TITLE: B-297503; B-297503.2, Kenco Associates, Inc.; Air Product and Chemicals, Inc., January 25, 2006
BNUMBER: B-297503; B-297503.2
DATE: January 25, 2006
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B-297503; B-297503.2, Kenco Associates, Inc.; Air Product and Chemicals, Inc., January 25, 2006

   Decision

   Matter of: Kenco Associates, Inc.; Air Product and Chemicals, Inc.

   File: B-297503; B-297503.2

   Date: January 25, 2006

   Gregory L. Monge, Esq., VanAntwerp, Monge, Jones & Edwards, LLP, for Kenco
   Associates, Inc., and Robert J. Symon, Esq., Bradley Arant Rose & White
   LLP, for Air Products and Chemicals, Inc., the protesters.

   Vincent A. Salgado, Esq., National Aeronautics & Space Administration, for
   the agency.

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

   DIGEST

   Cancellation of solicitation minutes prior to the scheduled time for
   receipt of proposals was reasonable where the agency, as a result of
   inquiries from members of Congress, reasonably determined that it needed
   to further review its mission requirements before proceeding with the
   procurement.

   DECISION

   Kenco Associates, Inc. and Air Products and Chemicals, Inc. protest the
   cancellation of request for proposals (RFP) No. NNL05111032R, issued by
   the National Aeronautics and Space Administration (NASA), Langley Research
   Center (LaRC), Hampton, Virginia, for building a government-owned,
   contractor-operated liquid nitrogen (LN[2]) plant.

   We deny the protests.

   NASA issued this RFP on September 2, 2005 to solicit proposals to build a
   government-owned, contractor-operated facility to produce an independent
   source of LN[2 ]for the National Transonic Facility (NTF) operated by
   LaRC. The NTF is a closed circuit, fan driven, pressurized wind tunnel
   operated by LaRC that utilizes LN[2] to test transonic aerodynamic flow.
   It is the only cryogenic wind tunnel in the United States and is utilized
   by the Department of Defense and the aeronautics industry to conduct
   aerodynamic research on scale model aircraft designs. See RFP, Statement
   of Work para. 1.1.

   Since 1984, to support the NTF's mission, NASA has acquired LN[2] via a
   pipeline from Praxair, Inc., a private supplier that operates an LN[2]
   plant near LaRC, under a sole-source requirements contract. The NTF
   requires large quantities of LN[2] over short periods, but there are long
   stretches where no LN[2 ]is needed, because the actual tests using large
   quantities of LN[2] at the NTF are intermittent. Because of this, NASA has
   paid a premium to Praxair for LN[2] to support the NTF. Specifically, the
   current contract with Praxair costs NASA a weighted average price of $81
   per ton (down from the previous contract price of $112 per ton).[1] After
   undertaking various studies to determine the feasibility of creating its
   own source of LN[2], NASA determined that it could potentially reduce its
   cost for LN[2] to $40 per ton, and make its testing more affordable and
   available to a wider range of customers, if it built and operated its own
   source of LN[2]. This RFP resulted from those studies culminating in an
   acquisition strategy meeting in May 2005. See Agency Memorandum of Law
   at 2-3.

   The RFP required the contractor to build and operate an LN[2] plant at
   LaRC under a fixed-price contract that was divided between a base period
   and an option period. The base period work consisted of engineering,
   design, manufacturing, testing and delivery of equipment, and the option
   period consisted of site work, training, commissioning, and demonstration
   of the LN[2] plant's performance. RFP, Statement of Work para. 1.2.2.
   After various amendments to the RFP, the closing time for receipt of
   proposals was set for 4 p.m. on October 14.

   Immediately after issuing the RFP, NASA began receiving inquiries from
   various Congressional members from Virginia questioning the propriety and
   feasibility of NASA devoting resources to build a government-owned LN[2]
   facility.[2] The concerns expressed included that NASA "may be . .
   .wast[ing] taxpayers' dollars" for an unnecessary facility and that NASA
   may be violating the policy of the President and of Office of Management
   Budget Circular No. A-76 "to rely on the private sector for commercially
   available products." See Agency Report, Tab 22.

   In view of these concerns, NASA had numerous internal communications as
   well discussions with Congressional representatives, which ultimately led
   the agency to cancel the RFP on October 14. The following excerpt from the
   internal e-mail of that date sets out the context for canceling the RFP:

   We are reshaping the Aeronautics program and the NTF will be part of a
   national assets program, which will place a new emphasis on operating and
   maintaining these high-value/unique facilities. As a result of this
   activity, this is an opportunity for LaRC technical staff . . . to revisit
   their technical needs and assess the options given the new direction of
   the program. A well scrubbed technical plan will be the product of this
   exercise. After we are convinced that we fully understand our
   requirements, the expectation is that there would be a Request for
   Information . . . and Industry Day to help us better scope our
   requirements and understand what options the commercial market may offer
   to help us meet not only our primary requirements, but any peak/surge
   demand that may arise. Ultimately, a competitive solicitation would be
   issued, reflecting the most optimal situation for the Government and
   industry. Specifically, the following actions by the Langley staff will be
   executed:

    Cancel current procurement of the LN[2] plant for Langley Research
   Center

    Reassess/update the technical requirements for LN[2] for the [NTF].
   Included in this assessment should be: estimated LN[2] needs for the long
   term, 15 years; the impact of a new third LN[2] storage tank; the
   possibility of trucking LN[2]; the possibility of offering a si[te] near
   the NTF on LaRC property for the construction and commercial operation of
   a new LN[2] plant; and the impacts of all the scenarios on the LN[2] and
   facility operations costs and the NTF capacity.

   See Agency Report, Tab 45, E-mail from NASA Director Aeronautics Test
   Program to NASA Associate Administrator for Aeronautics (and other NASA
   Officials) (Oct. 14, 2005), at 1. At that time, NASA had already received
   two proposals, one from Kenco and the other from Air Products, but had not
   opened the proposals, since the cancellation of the RFP occurred just a
   few minutes prior to the scheduled closing time on October 14. These
   protests followed.

   The protesters contend that the cancellation was improper because the
   primary reason that the agency canceled the RFP was political pressure
   exerted by Congressional members on behalf of Praxair.

   In a negotiated procurement, an agency has broad authority to decide
   whether to cancel a solicitation, and to do so need only establish a
   reasonable basis. A reasonable basis for cancellation exists and
   cancellation is appropriate when a solicitation does not accurately
   reflect the agency requirements, particularly where cancellation and the
   issuance of a revised solicitation would present the potential for
   increased competition or cost savings. VSE Corp., B-290452.2, Apr. 11,
   2005, 2005 CPD para. 111 at 6.

   Here, although the record confirms that the inquiries and concerns
   expressed by Congressional representatives caused NASA to review the need
   for a government-owned, contractor-operated LN[2] plant, the record also
   establishes that the ultimate decision to cancel was made because NASA was
   concerned that the RFP may not accurately reflect its requirements in
   light of the reshaping of the agency's aeronautics program.

   In response to the protest, the agency explains that the NTF, in April
   2005, was placed in the agency's Shared Capability Asset Program (SCAP),
   which is a program designed to ensure that key capabilities and assets are
   available to support NASA's mission. The SCAP involves identifying and
   prioritizing critical NASA assets and making strategic investment
   decisions to replace, modify, or dispose of such assets based on NASA and
   national needs. The SCAT contemplates that funding decisions for acquiring
   such assets would be made at the NASA headquarters level, not at the field
   activity level.

   NASA advises that, in response to the concerns expressed by the
   Congressional representatives, the agency initiated an independent review
   to verify the need for a government-owned LN[2] facility and to ensure
   that construction of the facility was consistent with the aeronautics
   research program and the SCAP program objectives. The agency explains that
   this review revealed that the requirement for LN[2] was not adequately
   defined and that proceeding with the procurement was "premature and
   inappropriate" because, for example, it was not clear whether the newly
   constructed LN[2] plant would fulfill the NTF's entire requirement for
   LN[2] or only part of the NTF's LN[2] requirements. In addition, NASA
   reports that, based on the SCAP, the requirement for LN[2] should have
   been, but was not, determined "based upon technical assessments aligned
   with [the agency's] reshaped aeronautics program," such as the need to
   "determine what technical capabilities the NTF facility will need to
   ensure the agency can address the data collection needs [relating to
   aerodynamics research] of NASA and other users in the coming 15-plus
   years." Moreover, NASA found that LaRC used the "Full Cost Recovery model"
   in justifying this procurement and this model is no longer applicable
   under the new SCAP program. See Agency Report, Tab 57, Declaration of NASA
   Associate Administrator for Aeronautics (who was the official responsible
   for the decision to cancel the RFP).

   As noted, a reasonable basis to cancel exists where a solicitation does
   not accurately reflect the agency's requirements. The fact that NASA found
   that the RFP may not accurately reflect its requirements, and that it
   needed to fully consider and resolve questions regarding its LN[2]
   requirements that were not considered at the time the RFP was issued,
   constituted a reasonable basis to cancel the RFP. While the protesters
   attack NASA's motives as merely capitulating to political pressure on
   behalf of a particular constituent, we find nothing questionable about
   NASA responding appropriately to the concerns expressed by representatives
   of Congress, which has oversight authority. Based on our review of the
   record, NASA has established that it has legitimate reasons for reviewing
   its requirements before proceeding with this procurement and thus a
   reasonable basis to cancel the RFP while it does so. See Global Solutions
   Network, Inc., B-290107, June 11, 2002, 2002 CPD para. 98 at 3-5

   Nevertheless, Kenco and Air Products question the timing of the agency's
   decision to cancel, given that it was made after each had expended
   considerable resources to address the RFP, and because no mention was made
   to the offerors of the SCAP prior to the cancellation, and because all the
   agency's prior studies concluded that building a LN[2] plant was in the
   government's best interest. The protesters argue that they should at least
   be entitled to recover their proposal preparation costs, given the
   agency's actions.

   However, as long as an agency has a reasonable basis to cancel, it may
   properly cancel a solicitation no matter when the information
   precipitating the cancellation first surfaces or should have been known.
   See The Potomack Partnership, B-252860, Aug. 3, 1993, 93-2 CPD para. 75 at
   4 (cancellation after receipt but without evaluating proposals); see also
   Global Solutions Network, Inc., supra (cancellation prior to receipt of
   proposals). Given that NASA promptly canceled the RFP when it learned that
   there were reasons for questioning its requirements, we have no reason to
   question the agency's actions here.

   Under the circumstances, we also find no basis to grant the protesters'
   request to recover their costs simply for competing in this procurement.
   The Competition in Contracting Act of 1984, 31 U.S.C sect. 3554 (c)(1)
   (2000), and our implementing regulations, 4 C.F.R. sect. 21.6(d) (2005),
   provide for our Office to recommend reimbursement of proposal preparation
   costs only where we determine that "a solicitation, proposed award, or
   award of a contract does not comply with a statue or regulation." Since
   the cancellation here was proper, and there is no other reason to conclude
   that the agency has acted contrary to statute or regulation, there is no
   basis to recommend the recovery of proposal preparation costs. See Bahan
   Dennis Inc., B-249496.3, Mar. 3, 1994, 94-1 CPD para. 184 at 6.

   The protests are denied.

   Anthony H. Gamboa

   General Counsel

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

   [1] Historically, the prices have exceeded $100 per ton.

   [2] The record indicates that Praxair's complaints were the reason that
   these inquiries were initiated. See, e.g., Agency Report, Tab 15, E-mail
   from American Continental Group to NASA Legislative Affairs Office ( Sept.
   6, 2005), at 1.