TITLE:  Saltwater Inc.--Reconsideration and Costs, B-294121.3; B-294121.4, February 8, 2005
BNUMBER:  B-294121.3; B-294121.4
DATE:  February 8, 2005
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   Decision

   Matter of:   Saltwater Inc.--Reconsideration and Costs

   File:            B-294121.3; B-294121.4

   Date:              February 8, 2005

   Joseph Sullivan, Esq., Mundt MacGregor, for the protester.

   William T. Grimm, Esq., Davis Grimm Payne & Marra, for NWO, Inc., an
intervenor.

   Terry Hart Lee, Esq., Department of Commerce, for the agency.

   Christina Sklarew, Esq., and Jerold D. Cohen, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1.  Where agency's implementation of the corrective action proposal that
led GAO to dismiss a protest as academic is such that the issue in
controversy in fact has not been rendered academic, GAO will consider the
protest's merits in response to reconsideration request.

   2.  Protest that contract award was based on terms different than those on
which competitive offers were received is sustained where the contract's
term exceeds the term provided for in the underlying solicitation.

   DECISION

   Saltwater Inc. asks that we reconsider our August 25, 2004 dismissal of
its protest of the award of a sole-source contract to NWO, Inc. by the
Department of Commerce, National Oceanic and Atmospheric Administration
(NOAA), for fisheries observer services.  Saltwater argues that the
corrective action that Commerce had proposed in response to the protest,
which led to our dismissal decision, in fact provided no meaningful
remedy.  Saltwater also complains that Commerce's implementation of that
corrective action has resulted in the continuation of an unjustified
sole-source contract with NWO.  Finally, Saltwater requests that it be
reimbursed its costs of pursuing this and its prior protest.

   We agree with Saltwater that, in light of Commerce's actions since we
dismissed the firm's protest, its challenge to the propriety of the award
to NWO is not academic.  Moreover, having reviewed the issue's merits, we
sustain Saltwater's protest in part.  We also recommend that Saltwater be
reimbursed the costs of pursuing this and its prior protest.

   BACKGROUND

   In January 2003, NOAA issued request for proposals (RFP) No.
AB1330-03-RP-0024, seeking 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.  Saltwater and NWO both submitted proposals, and
Saltwater was awarded the contract, the first year of which expired on
June 30, 2004 and which had a 1-year option ending on June 30, 2005. 
Following a protest filed by NWO, the agency held discussions and twice
permitted the offerors to submit final proposal revisions (FPR).  In its
second request for FPRs, Commerce advised Saltwater that if the agency
again selected Saltwater, its contract would be modified to include
certain overtime pay requirements. 

   In December 2003, Saltwater was again selected for award and was given,
for execution, a modification to its earlier-awarded contract.  Saltwater
declined to execute the modification, on the basis that it did not
accurately reflect the terms of Saltwater's FPR.  In January 2004, NOAA
informed Saltwater that it intended to terminate the firm's contract and
make award to NWO.  Saltwater protested this decision to our Office, and
we denied the protest in our decision, Saltwater Inc., Ba**293335.3,
AprilA 26, 2004, 2004 CPD P 106.

   Following our decision, rather than terminate Saltwater's contract for
convenience the contracting officer decided to wait for the base period of
the contract to expire, on June 30, 2004.  The agency awarded a contract
for the requirement to NWO on June 18, to commence performance on
JulyA 1.  This contract award was for a base period of July 1, 2004
through December 31, 2004, with an option for an additional year extending
to December 31, 2005 (which has been exercised).  This contract also
included provisions implementing the overtime pay requirements. 

   Saltwater protested that the award to NWO was improper, and the attorney
from our Office handling the protest conducted an alternative dispute
resolution (ADR) conference call with the parties in an attempt to resolve
the matter.  During that discussion, the GAO attorney advised the parties
that he anticipated that our Office would sustain the protest, on the
basis that the award was made on a sole-source basis without
justification.  The GAO attorney indicated that the protest would be
rendered academic if the agency (1) prepared and executed a Justification
and Approval (J&A) adequate to support the award to NWO, or
(2)A recompeted the acquisition.  Commerce then advised our Office by
telephone, and confirmed in writing, that the agency would recompete the
services as part of a restructuring of fishery observer services
nationwide, and that it envisioned that it would require at least 15
months to develop the solicitation.  In addition, Commerce would, "as
expeditiously as possible, make a determination as to the necessity for a
sole-source contract and thereafter prepare and execute an appropriate J&A
for the contract file."  Remedy Letter of Aug. 23, 2004. 

   We dismissed the protest by our decision of August 25.  We stated that we
viewed the protest to be academic "because Commerce has advised our Office
that it would, *as expeditiously as possible,' determine whether a sole
source contract was necessary and, if it determined that it was, would
then prepare an appropriate J&A for such action."  We noted, in addition,
that Commerce would undertake a new acquisition as part of the nationwide
restructuring of these services. 

   RECONSIDERATION REQUEST

   In requesting reconsideration, Saltwater maintains that we should not have
dismissed the protest because Commerce's proposed corrective action did
not, in fact, render the protest academic, especially given the way the
corrective action has been implemented. [1]  We agree.

   Our understanding from Commerce's letter proposing corrective action was
that the agency would decide whether a sole-source contract was needed
and, if so, prepare an adequate J&A.  In opposing Saltwater's
reconsideration request, Commerce indicates that it has not issued a J&A
to support the award to NWO because it has concluded that the award to NWO
was based on the 2003 competition and therefore no J&A is needed. 
Commerce asserts that, in its view, all it agreed to do in terms of
corrective action to render Saltwater's protest academic was to promise to
include the PIROP effort as part of the broader restructuring of the
nationwide fishery observer program, for which a solicitation would be
developed in the future.  We agree with Saltwater that the action Commerce
has taken did not render Saltwater's challenge academic, and we therefore
reverse our dismissal and will consider the protest's merits.

   PROTEST

   Saltwater protests that the award to NWO was improper because it was made
on a basis other than the proposal that NWO had submitted in response to
the 2003 solicitation.  We agree.

   As noted above, the competitive award to Saltwater was based upon a 1-year
contract extending through June 30, 2004 with a 1-year option to June 30,
2005.  However, the award to NWO was for a 6-month contract period from
July 1, 2004 toA December 31, 2004, with an option to extend the contract
1 year, i.e., to DecemberA 31, 2005, which Commerce has exercised. 
Because the period of performance under NWO's contract extends beyond June
30, 2005, it is inconsistent with the basis for the competition and
therefore improper.  See Tennessee Valley Serv. Co., Ba**188771, Dec. 8,
1977, 77-2 CPD P 442.  That is, the extension of NWO's contract beyond
JuneA 30, 2005 constitutes an improper sole-source, since it was not
supported by a J&A. 

   Since the contract with NWO now is in its option year, we recommend that
Commerce meet its needs after June 30 competitively (through limited
competition if full and open competition is not feasible) and terminate
NWO's contract as of that date if NWO is not the successful offeror.  We
further recommend that the agency reimburse Saltwater for the costs of
filing and pursuing its protests, including reasonable attorneys' fees. 
Saltwater's certified claim for costs, detailing the time spent and cost
incurred, must be submitted to the agency within 60 days of receiving this
decision.  4 C.F.R. SA 21.8(f)(1) (2004).

   In view of the above conclusion and recommendation, we see no practical
reason for our Office to address Saltwater's other objections to NWO's
award.[2]

   The protest is sustained.

   Anthony H. Gamboa
General Counsel

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

   [1] Saltwater has also alleged that improper ex parte discussions occurred
between the GAO attorney and Commerce, following the ADR conference call,
that contributed to our decision to dismiss the protest.  We have reviewed
this allegation and find it without merit, as the exchanges at issue
concerned only procedural matters.

   [2] The objections center around the fact that in awarding the contract to
NWO, Commerce did not include an overtime provision that had been included
in the solicitation and which Saltwater had believed conflicted with the
modification--essentially the reason why Saltwater refused to execute the
modification at issue in our April 26 decision.