TITLE: Saltwater Inc., B-293335.3, April 26, 2004
BNUMBER: B-293335.3
DATE: April 26, 2004
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Saltwater Inc., B-293335.3, April 26, 2004
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: Saltwater Inc.
File: B-293335.3
Date: April 26, 2004
Joseph M. Sullivan, Esq., and Elizabeth Poh, Esq., Mundt MacGregor, for
the protester.
William T. Grimm, Esq., Davis Grimm Payne & Marra, for NWO, Inc., an
intervenor.
Terry H. Lee, Esq., and Lynn W. Flannagan, Esq., National Oceanic and
Atmospheric Administration, for the agency.
Charles W. Morrow, Esq., and Ralph O. White, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protester*s contention that an agency is improperly terminating the
protester*s previously‑awarded contract, and awarding to another
offeror, is denied where the record shows that the protester has refused
to execute a modification to its previously-awarded contract that properly
reflects changes that occurred during a reevaluation undertaken in
response to a previous protest of this award; the protester*s underlying
assertion that the proffered modification is ambiguous is untimely where
the record shows there is nothing in the modification that was not also
included in the agency*s second request for revised proposals, and the
protester did not raise the matter before submitting its revised proposal.
DECISION
Saltwater Inc. protests the proposed award of a contract to NWO, Inc., as
well as the proposed termination of Saltwater*s earlier-awarded contract.
This proposed award, and corresponding termination, is based on
Saltwater*s refusal to sign a modification to its contract issued to
reflect (in the agency*s view) changes that occurred during a reevaluation
of proposals undertaken in response to an earlier protest by NWO. The
original award was made to Saltwater pursuant to request for proposals
(RFP) No. AB1330-03-RP-0024, issued by the United States Department of
Commerce, National Oceanic and Atmospheric Administration (NOAA), for
fisheries observer services.
We deny the protest.
BACKGROUND
The RFP here, issued as a total small business set-aside on January 30,
2003, sought fisheries observer services in connection with NOAA*s
National Marine Fisheries Service (NMFS) Pacific Islands Region Observer
Program (PIROP), under a fixed-rate contract, for a base year and one
option year. The PIROP is operated under the authority of the Fishery
Management Plan for the bottomfish and seamount groundfish fisheries
established under the Magnuson-Stevens Fishery Conservation and Management
Act.[1] Under PIROP, observers collect and record data about sea turtles,
sea birds, marine mammals, and other protected species and bycatch in
various fisheries. The fisheries observers here were to serve on
commercial fishing vessels usually embarking out of Honolulu, Hawaii and
Pago Pago, American Samoa. See Agency Report (AR), Tab 1, at 1; RFP,
Statement of Work (SOW) at 1, 6.
The RFP*s price schedule required offerors to insert a unit price and
extended amount, for various points of embarkation based upon a *Hawaii
Longline Observer Sea-day.*[2] RFP at 2. For each point of embarkation,
the RFP included an estimate of the number of observer sea days (e.g.,
6,118 days for Item No. 1). Id. The SOW explained *[w]hen at sea,
observers work 70 plus hours per week, as the sole contractor employee[s]
aboard privately owned commercial fishing vessels.*[3] SOW at 2. The RFP
anticipated that award would be made to the offeror whose proposal is
found to be most advantageous to the government, considering the following
evaluation factors, in descending order of importance: technical
approach, experience, past performance, and price. RFP at 64-65.
Saltwater and NWO both submitted proposals by the original March 20
closing date. At the conclusion of evaluations, Saltwater received the
original award on July 11. NWO protested that award on July 23, and on
August 21, NOAA decided to take corrective action in the face of the
protest, citing procedural flaws in its evaluation. The agency stated
that it would conduct clarifications or discussions, request revised
offers if necessary, and reevaluate; in response, we dismissed the
protest. NWO, Inc., B-292633, Aug. 23, 2003.
During the course of the re-evaluation, and after the offerors had
submitted final proposal revisions (FPR), the contracting officer (CO)
became concerned about whether the proposals included overtime
compensation for observers.[4] See AR, CO*s Statement at 4-6. To resolve
this concern, the CO sought a legal opinion within the agency regarding
*whether overtime pay is applicable to fisheries observers.* AR, Tab 14.
On November 13, the Director of NOAA, in a memorandum to the Office of
General Counsel, responded as follows:
NMFS maintains the position that fisheries observers are biological
technicians and are therefore eligible for overtime compensation under the
Service Contract Act (SCA), the Fair Labor Standards Act (FLSA), and other
Acts stipulating wages and benefits for contracted service employees, as
appropriate.
While we understand that work performed by observers beyond U.S.
territorial waters is outside of the jurisdiction of the SCA and FLSA,
attempting to track the geographical location of a vessel in order to
determine whether or not SCA/FLSA wages apply would be a huge
administrative burden for both the contracted observer provider and the
agency. Therefore, it is the position of NMFS that the wage rate that the
Department of Labor determines is appropriate for each specific locality
should be applied to contracted fisheries observers whether they are
working inside or outside of U.S. territorial waters in order to provide a
fair, simple, and consistent application of the SCA/FLSA.
AR, Tab 15, at 2-3.
In light of this memorandum, on November 18, the agency issued a second
request for FPRs to permit the offerors to make any pricing adjustments
needed to cover the cost of complying with the agency*s view about the
application of these statutes to fisheries observers. In its letter to
Saltwater, the agency stated:
It is the policy of the [NMFS] that fisheries observers are considered
non-exempt technicians and must be compensated for overtime work pursuant
to the overtime standards of the [FLSA]. Accordingly, if the new award
decision re-selects your firm, your contract (No. AB133F-030-CN-0024) will
be modified, effective January 1, 2004, to include the revised Wage
Determination dated 5/31/2001, and to require payment to fisheries
observers at a rate not less than 1 1/2 times the basic rate of pay for
all hours worked in excess of 40 hours a week. Note that it is also NMFS
policy that the [SCA] and overtime requirements apply whether an observer
is within or without U.S. territorial waters.
AR; Tab 16, at 1.
In response, both offerors revised their proposals, advised that they
would provide overtime compensation to the observers for hours worked in
excess of a 40-hour week, and explained that their proposals assumed a
70-hour work week for the observers. Saltwater, however, added the
following caveat to its revisions:
[P]lease note that this revised proposal should not be construed as a
concession, admission, or opinion, on our part, about the validity of any
legal conclusions upon which NMFS has based its policies with regard to
overtime compensation requirements pursuant to applicable state and
federal laws.
AR, Tab 21, at 1.
Saltwater*s FPR was priced at $4,196,243, and NWO*s was priced at
$4,217,061. In evaluating the FPRs, the source evaluation board (SEB)
compared prices on the basis of the cost per sea day for each proposal,
and noted that the compensation levels for both firms met the minimum
requirements of the SCA, and NMFS*s policy regarding overtime
compensation. The SEB recommended award to Saltwater based upon its
higher technical score, slightly higher benefits, and slightly lower
price. See AR, Tab 23, at 2; Tab 24, at 13-14, 16.
On December 2, NOAA notified Saltwater of its re-selection, and provided,
for execution, a modification to Saltwater*s earlier awarded contract.
Among other things, the modification contained the following language
concerning the NMFS policy statement:
[T]he contract is hereby modified to incorporate . . . [t]he requirement,
as determined by NMFS policy, that fisheries observers be paid at a rate
not less than 1 1/2 times the basic rate of pay for all hours worked in
excess of 40 hours a week, in accordance with the [FLSA] and other Acts.
It is also NMFS policy that the [SCA] and overtime requirements apply
whether an observer is within or without U.S. territorial waters.
AR, Tab 27, at 2.
Upon receipt of the modification, Saltwater advised the agency that it was
not willing to execute the modification, because it did not accurately
reflect the terms of Saltwater*s FPR. Saltwater stated, however, that it
remained willing to perform the contract in accordance with its FPR. On
January 13, NOAA informed Saltwater that it intended to terminate the
contract for the convenience of the government. This protest followed.[5]
DISCUSSION
Saltwater argues that the agency*s plan to terminate Saltwater*s
previously-awarded contract because of the company*s refusal to accede to
the terms of the pending modification is unreasonable. In Saltwater*s
view, the proposed modification does not accurately reflect the terms of
Saltwater*s FPR, and is ambiguous. In addition, Saltwater argues that the
agency exceeded the scope of the corrective action it undertook in
response to NWO*s earlier protest by incorporating into this solicitation
the recent changes to NMFS policy regarding overtime compensation for
fisheries observers. Finally, Saltwater argues that the proposed award to
NWO will be improper because the agency is contemplating making award to
NWO on terms different from those in its proposal.
We turn first to Saltwater*s underlying contention that the modification
here is ambiguous. In this regard, Saltwater has raised several concerns
about a conflict between the estimated workweek in the RFP, and the
meaning of the NMFS policy statement regarding overtime compensation for
fisheries observers. For example, Saltwater states that its proposal was
based on the RFP*s estimate that fisheries observers work a 70-plus hour
workweek. On the other hand, Saltwater states that the NMFS policy
interpreting fisheries observers as non-exempt technical personnel
--together with the policy of applying the FLSA both within, and outside
of, U.S. territorial waters--could result in a determination that
observers be paid for each and every hour of the week they are on board a
fishing vessel--up to 168 hours per week. In addition, Saltwater argues
that the terms of the modification would force the company to change its
approach to paying its observers from paying a flat rate per day to paying
an hourly rate. It is in this sense that Saltwater argues that the
proffered modification does not accurately reflect the terms of its FPR.
While we acknowledge the significance of the matters Saltwater raises,
these issues are not timely at this juncture. Our Bid Protest Regulations
require that improprieties in a solicitation--including those which did
not exist in the initial solicitation, but were subsequently
incorporated--must be raised prior to the next closing time for receipt of
proposals. 4 C.F.R. S: 21.2(a)(1); East Penn Mfg. Co., Inc., B-261046,
Aug. 1, 1995, 95-2 CPD P: 50 at 3. Put simply, Saltwater*s contention
that it became aware of these potential ambiguities upon receipt of the
modification on December 2, rather than upon receipt of the agency*s
November 18 second request for FPRs, is not persuasive.
As set forth above, a comparison of the November 18 request for a revised
proposal with the terms of the modification provided to implement the new
selection decision shows nothing in the modification that was not
previously disclosed to the company in the November 18 request.
Specifically, the November 18 request: (1) expressly advises that
fisheries observers will be viewed as non-exempt employees eligible for
overtime; (2) advises that overtime must be paid at a rate not less than 1
1/2 times the basic rate of pay for hours worked in excess of 40 per week;
and (3) advises that NMFS views these requirements as applicable whether
an observer is within or without U.S. territorial waters. AR, Tab 16, at
1. Each of these issues is reflected, in very similar terms, in the
December 2 modification.
Indeed, Saltwater*s response to the request for a second FPR indicates to
us that the company fully understood the implications of the NMFS policy
statement--and had concerns about it. In this regard, it advised the
agency that while it had revised its proposal, it did not want its actions
to be construed as agreement that the NMFS policies were required by law.
In our view, the clear language of the November 18 notice, Saltwater*s
caveat about it, and the lack of any meaningful difference between the
notice and the December 2 modification, mean that Saltwater was required
to raise any challenge to these overtime policies prior to submitting its
second FPR. Its attempt to do so now--as the underlying basis for
challenging the termination of its contract for its refusal to execute the
modification--is untimely.
As a result of our finding that Saltwater cannot now raise a timely
challenge to the terms of the modification to its contract, we conclude
that Saltwater has offered no reasonable justification for its refusal to
sign the proposed modification to its originally-awarded contract.
Accordingly, we deny Saltwater*s protest contention that the agency*s
decision to terminate its contract is improper.
We turn next to Saltwater*s contention that the agency exceeded the scope
of the originally proposed corrective action by incorporating in this
contract the NMFS policy statement regarding overtime payments for
fisheries observers. Again, we disagree. We know of no basis for holding
that the agency could not, or should not, have incorporated this policy
statement into the contract. To the extent that the agency was concerned
that the offerors might not have prepared their proposals with the NMFS
policy in mind, there was nothing improper about allowing both offerors to
revise their pricing accordingly. Moreover, we again think any challenge
to incorporating the NMFS policy statement into this procurement had to be
raised prior to the closing date set for receipt of the second FPRs.
As a final matter, Saltwater complains that the agency is contemplating an
improper award to NWO. In this regard, Saltwater states that when the
agency first notified our Office of its intent to terminate Saltwater*s
contract--during the pendency of NWO*s second protest--the agency stated
that it would award to NWO *at a price to be agreed upon between the
parties.* Initial Protest, Tab 13 (Letter to GAO General Counsel from
Dept. of Commerce). In Saltwater*s view, the agency*s stated intent to
negotiate a new price with NWO is improper, and supports Saltwater*s view
that the solicitation here contains ambiguities that must be resolved.
We note first that the agency did not use the language quoted above in
answer to this protest. Rather, the agency explains that it intends to
award to NWO at the prices offered in response to the second request for
FPRs. AR, Tab 1 at 14. In addition, we note that the agency has agreed
not to proceed with its award until our Office issues a decision on this
protest. As a result, this matter is premature at this juncture. In the
event the agency awards a contract to NWO on a basis other than the
proposal submitted in response to this reopened competition, Saltwater can
pursue that matter at that time.
The protest is denied.
Anthony H. Gamboa
General Counsel
------------------------
[1] This Act provides for the conservation and management of the United
States* fishery resources. See 16 U.S.C. S: 1801 et seq. (2000). Under
the Act, the term observer means any person required or authorized to be
carried on a vessel for conservation and management purposes. 16 U.S.C.
S: 1802(27).
[2] An *observed Sea Day* is a day when the observer is on board the
fishing vessel and the vessel is not in port, but includes the days of
departure from, and return to, port. RFP at 3.
[3] The RFP explained as follows:
Observers travel by public transportation to meet their assigned boats,
and are expected to remain with their boats until they return to port to
unload target catch. Typically, tuna trips average just over 21 days in
duration and swordfish trips average over 30 days. Bottomfish trips
average about three weeks. Long line and bottomfish vessels fish in deep
ocean waters, beyond 50 miles of the Northwestern Hawaiian Islands in all
weather conditions.
RFP, SOW at 2-3. In addition, the RFP stated *[v]essels not in port are
assumed to be fishing and counted as one day of effort. Vessels carrying
an observer and not in port are counted as one observed day of effort.*
Id.
[4] The agency found that NWO*s price was based on an assumption that the
company would pay overtime compensation at 1 1/2 times regular pay for all
hours over 40, but that Saltwater*s proposal did not appear to have been
based on similar overtime compensation assumptions, did not include
SCA-mandated vacation and holiday pay, and was based upon paying observers
under a different SCA wage determination.
[5] Prior to learning of the agency*s decision to terminate Saltwater, NWO
again protested Saltwater*s selection, on December 19. This protest was
dismissed, however, after the agency changed its course and decided to
award to NWO. The protester also filed a separate action in court for
injunctive relief on January 27. Since the protester sought only an
injunction to bar the agency from lifting the stay so that our Office
could continue to consider the protest, the protester*s suit did not
constitute a basis to dismiss the protest. See 4 C.F.R. S: 21.11(b)
(2004). We have been advised by the protester*s counsel that the agency
agreed to take no action on this procurement until our Office issues its
decision.