TITLE: B-299054, Continental Staffing, Inc., January 29, 2007
BNUMBER: B-299054
DATE: January 29, 2007
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B-299054, Continental Staffing, Inc., January 29, 2007

   Decision

   Matter of: Continental Staffing, Inc.

   File: B-299054

   Date: January 29, 2007

   Gilbert J. Ginsburg, Esq., for the protester.

   James H. Roberts, III, Esq., and Carrol H. Kinsey, Jr., Esq., Van Scoyoc
   Kelly, for TriStar Imaging, LLC, an intervenor.

   Phillipa L. Anderson, Esq., and Dennis Foley, Esq., Department of Veterans
   Affairs, for the agency.

   John W. Klein, Esq., and Kenneth W. Dodds, Esq., for the Small Business
   Administration.

   Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Protester's contention that solicitation's cascading set-aside clause
   violates certain set-aside provisions in the Federal Acquisition
   Regulation is untimely when first raised after award; the alleged
   solicitation impropriety was clear from the face of the solicitation, and
   the protester was required, under our Bid Protest Regulations, to raise
   this issue prior to the time set for the submission of offers.

   2. Contention by protester, a service-disabled veteran-owned small
   business (SDVOSB), that, under terms of the solicitation's cascading
   set-aside clause, agency should have made award in the SDVOSB tier is
   denied where agency reasonably decided that the condition for making award
   at that tier--receipt of adequate competition among SDVOSB firms--had not
   been met given that four of the five proposals submitted by SDVOSBs were
   found unacceptable for taking exception to the solicitation's limitations
   on subcontracting clause.

   DECISION

   Continental Staffing, Inc. protests the award of a contract to TriStar
   Imaging, LLC by the Department of Veterans Affairs (VA) pursuant to
   solicitation for offers (SFO) No. 693-06-0014, issued to procure off-site
   radiology readings, to include film and CAT scans, during weekday hours
   for the VA Medical Center in Wilkes Barre, Pennsylvania. The SFO here used
   what the VA terms a "cascade set-aside procedure." SFO at 13. Continental
   argues that the cascade clause here conflicts with the requirements of the
   Federal Acquisition Regulation (FAR), and that the agency did not obtain
   permission to deviate from the FAR's requirements. Alternatively,
   Continental contends that, even under the terms of the challenged clause,
   it should have received award, rather than TriStar.

   We deny the protest.

   BACKGROUND

   On August 4, 2006, the VA Medical Center in Wilkes Barre, Pennsylvania
   issued this SFO to supplement its in-house radiology capability with
   daytime off-site radiology interpretation services, to be performed by
   licensed radiologists. The SFO estimated a need for approximately 70 film
   readings, and 10 CAT scan studies, per day, and sought unit prices for
   readings and studies. SFO at 1. The solicitation anticipated award of a
   fixed-price contract to the "responsible offeror whose offer conforming to
   the solicitation will be most advantageous to the Government, price and
   other factors considered." Id. at 13.

   Two clauses incorporated into this SFO are relevant to the dispute here.
   First, the SFO incorporated the Limitations on Subcontracting Clause at
   FAR sect. 52.219-14. This clause requires that for services, other than
   construction, the offeror agree that "at least 50 percent of the cost of
   contract performance incurred for personnel shall be expended for
   employees of the concern." FAR sect. 52.219-14(b)(1).

   Second, the SFO contained a clause entitled, "Method of Award -- Cascade
   Set-Aside Procedure." SFO at 13. The relevant portions of this clause
   advised:

     1. Any award(s) resulting from this solicitation will be made using the
     following the [sic] cascade set-aside order of precedence:

       1.1 In accordance with FAR Subpart 19.1405, any award under this
       solicitation will be made on a competitive basis first to an eligible
       Service Disabled Veteran Owned small business [SDVOSB] concern . . .
       in accordance with FAR 19.1405 [repetition in original], provided that
       there is adequate competition among such firms.

       1.2 If there is inadequate competition for award to a SDVOSB concern,
       award will be made competitively to a small business concern IAW FAR
       19.5.

       1.3 If there is inadequate competition for award to a small business
       concern, award will be made on the basis of full and open competition
       considering all offers submitted by responsible business concerns.

     2. Adequate competition shall be deemed to exist if--

       2.1 At least two competitive offers are received from qualified,
       responsible business concerns at the tier under consideration; and

       2.2 Award will be made at fair market prices as determined in
       accordance with FAR 19.202-6.

   Id. (Emphasis in original.)

   On September 20, the VA received 10 proposals--five from SDVOSB concerns,
   three from small businesses (including TriStar), one from a large
   business, and one from an offeror whose size could not be ascertained
   because the offeror omitted the representations and certifications portion
   of its offer. Contracting Officer's (CO) Statement at 1. In reviewing the
   proposals received from the five SDVOSB concerns, the CO noticed
   immediately that four of the offerors proposed to subcontract with the
   medical professionals providing these services, rather than propose them
   as employees. As a result, the CO concluded that these four proposals from
   SDVOSB concerns had not offered to comply with the limitations on
   subcontracting clause, and the proposals were excluded from further
   consideration for award. Id. at 2.

   Based on the determination above, Continental's proposal was viewed as the
   only acceptable offer received from an SDVOSB concern. The CO then
   concluded that the agency had not received adequate competition from
   SDVOSB offerors to justify an award in that tier. (As defined in the
   cascade clause, at least two competitive offers from qualified,
   responsible business concerns were needed to make award within a given
   tier. SFO at 13.) Thus, the CO, in essence, moved Continental's proposal
   from the SDVOSB tier to the small business tier, and turned her review to
   the other proposals received from small business concerns.

   At the small business tier, the CO concluded, for reasons not relevant
   here, that two of the three proposals should be excluded from further
   consideration. Id. This left only the proposals of Continental and TriStar
   eligible for award within the small business tier. The CO then sent the
   Continental and TriStar proposals to the technical evaluation team. After
   their review, which resulted in assigning technical and price scores to
   these proposals, requesting and receiving final proposals, and rescoring
   the proposals, the CO selected TriStar's lower-priced, higher-rated
   proposal for award. This protest followed.

   DISCUSSION

   Continental raises only two issues for our review. First, it argues that
   the VA's cascade clause--and specifically, the decision to cascade from
   the SDVOSB tier to the small business tier--violated the FAR provisions
   applicable to SDVOSB set-asides set forth at FAR sect. 19.1405. Second, it
   argues that even applying the cascade clause as written, Continental
   should have received award because the five proposals received from
   SDVOSBs constituted adequate competition under the terms of the clause.[1]

   The VA answers that Continental's first argument is untimely, as it
   challenges an alleged solicitation impropriety that should have been
   raised prior to the time set for the submission of offers. With respect to
   Continental's alternative argument for award under the clause, the VA
   contends that it reasonably concluded there was not adequate competition
   among SDVOSBs to justify an award at that tier.

   The VA Clause and the FAR

   Continental's first argument is based on the conflict between the standard
   for determining adequate competition under the cascade clause in the
   solicitation, and the FAR's provisions applicable to SDVOSB set-asides.
   Under the solicitation, the presence of adequate competition is a
   necessary condition for award within a given tier. The clause specifies
   that adequate competition will not be "deemed" to exist unless the agency
   receives "at least two competitive offers . . . from qualified,
   responsible business concerns at the tier under consideration." SFO at 13.
   In contrast, the FAR provisions applicable to SDVOSB set-asides expressly
   indicate that "[i]f the [CO] receives only one acceptable offer from [an
   SDVOSB] concern in response to a set-aside, the [CO] should make an award
   to that concern." FAR sect. 19.1405(c).

   Continental also argues that this conflict between the SFO and the FAR is
   so stark that the company reasonably assumed the VA must have received
   permission to deviate from the requirements of the FAR. Continental states
   it did not learn that the VA failed to obtain permission to deviate from
   the FAR until the day it filed its protest, and that it was reasonable to
   wait until learning that the VA did not have a deviation from the FAR to
   file this challenge. We disagree.

   In our view, the argument Continental now raises--i.e., that the cascade
   clause in this solicitation is inconsistent with the SDVOSB set-aside
   scheme in the FAR--involves a matter that was clear from the face of the
   solicitation. Under the solicitation scheme, award would not be made to an
   SDVOSB unless offers were received from at least two qualified,
   responsible SDVOSB offerors; under the FAR's SDVOSB set-aside scheme, an
   award "should" be made to an SDVOSB even if there is only one qualified,
   responsible offeror. Challenges like this, which go to the heart of the
   underlying ground rules by which a competition is conducted, should be
   resolved as early as practicable during the solicitation process, but
   certainly in advance of an award decision, not afterwards. In this regard,
   our Bid Protest Regulations require that protests of solicitation
   improprieties which are apparent prior to the time set for the receipt of
   initial proposals must be filed prior to the time set for receipt of
   initial proposals. 4 C.F.R. sect. 21.2(a)(2) (2006).

   We also disagree with the contention that a protester can reasonably
   assume that an agency must have received permission to deviate from the
   requirements of the FAR, and thus forgo raising a solicitation challenge.
   We note first that the protester has provided no cases to support its
   interpretation of our timeliness rules. In addition, we think allowing
   offerors to assume that solicitation provisions that appear inconsistent
   with regulatory requirements must have been included with permission would
   have an undesirable impact on the procurement system by delaying until
   some later date the resolution of questions that could clearly be
   determined before contractor and government resources are expended in
   pursuing, and awarding contracts. See HMX, Inc., B-291102, Nov. 4, 2002,
   2003 CPD para. 52 at 5-7 (where protester's interpretation of the
   requirements of an applicable statute were in direct conflict with the
   requirements of a solicitation, any challenge to the solicitation had to
   be filed prior to the closing date for the receipt of proposals, not after
   award). Finally, we think the assertion that it was reasonable to assume
   that the agency must have received a deviation from the requirements of
   the FAR underscores the patent nature of the alleged solicitation defect.
   This basis of protest is untimely.[2]

   Adequate Competition Under the Clause

   As set forth above, the VA concluded that it had not received adequate
   competition from SDVOSB offerors, as required by its cascade clause, to
   justify an award in that tier. The VA reached this conclusion because the
   clause stipulated that competitive offers from at least two qualified,
   responsible business concerns were needed to make award within a given
   tier. SFO at 13. In the VA's view, since four of the five SDVOSB offerors
   submitted proposals that did not offer to comply with the solicitation's
   subcontracting limitation, those proposals should not be viewed as
   competitive offers from qualified, responsible business concerns for the
   purpose of establishing adequate competition. We agree.

   We think the decision about whether the competition in a given tier was
   adequate--i.e., whether competitive offers were received from at least two
   qualified, responsible business concerns--was properly made after an
   initial determination of how many competitive offers were received. The
   record here shows that the four proposals submitted by SDVOSB offerors
   were never subjected to a review by the evaluation team; instead, they
   were excluded from further consideration based on a judgment by the CO
   that none of the four had submitted an acceptable proposal because they
   had not offered to comply with the subcontracting limitation.

   During the course of this protest, we sought the views of the Small
   Business Administration (SBA) on these issues. The SBA contends that the
   proposals submitted by the four SDVOSB offerors should have been evaluated
   and if concerns remained about whether those offerors would comply with
   the subcontracting limitation, they should have been allowed to pursue a
   certificate of competency (COC) review at the SBA. Under this approach,
   the SBA suggests that the VA might have reached a different conclusion
   about the adequacy of the competition at the SDVOSB tier.

   We agree, as a general matter, that an agency's judgment as to whether a
   small business offeror will be able to comply with a subcontracting
   limitation presents a question of responsibility for review by the SBA.
   See 13 C.F.R. sect. 125.6(f); Spectrum Security Servs., Inc., B-297320.2,
   B-297320.3, Dec. 29, 2005, 2005 CPD para. 227 at 6. However, where a
   proposal, on its face, should lead an agency to the conclusion that an
   offeror has not agreed to comply with the subcontracting limitation, we
   have considered this to be a matter of the proposal's acceptability. KIRA
   Inc., B-287573.4, B-287573.5, Aug. 29, 2001, 2001 CPD para. 153 at 3.
   Thus, to the extent that these proposals were properly viewed as
   unacceptable and were therefore excluded from further consideration before
   the technical review ever began, we think it was reasonable for the VA not
   to include them in determining whether it had obtained adequate
   competition for purposes of this clause.[3]

   In our view, the situation here is very different from that reviewed by
   the Court of Federal Claims in its decision in Greenleaf Constr. Co., Inc.
   v. United States, 67 Fed. Cl. 350 (2005), which the protester contends
   supports its position. The Greenleaf decision involves a similarly-worded
   cascading set-aside clause that did not anticipate making award within a
   tier unless the agency received "at least two competitive offers . . .
   from qualified responsible business concerns." Greenleaf at 351-352.
   Although the agency in Greenleaf had received several competitive
   proposals from small businesses, and had established a competitive range
   and held discussions, subsequent events that occurred much later in time
   ultimately reduced to one the number of small business offerors. After an
   initial agency decision to cascade to the next tier, the agency reversed
   its decision[4] and concluded that despite those subsequent events--which
   are far too detailed for recitation here--the competition received was
   adequate to support an award under the terms of the clause. After a
   detailed analysis, the court concluded that the agency's decision that
   adequate competition had been received, and its decision not to cascade to
   the next tier despite there being only one remaining offeror eligible for
   award at that tier, was reasonable. Id. at 361.

   Unlike in Greenleaf, the VA decision to exclude from further consideration
   four of the five proposals received from SDVOSB offerors was made before
   the agency conducted its detailed evaluation of proposals, and before it
   established a competitive range. Since we think an agency may properly
   consider unacceptable a proposal that, on its face, fails to comply with a
   solicitation's subcontracting limitation, see KIRA Inc., supra, and since
   the early rejection of these proposals left only one acceptable and
   responsible offeror at the SDVOSB tier, we think the agency reasonably
   concluded, under the terms of its cascade set-aside clause, that it had
   not received adequate competition to make an award at the SDVOSB tier.

   The protest is denied.

   Gary L. Kepplinger

   General Counsel

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

   [1] This protest is limited to a challenge of the operation of the cascade
   clause. Continental does not argue that it should have prevailed in a
   comparison with TriStar's lower-priced, higher-rated proposal.

   [2] For the record, the protester does not request our consideration of
   this issue under the significant issue exception to our timeliness rules.
   4 C.F.R. sect. 21.2(c). Nonetheless, we have considered this possibility.
   What constitutes a significant issue, however, must be decided on a
   case-by-case basis, Pyxis Corp., B-282469, B-282469.2, July 15, 1999, 99-2
   CPD para. 18 at 4, and based on our review of the record in this case, and
   in the absence of a request that we do so, we will not invoke the
   significant issue exception to our timeliness rules here. We thus leave to
   a future, timely-filed protest, the question of whether cascading
   set-aside clauses comply with the requirements of the FAR.

   [3] We also note that none of the four SDVOSB offerors rejected for
   failure to comply with the subcontracting limitation imposed by this
   solicitation challenged that conclusion.

   [4] The agency's initial decision was protested to our Office. When the
   agency decided to reverse its decision, we dismissed the pending protest.
   The Chapman Law Firm Co., LPA, B-293105.15, B-293105.16, June 22, 2005.