TITLE:  American Multi Media, Inc.--Reconsideration, B-293782.2, August 25, 2004
BNUMBER:  B-293782.2
DATE:  August 25, 2004
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   Decision

   Matter of:   American Multi Media, Inc.--Reconsideration

   File:            B-293782.2

   Date:           August 25, 2004

   Frederic G. Antoun, Esq. for the protester.

   William L. Walsh, Jr., Esq. and Amy J. McMaster, Esq., Venable LLP, for
Potomac Talking Book Services, Inc., an intervenor.

   Emily Vartanian, Esq., Library of Congress, for the agency.

   Jeanne W. Isrin, Esq., and Jerold D. Cohen, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1.  Prior decision dismissing protest as untimely because it was filed
more than 10A days after a telephone conversation in which the contracting
officer told the protester/original awardee to stop work because
consideration of whether an evaluation preference should have been applied
to another bid could result in the contract going to that bidder is
reversed; a firm is not required to file a defensive protest* while an
agency is considering action inimical to the firm's interests. 

   2.  Where solicitation provided for 10-percent evaluation preference for
nonprofit-making institutions or agencies whose activities are primarily
concerned with the blind and with other physically handicapped persons,*
protest that awardee should not have been found eligible for the
preference because it lacks federal tax-exempt status under 26A U.S.C.
SA 501(c) is denied, since the agency was not unreasonable in determining
that the preference could be applied based on registration as a
not-for-profit corporation under applicable state law.

   DECISION

   American Multi Media, Inc. (AMI) requests that we reconsider our May 10,
2004 decision dismissing as untimely its protest of the award of a
contract to Potomac Talking Books Services, Inc. (PTBS) under invitation
for bids (IFB) No. S-LCO4004, issued by the Library of Congress for
recording magazines on cassettes in accordance with the National Library
Service for the Blind and Physically Handicapped specifications.  In its
protest, AMI, which initially had been awarded a contract that included
the recording of Good Housekeeping magazine, complained that the agency
terminated that portion of its contract in order to award the requirement
to PTBS after the agency decided that in evaluating bids it had neglected
to apply a 10-percent price preference for nonprofit organizations that
serve the blind and physically handicapped.  AMI argued that PTBS was not
a nonprofit organization, and it challenged the Library's interpretation
of the statutory preference and its application of the preference to
PTBS's bid.

   On reconsideration, we reverse our prior dismissal, but we deny the merits
of AMI's protest.

   Based on AMI's apparent low bid and satisfactory technical rating, the
firm was awarded the contract that included the recording of Good
Housekeeping magazine effective December 16, 2003.  After award, however,
it came to the attention of contracting officials that the 10a**percent
evaluation preference for nonprofit organizations that serve the blind and
physically handicapped had not been applied to PTBS's bid, possibly
erroneously, and that PTBS's bid would have been low had the preference
been applied.

   A telephone conversation took place between AMI and the contracting
officer on or about December 23; the content of that conversation is at
issue here.  The agency maintains that the contracting officer informed
AMI that its contract would be amended to remove Good Housekeeping.* 
Library's Rebuttal Response, Apr. 22, 2004 at exh. 1.  AMI states that it
was told only to stop work because the agency's consideration of the
matter might result in the award going to PTBS.  Both the agency and AMI
have submitted affidavits to support their conflicting statements as to
the conversation's content, and the record does not establish the accuracy
of either. 

   Some 2 weeks after the telephone conversation, on January 7, 2004, AMI
received an amendment/modification that terminated the Good Housekeeping
portion of its contract.  On January 13, AMI filed an agency-level protest
regarding the termination and the Library's decision to award a contract
for the Good Housekeeping work  to PTBS, arguing that PTBS was not a
nonprofit organization entitled to the preference.  On February 24, the
protester received the Library's denial of its protest, in which the
Library stated that it had reviewed PTBS's nonprofit status and determined
that the company was properly registered in Maryland as a nonprofit
organization offering services for the blind, and as such qualified for
the preference.  AMI filed its protest with our Office on March 5.

   Where a protest initially is filed at the agency level, any subsequent
protest to our Office will be considered timely if it is filed within 10
calendar days of actual or constructive knowledge of initial adverse
agency action, but only if the agency-level protest was filed within the
time limits for filing a protest with our Office (unless the agency
imposes a more stringent time for filing).  Bid Protest Regulations, 4
C.F.R. SA 21.2(a)(3) (2004).  Therefore, for our Office to consider AMI's
protest the firm's filing with the Library had to be within 10 days after
AMI knew, or should have known, its basis for protest.  4 C.F.R.
SA 21.2(a)(2). 

   In our original decision dismissing the protest, we found that the
late-December telephone conversation with the contracting officer provided
AMI with sufficient information to protest the agency's action.  Since AMI
did not file its agency-level protest until January 13, more than 10
calendar days later, we determined that it was untimely, which precluded
consideration of the subsequent protest here.

   In requesting reconsideration, AMI claims that the late-December
conversation conveyed to AMI only that PTBS had filed a complaint alleging
that it should have received award after application of the 10-percent
preference, and that the agency was imposing a stop-work order until a
decision could be made, which would be made known to AMI at that time. 
According to AMI, it became aware that the agency had made a final
determination to terminate the Good Housekeeping portion of AMI's contract
only when it received the amendment/modification to that effect on January
7, and that the timeliness period therefore should commence on that date,
making the January 13 agency protest timely.

   Our original decision found that the stop-work order plus the contracting
officer's explanation that application of the 10-percent preference could
result in the contract going to PTBS gave AMI sufficient information to
file a protest.  On reflection, however, and in light of our rule that
doubt as to when a protester became aware of its basis for protest should
be resolved in favor of the protester, Metro Monitoring Servs., Inc.,
B-274236, Nov. 27, 1996, 96-2 CPD P 204 at 4, we have decided that AMI
should be given the benefit of the doubt about the content of the
conversation with the contracting officer.

   While the information given to AMI in late December clearly conveyed that
the Good Housekeeping portion of its contract was in jeopardy, we are
willing to assume, for purposes of determining timeliness of the
subsequent protest, that the agency left AMI with reason to believe that a
final determination had yet to be made.  When a firm has been notified
that the agency is considering taking an action adverse to the firm's
interests, but has not made a final determination, the firm need not file
a defensive protest,* since it may presume that the agency will act
properly.  See Haworth, Inc.; Knoll North America, Inc., B-256702.2,
B-256702.3, Sept. 9, 1994, 94-2 CPD P 98 at 4-5; Tamper Corp., B-235376.2,
July 25, 1989, 89-2 CPD P 79 at 2; Dock Express Contractors, Inc.,
B-227865.3, Jan. 13, 1988, 88-1 CPD P 23 at 6. 

   Since, for timeliness purposes, we have decided to resolve the doubt in
favor of AMI's position that it was informed in the late-December
conversation only that the agency was considering whether the Good
Housekeeping portion of its contract should be terminated, and since AMI
was aware of no final determination until notified of the
amendment/modification on January 7, we reverse our prior decision as to
the untimeliness of the January 13 agency-level protest, and we therefore
will consider the merits of the protest subsequently filed in our Office.

   The solicitation, at S C.1.3, informed vendors that, pursuant to the
mandate of Public Law 89-522,[1] the Library's policy is to give
preference to nonprofit institutions whose activities are primarily
concerned with the blind and other physically handicapped persons where
bids submitted by such institutions are determined to be fair and
reasonable.*  Section M.1.3. provided:

   The Library reserves the right to give preference to nonprofit-making
institutions or agencies whose activities are primarily concerned with the
blind and with other physically handicapped persons, in all cases where
the price or bids submitted by such institutions or agencies are under all
the circumstances and needs involved determined to be fair and reasonable
(for these purposes fair and reasonable means no greater than 10 percent
higher than prices quoted by commercial sources), and if such
organizations meet the requirements or the policy set forth in section
C.1.3 in the preface to this invitation.

   IFB S C.1.3 provided further that, in order to qualify for the preference,
the institution or agency had to perform a minimum of 50 percent of the
narration and cassette duplication activities, or it had to perform either
the narration or the cassette duplication activities including mastering,
packaging and shipping.

   AMI argues that PTBS should not have qualified for the 10-percent
preference because, according to AMI, PTBS is not a legitimate nonprofit
entity within the meaning of the statute.  AMI maintains that PTBS was
created and is operated by a profit-making corporation that performs the
same type of work, specifically for the purpose of being able to take
advantage of the 10-percent preference.  AMI argues that bidders should be
required to possess Internal Revenue Service federal tax- exempt status
under 26 U.S.C. S 501(c)[2] in order to qualify for the preference, and
that since PTBS does not have S 501(c) status, it should not have been
afforded the preference.

   The Library points out that PTBS is registered in the State of Maryland as
a not-for-profit corporation, and that its Articles of Incorporation state
that it was organized and operated exclusively for literary and
educational purposes, for the audio recording of books and other audio
services for the blind.*  Agency Report, exh. 10.  The Library argues that
PTBS therefore qualifies for the preference under the IFB.  (The record
also contains PTBS's bid certification that it will meet the requirements
of IFB S C.1.3.  Agency Report, exh. 12.)  The Library maintains that its
position regarding nonprofit,* as used in its IFB and the underlying
statute, is a reasonable one that it has applied for many years.  It
argues that there is no single definition for nonprofit* organization,
that it is defined differently by different sources for different
purposes, and that it does not necessarily imply or include federal tax-
exempt status.  The Library claims that it has never, at least in the
30-year memory of long-term employees, required a bidder alleging
nonprofit status for purposes of the preference to possess S 501(c)
status. 

   An agency's interpretation of a statute that it is responsible for
implementing is entitled to substantial deference, and should be upheld if
it is reasonable.  Appalachian Council, Inc., B-256179, May 20, 1994, 94-1
CPD P 319 at 16.  Therefore, we will not question an agency's
implementation of statutory procurement requirements unless the record
shows that the implementation was unreasonable or inconsistent with
congressional intent.  HAP Constr., Inc., Ba**280044.2, Sept. 21, 1998,
98-2 CPD P 76 at 4.  Where a statute does not specify a particular way to
give a provided preference to a class of potential contractors, agency
acquisition officials have broad discretion in selecting the way to
effectuate the statutory mandate.  SeeA id.

   We have no basis to conclude that the Library's position is unreasonable
or inconsistent with congressional intent.

   As is evident from the above, neither the statute nor the solicitation
defines nonprofit* for purposes of an evaluation preference.  Moreover, as
the Library correctly asserts, the term nonprofit* has no single meaning,
and we see no legal basis to conclude that for purposes of the preference
in issue here the term necessarily is defined by S 501(c) status.  For
example, while the Federal Acquisition Regulation (FAR) governs only
executive agency procurements, FAR S 1.101, and therefore is not
controlling as to the procurements of legislative agencies such as the
Library, it nevertheless is instructive as to the different definitions of
nonprofit organization* that are used in government.  FAR S 31.701, which
pertains to cost principles in contracts between the government and
nonprofit organizations, provides a definition of nonprofit organization*
that includes S 501(c) status.  However, FAR S 27.301 provides that, for
purposes of FAR Subpart 27.3, Patent Rights Under Government Contracts,*
nonprofit organization* means (1) a university or other institution of
higher education;* or (2) an organization exempt from federal income
taxation under S 501(c) of the Internal Revenue Code; or (3)A any
nonprofit scientific or educational organization qualified under a State
nonprofit organization statute.*  Since PTBS would meet the third
definition under FAR S 27.301, it presumably would be considered a
nonprofit organization* for purposes of that section, irrespective of
whether its lack of S 501(c) status would preclude it from being
considered a nonprofit organization* under FAR S 31.701.[3]

   Further, our review of the legislative history of Public Law 89-522, H.R.
Rep. No. 1600 (Committee on House Administration) and S. Rep. No. 1343
(Committee on Rules andA Administration), discloses no reference to
federal tax-exempt status, or language or discussion that otherwise would
lead us to conclude that S 501(c) status is needed in order to receive the
nonprofit* evaluation preference.

   In sum, AMI's protest provides no legal basis for our Office to object to
the Library's decision that PTBS qualifies for the 10-percent preference
in this procurement; we consequently have no reason to object to the
corrected award.  We reverse our prior dismissal with respect to the
timeliness of AMI's challenge, but we deny the merits of the protest.[4]

   Anthony H. Gamboa
General Counsel

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

   [1] As IFB S C.1.1 pointed out, Public Law 89-522 requires the National
Library Service for the Blind and Physically Handicapped to provide
reading materials in recorded and braille formats to U.S. residents and
U.S. citizens living abroad who are unable to use conventional print
materials because of visual and physical limitations.  The statute states
that, in purchasing books, the Library shall give preference to
nonprofitmaking institutions or agencies whose activities are primarily
concerned with the blind and with other physically handicapped persons, in
all cases where the prices or bids submitted by such institutions or
agencies are . . . under all the circumstances and needs involved,
determined to be fair and reasonable.*  Public Law 89-522, July 30, 1966,
2 U.S.C. SA 135a.

   [2] Section 501(c) lists organizations that, according to S 501(a), are
exempt from federal income taxation.

   [3] The Library also notes other definitional examples that do not
reference federal tax status.  See Agency Report at 8.

   [4] In its comments on the agency report, AMI raises two new arguments: 
(1) that PTBS is not a nonprofit institution* or agency* as those terms
are used in the statute and the IFB, and (2) that the FAR S 31.701
definition of nonprofit organization* which, as noted above, includes
SA 501(c) status, should control since the FAR governs most federal
procurements.  We will not address these arguments in this decision,
however, since they could have been, but were not, raised by AMI in its
initial protest, and therefore are untimely.  See Dismas Charities, Inc.,
Ba**289575.2, B-289575.3, Feb. 20, 2004, 2004 CPD P 66 atA 3a**4.