TITLE:  Poly-Pacific Technologies, Inc., B-296029, June 1, 2005
BNUMBER:  B-296029
DATE:  June 1, 2005
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   Decision

   Matter of: Poly-Pacific Technologies, Inc.

   File: B-296029

   Date: June 1, 2005

   Ron Ward for the protester.

   Bradley S. Adams, Esq., and Eric Kattner, Department of the Air Force, for
the agency.

   Jonathan L. Kang, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest challenging agency's modification of a contract is sustained where
modification improperly changed the scope of work anticipated by the
underlying solicitation.

   DECISION

   Poly-Pacific Technologies, Inc. protests the modification of contract No.
F09650-02-D-0005 awarded to U.S. Technology Corporation (UST) by the
Department of the Air Force for the lease and the recycling of acrylic
plastic media.  Poly-Pacific argues that the agency improperly relaxed the
performance requirements in the contract beyond what was reasonably
contemplated by the underlying solicitation.

   We sustain the protest.

   BACKGROUND

   The underlying request for proposals (RFP), No. F09650-02-R-0007, was
issued on February 28, 2002 and anticipated the award of a fixed-price,
indefinite-delivery, indefinite-quantity contract for a 1-year base period
with up to four 1-year option periods.  The RFP sought proposals to lease
*Type V acrylic plastic media* to Robins Air Force Base for use as an
abrasive in the removal of organic and other coatings from aircraft,
components, and equipment.  Statement of Work (SOW) at 1.  After the
plastic media is used as an abrasive and is no longer usable for that
purpose, it is deemed *spent blast media* (SBM).  At this point in its
lifecycle, the SBM is intermixed with paint chips, organic compounds, and
heavy metals as a result of its use as an abrasive.  U.S. Environmental
Protection Agency (EPA) regulations treat the SBM as a *solid waste* that
must be disposed of using approved methods.  See
40 C.F.R. S 264.1 (2005); see also Resource Conservation and Recovery Act,
42 U.S.C.
SS 6901-6939e (2000).  EPA regulations also provide, however, that the SBM
may be excluded from the definition of solid waste if the SBM is recycled
according to approved criteria, thereby avoiding the need to follow
disposal procedures.  See
40 C.F.R. S 261.2.

   The RFP required offerors to propose a means of removing the SBM from the
agency's worksites and recycling it consistent with EPA regulations.  SOW
attach. 1.  During the course of the contract, the contractor retains
legal title to the plastic media, including liability for handling and
proper recycling of the resulting SBM.  SOW at 1.

   Poly-Pacific did not submit a proposal in response to the RFP, as it was
not on the list of qualified providers of type V plastic media at the time
proposals were due.  Poly-Pacific has subsequently become an approved
source to provide type V plastic media, as well as other types of plastic
media.  Agency Supplemental Responses, May 5, 2005, P 1.[1]

   The agency awarded the contract to UST on April 23, 2002.  The agency
became aware of an investigation of UST by EPA in late 2002 regarding the
alleged improper disposal of the SBM by UST's subcontractor.  AR, Tab 7,
Letter from Poly-Pacific to Agency, Dec. 23, 2004, exh. 1, Nov. 15, 2002
News Article.[2]  As a result of the investigation, the agency issued
modification No. P0003 to the UST contract on
May 27, 2003.  The modification stated that UST was still required to
provide
type V plastic media, but amended the contract to allow the agency to
either return the SBM to UST for recycling, or to order disposal of the
SBM in lieu of recycling.  AR, Tab 6, Contract Modification No. P0003, at
2.  The disposal of the SBM would either be done by UST at the agency's
direction, or it could be sent to a third party for disposal; in either
case, the modification held UST responsible for the additional costs of
disposal.  Id.  The contract costs were not otherwise changed by the
modification, i.e. UST's price for leasing the plastic media remained the
same, and the period of performance was not changed.  Poly-Pacific became
aware of the modification in February 2005, and filed this protest.[3]

   DISCUSSION

   Poly-Pacific argues that the modification of UST's contract improperly
relaxed the performance requirements, thereby changing the scope of work
anticipated by the RFP and resulting in an improper sole-source contract
of the modified work. 

   The Competition in Contracting Act (CICA) requires *full and open
competition* in government procurements as obtained through the use of
competitive procedures.  31 U.S.C. SS 3551-3556 (2000), amended by the
Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005,
Pub. L. No. 108-375, S 326, 118 Stat. 1811 (2004).  Once a contract is
awarded, however, our Office will generally not review modifications to
that contract, because such matters are related to contract administration
and are beyond the scope of our bid protest function.  4 C.F.R.
S 21.5(a); Sprint Comm. Co., B-278407, B-278407.2, Feb. 13, 1998, 98-1 CPD
P 60
at 5-6.  An exception to this rule arises where a protest alleges that a
contract modification changes the work from the scope of the original
contract, since the work covered by the modification would otherwise be
subject to the statutory requirements for competition absent a valid
determination that the work is appropriate for procurement on a
sole-source basis.  MCI Telecomms. Corp.,
B-276659.2, Sept. 29, 1997, 97-2 CPD P 90 at 7.  Although challenges to
the relaxation of contract requirements are less common than challenges to
contract modifications that enlarge a contract's scope of work, our Office
recognizes that both fall within this exception, and we will consider
whether modifications of performance requirements result in work that
should be subject to competition.  See Marvin J. Perry & Assoc., B-277684,
B-277685, Nov. 4, 1997, 97-2 CPD P 128; Avtron Mfg., Inc., B-229972, May
16, 1988, 88-1 CPD P 458.

   In determining whether a modification triggers the competition
requirements in CICA, our Office looks to whether there is a material
difference between the modified contract and the contract that was
originally awarded.  Marvin J. Perry & Assoc., supra, at 3; Avtron Mfg.,
Inc., supra, at 4; see also AT&T Comms., Inc. v. Wiltel, Inc., 1 F.3d
1201, 1205 (Fed. Cir. 1993).  In assessing whether a contract modification
is outside the scope of the original agreement, we examine whether the
original nature or purpose of the contract is so substantially changed by
the modification that the original and modified contracts are essentially
and materially different.  In assessing whether the modified work is
essentially the same as the effort for which the competition was held and
for which the parties contracted, we consider factors such as the
magnitude of the change in relation to the overall effort, including the
extent of any changes in the type of work, performance period, and costs
between the modification and the underlying contract.  HG Props. A, LP,
B-290416, B-290416.2, July 25, 2002, 2002 CPD P 128 at 3-4.  Where an
agency has relaxed a contract's performance requirements, our Office also
looks to whether the change in requirements was the type that reasonably
would have been anticipated under the solicitation, and whether the
modification materially changed the field of competition for the
requirement.  Marvin J. Perry & Assoc., supra, at 3; Avtron Mfg., Inc.,
supra, at 4.

   The scope of work in the RFP here required the contractor to lease type V
plastic media to the agency, to collect the SBM, and to recycle it in
accordance with EPA regulations.  SOW at 1.  The contract as modified
added provisions that allowed the agency either to direct UST to recycle
the SBM, or to order the disposal of the SBM as a hazardous waste at UST's
expense by UST or by a third party.  AR, Tab 6, Contract Modification No.
P0003, at 2.  Despite the modification's retention of the agency's ability
to direct UST to recycle the SBM, however, the agency acknowledges that
the modification in fact *suspended the recycle portion of the contract.* 
Contracting Officer's Statement at 1.  The agency further acknowledges
that, as a result of the modification, *UST is now only required to lease
the blasting media to the agency, and [] UST is required to reimburse the
government for disposal costs.*  Agency Supplemental Responses, May 5,
2005, P 2a.

   The agency characterizes the contract modification as a reasonable effort
to ensure that the agency remains in compliance with EPA regulations for
handling of the SBM.  The agency contends that, due to UST's
subcontractor's failure to properly recycle the SBM, UST's ability to
comply with the contract's recycling component was called into question. 
Thus, the agency states that in the absence of a viable recycling option,
it modified the contract to allow for disposal consistent with EPA
regulations.  The agency argues that the government's ultimate need for
plastic media and the obligation to comply with EPA regulations regarding
the handling of the SBM have not changed and, thus, the modification was
proper.

   We disagree with the agency's view that the modification does not
materially change the requirements of the contract or result in a
fundamental change to the nature of the work.  The original solicitation
sought proposals that required offerors to both lease plastic media and
recycle the resulting SBM in compliance with regulations, and offerors
were thus required to propose technical solutions and pricing for both the
lease and recycling components of the work.  The fact that the agency
still requires plastic media for its equipment needs and still requires
removal of the SBM from its facilities does not afford the agency
unlimited latitude to modify the way in which it contracts to meet those
requirements.

   An agency may not modify a contract by changing or relaxing requirements
where the resulting work is fundamentally different from the work
anticipated by the original solicitation.  Marvin J. Perry & Assoc.,
supra, at 4-5; Avtron Mfg., Inc., supra, at 4-5.  Here, the RFP did not
anticipate that the contractor could be relieved of the recycling
requirement or that a disposal effort could be ordered in lieu of
recycling.[4]  Furthermore, Poly-Pacific contends, and the agency does not
dispute, that the costs of leasing plastic media with no recycling
requirements is as much as 50 percent less than the costs of leasing
plastic media with recycling requirements.[5]  There also appear to be at
least 4 approved sources for providing type V plastic media, including
Poly-Pacific and UST, without the recycling requirement.  Comments,
exh. 8, *Media Approved for Air Force Use.*  Evidence suggesting that
proposals submitted on the basis of a modified contract's relaxed
requirements could result in more competition and lower prices generally
weighs in favor of finding that the contract modification was improper. 
Avtron Mfg., Inc., supra, at 5.  In sum, the agency's suspension of the
recycling requirement relaxed the performance requirements and modified
the contract beyond the scope of work anticipated by the underlying
solicitation and unmodified contract.  In our view, the modification
resulted in a material and fundamental change to the nature of the work
that changed the field of competition and that work, therefore, should
have been competed on a full and open basis, unless the agency followed
the steps required to conduct the procurement without full and open
competition.

   Finally, we find that the protester was prejudiced by the agency's
improper modification of the contract.  As discussed above, Poly-Pacific
is a qualified source to provide type V plastic media, and thus could
participate in a competition for the work now required under modification
No. P0003, i.e., the lease of the plastic media.[6]

   RECOMMENDATION

   From the record, we conclude that modification No. P0003 relaxed the
contract performance requirements, resulting in work that improperly
changed the scope of work anticipated by the underlying solicitation and
original contract.  Accordingly, we recommend that the agency terminate
modification No. P0003 of the contract.  If, after the termination of the
modification, the agency determines that it is not able to obtain the
required performance of the original contract from UST, we recommend that
the agency terminate the underlying contract and compete the lease of
plastic media on a full and open basis, with or without the recycling
requirements, as appropriate, unless the agency determines that a
procurement without full and open competition is warranted, and the
required steps are taken to conduct such a procurement.  We further
recommend that the agency reimburse Poly-Pacific the reasonable costs of
filing and pursuing the protest, including any reasonable attorneys' fees
incurred.  Poly-Pacific's certified claim for costs, detailing the time
expended and the costs incurred on this issue, must be submitted to the
agency within 60 days of receiving this decision.  4 C.F.R. S 21.8(f)(1).

   The protest is sustained.

   Anthony H. Gamboa

   General Counsel

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

   [1] Although Poly-Pacific did not submit a proposal for the original
contract, we conclude that it is an interested party to protest the
modification of UST's contract because, as the parties agree, Poly-Pacific
is currently a qualified source to provide type V plastic media. 
Poly-Pacific was placed on the agency's list of qualified offerors shortly
after the contract was awarded, and before the modification was executed. 
Comments, exh. 8, *Media Approved for Air Force Use.*  Because
Poly-Pacific argues that the contract as modified resulted in a reduced
scope of work that requires only the lease of the plastic media,
Poly-Pacific is a prospective offeror whose direct economic interest would
be affected by the award of a contract or the failure to award a contract.
    Bid Protest Regulations, 4 C.F.R. S 21.0(a) (2005); McRae Indus., Inc.,
B-287609.2, July 20, 2001, 2001 CPD P 127 at 3.

   [2] In January 2005, the Department of Justice filed a complaint against
UST under the False Claims Act, 31 U.S.C. S 3729 (2000), in the U.S.
District Court for the Northern District of Ohio.  Protest, exh. 4, P 3. 
The complaint alleged that UST sent the SBM generated under the Air Force
contract to UST's subcontractor for recycling in accordance with UST
standards, but knew that the subcontractor was improperly disposing of the
SBM by pouring it into the ground instead of recycling it.  Id.
PP 20-24.

   [3] Although the modification of UST's contract occurred approximately 2
years ago, we find that Poly-Pacific's protest is timely.  Upon learning
through news accounts that UST was under investigation for allegedly
failing to recycle the SBM according to the contract, Poly-Pacific
diligently pursued information regarding UST's performance.  Poly-Pacific
made several unsuccessful attempts to obtain information from the agency
regarding UST's contract following the news accounts of the investigation
of UST.  The agency did not inform Poly-Pacific of the modification until
February 25, 2005.  AR, Tab 8, Letter from Agency to Poly-Pacific, Feb.
25, 2005, at 1.  We conclude that Poly-Pacific diligently pursued the
information that forms the grounds for this protest, and its filing of the
protest within 10 days of its notice of the modification is timely.  4
C.F.R. S 21.2(a)(2).

   [4] The RFP stated that, in the event that the contractor mishandles the
SBM by causing a spill or leak, the SBM must be disposed of as a solid
waste.  SOW at 1.  This provision, however, outlines the contractor's
responsibilities in the event of mishandling of the recycling portion of
the contract and does not give the agency the right to direct disposal of
the SBM in lieu of recycling.

   [5] The agency describes the modification as a *stop-gap measure,* and
states that it intends for UST to resume recycling of the SBM *as soon as
the agency is confident UST's recycling process is again compliant with
applicable laws and regulations.*  Agency Supplemental Responses, May 5,
2005, P 2c.  UST has not been required to recycle the SBM since the
contract modification in May 2003, and we do not believe that the
possibility that that agency might someday reinstate the requirements
changes the fact that the contract was modified to relax the performance
requirements.  In any event, the agency does not provide any evidence that
UST will be able to meet the now optional recycling requirements under
this contract in the near term. 

   [6] The record does not discuss and, therefore, our decision does not
address whether Poly-Pacific would be able perform the SBM recycling
requirements of the original contract.