TITLE: B-298949, Caddell Construction Company, Inc., January 10, 2007
BNUMBER: B-298949
DATE: January 10, 2007
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B-298949, Caddell Construction Company, Inc., January 10, 2007

   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: Caddell Construction Company, Inc.

   File: B-298949

   Date: January 10, 2007

   James F. Archibald, III, Esq., Bradley Arant Rose & White LLP, for the
   protester.

   Scott M. Heimberg, Esq., Mark J. Groff, Esq., and Andrea T. Vavonese,
   Esq., Akin Gump Strauss Hauer & Feld LLP, for American International
   Contractors (Special Projects), Inc., an intervenor.

   Dennis J. Gallagher, Esq., Department of State, for the agency.

   Linda C. Glass, Esq., and Glenn G. Wolcott, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest that Department of State improperly made award to a company that
   is not a "United States person" as required by the Omnibus Diplomatic
   Security and Antiterrorism Act of 1986, 22 U.S.C. sect. 4852 (2000), is
   sustained where record shows that agency improperly prequalified the
   awardee as a "United States person" based on the awardee having a de facto
   joint venture relationship with its parent company, when the awardee
   specifically certified that it was neither a formal nor a de facto joint
   venture.

   DECISION

   Caddell Construction Company, Inc. protests the award of a contract to
   American International Contractors (Special Projects), Inc. (AICI-SP)
   under request for proposals No. SALMEC-06-R-0009, issued by the Department
   of State (DOS), Overseas Buildings Operations (OBO), to design and
   construct a new embassy compound in Djibouti, in eastern Africa. The
   solicitation was subject to the Omnibus Diplomatic Security and
   Antiterrorism Act of 1986, as amended, (Security Act), 22 U.S.C. sect.
   4852 (2000), which provides that only "United States persons" and
   "qualified United States joint venture persons" are eligible to compete
   for certain diplomatic construction projects.[1] Caddell contends that the
   agency unreasonably determined that AICI-SP was a "United States person"
   or "qualified United States joint venture person" within the meaning of
   the Security Act and, accordingly, that it was improper to award the
   contract to AICI-SP.

   We sustain the protest.

   BACKGROUND

   On October 27, 2005, the agency posted a "Sources Sought Notice" on the
   Federal Business Opportunities (FedBizOpps) website, announcing its
   planned fiscal year 2006 Standard Embassy Design projects and inviting
   interested firms to file prequalification submissions. The notice stated
   that potential offerors for the various construction projects "are limited
   to United States person bidders," and further provided:

     Each company responding to this notice shall contact the DOS Contract
     Specialist for a copy of the pamphlet "Certifications Relevant to Public
     Law 99-399, Statement of Qualifications for Purpose of Section 402 of
     The Omnibus Diplomatic Security and Antiterrorism Act of 1986." . . .
     The pamphlet must be completed and included as part of the
     prequalifications package. If a joint venture is formed, the company
     having 51 percent or greater interest in the JV [joint venture] must be
     the one completing the pamphlet. This is a pass/fail evaluated area.

   Agency Report (AR), Tab 1, Sources Sought Notice, at 5.

   In December 2005, AICI-SP submitted a prequalification package, stating in
   its cover letter that AICI-SP was established in November 2005 to perform
   classified contracts for DOS and was wholly owned by American
   International Contractors, Inc. (AICI). AR, Tab 2, AICI-SP
   Prequalification Submission Cover Letter. Among other things, AICI-SP's
   prequalification submission addressed the requirements regarding a "United
   States person" or a "qualified United States joint venture person," and
   contained the following statements relative to these requirements:

     Definitions:

     "JOINT VENTURE"--This terms refers to a formal or de facto arrangement
     by and through which two or more persons or entities associate for the
     purpose of carrying out the prospective contract.

   AR, Tab 2, AICI-SP Prequalification Submission at 9.

   Directly below this definition, AICI-SP's prequalification submission
   stated: "The prospective offeror . . . is not . . . a joint venture."[2]
   Id. Consistent with its statement that it was not a joint venturer,
   AICI-SP did not respond to two additional requests for information
   directed at joint venture offerors. First, offerors seeking to qualify on
   the basis of joint venture status were required to respond to the
   following:

     If the prospective offeror is a joint venture, the U.S. person
     participant is:[3]

       ________________________________ (name)

       ________________________________ (address)

       ________________________________ (address)

   Id.

   AICI-SP's prequalification submission provided no response to this request
   for information. Id. Similarly, joint venture offerors were required to
   respond to the following:

     If the prospective offeror is a joint venture, the names and countries
     of citizenship for all co-venturers are as follows:

       ___________________ (name) ____________________ (citizenship)

   Id.

   Again, AICI-SP's prequalification submission provided no information
   responding to this informational request. Id.

   In January 2006, the agency evaluated AICI-SP's submission with regard to
   the requirements concerning a "United States person" and "qualified United
   States joint venture persons." In reviewing AICI-SP's submission, the
   agency concluded that, because of AICI-SP's recent incorporation, it did
   not qualify as a "United States person" in its own right.[4] AR, Tab 3,
   DOS Legal Memorandum, Jan. 11, 2006, at 10. Nonetheless--and directly
   contrary to AICI-SP's own statement that it was not part of either a
   formal or a de facto joint venture--the agency concluded that "AICI-SP in
   de facto joint venture with AICI should be considered eligible as a United
   States person." Id. at 12. None of the agency's contemporaneous evaluation
   documents acknowledge, much less discuss, AICI-SP's express statement that
   it was not part of a joint venture, nor do these documents address any
   responses to the requests for required information identifying
   co-venturers.

   Six proposals were received from prequalified firms, including proposals
   from Caddell and AICI-SP. After a technical and price evaluation, only the
   proposals of Caddell and AICI-SP were included in the competitive range.
   Revised proposals were received from both offerors. After evaluation of
   revised proposals, both offerors were determined to be technically
   qualified, and award was made to AICI-SP with a final evaluated price of
   $74,988,000, compared to Caddell's evaluated price of $90,115,000. AR, Tab
   18, Price Negotiation Memorandum at 7. Following a debriefing, Caddell
   filed this protest and the agency has stayed contract performance pending
   resolution of Caddell's protest.

   DISCUSSION

   Caddell maintains that the record does not reasonably support the agency's
   determination that AICI-SP qualified either as a "United States person" or
   as a "qualified United States joint venture person" and, thus, was not
   properly eligible for award. We agree.

   In reviewing an agency's source selection decision, we examine the
   supporting record to determine whether the decision was rational,
   consistent with the stated evaluation criteria, consistent with applicable
   laws and regulations, and adequately documented. Johnson Controls World
   Servs., Inc., B-289942, May 24, 2002, 2002 CPD para. 88 at 6; AIU N. Am.,
   Inc., B-283743.2, Feb. 16, 2000, 2000 CPD para. 39 at 7; Matrix Int'l
   Logistics, Inc., B-272388.2, Dec. 9, 1996, 97-2 CPD para. 89 at 5. Where
   an agency's source selection decision is based on conclusions that appear
   to be directly contrary to the contemporaneous record, and where the
   agency's evaluation record provides no explanation regarding the apparent
   conflict, we cannot conclude that the decision was reasonable. See AIU N.
   Am., Inc., supra.

   As discussed above, the Security Act, and the agency's stated evaluation
   criteria regarding the procurement at issue here, limited eligible
   offerors to "United States persons" or "qualified United States joint
   venture persons." The DOS regulations implementing the statement of
   qualifications for the Security Act provide that:

     Organizations that wish to use the experience or financial resources of
     any other legally dependent organization or individual, including parent
     companies, subsidiaries, or other related organizations, must do so by
     way of a joint venture. A prospective bidder/offeror may be an
     individual organization or a firm, a formal joint venture in which the
     co-venturers have reduced their arrangement to writing, or a de facto
     joint venture where no formal agreement has been reached, but the
     offering entity relies upon the experience of a related U.S. firm that
     guarantees performance.

   48 C.F.R. sect. 652.236-72.

   Here, AICI-SP's own prequalification submission expressly stated: "The
   prospective offeror . . . is not . . . a joint venture." AR, Tab 2,
   AICI-SP Prequalification Submission at 9. This statement appeared directly
   beneath a definition of the term "joint venture," which stated the term
   "refers to a formal or de facto arrangement." Further, consistent with
   AICI-SP's statement that it was not seeking qualification on the basis of
   either a formal or de facto joint venture, AICI-SP declined to provide any
   of the necessary information regarding identification of the "U.S. person
   participant" in the joint venture, nor did it identify "all co-venturers,"
   as was specifically required. Finally, the contemporaneous documentation
   supporting the agency's summary conclusion that AICI-SP was eligible to
   participate in this procurement on the basis of a de facto joint venture
   provides no explanation as to how the agency could reach this conclusion
   in light of AICI-SP's expressly contrary representation. On the basis of
   the record here, we are unable to conclude that the agency's determination
   regarding AICI-SP's eligibility for award was reasonable.

   RECOMMENDATION

   We recommend that the agency reasonably review the qualification
   submission of AICI-SP, specifically considering and addressing AICI-SP's
   statement that it is not part of a formal or de facto joint venture, and
   fully document its review and analysis regarding that matter. In the event
   the agency concludes that additional information is required, it should
   seek such information only in a manner that is consistent with applicable
   procedural requirements. In the event the agency determines that AICI-SP
   is ineligible for award, it should terminate the contract with AICI-SP and
   make a new award consistent with the solicitation provisions and
   applicable law and regulation. In the event, following implementation of
   our recommendations, the agency establishes, and documents, a reasonable
   basis for concluding that a joint venture exists between AICI-SP and
   another entity, it should reasonably consider, and document, whether such
   other entity qualifies as a "United States person." Finally, we recommend
   that the protester be reimbursed its costs of filing and pursuing the
   protest, including reasonable attorneys' fees. Bid Protest Regulations,
   4 C.F.R. sect. 21.8(d)(1) (2006). The protester should submit its
   certified claim, detailing the time expended and costs incurred, directly
   to the contracting agency within 60 days of receiving this decision. 4
   C.F.R. sect. 21.8(f)(1).

   The protest is sustained.[5]

   Gary L. Kepplinger
   General Counsel

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

   [1] Specifically, the Security Act provides: "where adequate competition
   exists, only United States persons and qualified United States joint
   venture persons may . . . bid on a diplomatic construction or design
   project which has an estimated total project value exceeding $10,000,000."
   22 U.S.C. sect. 4852(a).

   [2] AICI-SP's cover letter accompanying the prequalification submission
   stated that it would "rely on the experience of its parent to prequalify
   for OBO work," and that "AICI will guaranty that AICI-SP has the financial
   resources to perform any project awarded to it by the Department of
   State." AR, AICI-SP Prequalification Submission Cover Letter. However, the
   record shows that AICI is, itself, owned by a foreign corporation. Id.

   [3] The DOS regulations implementing the Security Act provide that, in
   order to be considered a "qualified United States joint venture person,"
   the joint venture must have at least one firm or organization that,
   itself, meets all of the Security Act's requirements for a "United States
   person." 48 C.F.R. sect. 652.236-72 (2006).

   [4] Among other things, the Security Act defines "United States person" as
   a "person" that has been incorporated or legally organized in the United
   States for more than 5 years before the issuance date of the solicitation.
   22 U.S.C. sect. 4852(c)(2).

   [5] In addition to the agency's unsupported conclusion that AICI-SP was,
   contrary to its own representation, part of a de facto joint venture with
   its parent corporation, the contemporaneous record does not demonstrate
   that the agency properly considered whether the parent corporation, AICI,
   satisfied all of the requirements to qualify as a "United States person."
   As noted above, the regulations require that at least one member of a
   qualifying joint venture must, itself, meet all the requirements for a
   "United States person." 48 C.F.R. sect. 652.236-72. Our review of the
   record indicates that some of the applicable requirements may not have
   been addressed by the agency with regard to AICI's qualifications,
   including whether AICI employs United States citizens in at least 80
   percent of its principal management positions in the United States. See 22
   U.S.C. sect. 4852(c)(2)(F). In light of our conclusion, above, that the
   contemporaneous record fails to reasonably support the agency's
   determination regarding the existence of a joint venture, along with our
   accompanying recommendations, we need not definitively resolve this
   matter. Nonetheless, our recommendation addresses the agency's
   responsibility in this regard.