TITLE: B-296090.4, Kola Nut Travel, Inc., August 25, 2005
BNUMBER: B-296090.4
DATE: August 25, 2005
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B-296090.4, Kola Nut Travel, Inc., August 25, 2005

   DOCUMENT FOR PUBLIC RELEASE
   The decision issued on the date below was subject to a GAO Protective
   Order. This redacted version has been approved for public release.

   Decision

   Matter of: Kola Nut Travel, Inc.

   File: B-296090.4

   Date: August 25, 2005

   Bryant S. Banes, Esq., for the protester.

   Josephine L. Ursini, Esq., for Alamo Travel Group and Wingate Travel,
   Inc., intervenors.

   Lt. Col. Frank A. March, Department of the Army, for the agency.

   Glenn G. Wolcott, Esq., and Michael R. Golden, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Agency's contemporaneous evaluation record reasonably supports the
   agency's evaluation of protester's technical proposal as merely
   "acceptable."

   2. Where awardees' consultant will earn a fee based on profits earned
   during the awardees' performance of the contract, and there is no evidence
   of improper influence on government officials regarding the contract award
   decisions--rather, the record reflects that award was made on the basis of
   the awardees' significantly lower prices and higher rated technical
   proposals--the agreement between the awardees and the consultant does not
   violate the statutory and regulatory limitations on contingent fees.

   DECISION

   Kola Nut Travel, Inc. protests the Department of the Army's award of
   contracts to Alamo Travel Group and Wingate Travel, Inc. for travel
   management services under request for proposals (RFP) No.
   W91-QUZ-04-R-0003. Kola Nut maintains that the agency failed to properly
   evaluate its technical proposal and that the awardees' proposals reflect
   improper contingent fee agreements.

   We deny the protest.

   BACKGROUND

   The Army published the solicitation at issue here in February 2004,
   seeking proposals to provide travel management and related services for
   Department of Defense (DOD) travelers whose duty stations are within
   several specified travel areas.[1] The solicitation contemplated separate
   contract awards for each of the specified travel areas; accordingly, the
   agency performed separate evaluations and source selection decisions with
   regard to each area. All travel areas were set aside for small businesses,
   and offerors were permitted to submit proposals for any or all areas. Kola
   Nut's protest challenges the agency's contract awards to Alamo for travel
   area 67, and to Wingate for travel areas 72 and 82.

   The solicitation advised offerors that proposals would be evaluated on the
   basis of the following factors, listed in descending order of importance:
   technical,[2] price,[3] and performance risk.[4] With regard to proposed
   price, the solicitation recognized that travel service contractors may
   receive airline commissions, as well as utilization fees from global
   distribution system (GDS) providers.[5] Kola Nut acknowledges that each
   offeror's proposed price is significantly affected by the level of
   commissions or utilization fees that the offeror is able to negotiate with
   the airlines and GDS providers.[6] Kola Nut Submission (June 22, 2005) at
   3.

   On or before the specified closing dates, proposals were submitted for the
   travel areas at issue by several offerors including Alamo, Wingate, and
   Kola Nut.[7] The prices proposed by Alamo and Wingate were considerably
   lower than the prices proposed by Kola Nut. In this regard, Alamo and
   Wingate advised the agency that they were associated with a group of
   travel agencies who, with the common assistance of a consultant, Mr. Alvin
   Chisik,[8] had negotiated higher commissions and utilization fees from the
   airlines and GDS providers based on the consolidated higher volume of
   business that the group of companies is expected to provide to the
   airlines and GDS providers.

   The agency evaluated the proposals under each of the stated evaluation
   factors with the following results:

                                 Travel Area 67

   +------------------------------------------------------------------------+
   |                            |        Alamo        |      Kola Nut       |
   |----------------------------+---------------------+---------------------|
   |Technical                   |        Good         |     Acceptable      |
   |----------------------------+---------------------+---------------------|
   |Performance Risk            |      Very Low       |      Very Low       |
   |----------------------------+---------------------+---------------------|
   |Price                       |     $1,239,578      |     $1,815,401      |
   +------------------------------------------------------------------------+

   Agency Report, Tab 59, at 2, 4.

                                 Travel Area 72

   +------------------------------------------------------------------------+
   |                            |       Wingate       |      Kola Nut       |
   |----------------------------+---------------------+---------------------|
   |Technical                   |        Good         |     Acceptable      |
   |----------------------------+---------------------+---------------------|
   |Performance Risk            |      Very Low       |      Very Low       |
   |----------------------------+---------------------+---------------------|
   |Price                       |     $1,108,573      |     $2,149,632      |
   +------------------------------------------------------------------------+

   Agency Report, Tab 62, at 2-4.

                                 Travel Area 82

   +------------------------------------------------------------------------+
   |                            |       Wingate       |      Kola Nut       |
   |----------------------------+---------------------+---------------------|
   |Technical                   |        Good         |     Acceptable      |
   |----------------------------+---------------------+---------------------|
   |Performance Risk            |      Very Low       |      Very Low       |
   |----------------------------+---------------------+---------------------|
   |Price                       |      $380,821       |    $1,494,530[9]    |
   +------------------------------------------------------------------------+

   Agency Report, Tab 63, at 2-3.

   Based on the significantly lower prices offered by Alamo and Wingate,
   along with their equal or higher ratings under non-price factors, the
   agency selected the proposals submitted by Alamo and Wingate for contract
   awards. Kola Nut's protest followed.

   DISCUSSION

   Kola Nut first complains, similar to its complaints in previous protests,
   that the agency's evaluation of proposals "was improper and not in
   accordance with procurement regulations." Kola Nut Protest (May 18, 2005)
   at 1. More specifically, Kola Nut asserts that the agency's evaluation of
   Kola Nut's proposal as only "acceptable" under the technical evaluation
   factor was improperly based on the agency's assessment that Kola Nut had
   failed to adequately address its technical approach to servicing the
   unique needs of multiple customers from a central location, and that the
   agency's criticism of Kola Nut's proposal under the non-MEPS solicitation
   was "inconsistent" with the fact that the agency had not similarly
   criticized Kola Nut's proposal responding to the MEPS solicitation.

   As discussed above, the solicitation at issue here related to travel from
   non-MEPS locations. While travel under the simultaneously-issued MEPS
   solicitation would frequently entail travelers departing from the same
   origin and arriving at the same destination via shared transportation,
   such uniformity was not anticipated for travelers coming from non-MEPS
   locations. Accordingly, as noted above, the non-MEPS solicitation
   specifically advised offerors that proposals would be assessed with regard
   to the offerors' reliance on a central location for "servicing unique
   needs of multiple customers," RFP at 161; the MEPS solicitation did not
   have a similar provision.

   The record shows that, during discussions conducted in connection with the
   proposals submitted in response to the non-MEPS solicitation (the
   solicitation at issue here), the agency specifically sought information
   from Kola Nut regarding its approach to servicing the unique travel
   requirements contemplated under that solicitation and that Kola Nut's
   response was inadequate. Specifically, the agency's contemporaneous
   documentation supporting its evaluation of Kola Nut's proposal under the
   technical evaluation factor states:

   Offeror's entire discussion illustrates Offeror still interprets this
   subfactor to apply to travelers (individual or groups) departing the same
   origin and arriving at the same destination via shared transportation
   (e.g., the same flight or same train). Offeror appears not to understand
   that this subfactor actually pertains to having capability to service
   multiple travelers many of whom may have differing travel needs from a
   central location (e.g., a singular staffed office or a central call
   center). Multiple travelers departing same origin/arriving same
   destination via shared transportation likely would be a purely random
   event and be the exception rather than the rule.

   Agency Report, Tab 58, Final Technical Report, at 4.

   In pursuing this protest, Kola Nut has not explained why the agency's
   concerns regarding the unique requirements of the non-MEPS solicitation
   were invalid or unreasonable. Indeed, it appears that Kola Nut's assertion
   that the agency's evaluations under the two solicitations were
   "inconsistent" reflects an ongoing failure by Kola Nut to discern the
   differing requirements under the two solicitations. On this record, we
   find no basis to question the agency's evaluation of Kola Nut's technical
   proposal as merely "acceptable."

   Next, Kola Nut maintains that "the contracting agency's evaluation of
   price and performance risk [of the awardees' proposals] did not
   appropriately consider the price and performance risk associated with many
   offerors' assumptions regarding incentives." Kola Nut Protest Submission
   (May 18, 2005) at 2. In this regard, Kola Nut continues to complain, as it
   has under previous protests, that the fee paid to the consultant who
   negotiated the awardees' airline commissions and GDS utilization fees
   constitutes a prohibited "contingent fee" and creates performance
   risks.[10] As discussed in our previous decisions, Kola Nut's perception
   of what constitutes a prohibited contingent fee is flawed.

   Section 2306(b) of title 10, United States Code, places certain
   limitations on obtaining contracts under "contingent fee" arrangements.
   However, the purpose of this limitation, as implemented by Federal
   Acquisition Regulation (FAR) subpart 3.4, is to prevent the attempted or
   actual exercise of improper influence by third parties over the federal
   procurement system. Puma Industrial Consulting v. Daal Assocs., Inc., 808
   F.2d 89 (2d Cir. 1987); Quinn v. Gulf & Western Corp., 644 F.2d 89 (2d
   Cir. 1981); E&R, Inc.--Claim for Costs, B-255868.2, May 30, 1996, 96-1 CPD
   para. 264 at 3-4; Howard Johnson Lodge--Recon., B-244302.2, Mar. 24, 1992,
   92-1 CPD para. 305. We have held that the prohibition applies only to
   situations where an agent agrees "to solicit or obtain" a contract from a
   procuring agency. Bertsch Constr., B-253526, Aug. 25, 1993, 93-2 CPD para.
   122. The fact that an agent's fee is contingent upon the contractor's
   successful performance of the contract, or even upon receiving the
   contract award, is not sufficient, by itself, to bring a fee agreement
   under the contingent fee prohibition; rather, the regulation contemplates
   a specific demonstration that an agent is retained for the express purpose
   of contacting government officials, where such contact poses a threat of
   the exertion of improper influence to obtain government contracts.
   Convention Mktg. Servs., B-245660.3, B-246175, Feb. 4, 1992, 92-1 CPD
   para. 144.

   Here, Kola Nut acknowledges that the consultant's fee agreement is
   calculated as a portion of the profit resulting from the awardees'
   performance of the contract--not in exchange for the awardees' receipt of
   contract awards. Kola Nut Protest Submission (Mar. 28, 2005) at 3.
   Further, the record is devoid of any evidence that the challenged awards
   reflect any improper influence on government officials. To the contrary,
   as shown above, the agency selected proposals that offered significantly
   lower prices and were evaluated equal to, or higher than, Kola Nut's
   proposal with regard to the non-price evaluation factors. On this record,
   Kola Nut's assertion that the contracts incorporate a prohibited
   contingent fee agreement is without merit.

   Next, Kola Nut asserts that "[t]here is a latent agency bias against small
   businesses" and that the solicitation at issue here "created a system
   which encourages a conglomerate led by [the awardees' consultant] to
   negotiate special rates and contingent agreements, thus destroying any
   small business identity." Kola Nut Protest (May 18, 2005) at 2. We believe
   this essentially constitutes a challenge to the size status of the
   awardees, an issue not for consideration by our Office. In this regard,
   the Small Business Act, 15 U.S.C. sect. 637(b)(6), gives the Small
   Business Administration, not our Office, conclusive authority to determine
   matters of small business size status for federal procurements. Bid
   Protest Regulations, 4 C.F.R. sect. 21.5(b)(1); Randolph Eng'g Sunglasses,
   B-280270, Aug. 10, 1998, 98-2 CPD para. 39 at 3.

   Finally, in a "supplemental protest" filed with our Office on June 22,
   Kola Nut, for the first time, asserts that the discussions the agency
   conducted with Kola Nut were less than meaningful in that Kola Nut was not
   specifically advised that its proposal was priced substantially higher
   than that of the awardees. Kola Nut Protest Submission (June 22, 2005) at
   3. Although this issue was not timely presented,[11] we briefly respond as
   follows.

   As Kola Nut has, itself, expressly acknowledged, an offeror's proposed
   price is significantly affected by the level of airline commissions and
   GDS utilization fees it is able to negotiate. The record is undisputed
   that the commissions and utilization fees

   negotiated by the awardees were significantly greater than those that Kola
   Nut was able to negotiate. In one of its first submissions to our Office,
   Kola Nut stated as follows:

   [The awardees' association with Chisik and their ability to negotiate
   higher GDS utilization fees] enables agencies such as Alamo to have an
   unfair advantage over other small businesses. . . . Given this
   opportunity, Alamo Travel is able to offer a pricing that would not even
   cover staffing at this [Kola Nut's] location.

   Kola Nut Protest Submission (March 14, 2005) at 1.

   Although agencies are required to advise offerors that their prices are
   unreasonably high, the record, as discussed above, shows that such was not
   the case here. Rather, the record is clear that the agency believed Kola
   Nut's proposed prices were reasonable--given the lower level of
   commissions and utilization fees Kola Nut had been able to negotiate.
   Accordingly, the agency had no obligation to advise Kola Nut that, as
   compared to other competitors, its price was too high. See Hydraulics
   Int'l, Inc., B-284684, B-284684.2, May 24,

   2000, 2000 CPD para.149 at 17; MarLaw-Arco MFPD Mgmt., Apr. 23, 2003, 2003
   CPD para. 85 at 6.

   The protest is denied.[12]

   Anthony H. Gamboa

   General Counsel

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

   [1] The solicitation related to travel from locations other than military
   entrance processing stations (MEPS), that is, from non-MEPS locations. At
   the same time, the agency issued another solicitation, W91-QUZ-04-R-0007,
   which related to travel from MEPS locations; awards under both of these
   solicitations have been the subject of previous Kola Nut protests. See
   Kola Nut Travel, Inc., B-296090, March 16, 2005; Kola Nut Travel, Inc.,
   B-296090.2, B-296090.3, June 17, 2005, 2005 CPD para. ___. In its protest
   submissions here, Kola Nut has repeated various arguments previously made
   in connection with its prior protests, characterizing those repeated
   arguments as requests for reconsideration. Our Bid Protest Regulations
   provide that a request for reconsideration must show that our prior
   decision contained either errors of fact or law or present information not
   previously considered which warrants reversal or modification of our
   decision. 4 C.F.R. sect. 21.14(a) (2005). Kola Nut's submissions, which
   consists of repetition of arguments we have previously rejected, fail to
   identify any errors of fact or law, nor does Kola Nut present new
   information that is material to our prior rejection of its arguments;
   accordingly Kola Nut has not provided a basis for reconsideration of our
   prior decisions.

   [2] With regard to the technical evaluation factor, the solicitation
   provided that the agency would consider the following: understanding the
   requirements; feasibility of approach; and completeness. RFP at 161. Since
   the solicitation at issue here contemplated travel service from dispersed,
   non-MEPS locations, the solicitation advised that evaluation would include
   an assessment of the offeror's proposed approach to "servicing unique
   needs of multiple customers from a central location."  Id.

   [3] Offerors were required to propose fixed transaction fees,
   point-of-sale fees, and fixed prices for certain required reports. Section
   M.4.3 of the solicitations further provided, "The proposed fees will be
   evaluated as outlined herein," thereafter stating that the proposed fees
   and prices "will be multiplied by the [estimated quantity provided for
   each line item] to arrive at the overall total estimated contract
   value . . . ." RFP at 162-63.

   [4] With regard to performance risk, the solicitation stated: "The
   Government will conduct a performance risk assessment based on the
   quality, relevancy, and currency of the Offeror's current and past
   performance . . . as it relates to the probability of successful
   accomplishment of the required services." RFP at 162.

   [5] A GDS is defined as an "[o]n-line, transaction processing system with
   access to computer-based carrier reservation systems capable of providing
   lowest cost fare evaluations, reservations, ticketing, related travel, and
   accessorial services." RFP sect. J, at 5.

   [6] The issue of whether such fees and commissions are likely to continue
   in the travel industry has been a subject of controversy before our Office
   for several years. See, e.g., CW Gov't Travel, Inc. d/b/a/ Carlson
   Wagonlit Travel; American Express Travel Related Serv. Co., Inc.,
   B-283408, B-283408.2, Nov. 17, 1999, 99-2 CPD para. 89 (protests asserting
   that solicitation incorporating commission-based pricing of travel
   services was contrary to customary commercial practice).

   [7] The agency received a total of 12 proposals for travel area 67, 10
   proposals for travel area 72, and 9 proposals for travel area 82.
   Contracting Officer's Statement (June 10, 2005) at 4.

   [8] Kola Nut has previously identified Mr. Chisik as "the Society of
   Government Travel Professionals 2003 Person of the Year." Kola Nut Protest
   Submission (March 28, 2005) at 3.

   [9] With regard to travel area 82, Kola Nut submitted an "alternate
   proposal" which the agency evaluated as offering a price "as much as" 10
   percent lower than that stated above. Agency Report, Tab 63, at 3.
   Accordingly, the record indicates that Kola Nut's "alternate proposal" was
   evaluated as offering a price of approximately $1,345,077 ($1,494,530
   minus $149,453)--still more than three times higher than the price offered
   by Wingate.

   [10] To the extent Kola Nut is arguing that the agency failed to properly
   consider the alleged risk associated with the consultant fee agreement
   under the solicitation's performance risk evaluation factor, its arguments
   are contrary to the specific terms of the solicitation. As noted above,
   the solicitation expressly advised offerors that proposals would be
   evaluated under the performance risk factor on the basis of the offerors'
   "current and past performance." RFP at 163-64. Kola Nut has not identified
   any aspect of the awardees' current or past performance that the agency
   failed to consider at the time the evaluation was performed.

   [11] Kola Nut first raised this issue in a submission to our Office dated
   June 22, 2005; however, it was notified of the awardees' prices at the
   time award was made, several months prior to the June 22 submission and,
   of course, Kola Nut previously knew of all the discussions the agency had
   conducted with Kola Nut during the procurement. Our Bid Protest
   Regulations contain strict rules for the timely submission of protests.
   Under these rules, a protest based on other than alleged improprieties in
   a solicitation must be filed no later than 10 calendar days after the
   protester knew, or should have known, of the basis for protest, whichever
   is earlier. 4 C.F.R. sect. 21.2(a)(2).

   [12] In its comments responding to the agency report, Kola Nut, for the
   first time, argued that the awardees' use of a common consultant to assist
   in preparation of their proposals in the multiple competitions for the
   various travel areas constituted improper collusive bidding. The record
   shows that Alamo and Wingate submitted competing proposals for some of the
   same travel areas, indicates that Chisik assisted Alamo and Wingate in
   preparing their proposals, and establishes that Chisik was "an authorized
   negotiator" for both of these companies, as well as other, competing
   offerors. See Contracting Officer's Statement (July 20, 2005), at 2. In
   responding to this matter, the contracting officer described the awardees'
   proposals as "virtually identical" and stated that their pricing was
   presented in a similar manner. Id. In this regard, the Federal Acquisition
   Regulation (FAR) sect. 3.303 provides: "Agencies are required . . . to
   report to the Attorney General any bids or proposals that evidence
   violation of the antitrust laws," and lists various practices and events
   that may evidence violations of the antitrust laws including submission of
   identical bids. This Office subsequently conducted a conference call with
   counsel for all of the parties to discuss the matter, expressing concern
   that some of the indicia of antitrust violations listed in FAR sect. 3.303
   may exist. Following this Office's expression of concern, the agency
   advised our Office that it had referred the matter to the Department of
   Justice (DOJ) as contemplated by FAR sect. 3.303. Letter from Department
   of the Army to GAO (Aug. 10, 2005). In light of the agency's notification
   of DOJ regarding this matter, we do not further address Kola Nut's
   allegations.