TITLE: B-299108, SEI Group, Inc., February 6, 2007
BNUMBER: B-299108
DATE: February 6, 2007
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B-299108, SEI Group, Inc., February 6, 2007

   Decision

   Matter of: SEI Group, Inc.

   File: B-299108

   Date: February 6, 2007

   Eloy J. Torrez for the protester.

   Audrey H. Liebross, Esq., Federal Emergency Management Agency, for the
   agency.

   Kenneth Kilgour, Esq., and Christine S. Melody, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest challenging cancellation of solicitation is denied where the
   record supports the agency's assertion that by canceling the solicitation
   the agency could save money, enhance competition, and increase its
   purchasing flexibility.

   DECISION

   SEI Group, Inc. protests the Federal Emergency Management Agency's (FEMA)
   decision to cancel request for proposals (RFP) No. HSFEEM-06-R-0020 for
   base camp services. SEI asserts that the agency should have amended rather
   than canceled the solicitation because the contemplated changes to the
   solicitation are not significant and the agency's requirements have not
   changed. SEI also challenges the timing of the cancellation.

   We deny the protest.

   On April 30, 2006, FEMA issued the solicitation as a small business
   set-aside contemplating award of multiple
   indefinite-delivery/indefinite-quantity contracts for setting up and
   operating base camps to house personnel deployed in anticipation of
   domestic disasters. The solicitation divided the service area into four
   geographic regions covering the entire country. Prior to the proposal due
   date of May 4, 2006, the agency amended the solicitation to add line items
   for phase-in and readiness costs.

   In mid-July, the source evaluation board (SEB) completed review of the 46
   proposals received in response to the RFP and also decided to reexamine
   its requirements; the hurricane season had already begun and FEMA had
   concerns about the costs that would be incurred for readiness and phase-in
   activities. Discussions between the head of the SEB and agency management
   produced a number of options, one of which was to make award for
   geographic area 3 only, which was continuing to recover from Hurricanes
   Katrina and Rita. The SEB reconvened, adopted the option of making award
   for area 3 only, and recommended awards to the protester and one other
   offeror. On August 24, the agency referred the two offerors to the Small
   Business Administration (SBA) for review under the certificate of
   competency (COC) procedures. On August 29, the SBA in the course of its
   COC review notified the agency that the second offeror was not eligible
   for award as a small business and therefore not eligible for a COC,
   leaving only SEI in the competition. The agency ultimately concluded that
   the solicitation no longer accurately reflected its needs in that it could
   not justify incurring phase-in and readiness costs as the end of the
   hurricane season neared. The agency also expressed concern that because
   the protester was the only remaining offeror, it would be required to
   provide services to all five base camps. On September 14, the agency
   canceled the solicitation.

   SEI asserts that FEMA should have amended rather then canceled the
   solicitation. The protester contends that, because the agency added the
   line items for phase-in and readiness by amending the solicitation, an
   amendment to remove those same provisions would not be a significant
   enough change to warrant canceling the solicitation. Further, SEI argues
   that the agency's requirements in fact have not changed and that the
   agency will issue another solicitation to construct, operate, and maintain
   base camps. Even if the agency had proper grounds to cancel the
   solicitation, SEI contends, the agency should have canceled the
   solicitation after receiving the initial proposals and before asking for
   additional information from offerors. As explained below, we find the
   agency's decision to cancel the solicitation was proper.

   In a negotiated procurement, where one or more of the offerors' prices
   have been revealed, an agency may properly cancel a solicitation where the
   record contains plausible evidence or reflects a reasonable possibility
   that a decision not to cancel would be prejudicial to the government or
   the integrity of the procurement system. Noelke GmbH, B-278324.2, Feb. 9,
   1998, 98-1 CPD para. 46 at 3-4. Here, we conclude that the agency's
   decision to cancel the solicitation was proper. First, the record shows
   that the agency's needs had changed because it could no longer make good
   use of the phase-in and readiness provisions so late in the hurricane
   season and that any amendment to the solicitation to delete these
   requirements would have been so substantial that offerors could not have
   reasonably anticipated the changes. An agency has a reasonable basis to
   cancel a solicitation where, as here, it determines that a solicitation
   does not accurately reflect its needs. Logistics Solutions Group, Inc.,
   B-294604.7, B-294604.8, July 28, 2005, 2005 CPD para. 141 at 3.

   Second, the agency states that, by waiting to reissue the solicitation to
   coincide with the start of the 2007 hurricane season, it could avoid
   paying start-up costs for base camps that would have seen limited use in
   the 2006 hurricane season. Cost savings through a restructuring of the
   agency's requirements also constitute a reasonable basis to cancel a
   negotiated procurement, even after the agency has entered into
   negotiations with the potential awardee. Capitol Gateway Assocs. Ltd.
   P'ship,

   B-255587, Jan. 24, 1994, 94-1 CPD para. 37 at 2-3.

   Third, the agency asserts that its plan to eliminate the requirement that
   the offerors be prepared to operate five base camps simultaneously will
   increase competition by fostering the involvement of smaller firms capable
   of performing contracts of a more limited scope.[1] The ability to enhance
   competition is a reasonable basis to justify the cancellation of the
   solicitation. Id. at 3. In fact, as the agency notes, when "an amendment
   proposed for issuance after offers have been received is so substantial as
   to exceed what prospective offerors reasonably could have anticipated,"
   and competition would be enhanced if the contacting officer canceled the
   solicitation and issued a new one, the agency is required to cancel the
   solicitation. Federal Acquisition Regulation sect. 15.206(e).

   In summary, the record supports the agency's assertions that its decision
   to cancel rather than amend the solicitation will assist the agency in
   controlling costs and fostering competition through a solicitation that
   more accurately reflects the agency's needs; each of these reasons
   supports a finding that the agency's cancellation decision was proper.

   The protester asserts that the agency should have canceled the
   solicitation after the receipt of initial proposals and before requiring
   additional effort on the part of the offerors. So long as there is a
   reasonable basis for doing so, an agency may cancel a solicitation no
   matter when the information precipitating the cancellation first arises,
   even if it is not until proposals have been submitted and evaluated.
   Glen/Mar Constr., Inc., B-298355, Aug. 3, 2006, 2006 CPD para. 117 at 2.
   The agency completed review of 46 proposals for this new requirement in
   approximately 10 weeks. It was not until approximately 6 weeks later, near
   the end of August, that the agency faced the choice of canceling the
   solicitation or making award to one firm, for all five base camps, for the
   closing weeks of the 2006 hurricane season. The agency deliberated for
   approximately 2 weeks before making the decision to cancel the
   solicitation. On this record, we simply see no support for the protester's
   claim that the agency unreasonably delayed canceling the RFP.

   Finally, the protester's argument that because phase-in and readiness
   costs were added to the solicitation by amendment they could (and should)
   be removed by amendment, does not provide any basis to question the
   agency's action. The agency has expressed no intention to procure base
   camp services next year without paying phase-in and readiness costs; by
   canceling the solicitation the agency merely sought to avoid the wasteful
   payment of phase-in costs so late in the 2006 hurricane season. The
   possibility that the agency will issue the same solicitation in the future
   also does not invalidate the agency's decision to cancel. Even ignoring
   the substantive changes that the agency has indicated that it will make to
   the solicitation and assuming that the agency canceled the solicitation
   with the intent to issue an identical one in the future, such a
   cancellation is not, in and of itself, objectionable. See G.K.S. Inc.,
   B-235208, Aug. 9, 1989, 89-2 CPD para. 117at 3 (noting that agency may
   cancel solicitation and reissue it if cancellation will increase
   competition).

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] The protester does not challenge the agency's reasoning. Rather, the
   protester asserts that the solicitation only required offerors "to be
   prepared" to support five base camps and not to actually establish those
   five camps. Protester's Comments at 4. The protester is mistaken; in fact,
   the RFP states that the "contractor shall set up and operate multiple turn
   key base camps." Agency Report, Tab 3, Performance Work Statement at 1.