TITLE:  Capitol CREAG LLC, B-294958.4, January 31, 2005

BNUMBER:  B-294958.4

DATE:  January 31, 2005

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   Decision



   Matter of:   Capitol CREAG LLC



   File:            B-294958.4



   Date:              January 31, 2005



   James J. Regan, Esq., John E. McCarthy Jr., Esq., and Daniel R. Forman,

Esq., Crowell & Moring, for the protester.



   Kevin P. Mullen, Esq., and David E. Fletcher, Esq., Piper Rudnick, for

Jones Lang LaSalle, and Robert H. Koehler, Esq., Patton Boggs, for

Trammell Crow Company, the intervenors.



   Gary F. Davis, Esq., General Services Administration, and John W. Klein,

Esq., and  Kevin R. Harber, Esq., Small Business Administration, for the

agencies. 



   Linda S. Lebowitz, Esq., and Michael R. Golden, Esq., Office of the

General Counsel, GAO, participated in the preparation of the decision.



   DIGEST



   1.  Where a solicitation uses traditional responsibility factors as

technical evaluation criteria and where the proposal of a small business

concern which otherwise would be in line for award is found ineligible for

award based on an agency's evaluation under those criteria, the agency has

effectively made a determination that the small business offeror is not a

responsible contractor capable of performing the solicitation

requirements; accordingly, the agency must refer the matter of the firm's

responsibility to the Small Business Administration (SBA) for the possible

issuance of a certificate of competency (COC).



   2.  Where the proposal of a small business concern is not selected for

award because the agency concludes that the concern's approach to

management and staffing creates a high risk of unacceptable performance,

the agency's determination is not tantamount to a nonresponsibility

determination and there is no requirement for referral to the SBA for the

possible issuance of a COC.



   DECISION



   Capitol CREAG LLC, a small business concern, protests the decision by the

General Services Administration (GSA) not to award the firm a contract

under request for proposals (RFP) No.A GSa**04P-02-BVD-0035 for the

provision of national real estate broker services to support GSA's

National Office of Realty Services and 11 regional offices in the

acquisition of leasehold interests and related real estate services for

GSA's federal tenants.  CREAG contends that GSA improperly failed to refer

an issue involving the firm's responsibility to the Small Business

Administration (SBA) for the possible issuance of a certificate of

competency (COC).



   We deny the protest.



   BACKGROUND



   As explained in the RFP, which was issued on March 5, 2004, GSA provides

workspace for more than one million Federal workers through GSA's Public

Building Service (PBS).  Whenever possible, GSA satisfies tenant agency

needs in existing GSA-controlled owned or leased space.  When suitable

space is not available within the existing inventory, GSA acquires space

in privately-owned buildings through leases.  GSA's National Office of

Realty Services is the PBS entity responsible for the acquisition and

administration of leasehold interests.



   In 1997, GSA awarded eight regional real estate broker service contracts;

GSA subsequently awarded additional regional contracts for similar

services, but with varying terms and conditions.  GSA, in support of its

strategic goal of "Operating Effectively and Efficiently," identified a

need to award fewer real estate broker service contracts to achieve

national consistency and to better manage its realty services program. 

RFP S C.1, at 14.  The contracts awarded under this RFP, when compared to

the previous contracts awarded by GSA for similar services, will include

substantial changes to the contract terms and conditions.  For example,

under this RFP, the contractors will collect as their payments the real

estate commissions paid by building owners in lieu of receiving direct

payments or reimbursements from the government for services rendered under

the contracts.  Id.



   The RFP stated that GSA intended to make multiple awards of approximately

four "no cost,"[1] indefinite-delivery/indefinite-quantity contracts, with

one contract being set aside for award to a qualified small business

concern.  RFPA SA L.1, at 113.  (Each contract would be for a base period

and four 1-year option periods and each contract was estimated to have a

total contract value of approximately $33,103,000 based on estimated

annual commission amounts as included in the RFP.  RFPA SA B.2.2, Pricing

Worksheet, at 13.)  The RFP advised, however, that in the event that no

small business concern was "eligible" for the set-aside award, GSA

reserved the right to make this award to other than a small business

concern.  RFP S L.1, at 113; RFPA SA M.1, at 137.  The RFP also stated

that the "[a]ward of these contracts [would] not preclude the Government

from awarding additional contracts for similar services in the future in

the event GSA determines additional contracts are necessary." 

RFPA SA B.1, at 9.



   The RFP stated that the awards would be made to the offerors whose

proposals represented the best values to the government, technical

evaluation factors and priceA considered.  The RFP provided that the

technical evaluation factors were significantly more important than

price.  RFP S M.1, at 137.  The RFP listed, in descending order of

importance, the following technical evaluation factors:  (1)A experience;

(2) management and organizational approach; (3) past performance; and (4)

small business subcontracting participation.  For each technical

evaluation factor/subfactor, an offeror's technical proposal would receive

one of the following adjectival ratings with corresponding numerical

scores:  excellent/5 points; veryA good/4 points; acceptable/neutral/3

points; marginal/2 points; and unacceptable/1A point.  "Marginal" (the

rating at issue in this protest) was defined as follows:



   Does not fully meet the evaluation standard.  Deficiencies and/or

significant weaknesses, which may be correctable.  High risk of

unsuccessful contract performance.



   Final Source Selection Evaluation Board (SSEB) Report to the Source

Selection Authority (SSA) at 5.  The adjectival ratings/numerical scores

were to be supported by narratives addressing the strengths, significant

weaknesses, deficiencies, and risks in each offeror's proposal.  To arrive

at a total weighted technical score for each proposal, the agency would

multiply the raw points for each technical evaluation factor/subfactor by

the appropriate weighted percentage; the agency then would add the

weighted scores together.  The RFP further explained that an

offeror'sA price would be evaluated in terms of the proposed percentage of

an offeror's estimated commissions that would be credited against the

lease rental rates.  RFP SA M.2, atA 138a**43.  



   Eighteen firms submitted proposals.  As relevant to this protest, CREAG (a

ninea**member consortium comprised of one 8(a) small disadvantaged

business concern, three small business concerns, four women-owned small

business concerns, and one veteran-owned small business concern) was one

of three small business concerns that submitted a proposal.  Ten

proposals, including CREAG's proposal and the proposal from one other

small business concern, were included in the competitive range.[2] 

Following discussions and the submission of final revised proposals, the

SSA determined that neither CREAG nor the other small business concern was

"eligible for award due to the high risk of unacceptable performance

associated with the small business concerns['] proposals."  Source

Selection Decision at 2.



   More particularly, in the final SSEB report to the SSA, the SSEB

recommended to the SSA that no award be made to CREAG (or to the other

small business concern).  The SSEB stated as follows:



   Even though Capitol CREAG's overall average score of 3.18 appears to be

acceptable and their price is within the Government estimate, the Marginal

rating for the second most important factor, Factor 2, leads us to

conclude that this offeror presents an unacceptable risk of unsuccessful

contract performance.[3]  Therefore, it is determined by the SSEB that . .

. neither offeror[4] is eligible for award because of the unacceptable

risks, significant weaknesses and deficiencies that remain in their

proposals for Factor 2, Management and Organizational Approach.  The

Contracting Officer is not required to request a certificate of competency

from the Small Business Administration because this is a negotiated

procurement and the evaluation factors were evaluated on a comparative

basis.  It is recommended that no award be made to a small business in

this procurement because of the significant risks for unsuccessful

contract performance arising from the significant weaknesses and

deficiencies that remain in the proposals of the two firms for Factor 2

after final proposal revisions.  We further recommend that an award be

made to other than a small business.



   Final SSEB Report to the SSA at 88.



   With respect to the management and organizational approach technical

evaluation factor, for subfactor 2(a), CREAG's proposal received a

marginal rating.  The SSEB believed that CREAG's decentralized management

and organizational approach "raise[d] question[s] about whether [CREAG]

[would] deliver a consistent product for GSA's nationwide account."  Id.

at 85-86.  In addition, the SSEB stated that CREAG's proposal did not

demonstrate "how [it] [would] interface internally (and it appears that

many of the team members have not worked together before), or who within

[the] consortium is responsible for specific functions or duties relating

to the GSA account."  Id. at 86.  With respect to subfactor 2(c), for

which CREAG's proposal also received a marginal rating, the SSEB believed

that CREAG's staffing plan--where a different small-business consortium

member is to provide services in each of GSA's regional cities, and each

member has the right to hire subcontractors--"pose[d] a high risk of

unacceptable contract performance for the GSA nationwide account, as

consistency in delivery of services [would] likely be compromised."  Id.

at 87.  The SSEB continued that this "may not enable team members to

deliver the level of services required under the RFP, which could result

in high risk of unsuccessful contract performance."  Id.



   By letter dated September 23, GSA's contracting officer advised the SBA's

Procurement Center Representative (PCR) that "[i]n accordance with Federal

Acquisition Regulation [(FAR)] 19.506, Withdrawing or Modifying Small

Business Set-Asides," she had determined that "a set-aside award for the

solicitation . . . would be detrimental to the public interest due to the

high risk of unsuccessful contract performance associated with the

technical proposals submitted by small business concerns as documented in

the Source Selection Evaluation Board (SSEB) report.  This decision has

been coordinated with the Public Buildings Service, Small Business

Technical Advisor[,] and the GSA Office of Small Business Utilization." 

Letter from GSA's Contracting Officer to SBA's PCR, Sept. 23, 2004,

atA 1.  Referencing the "Recommendation Not to Award to a Small Business"

from the SSEB report, GSA's contracting officer stated that "both

proposals still presented a high risk to the Government of unsuccessful

contract performance and were not eligible for award."  Id. at 2. 

Accordingly, GSA's contracting officer advised the SBA's PCR that GSA's

SSA intended to make four awards to other than small business concerns. 

In addition to GSA's "Recommendation Not to Award to a Small Business," as

quoted above where GSA stated that it was not going to refer the matter to

the SBA for a COC, GSA also furnished, at the PCR's request, the

evaluations of the final revised proposals of all offerors in the

competitive range.



   By e-mail of September 28, SBA's PCR wrote to GSA's contracting officer,

"Please accept this message as SBA's approval of your request dated

September 23, 2004 to withdraw the set-aside portion of RFP

GS04P02BVD0035, National Real Estate Broker Services."  E-mail from SBA's

PCR to GSA's Contracting Officer, Sept. 28, 2004.



   By letter dated October 1, GSA advised CREAG that the SBA had approved

GSA's request to withdraw the set-aside.  GSA stated that after proposal

revisions were considered, "significant weaknesses remained in [CREAG's]

proposal which presented a high risk of unsuccessful contract

performance."  GSA Letter to CREAG, Oct. 1, 2004.



   On October 4, after considering the initial and final SSEB reports, the

SSA awarded contracts to four large business offerors whose proposals were

determined to  represent the best values to the government, considering

technical evaluation factors and price.  Source Selection Decision at 2.



   ISSUE AND ANALYSIS



   CREAG, a small business concern, argues that prior to withdrawing the

small business set-aside, GSA improperly failed to refer an issue

involving the firm's responsibility to the SBA for the possible issuance

of a COC.  In this regard, CREAG points out, based on the contemporaneous

evaluation and source selection record, that GSA did not determine that

CREAG was ineligible for award based on the submission of a technically

unacceptable proposal.  Rather, the record shows that CREAG's proposal was

technically acceptable.  CREAG maintains that the basis upon which GSA

determined that the firm was not eligible for award--that CREAG presented

an "unacceptable risk of unsuccessful contract performance" based on two

marginal ratings for two subfactors under the management and

organizational approach technical evaluation factor--involves the matter

of whether CREAG was a responsible contractor capable of successfully

performing the RFP requirements.  CREAG contends that GSA, prior to

withdrawing the small business set-aside, was required to refer this

matter involving CREAG's responsibility to the SBA for the possible

issuance of a COC.[5]



   Under the Small Business Act, agencies may not find a small business

nonresponsible without referring the matter to the SBA, which has the

ultimate authority to determine the responsibility of small businesses

under its COC procedures.  15 U.S.C. S 637(b)(7) (2000); FAR Subpart 19.6;

Phil Howry Co., Ba**291402.3, B-291402.4, Feb. 6, 2003, 2003 CPD P 33

atA 5.  Responsibility concerns, among other factors, whether a

prospective contractor will be able to comply with the required or

proposed delivery or performance schedule, and whether it has the

necessary organization, experience, and technical skills (or the ability

to obtain them).  FAR SA 9.104-1(b), (e).



   It is true that the reasons for GSA's concern about CREAG arose in

connection with the evaluation under the solicitation (not

post-evaluation, when a responsibility review is normally conducted). 

This, however, is not determinative.  We have long recognized that

agencies may use responsibility-type factors as evaluation criteria.  See,

e.g., Nomura Enters., Inc., B-277768, Nov. 19, 1997, 97-2 CPD P 148 at 3. 

Here, the evaluation criteria related to management and staffing are at

issue, and both can be viewed as "traditional" responsibility factors. 

See Clegg Indus., Inc., Ba**242204.3, Aug. 14, 1991, 91-2 CPD P145 at 2. 

Where a solicitation uses traditional responsibility factors as technical

evaluation criteria and where the proposal of a small business concern

which otherwise would be in line for award is found ineligible for award

based on an agency's evaluation under those criteria, the agency has

effectively made a determination that the small business offeror is not a

responsible contractor capable of performing the solicitation

requirements.[6]  In those circumstances, because of the offeror's small

business size status, the agency must refer the matter of the firm's

responsibility to the SBA for the possible issuance of a COC.



   Here, however, we conclude that the basis for GSA's ultimate decision not

to make award to CREAG was not a responsibility determination.  As noted

above, management and staffing are sometimes responsibility criteria.  In

this procurement, though, GSA's concern was not that CREAG lacked adequate

management and staffing (which might well have been a responsibility

concern), but rather that CREAG's proposed management and staffing

plan--CREAG's approach to performing the contract work--created a high

risk of unacceptable performance.  This was not due to doubt about CREAG's

ability or capability to perform (again, potentially a responsibility

concern), but rather to the decentralized approach that CREAG proposed to

use to perform GSA's requirements.  As the SSEB wrote, "The offeror did

not present an adequate resolution to adequately managing the scope of the

contract."  Final SSEB Report to the SSA at 59.  Because GSA's negative

assessment was based on the way that CREAG proposed to perform, rather

than on CREAG's capabilities, we conclude that what occurred was not

tantamount to a nonresponsibility determination, and we therefore find

that no referral to the SBA was required.



   Finally, we turn to the question of whether GSA could properly find

CREAG's proposal ineligible for award when, in fact, the evaluation record

shows that the proposal received an overall rating in the acceptable

range.  Notwithstanding that overall acceptable rating, the marginal

rating assigned to CREAG's proposal under two technical evaluation

subfactors indicated that the proposal was found to create a "high risk of

unacceptable contract performance" with regard to CREAG's approach to

management and staffing.  That finding is consistent with the evaluation

criteria, and is not unreasonable.  In our view, there is nothing in the

solicitation or in procurement statutes or regulations that would bar GSA

from deciding, notwithstanding the overall rating assigned to CREAG's

proposal, not to award a contract to CREAG on the basis of the risk

associated with its proposal, in light of GSA's articulated goals for this

procurement.



   The protest is denied.



   Anthony H. Gamboa



   General Counsel



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



   [1] In explaining the nature of the "no cost" contracts to be awarded, the

RFP stated that GSA would not make any direct payment or reimbursement to

a contractor for contract services including, but not limited to, any

expense associated with the performance of the services, such as travel. 

The RFP further explained that under the terms and conditions of the

contracts and in accordance with industry practice, a contractor would

have the opportunity to obtain a substantial monetary benefit by

collecting the real estate commissions paid by building owners/landlords. 

In order to be considered for award, the RFP required that an offeror's

price proposal be based on a stated percentage of commissions that the

firm would "forego" to the government in the form of a rental credit to

the lease.  RFPA SA B.2.1, at 11; RFP S M.2, at 138.       



   [2] The third small business concern withdrew its proposal for reasons

that are not relevant here.



   [3] For the technical evaluation factors/subfactors, CREAG's raw scores

ranged from 2A points to 5 points, which corresponded to the marginal

through excellent adjectival ratings.  As will be discussed below, for

technical evaluation factor 2--management and organizational

approacha**-CREAG's proposal received a raw score of 2 points for both

subfactors 2(a), management and organizational plan, and 2(c), staffing

plan; these scores corresponded to the marginal adjectival rating. 



   [4] The other small business concern filed a protest with our Office. 

However, after reviewing GSA's administrative report addressing the issues

raised in its protest, the firm withdrew its protest. 



   [5] Our Office solicited comments from the SBA on the COC referral issue

raised by CREAG.  The SBA supports CREAG's position that under the facts

of this protest, GSA improperly failed to refer the issue of CREAG's

responsibility to the SBA for the possible issuance of a COC.  SBA's

Initial and Supplemental Administrative Reports, Dec. 3 and 21, 2004.



   [6] Earlier decisions of our Office, such as Advanced Res. Int'l,

Inc.--Recon., Ba**249679.2, Apr.A 29, 1993, 93-1 CPD PA 348 at 2-3,

include language suggesting that no SBA referral is required, even where a

small business proposal is rejected solely due to an "unacceptable" rating

under a responsibility-type evaluation criterion, so long as the rating

was "comparative."  It appears from the final SSEB report to the SSA, as

quoted above, that GSA relied on the language in these earlier decisions

in deciding that no SBA referral was required here.  We continue to hold

that no SBA referral is needed where the small business offeror is not

selected for award merely because, while its proposal is evaluated as

acceptable, another offeror's proposal is evaluated as superior under a

comparative analysis or because of a cost/technical tradeoff analysis. 

Where, however, a finding that a small business offeror's proposal is

unacceptable under a responsibility-type criterion precludes such a

comparative or tradeoff analysis, it is tantamount to a nonresponsibility

determination.  To the extent our Office's earlier decisions can be read

to be inconsistent with the rule as stated here, they will no longer be

followed.