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.