TITLE: CDR Enterprises, Inc., B-293557, March 26, 2004
BNUMBER: B-293557
DATE: March 26, 2004
**********************************************************************
CDR Enterprises, Inc., B-293557, March 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: CDR Enterprises, Inc.
File: B-293557
Date: March 26, 2004
Cynthia Malyszek, Esq., Malyszek & Malyszek, for the protester.
Kay Bushman, Esq., Defense Energy Support Center, for the agency.
Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., Office
of the General Counsel, GAO, participated in the preparation of the
decision.
DIGEST
Agency properly concluded that there was no organizational conflict of
interest on the part of the firm in line for award where the firm was not
involved in creation of the solicitation*s statement of work (SOW); SOW
was not essentially derived from materials furnished by the firm; and the
firm did not play a role in the source selection process.
DECISION
CDR Enterprises, Inc. protests the award of a contract to Air Liquide
America L. P. under request for proposals (RFP) No. SPO600-03-R-0336,
issued by the Defense Logistics Agency, Defense Energy Support Center
(DESC), for repair of the cathodic protection system for the gaseous
nitrogen pipeline at Vandenberg Air Force Base (AFB), California. CDR
contends that Air Liquide should have been excluded from the competition
because it was involved in creating, and authored a report required to be
read in conjunction with, the RFP*s statement of work and because it had a
direct oversight relationship to the protester during the selection
process.
We deny the protest.
BACKGROUND
Air Liquide holds a contract for the supply of gaseous nitrogen (GN2)
through a government-owned pipeline to end users on Vandenberg AFB. The
pipeline extends from a nitrogen plant to space launch complex 3 (the
SLC-3 branch), space launch complex 4 (the SLC-4 branch), and space launch
complex 6 (the SLC-6 branch). Pursuant to its contract, Air Liquide is
required to perform semi-annual inspections of the pipeline cathodic
protection system and to notify the contracting officer of any
malfunctions capable of jeopardizing system operability. The notification
is to describe the malfunction, the consequences of not correcting it, the
contractor*s proposed method of correcting it, and the estimated cost of
implementing the corrective action. The contracting officer is to review
the notification and negotiate the scope and cost of the corrective action
that he or she deems appropriate.
In May 1999, Air Liquide reported that its inspections of the pipeline
cathodic protection system showed that the SLC-6 branch was unprotected as
a result of depletion of the protective anode beds and that several of the
anode beds along the SLC-3 and the SLC-4 branches were also depleted.
Pursuant to the above contract, the government negotiated with Air Liquide
for replacement of the anode beds along the SLC-6 branch, which work was
accomplished in June 2000. In September 2000, Air Liquide reported that
the integrity of the cathodic protection for the SLC-6 branch had been
restored, but that readings along the SLC-3/4 branch indicated anode
depletion on the SLC-4 portion. Over the course of the next 2-1/2 years,
Air Liquide reiterated its finding that the anode beds along the SLC-4
branch had been consumed and recommended their replacement; beginning in
November 2002, it also reported that the SLC-3 anode beds were
substantially depleted and recommended their replacement.
According to the contracting officer, initially it was assumed that Air
Liquide would perform the repairs on the SLC-3/4 branch under its existing
contract; pursuant to this assumption, Air Liquide submitted to the
contracting office both a Statement of Objectives (SOO) (dated September
21, 2001) and, after agency feedback, a revised SOO (dated March 10,
2003). Rather than proceeding with award of the work to Air Liquide under
its current contract, however, the Director of Missile Fuels at DESC
determined that the agency should compete the work to obtain better prices
for the government. Accordingly, she directed Vandenberg AFB personnel to
draft their own statement of work (SOW) and to exclude Air Liquide from
any discussions regarding the SOW. The contracting office contacted the
project manager for the GN2 pipeline at Vandenberg AFB, who worked with an
agency electrical engineer and a mechanical engineer employed by an agency
contractor to draft an SOW.
RFP No. SPO600-03-R-0336, requesting offers for inspection and repair of
the GN2 pipeline*s existing cathodic protection system, was issued on
September 25, 2003, with a closing date of October 7. The RFP
contemplated the award of a fixed-price contract to the acceptable offeror
with the lowest evaluated price. Acceptability of a proposal was to be
determined on the basis of two factors: technical capability and past
performance.
Three offerors submitted timely proposals. The agency*s technical
evaluators determined all three proposals technically acceptable and
conducted price
negotiations with each of the three offerors. Offerors* final prices were
as follows:
Air Liquide $136,310
CDR $139,137
Offeror A $153,669
On November 18, the agency awarded a contract to Air Liquide as the
lowest-priced, technically acceptable offeror and notified CDR of its
action.
By letter dated November 24, 2003, CDR filed an agency-level protest of
the award. The contracting officer denied the protest on December 29, and
on January 8, 2004, CDR protested to our Office.
Timeliness
As a preliminary matter, the agency argues that CDR*s protest should be
dismissed as untimely because the protester knew, or should have known,
prior to the closing time set for receipt of proposals that Air Liquide
would be permitted to compete for the work; thus, to be timely under our
Bid Protest Regulations, 4 C.F.R. S: 21.2(a)(1) (2003), its protest of the
agency*s failure to exclude Air Liquide would have had to have been filed
prior to the closing time. The agency asserts that the protester should
have known that Air Liquide would be permitted to compete because the
cover page of the solicitation (Form 1449) indicated that the acquisition
was *unrestricted* and there were no restrictions elsewhere in the RFP or
in the presolicitation notice.
A protester*s allegation that another firm has an impermissible conflict
of interest, and thus must be precluded from competing under the
solicitation, is generally premature when filed before an award has been
made. REEP, Inc., B-290688,
Sept. 20, 2002, 2002 CPD P: 158 at 1-2. This conclusion reflects the
underlying principle that a protester is charged with knowledge of the
basis for protest only at the point where the agency conveys to the
protester the agency*s intent to follow a course of action adverse to the
protester*s interests. Kimmins Thermal Corp.,
B-238646.3, Sept. 12, 1990, 90-2 CPD P: 198 at 2, aff*d, Kimmins Thermal
Corp.--Recon., B-238646.4, Jan 31, 1991, 91-1 CPD P: 106. In the context
of an alleged organizational conflict of interest, that point typically is
when the protester is notified of the agency*s selection decision.[1]
Contrary to the agency*s view, the fact that the RFP was issued on an
unrestricted basis was not sufficient to charge CDR with knowledge that
the agency planned to take what CDR considers to be improper
action--treating Air Liquide as eligible for award despite its alleged
conflict of interest. See REEP, Inc., supra.
Because CDR filed an agency-level protest within 10 days after receiving
notification that Air Liquide had been selected for award under the
solicitation and filed its protest to our Office within 10 days after
receipt of the agency*s denial of the agency-level protest, we find its
protest to be timely.
Analysis
CDR argues that Air Liquide should have been excluded from the competition
because it had an unfair advantage over other competitors based on an
organizational conflict of interest. In this connection, the protester
alleges that Air Liquide was directly involved in creating the SOW and
that it authored a report required to the read in conjunction with the
SOW. CDR further alleges that Air Liquide *had a direct oversight
relationship* during the selection process in that the contracting officer
*needed to get an approval from Air Liquide directly* to shut down the
pipeline for performance of the repairs. Protest at 4-5.
The Federal Acquisition Regulation (FAR) sets forth both general and
specific instructions on organizational conflicts of interest in subpart
9.5. The FAR generally requires contracting officials to avoid,
neutralize or mitigate potential significant conflicts of interest so as
to prevent unfair competitive advantage or the existence of conflicting
roles that might impair a contractor*s objectivity. FAR S:S: 9.501,
9.504, 9.505. Specifically, the FAR requires that if a contractor: (1)
*prepares, or assists in preparing, a work statement to be used in
competitively acquiring a system or services,* or (2) *provides material
leading directly, predictably, and without delay to such a work
statement,* the contractor may not supply the system or services, except
in certain limited situations. FAR S: 9.505-2(b)(1). This restriction is
intended to: (1) avoid the possibility of bias in situations where a
contractor would be in a position to favor its own capabilities, see FAR
S: 9.505(a), or (2) avoid the possibility that the contractor, by virtue
of its special knowledge of the agency*s future requirements, would have
an unfair advantage in the competition for those requirements. FAR S:
9.505(b); GIC Agric. Group, B-249065, Oct. 21, 1992, 92-2 CPD
P: 263 at 6. The responsibility for identifying and resolving conflicts
of interest is that of the contracting officer, who in doing so is
admonished to exercise *common sense, good judgment and sound
discretion.* FAR S:S: 9.504, 9.505. We will not sustain a protest
challenging a contracting officer*s determination regarding a conflict of
interest unless it is shown to be unreasonable. Daniel Eke and Assocs.,
P.C., B-271962, July 9, 1996, 96-2 CPD P: 9 at 4-5.
The agency denies that Air Liquide participated in creation of the agency
SOW and has submitted sworn statements from the three individuals involved
in its drafting in support of its position. The pipeline project director
and the two participating engineers all attest that in drafting the SOW,
they disregarded the previously drafted Air Liquide SOO, and instead
consulted the previous pipeline surveys, the existing pipeline maintenance
records, and the original records from the construction of the pipeline.
All three further attest that they had no conversations with Air Liquide
regarding the SOW while drafting it.
Moreover, a comparison of the agency*s SOW to Air Liquide*s March 10, 2003
SOO shows that the SOW contains a number of requirements that differ from
or are significantly more detailed than the requirements of the SOO.
Specfically, the SOO calls upon the contractor simply to install
replacement anode beds along the pipeline route, while the SOW requires
the contractor to design a cathodic protection system using sacrificial
anodes with a life of 20 years or more. Further, the SOW requires the
reestablishment of electrical isolation between the meter station and the
SLC-6 branch, whereas the SOO does not; the SOO requires a post-repair
cathodic protection survey and report while the SOW requires a
close-interval survey (the distinction being that in a close-interval
survey, the contractor is required to test the pipeline every 3 feet,
where in a routine survey, the pipeline is tested at designated test
stations only); the SOW requires that any deficiencies noted during the
post-repair survey be corrected at no additional cost to the government,
whereas the SOO does not contain such a requirement; and the SOW, but not
the SOO, requires the contractor to provide 4 hours of training to
government and contractor engineering/maintenance personnel on how to
maintain and operate the renovated system.
In sum, the record does not support the protester*s allegation that Air
Liquide was involved in drafting the SOW or that the SOW was essentially
derived from materials furnished by Air Liquide.
Regarding the protester*s allegation that Air Liquide authored a report
required to be read in conjunction with the SOW, the SOW requires the
contractor to refer to *survey reports* to determine where pipe-to-soil
potential readings show voltage below National Association of Corrosion
Engineers (NACE) standards, but does not indicate that the survey reports
to be referred to are those previously prepared by Air Liquide. Since the
contractor is to perform its own survey as a first step in its design of a
new cathodic protective system, we think that the above reference to
*survey reports* is most reasonably interpreted as a reference to that
survey, rather than to a prior Air Liquide survey. Our interpretation is
supported by the declaration of one of the SOW drafters, who states that
the drafters *wrote the SOW to include a new survey and evaluation report
from the contractor, which would become the basis of the repairs, not the
previous surveys.* Decl. of Mechanical Engineer, Feb. 6, 2004, at 3.
To the extent that the protester further argues that Air Liquide*s
knowledge of the existing pipeline cathodic protection system gave it an
unfair competitive advantage over other competitors, there is no
evidence--nor has the protester even alleged--that this knowledge was
garnered through exposure to proprietary or source selection information,
see FAR S: 9.505(b);[2] instead, the knowledge was the product of Air
Liquide*s work under its GN2 supply contract. The mere existence of a
prior or current contractual relationship between a contracting agency and
a firm does not create an organizational conflict of interest, and an
agency is not required to compensate for every competitive advantage
gleaned from a potential offeror*s prior performance of a particular
requirement. Daniel Eke and Assocs., P.C., supra, at 6. Moreover, DESC
took steps to mitigate any advantage that Air Liquide might have had by
virtue of its related pipeline work by furnishing CDR with the pipeline
survey results and an extensive site visit. Regarding CDR*s argument that
Air Liquide*s non-attendance at the site visit indicates that it already
had access to information that CDR learned during the site visit, the
protester concedes that it learned the information that Air Liquide
already allegedly knew during the site visit; thus, we see no basis for an
argument that it was prejudiced by Air Liquide*s prior knowledge.
Finally, regarding the protester*s assertion that Air Liquide *had a
direct oversight relationship* during the selection process in that the
contracting officer *needed to get an approval from Air Liquide directly*
to shut down the pipeline for performance of the repairs, Protest at 4-5,
the Director of Missile Fuels at DESC states as follows:
The decision of when and for how long to shut down the pipeline in order
to perform cathodic or any type of repair is controlled by the customers
at [Vandenberg] AFB and the needs of the users along the pipeline. This
is largely dependent on the launch schedule. This decision is coordinated
with Air Liquide in order to ensure that the customers continue to obtain
their needed GN2. However, under no circumstance would the contracting
office need to get approval from Air Liquide to shut down the pipeline for
repairs. On the contrary, Air Liquide would need approval from the
contracting office to shut down the pipeline.
Decl. of Director of Missile Fuels Commodity Business Unit, Feb. 3, 2004,
at 3. We fail to see how the coordination the agency describes in any way
demonstrates a conflict of interest on Air Liquide*s part.
The protest is denied.
Anthony H. Gamboa
General Counsel
------------------------
[1] A variation on the general rule applies in cases where the agency
specifically advises the protester before award is made that it will
consider the firm allegedly having the conflict of interest to be eligible
for award. See, e.g., International Sci. and Tech. Inst., Inc., B-259648,
Jan. 12, 1995, 95-1 CPD P: 16; Booz-Allen & Hamilton Inc., B-246919, Apr.
14, 1992, 92-1 CPD P: 368; Central Texas College, B-245233.4,
Jan. 29, 1992, 92-1 CPD P: 121. In those cases, timeliness of the protest
is measured from the date when the protester receives explicit notice from
the agency that the firm with the alleged conflict of interest is
considered eligible for award. The rule in those cases does not apply
here because there was no explicit indication from the agency, in the
solicitation or otherwise, that Air Liquide was considered eligible for
award.
[2] FAR S: 9.505(b) provides that:
In addition to the other situations described in this subpart, an unfair
competitive advantage exists where a contractor competing for award of any
Federal contract possesses*
(1) Proprietary information that was obtained from a Government official
without proper authorization; or
(2) Source selection information . . . that is relevant to the contract
but is not available to all competitors, and such information would assist
that contractor in obtaining the contract.