TITLE: B-298281.2, Bannum, Inc., October 16, 2006
BNUMBER: B-298281.2
DATE: October 16, 2006
******************************************
B-298281.2, Bannum, Inc., October 16, 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: Bannum, Inc.

   File: B-298281.2

   Date: October 16, 2006

   Michael A. Gordon, Esq., and Fran Baskin, Esq., Holmes & Gordon, for the
   protester.

   Alex D. Tomaszczuk, Esq., Daniel S. Herzfeld, Esq., and Orest J. Jowyk,
   Esq., Pillsbury Winthrop Shaw Pittman LLP, for Dismas Charities, Inc., the
   intervenor.

   Tracey L. Printer, Esq., Federal Bureau of Prisons, for the agency.

   Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., Office
   of the General Counsel, GAO, participated in the preparation of the
   decision.

   DIGEST

   Where solicitation provided for award on the basis of initial proposals to
   the offeror whose proposal was determined to be in the best interests of
   the government, agency properly awarded contract without discussions where
   record shows that discussions were not necessary to determine which
   proposal represented the best value to the government.

   DECISION

   Bannum, Inc. protests the award of a contract to Dismas Charities, Inc.
   under request for proposals (RFP) No. 200-0800-SE, issued by the
   Department of Justice, Federal Bureau of Prisons for community corrections
   center (CCC) services for federal offenders in the Orlando, Florida area.
   Bannum contends that the agency improperly awarded to Dismas on the basis
   of initial proposals.

   We deny the protest.

   The RFP, which was issued on November 30, 2005, contemplated the award of
   an indefinite-delivery requirements contracts for a 3-year base period and
   seven 1-year award terms.[1] The solicitation provided for award to the
   offeror whose proposal was determined to be in the "best interests" of the
   government, RFP sect. M.2, with proposals to be evaluated on the basis of
   the following three criteria, listed in descending order of importance:
   past performance, technical/management, and price. RFP sect. M.5. The RFP
   advised that past performance and technical/management, when combined,
   were significantly more important than price. Subfactors to be considered
   under the technical/management factor were site location, accountability,
   programs, facility, and personnel. The RFP advised offerors that the
   agency intended to evaluate proposals and make award without discussions,
   but reserved to the government the right to conduct discussions if the
   contracting officer determined them to be necessary. RFP sect.
   L.2(f)(4).[2]

   Four proposals were received by the March 1, 2006 closing date. A source
   selection evaluation board evaluated the technical/management proposals
   and forwarded to the contracting officer a memorandum summarizing items to
   be discussed and/or clarified with the various offerors. After reviewing
   the memorandum, the contracting officer concluded that award could be made
   without discussions, as "at least one offeror had no deficiencies or major
   weaknesses that required discussions." Agency Report, Aug. 11, 2006, at 4.

   By letter dated May 3, the contracting officer notified the protester that
   its proposal had been eliminated from consideration because Bannum had
   failed to provide the contracting officer with valid proof of zoning
   within 60 days after the date of its initial proposal submission. Bannum
   protested the agency's action to our Office on May 8, arguing that the
   solicitation required the submission of proof of zoning only if
   discussions were required, and that discussions had not been conducted in
   connection with the subject procurement.[3] The protester further noted
   that, if and when reinstated, it intended to request a change in its
   proposed facility.[4] Protest, May 8, 2006, at 4. By letter dated May 12,
   the contracting officer notified the protester that "[t]he correspondence
   dated May 3, 2006 eliminating Bannum Inc.'s proposal . . . is rescinded
   and Bannum's proposal is reinstated." Bannum subsequently withdrew its
   protest.

   In response to the contracting officer's decision to make award without
   discussions, the SSEB reconvened and assigned the proposals color and risk
   ratings under each factor.[5] The contracting officer evaluated offerors'
   past performance and prices and memorialized her findings in memoranda
   dated May 26 (price analysis) and June 2 (past performance). Past
   performance ratings, technical/management factor ratings, and offeror
   prices were as follows:[6]

   +------------------------------------------------------------------------+
   |Offeror      |Past Performance      |Technical/Mgmt      |Price         |
   |-------------+----------------------+--------------------+--------------|
   |Bannum       |Blue/Very Good        |Green/Low Risk      |[deleted]     |
   |-------------+----------------------+--------------------+--------------|
   |Dismas       |Blue/Very Good        |Blue/Low Risk       |$16,087,527   |
   |-------------+----------------------+--------------------+--------------|
   |Offeror A    |Blue/Very Good        |Green/Low Risk      |[deleted]     |
   |-------------+----------------------+--------------------+--------------|
   |Offeror B    |Green/Acceptable      |Green/Low Risk      |[deleted]     |
   +------------------------------------------------------------------------+

   On June 23, the agency amended the solicitation to incorporate a revised
   Department of Labor wage determination. In a cover letter accompanying the
   amendment, the contracting officer advised each offeror that it could
   "revisit [its] pricing schedule" if the revised wage determination
   affected its proposal, but to "keep in mind" that the amendment was
   "specific to pricing only" and was not "a form of written negotiations to
   open and conduct discussions." Agency Report, Tab 13. Bannum responded
   with a letter dated June 28, in which it proposed a new performance site
   and reduced its pricing based on the new site. The contracting officer did
   not approve the change in performance site and did not consider the
   revised pricing.

   By decision dated June 30, the contracting officer, acting as the source
   selection authority, determined that Dismas's proposal represented the
   most advantageous offer to the government. The contracting officer noted
   that Dismas had the highest rated non-price proposal and concluded that
   the superiority of Dismas's proposal over Offeror B's in both the past
   performance and technical/management areas, and over Bannum's in the
   technical/management area, warranted the payment of a price premium.[7]
   The agency awarded Dismas a contract on July 5.

   Bannum protested to our Office on July 14, arguing that the contracting
   officer had abused her discretion in electing to award to Dismas on the
   basis of initial proposals rather than conducting discussions. The
   protester asserted that the awardee's proposal was materially deficient in
   that Dismas's proposed facility was subject to a restrictive covenant that
   would prohibit its use as a community corrections center. The protester
   further asserted that the agency's decision not to conduct discussions was
   the product of bad faith on the part of agency officials who did not want
   to give Bannum the opportunity to substitute a new place of performance
   for the one originally proposed and thereby improve its competitive
   standing. The protester also argued that the agency had conducted
   discussions with Offeror A, and, as a consequence, was required to conduct
   discussions with all offerors, and that the agency had violated Federal
   Acquisition Regulation (FAR) sect. 15.306(a) by failing to permit Bannum
   to clarify allegedly inaccurate negative past performance information.

   Restrictive Covenants

   Bannum argues that Dismas's proposal was materially deficient and thus
   that the agency should have rejected the proposal or, at a minimum, held
   discussions with Dismas and all other offerors. As explained below, we
   find this argument to be without merit.

   Bannum contends that Dismas's proposal is deficient because the property
   that Dismas has proposed is subject to a restrictive covenant that
   prohibits its use as a community corrections center. In support of its
   position, the protester cites the following language from a document
   entitled Declaration of Covenants and Restrictions for Edgewater North
   Commerce Park:[8]

     Land Use and Building Type. No lot shall be used except for commercial,
     warehouse, and industrial purposes, including office buildings and office
     space. . . .

   Protester's Comments, Sept. 1, 2006, exh. A, Declaration of Covenants and
   Restrictions at 13. The protester argues that this language precludes use
   of the property for residential purposes, such as operation of a CCC. In
   this connection, Bannum asserts (without citing any support for its
   position) that "[a] CCC is a residential use." Protester's Comments, Aug.
   21, 2006, at 10.

   In response to the protester's argument, the agency asserts that "a CCC is
   an industrial use, and not a residential use" as alleged by Bannum. Agency
   Reply Comments, Aug. 25, 2006, at 3. The Bureau of Prisons cites as
   support for its position a letter from the Orange County Zoning Division
   included by Dismas in its offer. The letter provides in relevant part as
   follows:

     This is in response to your November 7, 2005 inquiry relating to the
     appropriate Orange County zoning district for the operation of a
     residential community correction center or "half-way house."

     We have reviewed the operation as described in your inquiry and have
     determined that the activities are consistent with Standard Industrial
     Classification (SIC) Group #8361 as applied to the Orange County Zoning
     Regulations.

     Uses listed in SIC Group #8361 are a permitted use in the following
     industrial districts: I-1/I-5, I-2/I-3 and I-4. But not in the I-1A,
     Restricted Industrial District (sic).

   Agency Report, Tab 17.

   The protester takes issue with the agency's response, maintaining that the
   Zoning Division's letter states that CCCs are a permitted use in an
   industrial zone, not that operation of a CCC is an industrial use. The
   protester further asserts that, in any event, it was the prerogative of
   the Edgewater North Commerce Park Property Owner's Association, and not
   the county, to determine whether operation of a CCC was an industrial use
   permitted by the covenant. According to the protester, it knows--from its
   own investigation of a building within the Edgewater North Commerce Park
   as a potential site--that the Association will not approve such a use.

   As a preliminary matter, even assuming that the covenant the protester
   cites has a material bearing on the acceptability of the awardee's
   proposal, it is clear that the agency was not on notice of the covenant
   since it was not referenced in Dismas's proposal. In this regard, the
   agency asserts that, as submitted, Dismas's proposal satisfied all the
   requirements of the RFP with respect to demonstrating that it has the
   right to use the site in question, Agency Reply Comments, Aug. 25, 2006,
   at 3, and Bannum does not take issue with this assertion. Accordingly,
   based on the record here, we see no basis to question the agency's
   determination that Dismas's proposal complied with the RFP requirements,
   or to conclude that the agency was required to hold discussions before
   making award to the firm.

   To the extent that the protester argues that the awardee's proposal now
   should be disqualified based on Dismas's failure to disclose the covenant
   in its proposal, this argument is without merit. There simply is no
   support in the record for the underlying premise of any such
   argument--that the awardee is barred from using the proposed site for
   operation of a CCC; Bannum merely states in a conclusory fashion that a
   CCC is a residential use, and therefore is not an authorized use of the
   proposed site. The protester's argument, as well as any assumption that
   the property owners' association will interpret the covenant in question
   as prohibiting the operation of a CCC and will choose to take legal action
   to enforce such an interpretation, amount to unsupported speculation, and
   thus do not give rise to a valid basis of protest.[9] See Janico Bldg.
   Servs., B-290683, July 1, 2002, 2002 CPD para. 119 at 2. In any event,
   whether Dismas succeeds in performing in the manner that it has proposed
   is a matter of contract administration not for review by our Office.

   Bid Protest Regulations, 4 C.F.R. sect. 21.5(a) (2006).

   Decision to award on the basis of initial proposals

   The protester contends that the contracting officer decided to award on
   the basis of initial proposals rather than to conduct discussions in order
   to deny it the opportunity to improve its proposal. According to the
   protester, this action is the latest of a series of actions undertaken by
   the agency to retaliate against it for filing grievances against Bureau of
   Prisons officials in connection with an earlier contract and for
   protesting to our Office.

   Where, as here, an RFP provides for award on the basis of initial
   proposals without discussions, an agency may make award without
   discussions, unless discussions are determined to be necessary. 41 U.S.C.
   sect. 253b(d)(1)(B) (2000). While discussions are necessary where the
   solicitation provides for award on a best value basis and the source
   selection official is unable to determine without further information
   which proposal represents the best value to the government, see Sierra
   Military Health Servs., Inc.; Aetna Gov't Health Plan, B-292780 et al.,
   Dec. 5, 2003, 2004 CPD para. 55 at 6-7 n.5, an agency may dispense with
   discussions where there is a reasonable basis to conclude that the
   proposal of the intended awardee represents the best overall value.
   Facilities Mgmt. Co., Inc., B-259731.2, May 23, 1995, 95-1 CPD para. 274
   at 8; see also Lloyd-Lamont Design, Inc., B-270090.3, Feb. 13, 1996, 96-1
   CPD para. 71 at 6.

   Here, the agency clearly had a reasonable basis to conclude that the
   proposal of Dismas represented the best overall value to the government.
   In this regard, Dismas's proposal contained no deficiencies requiring
   discussions; was the only proposal to receive the highest rating under
   both non-price evaluation factors; and was lower in price than Offeror A's
   and only slightly higher in price than Bannum's. Moreover, while the
   protester contends that the agency's objective in awarding on the basis of
   initial proposals was to deny it the opportunity to improve its proposal
   through discussions to the point where it would have been in line for
   award, this argument presumes bad faith on the agency's part. To show bad
   faith, a protester must submit convincing proof that the procuring agency
   directed its actions with the malicious and specific intent to injure the
   protester. Strategic Resources, Inc., B-287398, B-287398.2, June 18, 2001,
   2001 CPD para. 131 at 6 n.8. The protester has made no such showing here.

   Discussions with Offeror A

   The protester argues that it is clear from the record that the agency in
   fact conducted discussions with Offeror A, and that, as a consequence, the
   agency had an obligation to conduct discussions with all offerors. Bannum
   cites as evidence that the agency conducted discussions with Offeror A the
   fact that in its April 4 memorandum to the contracting officer, the
   evaluation board identified a deficiency in Offeror A's technical
   proposal, while in its evaluation report of late May, the board stated
   that Offeror A's proposal had no deficiencies.[10] According to the
   protester, the only explanation for the elimination of the deficiency is
   that the agency gave Offeror A the opportunity to cure it through
   discussions.

   The agency denies that it conducted discussions with Offeror A. According
   to the agency, the reason that the item was not mentioned as a deficiency
   in the second evaluation report was that subsequent to the April 4
   memorandum, the evaluators decided that it was not actually a deficiency.
   The agency further argues that even assuming that it had conducted
   discussions with Offeror A, the protester suffered no prejudice as a
   result because award was not ultimately made to Offeror A.

   In its comments on the agency report, Bannum does not rebut the agency's
   assertion that it did not conduct discussions with Offeror A. Instead,
   Bannum disputes the agency's finding that Offeror A's proposal did not
   have a deficiency and the agency's position that Bannum was not prejudiced
   as a result of the elimination of the alleged deficiency. Both of these
   arguments are wholly unpersuasive. First, since Offeror A was not in line
   for award in any event, any deficiency in its proposal which would have
   resulted in lowering its rating would have had no effect on the ranking of
   the offerors. Second, Bannum argues that it was prejudiced by the agency's
   failure to recognize the deficiency in Offeror A's proposal because the
   agency would not have elected to award on the basis of initial proposals
   if it had not thought that it had two technically acceptable proposals
   (i.e., those of Dismas and Offeror A) to trade off against one another in
   a best value determination.[11] This theory is simply too speculative to
   warrant questioning the agency's actions here.

   Adverse past performance information

   Finally, the protester argues that the agency violated FAR sect. 15.306(a)
   by denying it the opportunity to address adverse information pertaining to
   its performance under the preceding contract for the effort solicited
   here. In this regard, FAR sect. 15.306(a)(2) provides as follows:

     If award will be made without conducting discussions, offerors may be
     given the opportunity to clarify certain aspects of proposals (e.g., the
     relevance of an offeror's past performance information and adverse past
     performance information to which the offeror has not previously had an
     opportunity to respond) or to resolve minor or clerical errors.

   The agency acknowledges that it considered adverse information pertaining
   to Bannum's performance under the predecessor contract, but maintains that
   it was not information to which the protester had not previously had an
   opportunity to respond. In this connection, the agency contends that
   Bannum was furnished with a copy of the Contractor's Evaluation Form
   containing the adverse information and given the opportunity to comment on
   it, but that Bannum chose not to respond. While the protester disputes the
   agency's assertion that it had been given the opportunity to respond to
   the negative information, this is not a matter that we need to resolve
   because it is clear from the record that the protester, which received the
   highest overall past performance rating of blue, suffered no prejudice as
   a result of the agency's consideration of the adverse past performance
   information at issue. Moreover, to the extent that Bannum argues that, if
   the agency had given it the opportunity to address adverse past
   performance information pursuant to FAR

   sect. 15.306(a)(2), the agency would have decided to conduct discussions,
   we fail to see the logic of Bannum's argument since that FAR provision
   explicitly permits agencies to give offerors the opportunity to address
   such matters where award is to be made without conducting discussions.

   The protest is denied.

   Gary L. Kepplinger

   General Counsel

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

   [1] The "award term" concept is intended as an incentive to the contractor
   that permits extensions to the base contract period based on the
   contractor's performance. RFP sect. I.11.

   [2] Similarly, sect. M.4 advised offerors that "an award may be made
   without discussions," and sect. L.7(f)(2) notified them that the "Bureau
   of Prisons may award a contract based on the initial submittal of offers."

   [3] The RFP provision in question, sect. L.7(i), provides in relevant part
   as follows:

     The Government reserves the right to conduct discussions if the
     Contracting Officer determines them necessary. If discussions are
     required, offerors shall provide the Contracting Officer with valid proof
     of all zoning and local ordinance requirements necessary for the operation
     of a Community Corrections Center . . . within sixty days after the date
     of the initial proposal submission.

   [4] The RFP permitted offerors to make one request for a change in
   facilities. In this regard, sect. L.7(f)(3) provided as follows:

     Only one request for a change in an offeror's proposed facility will be
     approved by the Contracting Officer. This request must be received by the
     Contracting Officer prior to offerors being given an opportunity to submit
     final proposal revisions. All requests for a site change must include all
     site information required herein. Contractor to reimburse the Government
     for all associated costs incurred in the pre-site inspection conducted by
     the Government for the change of location.

   [5] While the evaluation report is undated, e-mail correspondence under
   Tab 3 of the agency report indicates that it was circulated among board
   members for approval in late May.

   [6] The RFP provided for the assignment of the following color/adjectival
   ratings: Blue-Very Good; Green-Acceptable; Yellow-Poor; and
   Red-Unacceptable.

   [7] The contracting officer noted that no trade-off determination was
   required to select Dismas's proposal over Offeror A's because Dismas's
   proposal was both higher-rated on the technical/management factor and
   lower in price than Offeror A's.

   [8] As neither counsel for Dismas nor counsel for the agency has argued
   that the property offered by Dismas is not part of the Edgewater North
   Commerce Park, we assume that this is the case.

   [9] Bannum also cites language from the Declaration of Covenants and
   Restrictions providing as follows:

     Opening Blank Walls; Removing Fences. No owner shall make or permit any
     opening to be made in any masonry wall or fence, except as such opening is
     installed by the Developer. No such masonry wall or fence shall be
     demolished or removed without, nor shall any opening be made therein
     without the prior written consent of the Architectural Control Board.

   Protester's Comments, Sept. 1, 2006, exh. A, supra, at 13. As noted above,
   the agency was unaware of this covenant. Moreover, while the protester
   argues that the prohibition on the destruction of masonry walls "would
   likely prevent Dismas' ability to carry out its planned renovation,"
   Protester's Comments, Aug. 21, 2006, at 10, the protester has cited
   nothing from Dismas's proposal that would indicate an intent to destroy a
   masonry wall.

   [10] The deficiency identified in the April 4 memorandum was as follows:

     Zoning: Offeror shall submit revised zoning letter to accept all
     offenders, regardless of their offenses.

   Agency Report, Tab 3, Memorandum to the Contracting Officer, Apr. 4, 2006,
   at 4.

   [11] While the evaluators assigned the proposals of the other two
   offerors, Bannum and Offeror B, overall technical ratings of Green, they
   also characterized both as containing significant weaknesses that would
   need to be resolved for the proposals to be considered acceptable. Agency
   Report, Tab 5, Technical/Management Evaluation, at 1. While the agency
   does not explain this discrepancy in the record, it has no effect on our
   analysis here. Moreover, as noted above, the contracting officer in fact
   considered both Bannum's and Offeror B's proposals in her best value
   tradeoff decision.