TITLE: B-297537, MMI-Federal Marketing Service Corp., February 8, 2006
BNUMBER: B-297537
DATE: February 8, 2006
***************************************************************
B-297537, MMI-Federal Marketing Service Corp., February 8, 2006

   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: MMI-Federal Marketing Service Corp.

   File: B-297537

   Date: February 8, 2006

   Ron R. Hutchison, Esq., Doyle & Bachman LLP, for the protester.

   Jennifer A. Kerkhoff, Esq., Troutman Sanders LLP, for Iguana, LLC, an
   intervenor.

   Marit D. Bank, Esq., Defense Logistics Agency, for the agency.

   Jonathan L. Kang, Esq., and Michael R. Golden, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest is sustained where the agency unreasonably determined that
   awardee's quotation demonstrated compliance with the Berry Amendment's
   domestic production requirements, in light of countervailing pre-award
   information that the awardee would not comply.

   DECISION

   MMI-Federal Marketing Service Corp. protests the award of a contract to
   Iguana, LLC under request for quotations (RFQ) SPO406-05-Q-T784, issued by
   the Defense Logistics Agency, Defense Supply Center Richmond (DSCR) for
   pop-up bednets impregnated with an insecticide. The protester contends
   that the agency unreasonably relied upon information provided by the
   awardee indicating that it would comply with the RFQ's domestic production
   restrictions.

   We sustain the protest.

   BACKGROUND

   The agency sought quotations for the supply of 25,000 bednets, which are
   mesh screen fabric covers that surround a user's sleeping area. The
   required bednets are manufactured from synthetic fabrics and coated
   synthetic fabrics that have been impregnated with permethrin, an
   insecticide. The RFQ stated that the bednet manufacturing process must
   comply with the requirements of 10 U.S.C. sect. 2533a, commonly referred
   to as the "Berry Amendment." RFQ at 2. The Berry Amendment generally
   restricts the Department of Defense's expenditure of funds for certain
   articles and items, including synthetic fabric and coated synthetic
   fabric, to domestically produced products. See 10 U.S.C. sect. 2533a(b).
   The RFQ also included the "Preference for Certain Domestic Commodities"
   clause, Defense Federal Acquisition Regulation Supplement (DFARS) sect.
   252.225-7012, which implements the Berry Amendment. RFP at 11. The RFQ
   listed two approved sources for the bednets, MMI and Iguana. Id. at 3.
   Award of a contract under the solicitation was reserved for small business
   vendors. Id. at 7. Award was to be made based on vendors' prices and
   scores derived from the Automated Best Value System (ABVS), and vendors
   were advised that "[d]elivery is more important than price." Id. at 18, 2.

   Because the use of permethrin is regulated as a pesticide by the Federal
   Insecticide, Fungicide and Rodenticide Act (FIFRA), 7 U.S.C. sections
   136a-y, the RFP required the bednets to carry a label listing valid
   Environmental Protection Agency (EPA) registration and establishment
   numbers. RFP at 2-3; see also 40 C.F.R. sect. 156.10 (EPA labeling
   requirements). An EPA registration number identifies the company that
   registered the pesticide product, and an establishment number identifies
   the location where the final product will be assembled. EPA FIFRA Label
   Review Manual 3d Ed., available at
   http://www.epa.gov/oppfead1/labeling/lrm. A supplemental distribution
   number must be identified on the product label, comprised of the
   registration number and a number identifying the distributor, if the
   distributor of the pesticide product is not the party to whom the
   pesticide product is registered. Id.

   The agency received quotations from both Iguana and MMI. The agency
   delayed award of the contract to review information indicating that Iguana
   would not comply with the Berry Amendment requirements. Contracting
   Officer's Statement at 2. In its quotation, Iguana provided a product
   label that identified EPA registration No. 81041-1-66306 and EPA
   establishment No. 81041-CHN-001. Agency Report (AR), Tab C, Iguana
   Quotation, at 27-28. The agency was aware, due to its exchanges with
   Iguana regarding another procurement for bednets, contract No.
   SP0406-05-D-4084, that establishment No. 81041-CHN-001 referred to
   Igauana's subcontractor in China that would "treat the fabric using a
   patented process to apply the pesticide."
   AR, Tab G, Exh. B, Letter from Iguana to Agency, Apr. 6, 2005, at 1.

   Additionally, MMI filed a protest with the Small Business Administration
   (SBA) challenging the small business status of Iguana in connection with
   the award of contract No. SP0406-05-D-4084. SBA denied the protest,
   concluding that Iguana was a small business for purposes of the
   procurement. AR, Tab L, SBA Size Determination No. 3-2005-57, July 22,
   2005, at 4-5. SBA's decision noted, however, that Iguana's manufacturing
   plan involved impregnation of the bednet fabric in China. Id. SBA's
   determination quoted the following statement from Iguana regarding its
   intended manufacturing process:

     Domestically produced rip-stop polyester fabric, which is the material
     used to make the bednets, will be procured in the United States.
     [Iguana] will also purchase (in the U.S.) Permetherin (pesticide), dye
     and waterproofing chemicals. These materials will then be shipped to
     China where [Bickel Company of Seoul, Korea] will use the EXPEL^TM
     process to impregnate the rip-stop polyester fabric with the pesticide,
     and will dye and waterproof the fabric. This is because [Bickel's]
     facility in China is the only facility in the world where the EXPEL^TM
     process is performed. The treated fabric will then be shipped to the
     U.S., where it will be cut-and-sewn into the appropriate dimensions.

   Id.

   Based on the information indicating Iguana's plan to use bednet fabric
   that was impregnated in a facility in China, the agency issued a stop-work
   order to Iguana under the SP0406-05-D-4084 contract. Contracting Officer's
   Statement at 2. The agency subsequently issued a cure notice to Iguana for
   that contract, advising the firm that the agency interpreted the Berry
   Amendment to require impregnation of the bednet fabric to take place in a
   domestic facility, and thus did not consider Iguana's intended
   manufacturing plan of impregnating the bednet fabric in China to comply
   with the Berry Amendment. AR, Tab F, Cure Notice, at 1-2.

   In correspondence with the agency, Iguana confirmed that it intended to
   impregnate the bednet fabric with permethrin in China. AR, Tab G, Letter
   from Iguana's Counsel to Agency, Sept. 20, 2005, at 4-7. Although Iguana
   argued that its intended manufacturing process complied with the Berry
   Amendment, Iguana agreed to comply with the agency's interpretation of the
   domestic production requirements.[1] Id. at 3. Iguana proposed a modified
   manufacturing plan for the SP0406-05-D-4084 contract that would involve
   impregnation of the bednet fabric with permethrin using Bickel's EXPEL
   process in a domestic facility. Id. at 7. Iguana advised the agency that,
   at that time, the only facility where the EXPEL permethrin impregnation
   process could take place was in China, and that Iguana "may need
   approximately 60 days to set-up a domestic production facility that is
   capable of performing the EXPEL^TM impregnation process with the necessary
   EPA registration."[2] Id. at 8.

   The agency then requested that both Iguana and MMI confirm that their
   quotations in response to the RFQ at issue in this protest would comply
   with the Berry Amendment. Contracting Officer's Statement at 3. Iguana
   replied that all items provided under the RFQ would comply with the Berry
   Amendment:

     [Iguana] certifies all line items delivered on RFQ SP0406-06-Q-T784, if
     awarded to Iguana will be "B[e]rry Amendment" compliant as interpreted
     by DSCR. All materials will be domestically produced, treated, cut &
     sewn and assembled in the United States.

     Impregnation will be performed in the United States at a registered EPA
     establishment [by] either [deleted], Burlington Mills Services or
     another qualified EPA establishment within the United States.

   AR, Tab H, E-mail from Iguana to Agency, Sept. 23, 2005.

   In response to the agency's request for additional information regarding
   Iguana's manufacturing process, Iguana provided a copy of its product
   label, indicating the EPA registration and establishment numbers for the
   bednet:

     Please see the attached Iguana Bed Net Label. International Textile
     Group's number is 82689-VA-1; which is Burlington Industries. [Deleted]
     we will be receiving electronically on Tuesday 27 SEP and as soon as I
     get it back from our Graphics company I will forward theirs to you.

     We have 2 labels one with International Textile Group and one with
     [deleted]. According to our EPA consultant with Technology Sciences Mr.
     Bob Stewart, Iguana does not need any additional submissions to the EPA
     to change the establishment number at any time.

   AR, Tab H, E-mail from Iguana to Agency, Sept. 26, 2005. The label
   provided by Iguana included EPA registration No. 81041-1-66306, which
   denoted Bickel as the registrant of the EXPEL permethrin impregnation
   process and Iguana as the supplemental distributor, and establishment No.
   82689-VA-1, which denoted Burlington as the final location where the
   bednets would be assembled. Contracting Officer's Statement at 4;
   Supplemental AR, Tab 1, Iguana Product Label.

   The agency requested that Iguana clarify its previous e-mail: "Tech reply:
   Which establishment location will be supplying the product? That is the
   one we need." AR, Tab H, E-mail from Agency to Iguana, Sept. 27, 2005. In
   response, Iguana stated:

     Our label reflects International Textile Groups (Burlington) located in
     Hurt Virginia; so therefore this will be our source for fabric
     impregnation. Should another establishment acquire the proper
     establishment registration and are capable of producing this product we
     may decide to use them at that time. If they acquire this ability we
     then will submit a label with their EPA registration number.

   AR, Tab H, E-mail from Iguana to Agency, Sept. 27, 2005.

   The label submitted by Iguana on September 26 was approved by an agency
   technician on September 28. Contracting Officer's Statement at 4; AR, Tab
   J, Source Selection Decision (SSD), at 2. The agency determined that
   Iguana had submitted sufficient information to warrant lifting the
   stop-work order under SP0406-05-D-4084 contract: "The contractor has
   provided documentation indicating all of the material is now domestically
   produced and therefore fully complies with the Berry Amendment." AR, Tab
   J, SSD at 1. The agency also concluded that Iguana's quotation complied
   with the Berry Amendment. Id. The agency determined that the quotations
   were rated as follows:

   +------------------------------------------------------------------------+
   |                        |        Iguana         |          MMI          |
   |------------------------+-----------------------+-----------------------|
   |ABVS Score              |         90.5          |         76.6          |
   |------------------------+-----------------------+-----------------------|
   |Price                   |      $1,999,250       |       [deleted]       |
   +------------------------------------------------------------------------+

    

   Based on Iguana's lower price and higher ABVS score, the agency awarded
   the contract to Iguana on October 28. Id. at 2-3. MMI subsequently filed
   this protest.

   DISCUSSION

   MMI contends that the agency unreasonably relied upon information provided
   by Iguana certifying that it would comply with the Berry Amendment in the
   impregnation of the bednet fabrics with permethrin. As discussed in detail
   below, the agency requested that Iguana provide information to establish
   its quotation's compliance with the Berry Amendment, and the agency relied
   upon this information to determine that Iguana's quotation did comply. It
   is clear, however, based on our review of the record, that Iguana's
   submissions did not convey the information that the agency believed was
   required to establish compliance with the Berry Amendment.

   In reviewing an agency's technical evaluation of vendor submissions under
   an RFQ, we will not reevaluate the quotations; we will only consider
   whether the agency's evaluation was reasonable and in accord with the
   evaluation criteria listed in the solicitation and applicable procurement
   statutes and regulations. American Recycling Sys., Inc., B-292500, Aug.
   18, 2003, 2003 CPD para. 143 at 4. In determining the technical
   acceptability of a quotation, an agency may not accept at face value a
   promise to meet a material requirement, where there is significant
   countervailing evidence reasonably known to the agency that should create
   doubt whether the vendor will or can comply with that requirement. See
   Maritime Berthing, Inc., B-284123.3, Apr. 27, 2000, 2000 CPD para. 89 at
   9. As relevant here, an agency should go beyond a firm's
   self-certification regarding domestic manufacturing requirements where the
   agency has reason to believe, prior to award, that a vendor will not
   provide compliant products. See Leisure-Lift, Inc., B-291878.3,
   B-292448.2, Sept. 25, 2003, 2003 CPD para. 189 at 3-4.

   The agency acknowledges that it had reason to question Iguana's
   representation in its initial quotation that it would comply with the
   Berry Amendment requirements, in light of the facts that gave rise to the
   stop-work order and cure notice under the SP0406-05-D-4084 contract.
   Contracting Officer's Statement at 2. The agency contends, however, that
   it did not rely solely on Iguana's certification that its quotation met
   the Berry Amendment requirements; rather, the agency requested and
   received information regarding Iguana's EPA product label and the identity
   of Iguana's proposed manufacturers. Contracting Officer's Statement at 5.
   The agency then confirmed that the facility identified by Iguana for
   permethrin impregnation was in the United States. Id. The agency further
   explains that during the performance of the SP0406-05-D-4084 contract, the
   agency had "granted Iguana a delivery extension to set up an arrangement
   with Bickel to perform the permethrin-impregnation of the bednets at an
   EPA-registered domestic facility." Agency Supplemental Response, Dec. 20,
   2005, at 1. The agency states that it believed that "[s]ince Iguana had
   not misrepresented its manufacturing plans in the past, DSCR had no reason
   to question the veracity of Iguana's statements concerning a plan to
   comply with DSCR's clear direction that impregnation of the bednets must
   be performed domestically." Id. Thus, the agency argues, its approval of
   Iguana's product label and confirmation that manufacturers identified by
   Iguana were domestic was sufficient to determine that Iguana would comply
   with the Berry Amendment requirements.

   For the reasons discussed below, we disagree with the agency's view that
   the information it received was sufficient to determine that Iguana's
   quotation demonstrated compliance with the Berry Amendment.

   Here, to comply with the Berry Amendment, as interpreted by the agency,
   the vendor had to establish that the impregnation of the bednet fabric
   would be performed at a domestic facility. It is clear from the
   Contracting Officer's Statement and the record that the agency believed,
   prior to award, that the establishment number listed on Iguana's label
   indicated the facility at which the impregnation would take place:

     The EPA label Iguana provided was from International Textile Group,
     which Iguana explained was Burlington Industries, with EPA registration
     number 81041-1-66306 and indicates the place where pesticide-related
     work will be performed, and appears after the number identifying the
     company. See Tab I. Iguana's EPA establishment identified a facility in
     Virginia. A DSCR technician approved the label Iguana provided on
     September 28, 2005. TAB J.

   CO Statement at 4. Although the record does not disclose the method
   followed by the agency technician in approving Iguana's label,
   post-protest exchanges between agency counsel and the technician indicate
   that the approval process involved checking the establishment and
   registration numbers in EPA databases to ensure that they were valid.
   Supplemental AR, Tab 2B, E-mail from Agency Counsel to Agency Technician,
   Nov. 29, 2005.

   However, in response to questions posed by our Office, the agency
   acknowledged that information from a vendor's product label, particularly
   the EPA establishment number, would not be sufficient to verify whether
   that vendor would perform the permethrin impregnation at a domestic
   facility. The agency's technician explained that "[t]he EPA establishment
   number of Iguana's label does not reflect that the treatment facility will
   engage in any kind of pesticide usage" and, therefore, "the registration
   label that Iguana provided identifying [deleted] taken alone would not be
   sufficient to establish that permethrin treatment would occur at the
   establishment facility." Agency Technician's Responses to GAO Questions,
   Dec. 20, 2005, at 1. The technician further explained that any party
   seeking to perform impregnation of the bednet fabric for Iguana at a
   domestic facility would need a relationship with Bickel, as the registrant
   of the pesticide product. Id. The agency would thus need to "confirm that
   the EPA has approved the product label, and that a valid relationship
   exists between the original registrant (Bickel) and the supplemental
   registrant company [Iguana] to perform the process at the facility
   identified with the EPA establishment number." Id.

   As relevant here, therefore, when a vendor identifies a facility for a
   particular manufacturing process, such as permethrin impregnation, the
   fact that the vendor lists an establishment number for the same facility
   on a product label does not mean that the facility is necessarily capable
   of performing that process or that the vendor has a valid relationship
   with a pesticide registrant that authorizes the facility to perform the
   process with the registrant's pesticide. See id.; see also, 40 C.F.R.
   sect. 167.20 (issuance of EPA establishment number is not made in
   connection with and does not indicate EPA's approval for any particular
   pesticide use or process).

   As Iguana explained to SBA in July 2005 and to the agency in September
   2005, Bickel was the registrant for the EXPEL permethrin impregnation
   process that would be used to produce Iguana's bednet fabric, and the only
   location where Bickel authorized that process to occur was in China. AR,
   Tab L, SBA Size Determination No. 3-2005-57, July 22, 2005, at 4-5; Tab G,
   Letter from Iguana's Counsel to Agency, Sept. 20, 2005, at 4-7.
   Accordingly, as discussed above, the agency would need to determine
   whether an agreement existed between Bickel and a domestic facility that
   authorized that facility to perform the impregnation of the bednet fabric
   using Bickel's EXPEL process. See Agency Technician's Responses to GAO
   Questions, Dec. 20, 2005, at 1.

   With regard to the relationship between Bickel and a domestic
   manufacturer, Iguana now states, in response to questions posed by our
   Office, that Iguana will subcontract with [deleted], and not Burlington,
   to perform the permethrin impregnation. Iguana Response to GAO Questions,
   Dec. 22, 2005, at 2. Iguana provided documentation showing a contractual
   agreement between Bickel and [deleted] to allow [deleted] to perform the
   permethrin impregnation using Bickel's EXPEL process. Id. at Exh. A.
   Iguana stated that [deleted] "has been issued an EPA establishment number
   ([deleted])" for the facility that it will perform the permethrin
   impregnation. Iguana Response to GAO Questions, Dec. 22, 2005, at 2.
   Iguana further stated that it "will subcontract with [deleted] to conduct
   the permethrin impregnation process." Id. at 3.

   The Bickel-[deleted] documentation, however, was signed on November 29,
   2005 -- more than two months after the agency determined that Iguana's
   proposed manufacturing process complied with the Berry Amendment, and a
   month after the contract was awarded. Iguana Response to GAO Questions,
   Dec. 22, 2005, Exh. A. The record is not clear when this information was
   provided to the agency, apart from Iguana's response to our Office.
   Additionally, as Iguana appears to concede, it had not, as of the end of
   December, subcontracted with [deleted] to perform the work. See Iguana
   Response to GAO Questions, Dec. 22, 2005, at 3. In any case, the agency
   could not have received the evidence of the agreement until after it was
   signed on
   November 29, and therefore could not, at the time of award, have made any
   determination regarding the relationship between Bickel, [deleted] and
   Iguana. In addition, Iguana provided in its December 22 response to our
   Office a new EPA product label, which lists Iguana's own facility as the
   establishment number, indicating that final assembly of the bednets will
   take place there. Iguana Response to GAO Questions, Dec. 22, 2005, exh. B.
   The revised manufacturing plan disclosed by the label is different from
   the plan disclosed by the product label approved by the agency, which
   indicated that Burlington's facility would be the place of final assembly.

   During the agency's attempts to verify that both vendors would comply with
   the Berry Amendment requirements, Iguana stated that the impregnation
   would take place at the Burlington facility identified by the
   establishment number on its label: "Our label reflects International
   Textile Groups (Burlington) located in Hurt Virginia; so therefore this
   will be our source for fabric impregnation." AR, Tab H, E-mail from Iguana
   to Agency, Sept. 27, 2005. Although Iguana stated that it might use
   another facility if one became available, because the agency's finding of
   Iguana's compliance with the Berry Amendment was premised on performance
   by Burlington, we believe that the agency was required, at a minimum, to
   determine whether Burlington could have done the work. We conclude that
   there is no evidence in the record that Bickel had (or has) an agreement
   with Burlington that would have permitted permethrin impregnation at
   Burlington's facility.[3] Because the agreement between Bickel and
   [deleted] occurred only after award, the agency could not have relied on
   that agreement. Furthermore, there is no evidence in the record that the
   agency has determined whether [deleted]'s new manufacturing arrangements
   with Bickel will allow Iguana to comply with the Berry Amendment
   requirements.

   In sum, we believe that the agency's evaluation of Iguana's quotation was
   unreasonable. Because Iguana's quotation as originally submitted disclosed
   a manufacturing process in China that violated the Berry Amendment
   requirements, and because Iguana advised the agency that domestic
   facilities capable of performing the EXPEL impregnation processes were not
   then available, the agency was required to verify, prior to award, that
   Iguana's intended manufacturing process would comply with the Berry
   Amendment. The agency's pre-award determination regarding Iguana's
   compliance was flawed because the agency relied on inadequate information
   to satisfy its concerns. Although Iguana identified Burlington as the
   domestic facility where permethrin impregnation would occur, the
   establishment number relied upon by the agency to verify Iguana's
   self-certification of Berry Amendment compliance could not, as the agency
   acknowledges, have provided sufficient information needed to determine
   whether Burlington could perform the work. Instead, the agency confirms
   that, aside from verifying that the EPA establishment number for
   Burlington was valid, the agency did not determine whether Burlington,
   Bickel and Iguana had made the required arrangements to establish that
   Iguana's quotation complied with the Berry Amendment. Furthermore, there
   is still substantial doubt as to whether post-award changes to Iguana's
   manufacturing process bring Iguana's quotation into compliance with the
   Berry Amendment, and the record does not show that the agency has
   evaluated these post-award changes.

   RECOMMENDATION

   From the record, it is clear that the agency did not have a reasonable
   basis at the time of award to conclude that Iguana would perform the
   contract in accordance with the Berry Amendment. We recommend that the
   agency reassess, in light of the facts discussed above, the compliance of
   Iguana's quotation with the agency's interpretation of the Berry Amendment
   requirements.

   We additionally recommend that the agency reimburse the protester the
   reasonable costs of pursuing its protest, including reasonable attorneys'
   fees. The protester's certified claim for costs, detailing the time
   expended and the costs incurred on this issue, must be submitted to the
   agency within 60 days of receiving this decision. 4 C.F.R. sect.
   21.8(f)(1) (2005).

   The protest is sustained.

   Anthony H. Gamboa

   General Counsel

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

   [1] Because Iguana agreed to comply with the agency's interpretation of
   the Berry Amendment, our decision addresses only whether the agency
   reasonably determined whether Iguana would supply bednets that complied
   with that interpretation; references to compliance with the Berry
   Amendment in this decision refer to compliance with the agency's
   interpretation. We need not, therefore, address the substance of the
   agency's interpretation of the Berry Amendment.

   [2] During exchanges between Iguana and the agency concerning the cure
   notice issued for performance of contract No. SP0406-05-D-4084, Iguana
   indicated that the shift from impregnating the fabric with permethrin in
   China to impregnating the fabric in a domestic facility would cause a cost
   increase for which Iguana would seek an equitable adjustment. AR, Tab G,
   Letter from Iguana's Counsel to Agency, Sept. 20, 2005, at 9-10.

   [3] Iguana provided the agency a Notice of Supplemental Distribution of a
   Registered Pesticide Product, which indicated that Bickel had authorized
   Iguana to distribute fabrics treated with Bickel's EXPEL permethrin, under
   EPA registration No. 81041-1. AR, Tab H, Notice of Supplemental
   Distribution of a Registered Pesticide Product, Sept. 28, 2004. This
   notice, however, does not authorize Iguana or any other party to perform
   impregnation of fabrics with Bickel's EXPEL permethrin process.