TITLE: B-296628.4, Ystueta Inc., February 27, 2006
BNUMBER: B-296628.4
DATE: February 27, 2006
*******************************************
B-296628.4, Ystueta Inc., February 27, 2006

   Decision

   Matter of: Ystueta Inc.

   File: B-296628.4

   Date: February 27, 2006

   R. Brent Blackburn, Esq., and Edward J. Kinberg, Esq., Kinberg &
   Associates, LLC, for the protester.

   Samar A. Shams, Esq., Department of Agriculture, for the agency.

   Susan K. McAuliffe, Esq., and Christine S. Melody, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   In a negotiated procurement, agency need only establish a reasonable basis
   for the cancellation of a solicitation; lack of funding for the
   procurement clearly provides a reasonable basis for cancellation as agency
   cannot award contract which exceeds available funds.

   DECISION

   Ystueta, Inc. protests the withdrawal of the small business set-aside
   restriction under, and the subsequent cancellation of, request for
   proposals (RFP) No. 04-3K15-05, issued by the Department of Agriculture
   for construction services for the renovation of the James Whitten Delta
   States Research Center in Stoneville, Mississippi. Ystueta contends
   principally that the agency's actions were undertaken to avoid having to
   award a contract under the RFP to the protester.[1]

   We deny the protest.

   The agency reports that while it had substantial concerns about the
   sufficiency of the protester's bid guarantee and had determined that the
   firm's proposal (the sole small business proposal received) was
   unacceptable on that basis, the set-aside withdrawal determination and the
   subsequent cancellation of the RFP were based on additional grounds,
   including the fact that Ystueta's proposed price substantially exceeded
   both the agency's cost estimate for the work and the funding available for
   the project.

   Regarding the firm's challenge to the agency's cancellation of the
   procurement, in a negotiated procurement, such as here, a contracting
   agency need only establish a reasonable basis to support a decision to
   cancel an RFP. PBSI Corp., B-227897, Oct. 5, 1987, 87-2 CPD para. 333 at
   2. It is well established that an agency's lack of funding for the
   procurement provides a reasonable basis for its cancellation, as agencies
   cannot award contracts which exceed available funds. Quality Support,
   Inc., B-296716, Sept. 13, 2005, 2005 CPD para. 172 at 2. Here, the agency
   explains that the protester's proposed price substantially exceeds the
   agency's funding for the project.[2] Accordingly, the cancellation clearly
   was reasonable, since an award was not possible within available agency
   funds. See First Enter., B-292967, Jan. 7, 2004, 2004 CPD para. 11 at 3.

   As to the protester's challenge to the agency's earlier determination to
   withdraw the set-aside restriction in the RFP, the cancellation renders
   academic the challenge to the terms of the cancelled procurement. See
   Morey Machinery, Inc.--Recon., B-233793.2, Aug. 3, 1989, 89-2 CPD para.102
   at 1-2. To the extent the protester contends that any follow-on
   procurement for the same renovation work must be set aside for small
   business concerns, we see the challenge as premature at this juncture.
   While the protester speculates that the agency will solicit proposals for
   this work in the future on an unrestricted basis, and that such
   determination will be improper, it merely anticipates improper agency
   action and is premature to challenge the matter at this time; moreover,
   adding to the premature nature of the allegation, we note that the agency
   continues to report a lack of current funding for a follow-on
   procurement.[3] See General Elec. Canada, Inc., B-230584, June 1, 1988,
   88-1 CPD para. 512 at 6.

   Lastly, the protester argues that the challenged withdrawal determination
   and subsequent cancellation of the RFP were undertaken in bad faith by the
   agency to avoid awarding a contract to Ystueta, or in retaliation for the
   firm's previous protests of the procurement. Procurement authorities are
   presumed to act in good faith and in order for our Office to conclude
   otherwise, the record must show that procuring officials intended to
   injure the protester. See Cycad Corp., B-255870, Apr. 12, 1994, 94-1 CPD
   para. 253 at 5. As there is no evidence of intent here by the agency to
   injure the protester, the protester's inference of bad faith is
   insufficient to question the agency's decisions.[4] Quality Support, Inc.,
   supra.

   The protest is denied.

   Anthony H. Gamboa

   General Counsel

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

   [1] In its initial protest, Ystueta challenged the agency's rejection of
   its proposal for failure to submit an adequate bid guarantee; that protest
   was dismissed after the agency advised that it was taking corrective
   action, including conducting discussions and evaluating final revised
   proposals. Ystueta's second protest challenged solicitation terms
   concerning the bid guarantee to be submitted with the revised proposals;
   that protest was dismissed for lack of standing after the agency reported
   the firm was not in line for award. In its third protest, Ystueta,
   reasserting its solicitation challenge, argued that the offeror next in
   line for award had been found to be other than a small business; Ystueta
   argued that the agency should accept its bid guarantee and make an award
   to the firm as the sole remaining offeror. That protest was dismissed as
   academic after the agency reported that it planned to withdraw the
   set-aside restriction in the RFP and cancel the procurement. This protest
   followed.

   [2] In this regard, the agency also notes that it is not feasible to
   delete any RFP requirements to allow for award of a contract with a
   smaller scope of work, since it previously had already deleted certain
   work requirements from the RFP in an effort to reduce offerors' proposed
   prices in the hope of allowing an award within the agency's set budget.

   [3] The record shows that the agency eventually (approximately 2 months
   after the agency reported it was withdrawing the set-aside) notified the
   Small Business Administration (SBA) Procurement Center Representative
   (PCR) of its desire to withdraw the set-aside restriction in the
   subsequently-cancelled procurement. The SBA PCR, prior to the cancellation
   of the RFP, reported to the agency that he would not comment on the matter
   until after the current protest was resolved.

   [4] The protester also requests reimbursement of its costs of filing and
   pursuing the protest. In this regard, the protester generally contends
   that the agency delayed reporting the basis of the cancellation, and
   suggests that had the firm been notified earlier of the cancellation due
   to inadequate funding, it might not have undertaken the costs of pursuing
   its protest. Since we deny the protest, there is no basis to recommend
   that the firm be reimbursed its protest costs. See Bid Protest
   Regulations, 4 C.F.R. sect. 21.8(d) (2005). We note, however, that despite
   the firm's suggestion that it was not timely notified of the basis of
   cancellation, our review of the record confirms that the agency's lack of
   funding for the procurement was discussed in its initial agency report
   filed shortly after the protest was filed; thus, the record suggests that,
   contrary to its current position, the protester chose to pursue the
   protest in the face of the agency's prompt report that cancellation was
   due, at least in part, to a lack of available funding.