TITLE: B-297648.3, Yardney Technical Products, Inc.--Costs, March 28, 2006
BNUMBER: B-297648.3
DATE: March 28, 2006
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B-297648.3, Yardney Technical Products, Inc.--Costs, March 28, 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: Yardney Technical Products, Inc.--Costs

   File: B-297648.3

   Date: March 28, 2006

   Jonathan D. Shaffer, Esq., Smith Pachter McWhorter & Allen PLC, for the
   protester.

   Clarence D. Long, III, Esq., Department of the Air Force, for the agency.

   Paul E. Jordan, Esq., and John M. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest was not clearly meritorious, and reimbursement of protest costs
   following agency corrective action therefore is not warranted, where
   additional record development and substantial further analysis would have
   been required to resolve protest.

   DECISION

   Yardney Technical Products, Inc. requests that we recommend that it be
   reimbursed the costs of filing and pursuing its protest challenging the
   award of a contract to Quallion, LLC under broad agency announcement (BAA)
   No. BAA-04-08-PKM Call 8, issued by the Department of the Air Force for
   establishment of a domestic supplier of spacecraft-quality rechargeable
   lithium-ion batteries.

   We deny the request.

   The BAA identified three program objectives: establish U.S.-owned domestic
   trusted source(s) of cathode materials; strengthen U.S.-owned domestic
   industrial base for true prismatic lithium-ion cells and batteries for
   spacecraft use; and establish U.S.-owned domestic trusted source(s) of
   other base cell components and their precursors. Proposals were to be
   evaluated under three factors, listed in descending order of
   importance--business and technical aspect, cost/price, and proposal risk
   assessment. Proposals were to be rated as category I--well conceived and
   technically sound (recommended for acceptance); category II--technically
   sound, but requires further development (recommended for acceptance but at
   a lower priority than the first category); and category III--not
   technically sound or does not meet agency needs. The BAA contemplated the
   possibility of awarding multiple contracts, depending upon the evaluated
   order of merit of competing proposals and the availability of funding.

   Four offerors, including Yardney and Quallion, submitted proposals, which
   were evaluated by the technical team. Both Yardney's and Quallion's
   proposals were determined to be in category I, with Quallion's considered
   first in order of merit based on its superior, low-risk technical
   approach, which included $7 million in cost sharing. Yardney's proposal
   was evaluated as acceptable but high-risk, due to uncertainties associated
   with its technical approach; it did not provide for cost sharing. Since
   funding ultimately was available for only one award, the agency selected
   Quallion for award.

   In its protest, Yardney alleged that the agency evaluated the proposals
   based on factors outside the stated evaluation scheme, that its proposal
   should have been rated superior because it had greater experience and
   existing manufacturing capability than Quallion, and that Quallion's
   approach to developing and supplying the raw material was flawed. Yardney
   further asserted that one of the evaluators was biased in favor of
   Quallion and had unduly influenced the source selection team. In support
   of this claim, Yardney cited the fact that the evaluator had traveled to
   Japan with the firm, while refusing to accompany Yardney on a similar
   visit, and had offered to support the transfer of a material license to
   Quallion, without making the same offer to Yardney.

   The Air Force filed an agency report that addressed all of Yardney's
   arguments and included a sworn statement from the allegedly biased
   evaluator, who was the program manager for battery technology at the
   National Reconnaissance Office. Agency Report, Tab 10, Statement of
   Program Manager. The program manager denied any improper influence over
   the evaluators in favor of Quallion's proposal. Statement of Program
   Manager, at 3. With regard to his Japan trip, the program manager stated
   that, approximately 1 year before issuance of BAA Call 8, he recognized
   the need to ensure supply of a critical cathode material--available from a
   specific Japanese company--for use in spacecraft-quality rechargeable
   batteries. Id. at 1. In his experience, Japanese business culture required
   an introduction from someone with an existing relationship and he knew
   that Quallion had such a relationship with the Japanese firm. Id. The
   program manager, who was then serving in that capacity on a contract held
   by Quallion, discussed his interest in meeting with the Japanese firm, and
   Quallion offered to make the introduction after an international battery
   conference that both planned to attend in Japan. Id. at 2. At the meeting
   with the Japanese firm, the program manager asked the firm if it would
   consider a technology transfer to U.S. companies. Id. While the Japanese
   firm was interested, the program manager denied that any definite
   commitment was made or that he ever supported or assisted in the transfer
   of a material license to Quallion. Id. at 3. When Yardney later asked for
   a personal introduction to the Japanese firm, the program manager declined
   to go to Japan, but arranged for Yardney's introduction. Id. The program
   manger believed that Yardney held meetings with the Japanese firm and
   stated that Yardney thanked him for his assistance. Id.

   After receipt of the agency report, Yardney retained outside counsel, who
   filed a supplemental protest challenging the propriety of the program
   manager's meeting with the Japanese firm and Quallion. Specifically,
   Yardney asserted that (1) the BAA improperly failed to identify technology
   transfer as the favored approach; (2) the meeting was outside "formal
   procedures" and gave Quallion favored treatment; (3) Quallion obtained
   inside information and an unfair competitive advantage from the meeting;
   (4) Quallion's unfair advantage resulted in its elevated--and Yardney's
   lower--ratings in the evaluation; and (5) the program manager's
   actions--accepting Quallion's "technical services" through the
   introductory meeting, failing to ensure a level playing field in the
   procurement, and providing Quallion with unequal access to
   information--violated applicable statutes and regulations. Yardney also
   challenged the evaluation of Quallion's proposed cost share as a strength,
   arguing that it was "illusory," and asserted that the agency ignored
   Yardney's significant investment in battery development.

   Before our Office obtained a supplemental agency report responding to
   Yardney's supplemental arguments, the Air Force announced that it was
   taking corrective action by canceling the current BAA and resoliciting for
   its requirements. The Air Force noted that the new solicitation would
   likely state a preferred/lowest risk solution, and that the program
   manager would not be part of the new evaluation team or selection process.
   We advised Yardney not to submit its comments on the original agency
   report, and dismissed its protest as academic.

   Yardney requests that we recommend that it be reimbursed the reasonable
   costs of filing and pursuing its protests, including reasonable attorneys'
   fees. Yardney asserts that its protest grounds were clearly meritorious
   and the agency unduly delayed taking corrective action, as evidenced by
   its failure to do so until after it filed the agency report on the
   original protest and Yardney had filed its supplemental protest.^[1]
   Request for Reimbursement at 4. Yardney further asserts that, while the
   agency took corrective action shortly after the supplemental protest was
   filed, the corrective action should be viewed as unduly delayed with
   regard to the supplemental protest because the supplemental protest issues
   overlapped those raised in the original protest.

   Under the Competition in Contracting Act of 1984, our Office may recommend
   that protest costs be reimbursed only where we find that an agency's
   action violated a procurement statute or regulation. 31 U.S.C. sect.
   3554(c)(1) (2000). Our Bid Protest Regulations provide that, where the
   contracting agency decides to take corrective action in response to a
   protest, we may recommend that the protester be reimbursed the costs of
   filing and pursuing its protest, including reasonable attorneys' fees.
   4 C.F.R. sect. 21.8(e) (2005). This does not mean that costs should be
   reimbursed in every case in which an agency decides to take corrective
   action; rather, we will recommend reimbursement only where an agency
   unduly delayed its decision to take corrective action in the face of a
   clearly meritorious protest. Griner's-A-One Pipeline Servs.,
   Inc.--Entitlement to Costs, B-255078.3, July 22, 1994, 94-2 CPD para. 41.
   Thus, as a prerequisite to our recommending that costs be reimbursed where
   a protest has been settled by corrective action, not only must the protest
   have been meritorious, but it also must have been clearly meritorious,
   i.e., not a close question. J.F. Taylor, Inc.--Entitlement to Costs,
   B-266039.3, July 5, 1996, 96-2 CPD para. 5 at 3; Baxter Healthcare
   Corp.--Entitlement to Costs, B-259811.3, Oct. 16, 1995, 95-2 CPD para. 174
   at 4-5; GVC Cos.--Entitlement to Costs, B-254670.4, May 3, 1994, 94-1 CPD
   para. 292 at 3. A protest is "clearly meritorious" where a reasonable
   agency inquiry into the protester's allegations would reveal facts showing
   the absence of a defensible legal position. Department of the
   Army--Recon., B-270860.5, July 18, 1996, 96-2 CPD para. 23 at 3. The mere
   fact that an agency decides to take corrective action does not establish
   that a statute or regulation clearly has been violated. Spar Applied
   Sys.--Declaration of Entitlement, B-276030.2, Sept. 12, 1997, 97-2 CPD
   para. 70 at 5.

   We find that reimbursement is not appropriate in this case since, even if
   we agreed with Yardney that the agency's corrective action was not prompt,
   the protest was not clearly meritorious. In its original protest, Yardney
   asserted that the evaluation of Quallion's proposal as superior was
   flawed, that Quallion enjoyed an unfair competitive advantage, as
   evidenced by the program manager's trip to Japan with the firm, and that
   the program manager unduly influenced the evaluation panel in favor of
   Quallion. The Air Force asserts that its response (detailed above)
   constitutes a defensible legal position with regard to the evaluation and
   unfair advantage issues based in part on the pre-existing business
   relationship between the awardee and the Japanese firm. Which party's
   position is correct is not apparent from the record as it stands. Rather,
   in order to reach a decision on the matter, we would have required, at a
   minimum (as was our intention prior to being notified of the corrective
   action), a supplemental report from the agency and comments on that report
   by Yardney. Following this further development of the record, we would
   have had to conduct substantial further analysis of the parties'
   positions. In such cases, we do not consider the protest grounds to be
   clearly meritorious. New England Radiation Therapy Mgmt, Servs.,
   Inc.--Costs, B-297397.3, Feb. 2, 2006, 2006 CPD para. 30 at 4; LENS,
   JV--Costs, B-295952.4, Dec. 12, 2005, 2006 CPD para. 9 at 5; East Penn
   Mfg. Co., Inc.--Costs, B-291503.4, Apr. 10, 2003, 2003 CPD para. 83 at 2-3
   (protest not clearly meritorious where decision would have required
   further steps to complete and clarify the record). We therefore decline to
   recommend reimbursement of Yardney's protest costs.

   Yardney also asserts that it is entitled to reimbursement of its proposal
   preparation costs. In this regard, Yardney argues that its initial
   proposal was "wasted" work because the new solicitation--which was
   expected to identify technology transfer as the preferred
   solution--represents a solution different from the one it originally
   proposed, thus requiring it to completely rewrite its proposal. Request
   for Reimbursement at 5.

   Where we have sustained a protest, we may recommend reimbursement of
   proposal preparation costs when changed circumstances render a
   previously-submitted proposal no longer relevant. See COBRO Corp.,
   B-287578.2, Oct. 15, 2001, 2001 CPD para. 181 at 8-9. However, our
   Regulations do not provide for recovery of such costs where an agency has
   taken corrective action. See 4 C.F.R. sect. 21.8(e); Mapp  Building
   Servs.--Costs,  B-289160.2, Mar. 13, 2002, 2002 CPD para. 60 at 2.
   Moreover, we generally will not recommend payment of proposal costs where,
   as here, the protester will have the opportunity to compete for the
   requirement under a reopened competition. Moon Eng'g Co., Inc.--Request
   for Declaration of Entitlement to Costs, B-247053.6, Aug. 27, 1992, 92-2
   CPD para. 129 at 7 n.7. [2]

   The request that we recommend reimbursement of costs is denied.

   Anthony H. Gamboa

   General Counsel

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

   [1] In addition, while Yardney never filed comments, it asserts that the
   comments were substantially completed when it was notified of the
   corrective action.

   [2] Notwithstanding Yardney's assertions, moreover, it is not clear to
   what extent its original solution would have no value under the
   resolicitation.