TITLE: Liberty Power Corporation, B-295502, March 14, 2005
BNUMBER: B-295502
DATE: March 14, 2005
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Decision
Matter of: Liberty Power Corporation
File: B-295502
Date: March 14, 2005
J. Alex Ward, Esq., and Kali N. Bracey, Esq., Jenner & Block, for the
protester.
Alison L. Doyle, Esq., and Jason N. Workmaster, Esq., McKenna, Long &
Aldridge, for Pepco Energy Services, Inc.; Thomas C. Wheeler, Esq., Carl
L. Vacketta, Esq., and Eliza P. Nagle, Esq., DLA Piper Rudnick Gray Cary,
for Constellation NewEnergy, Inc., intervenors.
Richard R. Butterworth, Esq., General Services Administration, and Kenneth
Dodds, Esq., Small Business Administration, for the agencies.
David A. Ashen, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Where solicitation established an evaluation scheme providing for
application of price evaluation adjustment on behalf of eligible small
disadvantaged business (SDB) offerors, and agency, through its exchanges
with protester prior to the submission of price proposals, led firm to
believe that adjustment would be applied in the event that protester
established its eligibility, agency cannot defend its failure to accord
protester the preference on the basis that the preference in fact is not
authorized; rather, having led protester to base its price proposal on the
expectation that it would benefit from the SDB price evaluation adjustment
if it established its eligibility, if agency believes adjustment is not
authorized for this procurement, agency should amend the solicitation to
delete adjustment and reopen discussions so as to permit offerors to
submit revised proposals. 2. Contracting officer's determination to deny
a small disadvantaged business (SDB) concern the benefit of an SDB price
evaluation adjustment essentially on the basis that the SDB could not
comply with this provision must be referred to the Small Business
Administration for final determination.
DECISION
Liberty Power Corporation protests the General Services Administration's
(GSA) award of contracts to Pepco Energy Services, Inc. and Constellation
NewEnergy, Inc., under request for proposals (RFP) No. GS-00P-05-BSC-0335,
for electric power supply to various federal and non-federal facilities.
Liberty, a small disadvantaged business (SDB) concern, asserts that GSA
improperly failed to accord it an SDB price evaluation adjustment.
We sustain the protest.
The RFP, issued on September 22, 2004, contemplated award of a contract,
for a base period of 10 months with 2 option years, to the responsible
offeror or offerors whose technically acceptable proposal or proposals
offered the low total evaluated price for electricity supply commodity
components up to the delivery point, including energy, capacity, ancillary
services, and network firm transmission, necessary for the firm supply of
electricity to a number of federal and non-federal facilities in the Pepco
service territory in Maryland and the District of Columbia. The
solicitation reserved to the government the right to make separate awards
for the Maryland and District of Columbia requirements.
The solicitation required offerors to furnish evidence of technical
qualifications, including evidence that the offeror possessed the
requisite licenses, network transmission agreements,A comparable
experience, risk management measures related to providing retail electric
supply, and plans to supply the energy required by this contract to the
delivery point. RFP S C.1(c). Technical proposals from eightA offerors,
including Liberty, were received by the October 21 closing time. Although
the contracting officer was concerned that Liberty's experience was
limited, such that "there is a question as to whether Liberty has the
capability to handle two large load groupings," he ultimately determined
that Liberty met the minimum qualifications and was "responsible for
purposes of submitting pricing." Solicitation Summary and Award Decision
at 7.
This protest concerns the evaluation of the subsequently submitted price
proposals. In this regard, the RFP provided that "[o]ffers will be
evaluated by adding a factor of tenA percent to the price of all offers,
except offers from [SDB] concerns that have not waived the adjustment.
For details regarding the application of the evaluation adjustment, see
subpart 52.219-23 of the Federal Acquisition Regulation [(FAR)]." Section
52.219-23(d), as relevant, provides as follows:
(d) Agreements.
(1) A small disadvantaged business concern, that did not waive the
adjustment, agrees that in performance of the contract, in the case of a
contract for--
. . . .
(ii) Supplies (other than procurement from a nonmanufacturer of such
supplies), at least 50A percent of the cost of manufacturing, excluding
the cost of materials, will be performed by the concern;
. . . .
(2) A small disadvantaged business concern submitting an offer in its own
name shall furnish in performing this contract only end items manufactured
or produced by small disadvantaged business concerns in the United States
or its outlying areas. This paragraph does not apply to construction or
service contracts.
Liberty, an SDB, did not waive the SDB evaluation preference.
On November 11, GSA asked Liberty whether it would be buying, rather than
generating, the power it proposed to provide. Liberty responded later
that day that
Liberty Power will be the manufacturer of at least 50% of the electricity
that will supply this solicitation and thus will perform at least 50% of
the cost of manufacturing. In addition, for any supplemental electricity
that is required, Liberty Power will secure supply from one or more of our
existing suppliers who include:
[DELETED]
In response, GSA requested as follows:
In order to ensure that Liberty Power meets the requirements of FAR Clause
52.219-23, please provide us with details as to what power plant(s) you
plan to provide the power from, location(s), your ownership interests,
date purchased, and any other information that we can review so that we
may substantiate your statements.
E-mail from GSA to Liberty, Nov. 11, 2004. Liberty responded that it was
its understanding that qualification for the SDB pricing evaluation
adjustment could be shown by "a firm commitment to purchase the
facilities, equipment and manpower necessary to meet at least 50 % of the
requirements of the solicitation." Letter from Liberty to GSA, Nov. 11,
2004. Liberty then advised GSA that "[t]o that end, Liberty Power has
secured a commitment to purchase a power plant that will supply sufficient
levels of electricity to meet the SDB manufacturing obligation set forth
in FAR 52.219-23." Id. When GSA subsequently asked again for
documentation to support Liberty's proposal to manufacture at least 50
percent of the electricity, Liberty responded on November 16 that
over the last few weeks Liberty Power has been in negotiations with
several power plant owners in the PJM [Interconnection, LLC] territory to
acquire the necessary manufacturing capability. We are attaching a recent
Letter of Intent for one of the assets currently under negotiation.
Please note: we ask that you not contact the asset owner as this may
adversely impact our negotiations. We will provide you with any
additional information you may need about this asset.
Letter from Liberty to GSA, Nov. 16, 2004.
On November 22, GSA determined that Liberty was not entitled to the
benefit of the 10-percent SDB evaluation price adjustment on the basis
that Liberty did not currently own any power generation assets and had not
shown that it had a firm commitment to purchase generating assets
sufficient to meet the requirement in FAR S 52.219-23(d)(1)(ii) that it
perform at least 50 percent of the cost of manufacturing, excluding the
cost of materials. Although Liberty had furnished a letter of intent with
respect to its purchase of a generating asset in [DELETED], the
contracting officer did not consider this to be adequate to support
application of the SDB price evaluation adjustment since the letter of
intent had already expired (on October 31) at the time it was furnished
and, in any case, was interpreted by the contracting officer as not being
a definitive, binding purchase agreement. Contracting Officer's
Determination of Applicability of 10% Price Preference for Liberty Power
Corporation, Nov. 22, 2004.
Upon examining the initial price proposals received on November 22, GSA
decided to request revised proposals for the District of Columbia
requirement (with the intent of obtaining better pricing and because of a
suspected mistake in Pepco's proposal). Based upon the resulting offers,
GSA made award on NovemberA 23 to Pepco as the low-priced, responsible,
technically-qualified offeror for the District of Columbia requirement,
and to Constellation as the low-priced, responsible, technically-qualified
offeror for the Maryland requirement. Liberty thereupon filed this
protest with our Office.
Liberty asserts that it proposed to generate at least 50 percent of the
required power, and that GSA therefore unreasonably denied it the benefit
of the SDB price evaluation adjustment. Liberty further asserts that, in
any case, GSA was required to refer the question of Liberty's ability to
comply with the SDB manufacturing requirement to the Small Business
Administration (SBA).
GSA responds, as a preliminary matter, that the protest is essentially
academic because the contracting officer lacked the authority to include
the SDB price evaluation adjustment in the solicitation, so that it could
not be applied to Liberty or any offeror. In this regard, the agency
notes that the SBA, as well as the Civilian Agency Acquisition Council,
has advised civilian agencies that the statutory authority for civilian
agencies to apply the SDB price evaluation adjustment expired, and no
longer was available, as of DecemberA 9, 2004. See Civilian Agency
Acquisition Council Letter 2004-04. Indeed, according to GSA, the
statutory authority for civilian agencies to apply the SDB price
evaluation adjustment in fact expired after September 30, 2003, that is,
well before the September 22, 2004 issuance of the solicitation. In any
case, argues the agency, even if the authority did not expire until
DecemberA 2004, that would preclude its applying the adjustment for
Liberty even if we otherwise agreed with Liberty's argument.
We find GSA's position to be without merit. While agencies have broad
discretion in making source selection decisions, their decisions must be
rational and consistent with the solicitation's stated evaluation scheme;
an agency may not announce one basis for evaluation and award in the RFP
and then evaluate proposals and make award on a different basis.
Marquette Med. Sys., Inc., B-277827.5, B-277827.7, Apr.A 29, 1999, 99-1
CPD P 90 at 5-6. Here, whether or not the SDB price evaluation adjustment
was properly included in the solicitation, the fact remains that the
solicitation expressly provided for application of such an adjustment on
behalf of eligible SDB offerors, and GSA, through its exchanges with
Liberty prior to the submission of price proposals, affirmatively led the
firm to believe that the adjustment would be applied in the event that
Liberty established its eligibility under FAR S 52.219-23. In this
regard, Liberty's chief operating officer has furnished a sworn affidavit
stating that Liberty submitted its price proposal with the expectation
that it would receive the SDB price evaluation adjustment. We conclude
that, having established an evaluation scheme providing for an SDB
preference, and having affirmatively led Liberty to base its price
proposal on the expectation that it would benefit from the SDB price
evaluation adjustment if it established its eligibility, the agency cannot
defend its failure to accord Liberty the preference on the basis that the
preference in fact is not authorized.
GSA asserts that, in any case, Liberty was not entitled to the benefit of
the SDB price evaluation adjustment. However, we think that the authority
to make the final determination in this regard belongs not to GSA, but to
the SBA. In this regard, the Small Business Act, 15A U.S.C. S 637(b)(7)
(2000), provides that it is the exclusive responsibility of the SBA to
certify to Government procurement officers . . . with respect to all
elements of responsibility, including, but not limited to, capability,
competency, capacity, credit, integrity, perseverance, and tenacity, of
any small business concern or group of such concerns to receive and
perform a specific Government contract. A Government procurement officer
. . . may not, for any reason specified in the preceding sentence preclude
any small business concern or group of such concerns from being awarded
such contract without referring the matter for a final disposition to the
Administration.
15 U.S.C. S 637(b)(7)(A). Thus, we have previously recognized with
respect to the limitation on subcontracting clause at FAR S 52.219-14,
governing eligibility for consideration for requirements set aside for
small business concerns and 8(a) contractors, that, as a general rule, an
agency's judgment as to whether a small business offeror will comply with
the subcontracting limitation is a matter of responsibility, to be finally
determined by the SBA in connection with its Certificate of Competency
(COC) proceedings. See, e.g., Mechanical Equip. Co., Inc.; Highland Eng.,
Inc.; Etnyre Int'l, Ltd.; Kara Aerospace, Inc., B-292789.2 et al., Dec.
15, 2003, 2004 CPD PA 192 at 18.
FAR S 52.219-23(d)(1)(ii) likewise contains a limitation on subcontracting
provision, providing that the SDB agrees that in the performance of a
supply contract, at least 50A percent of the cost of manufacturing,
excluding the cost of materials, will be performed by the concern. While
the result here may be a matter of entitlement to a price evaluation
adjustment rather than eligibility for award, the underlying
determination--whether the offeror has the ability to perform as an
SDB--is similar. Accordingly, we agree with the SBA (SBA Comments, Jan.
26, 2005, at 3-4) that a contracting officer's determination to deny an
SDB the benefit of an SDB price evaluation adjustment on the basis that
the SDB could not comply with this provision must be referred to the SBA.
See FAR S 19.601(d) ("When a solicitation requires a small business to
adhere to the limitations on subcontracting, a contracting officer's
finding that a small business cannot comply with the limitation shall be
treated as an element of responsibility and shall be subject to the COC
process.").
GSA and Pepco assert that Liberty's proposal evidenced a defective
commitment to complying with the subcontracting limitation, and that this
therefore was a matter of acceptability, and not responsibility. See
Ecompex, Inc., B-292865.4 et al., JuneA 18, 2004, 2004 CPD P 149 at 5;
Mechanical Equip. Co., Inc.; Highland Eng., Inc.; Etnyre Int'l, Ltd.; Kara
Aerospace, Inc., supra; KIRA Inc., B-287573.4, B-287573.5, Aug.A 29, 2001,
2001 CPD PA 153 at 3. We disagree. As an initial matter, the contracting
officer in fact determined that Liberty's proposal was acceptable; the
only question was whether Liberty was entitled to the SDB preference.
Further, while GSA asserts that the generating asset in [DELETED] for
which Liberty submitted an expired letter of intent could not generate
sufficient power to meet the 50-percent rule, the agency fails to take
into account the fact that Liberty stated that it had "been in
negotiations with several plant owners in the PJM territory to acquire the
necessary manufacturing capability," Letter from Liberty to GSA, Nov.A 16,
2004, and not merely with the owner of the generating asset in [DELETED].
Consequently, this is not an instance where the offeror's proposal, on its
face, reasonably indicated that the offeror would not comply with a
subcontracting limitation, see, e.g., Orincon Corp., B-276704, July 18,
1997, 97-2 CPD PA 26 at 4; rather, it involves a question of the offeror's
capability to comply with a subcontracting limitation and, thus, its
responsibility. As such, this was a matter for the SBA.
GSA now asserts that Liberty also failed to meet the requirement set forth
in FAR SA 52.219-23(d)(2) that states: "A small disadvantaged business
concern submitting an offer in its own name shall furnish in performing
this contract only end items manufactured or produced by small
disadvantaged business concerns in the United States or its outlying
areas." The agency notes in this regard that in its November 11 response
to the agency's inquiries, Liberty stated that it would obtain
supplemental electricity from one or more firms on a list of its existing
suppliers, which includes large businesses. However, as noted by the SBA
in its comments on this matter, SBA Comments, Feb. 2, 2005, at 3, while
the provisions of FAR S 52.219-23(d)(1) apply to manufacturers, those of
FAR SA 52.219-23(d)(2) clearly apply to SDBs that are nonmanufacturers,
that is, SDBs that intend to furnish the products of other SDB concerns.
See distinction between manufacturer and nonmanufacturer in 15 U.S.C.
SA 637(a)(17)(A); 13 C.F.R. S 121.406; FAR SS 19.001, 19.102(f),
19.601(d). Here, Liberty essentially claimed that it would qualify as a
manufacturer under FAR SA 52.219-23(d)(1); thus, FAR SA 52.219-23(d)(2)
was irrelevant to determining Liberty's SDB status and entitlement to the
preference, and the final determination as to whether that in fact is the
case is for the SBA, as discussed above. Accordingly, we sustain the
protest.
Ordinarily, under the circumstances, we would recommend that GSA refer the
matter of Liberty's entitlement to the benefit of the SDB price evaluation
adjustment to the SBA. However, as the authority for civilian agencies to
apply the SDB adjustment has expired, we decline to do so. We recommend
instead that GSA amend the solicitation to delete the SDB price evaluation
adjustment and reopen discussions to permit offerors to submit revised
proposals. We also recommend that the protester be reimbursed the costs
of filing and pursuing the protest, including reasonable attorney's fees.
4A C.F.R. S 21.8(d) (2004). The protester should submit its certified
claim for such costs, detailing the time expended and costs incurred,
directly to the agency within 60 days of receipt of this decision. 4
C.F.R. S 21.8(f)(1).
Anthony H. Gamboa
General Counsel