TITLE: B-297320.2; B-297320.3, Spectrum Security Services, Inc., December 29, 2005
BNUMBER: B-297320.2; B-297320.3
DATE: December 29, 2005
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B-297320.2; B-297320.3, Spectrum Security Services, Inc., December 29, 2005

   Decision

   Matter of: Spectrum Security Services, Inc.

   File: B-297320.2; B-297320.3

   Date: December 29, 2005

   Timothy H. Power, Esq., for the protester.

   John S. Pachter, Esq., and Jonathan D. Shaffer, Esq., Smith Pachter
   McWhorter & Allen, PLC, for Ahuska Security Corporation, the intervenor.

   Aaron T. Marshall, Esq., Department of Homeland Security, and Kenneth
   Dodds, Esq., and John W. Klein, Esq., Small Business Administration, for
   the agencies.

   Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1.      Where an agency fails to provide pre-award notification of the
   identity of the prospective awardee on a small business set-aside and the
   awardee is ultimately found by the Small Business Administration to be
   other than small based upon a timely size protest filed after award, the
   agency should terminate the contract and obtain the services from a small
   business offeror.

   2.      Protest that awardee's proposal, on its face, shows that the
   awardee would not comply with the solicitation's subcontracting limitation
   is denied, where the solicitation for services provided for the evaluation
   of base and option requirements and the awardee proposed to perform more
   than 50 percent of the personnel costs of the contract, considering the
   entire contract period.

   3.      Protest that agency improperly considered the corporate experience
   and past performance of awardee's proposed subcontractor is denied, where
   the solicitation encouraged offerors to submit such information.

   DECISION

   Spectrum Security Services, Inc. protests the award of a contract to
   Ahuska Security Corporation under request for proposals (RFP) No.
   HSCEOP-05-R-00001, issued as a small business set-aside by the U.S.
   Immigration and Customs Enforcement (ICE), Department of Homeland
   Security, for detention officer and transportation services. Spectrum
   complains that, as found by the Small Business Administration (SBA),
   Ahuska is not a small business concern for this procurement.[1] Spectrum
   also challenges the evaluation of Ahuska's proposal.

   We sustain the protest in part and deny it in part.

   The RFP provided for the award of an indefinite-delivery,
   indefinite-quantity contract for the provision of detention officer and
   transportation services for a base and 4 option years. Offerors were
   informed that to satisfy the agency's responsibility for "the detention,
   health, welfare, transportation and deportation of immigrants in removal
   proceedings and immigrants subject to final order of removal," a
   contractor was sought to provide uniformed detention officers on a 24-hour
   per day, 7-day per week basis. RFP, Statement of Work, at 6.

   The RFP incorporated by reference the standard "Notice of Total Small
   Business Set-Aside" clause, Federal Acquisition Regulation (FAR) sect.
   52.219-6, and "Limitations on Subcontracting" clause, FAR sect. 52.219-14.
   Thus, offerors were informed that the procurement was set aside
   exclusively for small business concerns and that, with respect to the
   limitations on subcontracting, "[a]t least 50 percent of the cost of
   contract performance incurred for personnel shall be expended for
   employees of the concern." FAR sect. 52-219-14(b)(1).

   Offerors were informed that award would be made on a "best value" basis,
   considering the following factors: (1) corporate experience, (2) past
   performance, (3) contractor's work plan, (4) personnel, (5) training, (6)
   transportation, and (7) price. Offerors were also informed that factors
   (1) through (4) were of equal importance and were slightly more important
   than factors (5) and (6), which were identified as being equal in
   importance to each other. All of the technical factors, when combined,
   were stated to be slightly more important than price. RFP at 77. The
   solicitation also incorporated by reference the standard "Evaluation of
   Options" clause, FAR sect. 52.217-5, which informed offerors that the
   agency would evaluate offers for award purposes by adding the total price
   for all options to the total price for the basic requirement.

   The agency received offers from three firms, including Spectrum and
   Ahuska. Following discussions and proposal revisions, the technical
   proposals were evaluated as follows:

+-----------------------------------------------------------------------------------+
|Offeror | Corporate |   Past    |   Work    | Personnel | Training  |Transportation|
|        |           |           |           |           |           |              |
|        |Experience |Performance|   Plan    |           |           |              |
|--------+-----------+-----------+-----------+-----------+-----------+--------------|
|Ahuska  |Outstanding|Good       |Outstanding|Outstanding|Outstanding|Outstanding   |
|--------+-----------+-----------+-----------+-----------+-----------+--------------|
|Spectrum|Outstanding|Outstanding|Outstanding|Outstanding|Good       |Good          |
|--------+-----------+-----------+-----------+-----------+-----------+--------------|
|Offeror |Outstanding|Good       |Outstanding|Outstanding|Good       |Outstanding   |
|A       |           |           |           |           |           |              |
+-----------------------------------------------------------------------------------+

   Agency Report (AR), Tab 9, Source Selection Decision, at 2. The
   contracting officer selected Ahuska's proposal for award, stating that
   "[Ahuska] received the highest technical rating and is the lowest overall
   price."[2] Id. On September 22, 2005, the agency awarded a $45 million
   contract to Ahuska.

   Although the RFP was set aside for small businesses, the agency failed to
   provide offerors with pre-award notice of the prospective awardee, as
   required by FAR sect. 15.503(a)(2). Following notice of award on September
   23 and a debriefing on September 26, Spectrum timely protested Ahuska's
   size status to the contracting officer on September 29.[3] The contracting
   officer forwarded Spectrum's size protest to SBA, which received it on
   October 7.

   On September 30, Spectrum protested to our Office, challenging the
   evaluation of Ahuska's proposal under the corporate experience and past
   performance factors. On October 19, prior to submitting its report on
   Spectrum's protest to our Office, ICE determined in writing that it would
   authorize performance of Ahuska's contract as being in the best interests
   of the United States, notwithstanding Spectrum's protest that triggered a
   stay of performance under the Competition in Contracting Act of 1984
   (CICA). Authority to Continue Performance of Award to Ahuska in Face of
   GAO Protest; see 31 U.S.C. sect. 3553(d)(3)(A) (2000). On October 28, SBA
   determined that Ahuska was not a small business concern for this
   procurement. On November 14, Spectrum filed a timely supplemental protest
   with our Office, arguing that, as found by SBA, Ahuska was not a small
   business concern for this procurement and therefore Ahuska's contract
   should be terminated. On November 15, Ahuska appealed the size
   determination to SBA's Office of Hearings and Appeals (OHA). On December
   20, OHA affirmed the determination that Ahuska was not a small business
   concern.

   As noted above, under FAR sect. 15.503(a)(2), in procurements that have
   been set aside for small businesses, the contracting agency is required to
   inform each unsuccessful offeror, in writing, of the identity of the
   apparent successful offeror prior to making award.[4] The purpose for this
   pre-award notice is to allow unsuccessful offerors the opportunity to have
   SBA review the prospective awardee's size status before award. Science
   Sys. and Applications, Inc., B-236477, Dec. 15, 1989, 89-2 CPD para. 558
   at 3. The FAR provides that a contracting officer may not make an award
   after receiving a size protest until (1) SBA has made a size
   determination, (2) 10 business days have expired since SBA's receipt of
   the size protest, or (3) where the contracting officer determines in
   writing that an award must be made to protect the "public interest." See
   FAR sect. 19.302(h)(1).

   Here, ICE violated the pre-award notice regulation, thus precluding
   Spectrum from being able to file a size status protest until after award
   and denying SBA the opportunity to issue its size determination before
   award. Under similar circumstances where the agency failed to give the
   required pre-award notice, we have sustained protests and recommended the
   termination of contracts awarded to the concerns that were determined to
   be large businesses. See, e.g., Tiger Enters., Inc., B-292815.3, B-293439,
   Jan. 20, 2004, 2004 CPD para. 19 at 4-5; Science Sys. & Applications,
   Inc., supra, at 6.

   ICE nevertheless argues that termination of Ahuska's contract is not
   appropriate despite SBA's determination that Ahuska is not a small
   business concern for this procurement.[5] ICE first points out that the
   FAR allows the contracting officer to make award pending SBA's size
   determination after 10 business days have expired since SBA's receipt of
   the size protest, see FAR sect. 19.302(h)(1), and that, here, SBA took
   14 business days to issue its size determination.[6] ICE suggests that
   SBA's failure to issue its size determination within 10 business days
   excuses the agency's failure to provide the pre-award notice.

   We disagree. As we have noted in prior decisions, we are unwilling to
   speculate whether SBA would not have provided its formal determination
   within 10 business days of receipt had ICE complied with the pre-award
   notice requirement. See Science Sys. & Applications, Inc., supra, at 4.
   Rather, we think it is more reasonable to assume--given that the 10-day
   period for SBA's size decisions is premised upon agency compliance with
   the pre-award notice requirement--that SBA would have issued its size
   determination within the 10-day period had the agency been delaying award
   pending SBA's determination. Id.; see also Eagle Marketing Group,
   B-242527, May 13, 1991, 91-1 CPD para. 459 at 3. Accordingly, we do not
   find that SBA's failure to issue its size determination within 10 business
   days excuses ICE's failure to provide pre-award notice and to stay award
   pending SBA's decision.

   ICE also points out that (as noted above) the FAR allows a contracting
   officer to make award, despite a timely size protest, where the
   contracting officer determines in writing that an award must be made to
   protect the public interest. ICE contends that the "best interest"
   override determination, which the agency executed after award to allow
   performance of Ahuska's contract during our consideration of Spectrum's
   protest, is tantamount to a determination that award had to be made to
   protect the public interest. See Agency Reply to Protester's Comments at
   4.

   There are several problems with ICE's argument. First, the agency made no
   such public interest determination with regard to the size protest but
   only postulates that it would have made such a determination. In fact, the
   agency's "best interest" override determination here was premised upon the
   agency's judgment that, given the agency's immediate need for these
   services, the agency could not await our decision, which was required to
   be issued by January 9, 2006. Specifically, ICE's written determination
   documents that the agency does not itself have the resources to provide
   the required detention officer services and that the agency had been
   obtaining these services under a contract held by the U.S. Army Corps of
   Engineers, pursuant to an interagency agreement with that agency.[7] That
   contract was to end on December 12, 2005, prior to the expected date for
   our bid protest decision. See Authority to Continue Performance of Award
   to Ahuska in Face of GAO Protest at 3. What is unexplained by the agency,
   however, is why the agency could not continue to obtain the detention
   officer services under this contract until SBA issued its size
   determination in October. In the absence of any explanation as to why the
   public interest would require an award prior to the date of SBA's size
   determination, we cannot find that the agency's determination not to stay
   performance until January 9, 2006 excused the agency's failure to provide
   the required pre-award notice and to stay award pending SBA's decision.

   In conclusion, we find that, in the absence of countervailing reasons, it
   is inconsistent with the integrity of the Small Business Act, 15 U.S.C.
   sect. 631 et seq., to permit a large business, which was ineligible under
   the terms of the solicitation, to continue to perform the contract. In
   this regard, a formal size determination by SBA becomes effective
   immediately and remains in full force and effect unless and until reversed
   by SBA's OHA, 13 C.F.R. sect. 121.1009(g)(1), and here OHA has affirmed
   the determination that Ahuska is not a small business concern.

   Spectrum also protests that Ahuska's proposal was unacceptable because the
   proposal, on its face, showed that Ahuska would not comply with the RFP's
   subcontracting limitation. Specifically, Spectrum argues that Ahuska has
   proposed the use of a large business subcontractor, which would incur more
   than 50 percent of the personnel costs in the base contract period. The
   agency and SBA contend that Ahuska's proposal shows that, taking into
   account performance of the base and option periods, Ahuska would perform
   more than 50 percent of the personnel costs of the contract, and therefore
   Ahuska's proposal does not show that the awardee would violate the
   subcontracting limitation.

   Generally, 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 SBA in connection with its
   certificate of competency proceedings. See 13 C.F.R. sect. 125.6(f);
   Mechanical Equip. Co., Inc., et al., B-292789.2 et al., Dec. 15, 2003,
   2004 CPD para. 192 at 18. However, where a proposal, on its face, should
   lead an agency to the conclusion that an offeror could not and would not
   comply with the subcontracting  limitation, the proposal may not form the
   basis for an award. KIRA Inc., B-287573.4, B-287573.5, Aug. 29, 2001, 2001
   CPD para. 153 at 3.

   Here, Spectrum admits that Ahuska's proposal shows that the awardee would
   perform more than 50 percent of the personnel costs over the life of the
   contract, considering both the base period and options. Protester's
   Comments (Dec. 5, 2005) at 3. Spectrum nevertheless argues that, although
   the solicitation provided for the evaluation of the base and option years
   and Ahuska would perform more than 50 percent of the cost of the work over
   the entire contract, Ahuska's price proposal is materially unbalanced
   because Ahuska only begins performing more than 50 percent of the cost of
   the work when the fourth option period is considered. In Spectrum's view,
   because Ahuska's price proposal is materially unbalanced, we should
   conclude that Ahuska violated the solicitation's subcontracting
   limitation. We find this argument to be without merit.[8] Notwithstanding
   Spectrum's argument, according to SBA's regulations, where a solicitation
   provides for the price evaluation of base and option requirement, the
   entire contract period will be reviewed to determine compliance with the
   subcontracting limitation.[9] 13 C.F.R. sect. 125.6(g); see also Parmatic
   Filter Corp., B-285288, B-285288.2, Aug. 14, 2000, 2000 CPD para. 185
   at 9-10 (subcontracting limitation does not apply to individual line
   items, but to the contract as a whole); Lockheed Martin Fairchild Sys.,
   B-275034, Jan. 17, 1997, 97-1 CPD para. 28 at 5 (subcontracting 
   limitation applies to the contract as a whole and does not require that
   each delivery order placed under the contract satisfy the requirements of
   the clause).

   Spectrum also challenges ICE's assessment that Ahuska's proposal should be
   rated "outstanding" and "good" under the corporate experience and past
   performance factors, respectively. Specifically, Spectrum argues that the
   agency improperly considered the corporate experience and past performance
   of Ahuska's proposed large business subcontractor in evaluating Ahuska's
   proposal under these factors. This argument is also without merit. The RFP
   specifically encouraged offerors to provide past performance and
   experience information for subcontractors. See RFP at 78. Thus, ICE
   appropriately considered the corporate experience and past performance of
   Ahuska's proposed subcontractor in evaluating Ahuska's proposal under
   these factors. See ROCA Mgmt. Educ. & Training Inc., B-293067, Jan. 15,
   2004, 2004 CPD para. 28 at 5.

   The protest is sustained in part and denied in part.

   We recommend that Ahuska's contract be terminated and that the agency
   consider award to Spectrum or the other small business offeror.[10] We
   further recommend that the agency reimburse Spectrum the reasonable costs
   of filing and pursuing the protest, including reasonable attorneys' fees,
   with respect to the issue sustained in this decision. 4 C.F.R. sect.
   21.8(d)(1). The protester's certified claim for costs, detailing the time
   spent and costs incurred, must be submitted to the agency within 60 days
   of receiving this decision. 4 C.F.R. sect. 21.8(f)(1).

   Anthony H. Gamboa

   General Counsel

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

   [1] In response to our request, SBA provided its views on this
   procurement.

   [2] Spectrum's and Ahuska's proposals were both evaluated as "outstanding"
   overall. See AR, Tab 14, Agency Debriefing Notes.

   [3] Under SBA's regulations, to be timely, a size status protest in a
   negotiated procurement must be filed with the contracting officer within 5
   working days after notification of the awardee's identity. See 13 C.F.R.
   sect. 121.1004(a)(2), (5) (2005).

   [4] FAR sect. 15.503(a)(2)(iii) provides that pre-award notice is not
   required when the contracting officer determines in writing that the
   urgency of the requirement necessitates award without delay. Here, no such
   written urgency determination was executed, nor does the agency argue that
   urgency prevented it from providing the required notice.

   [5] ICE states that it will not exercise the options in Ahuska's contract.
   Agency Letter to GAO, Dec. 2, 2005.

   [6] SBA received the size protest from ICE on October 7, but did not issue
   a formal size determination until October 28, which ICE received by
   certified mail on October 31.

   [7] Spectrum, as a subcontractor under the Corps of Engineers contract,
   actually provided the detention officer services to ICE. See Authority to
   Continue Performance of Award to Ahuska in Face of GAO Protest at 3.

   [8] To the extent that Spectrum is protesting that Ahuska's proposal
   should be rejected as materially unbalanced, this protest ground, which
   was raised more than 10 days after receipt of the agency's report, is
   untimely and is dismissed. 4 C.F.R. sect. 21.2(a)(2) (2005).

   [9] We note that one factor considered by SBA and OHA in determining that
   Ahuska was not a small business concern was its extensive subcontracting
   with its large business subcontractor that evidenced an "ostensible
   subcontractor affiliation" between Ahuska and the large business
   subcontractor. However, as noted by OHA, an offeror's compliance with the
   subcontracting limitation on a service contract is not controlling in
   determining the existence of an "ostensible subcontractor affiliation."

   [10] In accordance with CICA, where an agency has authorized performance
   of a contract based upon a determination that the best interests of the
   United States would not permit awaiting our decision, we make our
   recommendation without regard to any cost or disruption from terminating,
   recompeting, or reawarding the contract. 31 U.S.C. sect. 3554(b)(2).