TITLE:  PPCSC/RAC BENNING JV 1, B-296239, July 19, 2005
BNUMBER:  B-296239
DATE:  July 19, 2005
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   Decision

   Matter of: PPCSC/RAC BENNING JV 1

   File: B-296239

   Date: July 19, 2005

   John E. Jensen, Esq., and Devon E. Hewitt, Esq., Pillsbury Winthrop Shaw
Pittman LLP, for the protester.

   Bryan C. Naquin, Esq., and Lloyd R. Crosswhite, Esq., Department of the
Army, and Kenneth Dodds, Esq., and John W. Klein, Esq., Small Business
Administration, for the agencies.

   Charles W. Morrow, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Agency decision to include clauses applicable to both construction work
and supply work in a solicitation for a complex of prefabricated modular
structures that included both types of work was reasonable where the
solicitation divided the work into separate line items, many of which were
for construction and many for supply.

   DECISION

   PPCSC/RAC BENNING JV 1 protests the terms of request for proposals (RFP)
No. W9126G-05-R-0013, issued by the United States Army Corps of Engineers,
for design and construction of a complex of prefabricated temporary
modular structures at Biggs Army Airfield, Fort Bliss, Texas.

   We deny the protest.

   The RFP, issued April 4, 2005, sought proposals for design and
construction of a complex of prefabricated modular structures to
accommodate a large combat unit arriving at Fort Bliss.  The scope of the
project was for the design and construction of a complete complex,
including the assembly of prefabricated structures, to serve as barracks,
dining, vehicle maintenance, classroom and administrative facilities, as
well as site development, which entailed clearing and grubbing;
constructing roadways, parking areas, sidewalks, curbs, and utilities
supporting the structures (for example, sewer, storm drainage, gas, water,
electrical); and landscaping. 

   The project was divided into four "construction phases," each with a
separate completion date, with the final completion date occurring on
January 27, 2006.  The first 6 line items in the price schedule comprised
the base bid and there were 35 optional line items.  The 6 base bid line
items and the first 6 option line items required prices for the vast bulk
of the site-preparation work.  The remaining option line items primarily
reflected the work associated with providing and installing the
prefabricated structures.  The solicitation, as issued, required the
successful contractor to furnish both performance and payment bonds
acceptable to the government at 100 percent of the original contract price
(including options exercised at the time of award), as a condition of
award.

   Award was to be made on a "best-value" basis, considering four technical
evaluation factors and price.  The technical evaluation factors were
design and construction past performance, corporate relevant specialized
experience, management effectiveness (evaluation of proposed personnel and
project management plan), and project duration (evaluation of proposed
project schedule).  Both the design and construction past performance and
corporate relevant specialized experience factors contemplated considering
offerors' construction experience on projects within the last 5 years.[1] 
The first three listed technical evaluation factors were of equal
importance, while the fourth factor was worth more than the total weight
of the first three factors.  Price was approximately equal to the combined
weight of the technical factors. 

   PPCSC/RAC, a HUB (Historically Underutilized Business) Zone small
business, which supplies and installs prefabricated modular structures,
protested that the Corps had improperly characterized the acquisition as
one for construction, instead of supply, and had failed to set aside the
procurement for small businesses.  In its protest, PPCSC/RAC argued that
the Corps should have solicited the contract as a supply contract, with
the appropriate terms and clauses, instead of the construction clauses,
because the predominant effort under the contract involves supplying
prefabricated modular structures.[2]  PPCSC/RAC contended that because the
supply work is the predominant work, the Corps was required to solicit the
contract as one for supply and to delete all the clauses in the
solicitation associated with construction, in particular the requirements
for performance and payment bonds and the evaluation criteria providing
for the evaluation of offerors' construction experience.  In the
alternative, PPCSC/RAC maintained in its protest that the project should
be viewed as divided into two parts and clauses applicable to both the
construction work and to the supply work should be included.  

   In response to PPCSC/RAC's protest, the Corps determined that the contract
would be a "hybrid contract with features which were uniquely construction
in nature and features which were supply in nature."  Agency Request for
Summary Dismissal at 3.  Consequently, pursuant to Federal Acquisition
Regulation Section 36.101(c)(2), the Corps divided the contract work into
two parts, and issued an amendment to the RFP to add the applicable supply
contract clauses and to reduce the amount of the performance and payment
bonds from 100 percent of the original contract price (estimated at
approximately $180 million) to $48 million (estimate of construction
portion).  The Corps also undertook a new market survey of small
businesses based on the lower bonding requirements, and determined that
none of the 20 firms that it located that met the bonding requirements
were capable of carrying out a project of this size, and continued the
procurement on an unrestricted basis.

   We solicited the views of the Small Business Administration (SBA), which
opined that it did not appear that the Corps had used reasonable efforts
to identify HUBZone small businesses capable of performing the requirement
to determine whether or not this procurement should have been a HUBZone
set-aside.

   Our Office then conducted a conference to provide "outcome prediction"
alternative dispute resolution (ADR) to the parties.  In this conference,
the GAO attorney handling the protest expressed concern that the record
before us showed that the Corps had not used reasonable efforts to
identify HUBZone small businesses capable of performing the requirement,
particularly given the lower bond levels now required.  In response, the
Corps "propose[d] to take corrective action by conducting a new market
survey to determine whether there is a reasonable expectation of receiving
offers from at least two HUBZone small businesses capable of performing
the work and whether an 8(a) or Veteran Disabled Small Business set-aside
would be required under [Federal Acquisition Regulation] part 19."  Army
Corrective Action Letter.  Accordingly, we partially dismissed the protest
insofar as it challenged the Corps's decision not to set aside the
requirement for small businesses. 

   In that same ADR conference, the GAO attorney handling the protest stated
that he viewed it as unlikely that PPCSC/RAC would prevail on the
remainder of the protest grounds because the record evidenced that the
agency had reasonably exercised its discretion in dividing the contract
into construction and supply sections, including both the applicable
supply and construction clauses in the solicitation, and lowering but
retaining the bond requirements.  PPCSC/RAC elected not to withdraw these
protest grounds.

   As recognized by the parties, the determination of which clauses are the
appropriate ones to include in a contract is governed by FAR Section
36.101(c), which provides:

   A contract for both construction and supplies or services shall include--

   (1)  Clauses applicable to the predominant part of the work (see Subpart
22.4) or

   (2)  If the contract is divided into parts, the clauses applicable to each
portion.

   FAR Section 22.402 provides that the construction labor standards are
applicable where the construction work is physically or functionally
separate from, and is capable of being performed on a segregated basis
from the other work required by the contract.[3]  The contracting agency
has the discretion to determine whether a contract is one principally for
construction or one for supplies, and we generally will not disturb this
agency judgment, where it was made in good faith.  See Abbott Power Corp.,
B-190067, Dec. 6, 1977, 77-2 CPD paragraph 434 at 3.

   In response to the protest, the Corps here determined, consistent with the
suggestion made in the original protest, that the procurement involved the
award of a hybrid contract divisible into separate parts, such that both
construction clauses and supply clauses should be included.  While
PPCSC/RAC now argues that the solicited work was not clearly divisible
given that the statement of work does not divide the work, our review
confirms that the bulk of the construction work was limited to the first
12 line items comprising the base bid and the first 6 option line items,
whereas the supply work basically constituted the remainder of the
options.  In fact, the Corps reports that the most critical work is the
construction, which must be completed (or substantially completed) before
installation of the prefabricated modular structures is to take place. 
Thus, the record confirms that the agency could reasonably determine that
the site-preparation construction work was sufficiently divided from the
work involving installation of the prefabricated modular structures to
satisfy the requirements of FAR Section 36.101(c)(2).  

   While PPCSC/RAC also now argues that only supply clauses should be
included pursuant to FAR Section 36.101(c)(1) because that is the
predominant part of the work, FAR Section 36.101(c) gives the agency the
discretion of either determining which clauses should be included based
upon the predominant part of the work to be performed under the contract
or dividing the contract into severable parts, and does not preclude the
agency from dividing the contracts into parts, even if supply work
constitutes a larger percentage of the work.[4]  Thus, the Corps's
decision here to include both the applicable supply and construction
clauses in the RFP is consistent with the regulation.[5]  

   PPCSC/RAC also asserts that the evaluation scheme unduly focused on past
construction experience, instead of giving weight to experience with
installing prefabricated modular structures.  Agency acquisition officials
have broad discretion in selecting evaluation factors that will be used in
an acquisition, and we will not object to the use of particular evaluation
factors or an evaluation scheme so long as the factors used reasonably
relate to the agency's needs in choosing a contractor that will best serve
the government's interest.  FAR Section 15.304; Olympus  Building Servs.,
Inc., B-282887, Aug. 31, 1999, 99-2 CPD paragraph 49 at 3.  

   As noted above, the Corps here found that the construction work was the
most critical aspect of performance of each phase of the contract because
this work must be accomplished before the prefabricated structures can be
installed and because the construction work effort must be expedited with
an intensive commitment of resources in order to meet the agency's
compressed schedule.[6]  The Corps explains that it therefore considered
construction experience to be far more relevant than experience in
providing and installing prefabricated structures in determining which
offeror was the most qualified to successfully complete the project,
notwithstanding that the supply work constituted the majority of the
dollar value of the contract.  Based on our review, we find the
establishment of evaluation factors focusing on construction experience
was a reasonable exercise of the agency's judgment.

   The protest is denied.

   Anthony H. Gamboa

   General Counsel

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

   [1] The design and construction past performance factor entailed an
evaluation of offerors' past performance on the basis of quality of
construction, timeliness of performance, customer satisfaction,
subcontractor management, documentation, and safety record.  The corporate
relevant specialized experience factor entailed considering offerors'
construction experience with completing a design/build project on the
basis of similar projects, design/build experience, and military
construction experience. 

   [2] The protester asserts that the General Services Administration and the
Department of Defense have classified procurements for providing and
installing prefabricated modular structures, including site preparation,
as procurements for supplies.    

   [3] " 'Construction' means construction, alteration, or repair (including
dredging, excavating, and painting) of buildings, structures, or other
real property. . . . Construction does not include the manufacture,
production, furnishing, construction, alteration, repair, processing, or
assembling of vessels, aircraft, or other kinds of personal property." 
FAR Section 2.101.

   [4] As noted by the SBA, the North American Industry Classification System
code for commercial and institutional building construction included in
this solicitation was not, and cannot now be timely, challenged.

   [5] While the protester here assumes that reclassifying the contract as
one for supplies would require removal of the requirement to provide
performance and payment bonds, whenever construction work in a contract
exceeds $100,000, as here, the Miller Act, 40 U.S.C. Sections 270a-270f
(2000), requires the contracting agency to require performance and payment
bonds.  Because the construction work was estimated to exceed $100,000,
the Corps still would have been legally required to include the bonding
requirement in the RFP's terms, regardless of whether it classified the
contract as one for construction or supply.  See TLC Servs., Inc.,
B-254972.2, Mar. 30, 1994, 94-1 CPD paragraph 235 at 2-3.  Here, the
protester has provided no evidence that $48 million is not a reasonable
estimate for the construction portion of the contract.  Thus, we have no
basis to find the required bonding level for payment and performance bonds
was unreasonable.

   [6] The Corps advises that the contract required all work to be completed
within 239 calendar days, which considering the design work allowed
approximately 207 days to complete the construction work.  The Corps
states that normally it would allow 660 calendar days to complete
construction on a contract valued between $40 and $50 million.