TITLE: B-298082, Paramount Group, Inc., June 15, 2006
BNUMBER: B-298082
DATE: June 15, 2006
**********************************************
B-298082, Paramount Group, Inc., June 15, 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: Paramount Group, Inc.
File: B-298082
Date: June 15, 2006
Kevin P. Mullen, Esq., and David E. Fletcher, Esq., DLA Piper Rudnick Gray
Cary LLP, for the protester.
Robert C. MacKichan, Jr., Esq., Stuart W. Turner, Esq., and Kristen E.
Ittig, Esq., Holland & Knight LLP, for Bristol Group, an intervenor.
Edith Toms, Esq., and Elizabeth A. Hall, Esq., General Services
Administration, 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 challenging solicitation's terms as unduly restrictive of
competition is denied where agency demonstrates a reasonable basis for
required approach to lease of office space and information provided in the
solicitation is adequate to allow for submission of offers.
DECISION
Paramount Group, Inc. protests the terms of solicitation for offers (SFO)
No. 06-011, issued by the General Services Administration (GSA) for the
lease of office space to be occupied by the Department of Homeland
Security (DHS), Immigration and Customs Enforcement Agency (ICE). The
protester contends that the solicitation is unduly restrictive of
competition.
We deny the protest.
BACKGROUND
The SFO seeks offers for the lease by GSA of up to 403,847 square feet of
office space in Washington, DC on behalf of ICE. GSA currently leases
office space for ICE in the Chester A. Arthur Building (CAB), 425 I
Street, N.W., Washington, DC.[1] Paramount is the current owner of the CAB
and the incumbent lessor to GSA.
The SFO states that offers will be evaluated on the basis of three
non-price technical factors, in descending order of importance: building
characteristics, location, and key personnel and past performance. SFO
sect. 2.3. The SFO states that the award will be made to the offeror
"whose offer will be most advantageous to the Government and provides the
best value to the Government." Id. In selecting the successful offer,
"price is of significantly less importance than the combined weight of the
technical factors." Id. The SFO anticipates a lease of 10 years, with an
option for lease extension by the government after the eighth year. SFO at
7.
The SFO requires offerors to propose office space located within specified
boundary areas in Washington, DC, that provides parking and access to
metrorail and other amenities. SFO sections 1.2, 1.3. The competition will
take place in two phases. In the first phase of the competition, offerors
must submit offers for office space provided as a building shell with
basic construction elements, but without tenant improvements such as
completed interior office space. SFO sect. 1.9. The parties refer to this
standard by the common commercial term "warm lit shell." Offerors are
required to propose the office space with the following features:
Base structure and building enclosure components shall be complete. All
common areas accessible by the Government, such as lobbies, fire egress
corridors and stairwells, elevators, garages, and service areas, shall
be complete. Restrooms shall be complete and operational. All newly
installed building shell components, including but not limited to
heating, ventilation, and air conditioning (HVAC), electrical, ceilings,
sprinklers, etc., shall be furnished, installed, and coordinated with
Tenant Improvements.
SFO sect. 1.9.A.1.
In their offers for the warm lit shell, offerors must propose a basic
price per square foot for space, with an allowance for tenant
improvements. This allowance is an established rate of $38.30 per square
foot set by the SFO for all offerors, and will be used by the lessor to
build the tenant improvements, as directed by the agency, prior to
occupancy. SFO sections 1.10, 1.15; Supplemental Agency Memorandum of Law
at 6-7. Based on the initial offers for the warm lit shell, GSA will
select offerors for a competitive range. SFO sect. 1.8(B)(2).
In the second phase of the competition, offerors selected for the
competitive range will be provided additional information, including the
program of requirements (POR), and will be required to conduct "test fits"
of their space to determine which offeror provides the most efficient
utilization of space for the government's needs. Id.; Contracting
Officer's Statement para. 15.
The SFO also contains provisions that apply only to Paramount, as the
lessor of ICE's current office space in the CAB. The "Renovation of
Current Location Alternative" provisions state that the CAB may be
proposed as office space, provided that the building meets the
requirements of the SFO. SFO sect. 1.21. These provisions require
Paramount to renovate the CAB by demolishing existing tenant improvements,
thereby providing the CAB as a warm lit shell in accordance with the SFO.
Id. As part of the renovation process, Paramount must provide "swing
space" for ICE, that is, provide temporary space for ICE during the
renovation of the CAB, and conduct the required office moves for ICE
personnel to and from the swing space during that time. Id.
Paramount submitted an agency-level protest on January 18, 2006, prior to
the solicitation closing date, alleging that various SFO requirements and
the lack of the POR placed it at a competitive disadvantage. The agency
denied that protest on February 28, 2006, and Paramount then filed a
timely protest with our Office.
WARM LIT SHELL REQUIREMENT
The protester contends that the warm lit shell requirement and the
"Renovation of Current Location Alternative" provisions place it at a
competitive disadvantage. The protester argues that the agency has not
reasonably justified its requirement for a warm lit shell in a way that
should require Paramount to demolish the existing tenant improvements in
the CAB. In this regard, Paramount argues that the SFO unreasonably
prevents it from offering the CAB with its existing tenant improvements
and from reconfiguring the CAB to satisfy ICE's needs, thereby saving time
and costs; as a result, the protester contends that the SFO is unduly
restrictive of competition.
While a contracting agency has the discretion to determine its needs and
the best method to accommodate them, those needs must be specified in a
manner designed to achieve full and open competition. Mark Dunning Indus.,
Inc., B-289378, Feb. 27, 2002, 2002 CPD para. 46 at 3-4. Solicitations may
include restrictive requirements only to the extent they are necessary to
satisfy the agency's legitimate needs. 41 U.S.C. sections 253a(a)(1)(A),
(2)(B) (2000). Where a protester challenges a specification as unduly
restrictive of competition, the procuring agency has the responsibility of
establishing that the specification is reasonably necessary to meet the
agency's needs. Chadwick-Helmuth Co., B-279621.2, Aug. 17, 1998, 98-2 CPD
para. 44 at 3. A protester's mere disagreement with the agency's judgment
concerning the agency's needs and how to accommodate them does not show
that the agency's judgment is unreasonable. USA Fabrics, Inc., B-295737,
B-295737.2, Apr. 19, 2005, 2005 CPD para. 82 at 5.
The agency cites two primary rationales for its requirement for a warm lit
shell: flexibility for GSA client agencies and facilitation of evaluation
of competing offers. With regard to the first rationale, the agency
explains that a warm lit shell standard provides relatively uniform office
space that allows GSA client agencies, such as ICE, to "focus their design
efforts on their individual adjacency requirements and on other interior
layout requirements," rather then "redesign, from scratch, the MEP
[mechanical, electrical, plumbing] systems, the common areas, standard
finishes, any fire and life safety related systems, etc." Supplemental
Agency Memorandum of Law at 4. The warm lit shell also provides a standard
level of quality that allows agencies to "know[] generally what to expect
in the way of minimum quality standards in a Government leased location."
Declaration of GSA Senior Realty Specialist para. 6. The agency states
that the warm lit shell approach "is the only method of obtaining space
that will permit ICE to actually design its interiors around its own
operational needs so that it functions in accordance with its own mission,
as opposed to functioning around the incumbent's constraints."
Supplemental Agency Memorandum of Law at 5. In this regard, the agency
explains that because ICE is comprised of portions of numerous predecessor
agencies, it now requires the flexibility to reorganize the agency in new
office space configurations. Contracting Officer's Statement paras. 4,
8-9.
With regard to the second rationale, the agency explains that GSA's
adoption of the warm lit shell standard stems from the agency's efforts in
the early 1990s to bring the government's leasing practices in line with
commercial practices, with the goal of attracting increased competition
from potential commercial offerors. Declaration of GSA Senior Realty
Specialist para. 5. The agency contends that requiring all offerors to
offer a basic warm lit shell, without tenant improvements such as
completed interior office space construction, allows the agency to more
easily compare offers: "By requiring a uniform `warm, lit shell' and a
uniform Tenant Improvement allowance (set based on individual tenant needs
for a given procurement), it is very easy to price compare between offers
in a procurement." Id. para. 6. The agency contends that allowing
Paramount to propose its current space without demolition, instead of the
warm lit shell, would require the agency to provide for a much more
detailed and complicated competition that specifically evaluates and
compares the design of each offeror's proposed building and tenant
improvements. Id. para. 7.
We believe that the agency has reasonably explained the basis for
requiring offerors to provide a warm lit shell. Although the protester
contends that it may be able to provide a more efficient or less costly
alternative to the warm lit shell requirement, the agency need only
provide a reasonable basis for its procurement approach, and the
protester's mere disagreement with the agency's solicitation approach does
not render the agency's judgment unreasonable.[2] USA Fabrics, supra, at
5.
In any event, the government is not required to perpetuate a competitive
advantage that an offeror may enjoy as the result of its performance of
the current, or a prior, government contract. Inventory Accounting Serv.,
B-286814, Feb. 7, 2001, 2001 CPD para. 37 at 4. Conversely, an agency is
not required to neutralize a competitive advantage that a potential
offeror may have by virtue of its own particular circumstances where the
advantage does not result from unfair action on the part of the
government. Military Waste Mgmt., Inc., B-294645.2, Jan. 13, 2005, 2005
CPD para. 13 at 4. As long as an agency reasonably identifies its needs
and allows offerors the opportunity to meet those needs, the fact that an
offeror may have an advantage based on its ability to more readily meet
the government's needs, as compared to the protester, does not mean that
the solicitation is unduly restrictive of competition. See HG Props. A,
L.P., B-280652, Nov. 2, 1998, 98-2 CPD para. 104.[3]
In sum, because the agency has demonstrated a reasonable basis for
requiring offerors to propose a warm lit shell, and because the protester
does not demonstrate that any competitive disadvantage it might incur is
based on unfair government action, we deny this ground of protest.[4]
POR DISCLOSURE
The protester next argues that the agency unreasonably withheld the POR
from offerors, and that Paramount is disadvantaged because the absence of
this information will make it more difficult for the protester to develop
its offer for a warm lit shell and also to meet the unique requirements of
the CAB renovation provisions of the SFO.
The agency contends that offerors do not need the POR to be able to submit
their offers, stating that the SFO "contain[s] detailed construction
specifications for the base building and certain generic aspects of the
tenant improvements, as well as detailed criteria for the evaluation of
the quality of the building architecture, systems, and construction."
Contracting Officer's Statement at 6. The POR, in contrast, provides some,
although not all, of the specifications for the actual tenant
improvements, such as office space layout and configuration. Contracting
Officer's Statement at 6-7. With regard to the SFO provisions that apply
to the renovation of the CAB, the agency also states that there is
sufficient information for the protester to submit an offer:
The SFO contains all of the information needed for Paramount to develop
a plan for the renovation and re-positioning of the base building to
meet the minimum requirements of the SFO and to improve the competitive
standing of the building in the procurement, as well as to develop a
plan for the relocation of a portion of the building occupants into
temporary swing space and for the phasing of tenant improvement
construction.
Contracting Officer's Statement at 6-7.
Thus, the agency argues, because offerors will be evaluated in the first
stage of the procurement based on their offers for the warm lit shell in
accordance with the information contained in the SFO, there is no need for
offerors to have access to the POR. Furthermore, the agency notes that
offerors do not need access to the POR to determine their proposed prices
because the lease rate must be based solely on the warm lit shell, and all
offerors are required to include the same tenant improvement allowance.
SFO sections 1.10, 1.15; Supplemental Agency Memorandum of Law at 6-7.
Although offerors are required to describe their general approach to
providing the completed office space, and the CAB renovation requirements
impose additional requirements for Paramount, we believe that it is
speculative at this point to conclude that Paramount might be evaluated
based on information that could not have been known without the POR (e.g.,
downgraded for insufficiently detailing the completed office space or
phasing of swing space and tenant improvements). The agency has not
conducted its evaluation of offers or indicated that the protester's offer
will not be included in the competitive range or otherwise excluded from
award consideration; thus its protest merely anticipates prejudicial
agency action and is, therefore, speculative and premature. See Computer
Assoc. Int'l, Inc., B-292077.2, Sept. 4, 2003, 2003 CPD para. 157. We
assume that agencies, such as GSA, will conduct procurements in a fair and
reasonable manner in accordance with the terms of the solicitation, and
our Office will not consider a protest allegation which speculates that an
agency will not evaluate proposals in the manner set forth in the
solicitation. Walmac, Inc., B-244741, Oct. 22, 1991, 91-2 CPD para. 358.
The protest is denied.
Anthony H. Gamboa
General Counsel
------------------------
[1] ICE is the DHS agency with responsibility for investigating threats to
border security, and for enforcing economic, transportation, and
infrastructure security laws and regulations. Prior to the creation of
DHS, the CAB was occupied by one of ICE's predecessor agencies, the
Immigration and Naturalization Service (INS). In 2003, INS and other
agencies were reorganized and consolidated into ICE, which assumed INS's
office space at the CAB.
[2] Paramount also contends that the SFO provisions affect it more than
other offerors, because the existing tenant improvements of the CAB could
have been offered by the protester without incurring the costs of
demolition. The agency notes, however, that any offeror who has office
space with current tenant improvements will also be required to demolish
them to provide a warm lit shell. Thus, Paramount is not uniquely
disadvantaged by the requirement.
[3] In HG Properties, our Office concluded that an SFO for leased property
did not unduly restrict competition merely because it had some provisions
favoring award to offerors who proposed new construction where the agency
justified its preference for new construction, and the SFO did not
preclude the protester, the incumbent lessor, from offering its existing
property; the fact that the property owned by the incumbent lessor would
require additional work to meet the agency's requirements did not mean
that the SFO was unduly restrictive of competition. HG Props. A, L.P.,
supra, at 4-5.
[4] Although Paramount challenged in its agency-level protest other SFO
provisions that apply only to the CAB, such as the swing-space
requirement, it does not do so in its protest to our Office. Rather,
Paramount generally refers to these provisions as examples of the
additional burdens it will bear because of the warm lit shell and
demolition requirements.