations governing FSS acquisitions and inconsistent with
an urgent need to conduct the procurement with minimum delay was not
reasonable where the competition conducted was not contrary to applicable
regulations and the urgency was primarily the result of the agency's
missteps in the acquisition process.
DECISION
    
SMF Systems Technology Corporation (SMF) protests the decision of the
Department of Veterans Affairs (VA) to cancel request for quotations (RFQ)
No. RFQ15198 for video teleconferencing support services for the Air Force
Surgeon General (AFSG) and to acquire these services on a noncompetitive
basis.[1]
    
We sustain the protest.
    
On May 21, 2003, the VA issued the RFQ to three FSS contractors, including
SMF and Electronic Data Systems, Inc. (EDS).  SMF timely submitted its
quotation prior to the May 28 closing time.  On June 5, the VA advised SMF
that its quotation was not selected.  At its debriefing, SMF was advised
that its quotation, even though significantly less expensive than the EDS
quotation, which was selected, was not considered because SMF had not
included required resumes.  On June 10, SMF protested that the VA had
simply overlooked the resumes, and that the VA should take corrective
action and consider SMF's quotation.  Protest, June 10, 2003.  On June 24,
the VA advised that it would reevaluate the quotations because SMF's
resumes had been *inadvertently overlooked.*  E-Mail from VA to
Protester's Counsel, June 24, 2003.  On the next day, SMF agreed to
withdraw its protest and, on June 26, our Office closed our file without
further action.
    
The agency conducted a reevaluation and, on July 10, again selected the
EDS quotation for the order.  On July 16, SMF received a debriefing and on
July 17, SMF filed a second protest, asserting that the VA had
misevaluated quotations and had made an unreasonable cost/technical
tradeoff.  On August 18, 2003, the VA advised our Office that the
contracting officer had reviewed the procurement and
    
determined that since a General Services Administration (GSA) schedule
contract was the source [of the RFQ], she had used procedures for
conducting this procurement that were contrary to    the . . . Federal
Acquisition Regulation (FAR) 8.402 and inconsistent with the urgent need
to conduct this procurement with minimum delay.
Letter from VA to GAO (Aug. 18, 2003).
    
The VA reported that *[s]ince the need for this contract to be established
and functional is critical to the success of AFSG's operations worldwide,
the slow process of the current solicitation through FAR Part 15-type
procedures is contrary to the interests of the agency.*  Id.  The VA
stated that the Defense Federal Acquisition Regulation Supplement (DFARS)
S: 208.404-70, entitled *Additional ordering procedures for services,*
applied to this FSS order.  This provision implements Section 803 of the
National Defense Authorization Act for Fiscal Year 2002 (Pub. L. 107-107)
and applies to orders placed by non-Department of Defense (DOD) agencies
on behalf of DOD.
    
As relevant here, this provision states that:
    
(b) Each order for services exceeding $100,000 shall be placed on a
competitive basis in accordance with paragraph (c) of this subsection,
unless the contracting officer waives this requirement on the basis of a
written determination that--
                           (1)  One of the circumstances described at FAR
16.505(b)(2)(i) through (iii) applies to the order; or
                           (2)  A statute expressly authorizes or requires
that the purchase be made from a specified source.
               (c)  An order for services exceeding $100,000 is placed on a
competitive basis only if the contracting officer provides a fair notice
of the intent to make the purchase, including a description of the work
the contractor shall perform and the basis upon which the contracting
officer will make the selection, to--
                           (1)  As many schedule contractors as practicable,
consistent with market research appropriate to the circumstances, to
reasonably ensure that offers will be received from at least three
contractors that can fulfill the work requirements, and the contracting
officer--
                                       (i)(A)  Receives offers from at least
three contractors that can fulfill the work requirements; or
                                           (B)  Determines in writing that no
additional contractors that can fulfill the work requirements could be
identified despite reasonable efforts to do so (documentation should
clearly explain efforts made to obtain offers from at least three
contractors); and
                                       (ii)  Ensures all offers received are
fairly considered
    
The VA subsequently determined on September 26 that this schedule order
should be placed without competition pursuant to FAR S: 16.505(b)(2)(i)
because AFSG's need for these services were *so urgent that [competition]
would result in unacceptable delay.* Contracting Officer's Determination
and Findings, Sept. 26, 2003.  The basis for the decision was that the
services were necessary to *the execution of [Air Force] Medical Service
programs that is paramount to the medical community.  Interruption of this
service would disrupt high-level fast paced business communication during
this time of war.*  Id. at 2.  The agency also reports that resoliciting
the requirement *would put the [AFSG] at risk [in performing] adequate
technical oversight that he provides the medical community in regards to
direct patient care for the Air Force warfighter and families worldwide.* 
Id. at 2.  On August 21, our Office dismissed SMF's second protest because
the RFQ had been canceled.
    
On August 19, SMF protested the agency's determination to cancel the RFQ,
which is the issue we address in this decision.  SMF argued that the
cancellation could not be supported on an urgency basis, that there was no
basis to forgo the competition already conducted, and that the VA's real
reason for canceling was the VA's *inability to get it right in a
competitive setting* and the agency's desire to avoid scrutiny.  Protest
at 9.  SMF also argued that GAO should resolve the firm's earlier protest
challenging the evaluation of quotations and the agency's tradeoff
analysis and selection decision.
    
On September 29, the VA responded to SMF's protest, pointing out that in
the context of a negotiated procurement, an agency has broad discretion in
deciding whether to cancel a solicitation and arguing that the VA had a
reasonable basis for canceling this solicitation.  The VA cited its
earlier letter to our Office explaining the basis for its decision to
cancel the solicitation and provided further information from AFSG's
office elaborating on the urgent need for these services in order to avoid
any further potential disruption to its mission.  The VA submitted the
contracting officer's determination and findings, as referenced above,
that the requirement was urgent and that this urgency supported the
issuance, without additional competition, of an order to EDS, the firm
that had received the order under the protested competition and that was
currently performing the work.  In its comments, the protester continues
to maintain that the agency's actions are improper and that the original
competition should have been completed.
    
A contracting agency need only establish a reasonable basis to support a
decision to cancel an RFQ.  Surgi-Textile, B-289370, Feb. 7, 2002, 2002
CPD P: 38 at 2.  So long as there is a reasonable basis for doing so, an
agency may cancel a solicitation no matter when the information
precipitating the cancellation first arises, even if it is not until
offers (or, as here, quotations) have been submitted and evaluated. 
A-Tek, Inc., B-286967, Mar. 22, 2001, 2001 CPD P: 57 at 2-3.  However,
where, as here, a protester has alleged that the agency's rationale for
cancellation is but a pretext--that the agency's actual motivation is to
avoid awarding a contract on a competitive basis or to avoid resolving a
protest--we will closely examine the reasonableness of the agency's
actions in canceling the acquisition.  Miller, Davis, Marter & Opper,
P.C., B‑242933.2, Aug. 8, 1991, 91-2 CPD P: 176 at 4.
    
Here, the VA has not offered a reasonable basis for canceling the
competition.  The VA states that its initial decision to conduct a
competition using FAR *Part 15-type* procedures was *contrary to the
requirements of the FAR 8.402 and inconsistent with the urgent need to
conduct this procurement with minimum delay.*  Letter from VA to GAO (Aug.
18, 2003).  However, this post-protest conclusion that the VA should not
have conducted the procurement as it did is flawed in a number of
respects. 
    
First, contrary to the position VA takes in its justification for
canceling the competitive acquisition, the VA's decision to conduct a
competition under rules similar to those used in negotiated procurements
did not violate FAR S: 8.402.  It is not clear from the record what aspect
of the process followed--which took approximately 2 weeks, from issuance
of the RFQ to the announcement of the results--the VA thought was
improper.  FAR Subpart 8.4 (which governs the use of the FSS) does not
prohibit the use of negotiated procurement-type procedures for an FSS buy
(although it also does not require use of those procedures).  Similarly,
under the DFARS provision quoted above, which the VA now relies on for its
subsequent actions, an agency is not prohibited from conducting an FSS buy
using negotiated procurement-type procedures (although, again, an agency
is also not required to use those procedures).  The ordering procedures
found at DFARS S: 208.404-70(c), quoted above, set a minimum competition
requirement which, it is true, is simpler than the process in FAR Part
15.  The VA's competition among three vendors certainly appears to have
complied with the DFARS requirement (assuming that three vendors who could
fulfill the requirements responded).  Thus, the VA's position that its
initial competition violated FAR Subpart 8.4 is misplaced. 
    
Second, as the protester correctly points out, at the time the VA decided
to take its *corrective action,* the VA had already, on two occasions,
effectively completed this competitive procurement.  Taking under 16 days
each time, the VA twice evaluated the quotations and made a selection
decision (as noted above, in response to SMF's first protest, the VA
admitted that it had overlooked the protester's resumes, so that the
agency took corrective action and conducted a reevaluation of the
quotations and made a new selection decision based on the reevaluation). 
During the 3-month period from the VA's issuance of the RFQ on May 21
until its letter of August 18 stating its intent to cancel based on
urgency grounds, the VA never asserted any urgency concerns or any
concerns regarding the acquisition approach it used to conduct the
acquisition.  It is difficult to find reasonable an agency's claim that
urgency prevents it from using competitive procedures when the urgency is
not identified or asserted until after the competitive procedures have
been completed.
    
Third, as the protester also points out, the VA fails to explain why it
could not have allowed our Office to resolve SMF's protest of the
selection decision.  The record shows that the protester filed its second
protest on July 17, and the VA took approximately 1 month (until August
18) to decide that it would cancel the acquisition and award to EDS
without further competition.  The reason for this delay is not explained
in the record.  However, in our view, the urgency that exists today was
primarily the result of missteps in the agency's acquisition process, and
it is troubling that the resulting urgency is now the basis proffered for
the cancellation of the solicitation.
    
The Competition in Contracting Act of 1984 (CICA), as amended, requires
our Office to complete its review of bid protests within 100 calendar
days--a deadline consistently met--to minimize the disruption that
protests necessarily engender.  31 U.S.C. S: 3554(a)(1) (2000).  Congress
decided that, in the event that a protest qualifies for a stay of
performance under the terms of the Act, the 100-day timeframe strikes an
appropriate balance between agency needs and the need to preserve the
possibility of meaningful relief for contractors whose protests are
vindicated upon review.  Where an agency's procurement needs cannot wait
for our resolution of a protest, CICA identifies the steps the agency may
take to override the stay, and begin performance of the contract
notwithstanding the protest.  31 U.S.C. S: 3553(d)(3)(C).  The protest
process, which plays an important role in ensuring transparency and
accountability in our federal procurement system, is thus structured to
allow agencies with urgent needs to proceed with contract performance
unhindered by protests.
    
Here, the VA baldly acknowledges that one of its bases for canceling the
solicitation is *the fact that the SMF protests have come post award, in
the first case necessitating corrective action and re-evaluation of
proposals*.*  Letter from VA to GAO, Sept. 29, 2003, at 1.  The VA thus
indicates that, in its view, one of the problems with these protests was
their merit--that is, the protester was right when it pointed out that the
agency had overlooked its resumes in rejecting its lowest-priced offer. 
While this situation may be inconvenient for the VA, the decision to
cancel appears to be, as the protester contends, essentially an attempt to
avoid further scrutiny and review, when, if it needed to, the agency could
have proceeded with contract performance during the pendency of the
protest.
    
In reaching our conclusion about the merits of the VA's decision to
cancel, we do not mean to suggest that the ultimate user of these
services, the Air Force Surgeon General's Office, does not urgently need
them.  At this point, the AFSG has documented the need to avoid further
disruption to its mission to provide medical services.  On the other hand,
this record suggests that the urgency here may spring more from the VA's
inability to properly complete this procurement, than from any other
source.  We conclude that the VA has unreasonably canceled a competitive
acquisition, after receiving and evaluating quotations and selecting one
for award, without a reasonable basis. 
    
The protest is sustained.
    
As noted above, we are mindful of AFSG's concern for the need to avoid
potential further disruption to AFSG's medical services mission, a concern
that the protester has not meaningfully challenged.  In our decisions, our
Office takes into account concerns such as these.  See, e.g., J & J /BMAR
Joint Venture, LLP--Costs, B‑290316.7, July 22, 2003, 2003 CPD P:
129 at 2 (recognizing that wartime exigencies created by the recent Iraq
conflict provided a reasonable basis for an agency to delay the
implementation of its promised corrective action).  We therefore conclude
that disturbing the award to EDS and reinstatement of the solicitation are
not appropriate in the circumstances.  We do, however, recommend that the
agency not exercise any options under this task order.  Because of the
absence of other relief at this point, we also recommend that SMF be
reimbursed the reasonable costs incurred in preparing its quotation.  Bid
Protest Regulations, 4 C.F.R. S: 21.8(d)(2) (2003).  We further recommend
that SMF be reimbursed its cost of filing and pursuing all three protests,
including reasonable attorneys' fees.  4 C.F.R. S: 21.8(d)(1).  The
protester should submit its certified claim for such costs, detailing the
time expended and costs incurred, directly to the agency within 60 days of
receipt of this decision.  4 C.F.R. S: 21.8(f)(1).
    
Anthony H. Gamboa
General Counsel
    

   ------------------------

   [1] The AFSG reports that the office oversees the efforts of nearly 40,000
personnel providing direct medical care to more that 2.7 million
beneficiaries worldwide.  The AFSG uses full video teleconferencing
support on a daily basis as a means to conduct business with staff located
throughout the world.  The AFSG staff conducts approximately 30 to 40
video teleconferences each week.  The topics discussed range from routine
organizational issues to reviews of medical operation issues that *are
literally life and death decisions.*  Office of the Air Force Surgeon
Memorandum at 1.  According to the AFSG, the video teleconferencing
capability *has become central to the Air Force's ability to adapt its
medical care to a highly variable environment,* and the support staff are
the *lynchpin* to maintaining this capability. Id.