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