TITLE: B-299556.3, Diligent Consulting, Inc.--Costs, June 26, 2007
BNUMBER: B-299556.3
DATE: June 26, 2007
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B-299556.3, Diligent Consulting, Inc.--Costs, June 26, 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: Diligent Consulting, Inc.--Costs

   File: B-299556.3

   Date: June 26, 2007

   Gerald H. Werfel, Esq., Pompan, Murray & Werfel, PLC, for the protester.

   Gary R. Allen, Esq., Department of the Air Force, 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

   Request that Government Accountability Office recommend reimbursement of
   the costs of filing and pursuing an initial and a supplemental protest is
   denied where the initial protest grounds were not clearly meritorious and
   the agency took prompt corrective action in response to the supplemental
   protest.

   DECISION

   Diligent Consulting, Inc. requests that we recommend that it be reimbursed
   the costs of filing and pursuing its protest and supplemental protest
   challenging the agency's evaluation of proposals submitted in response to
   request for proposals (RFP) No. FA3300-06-R-0013, issued by the Department
   of the Air Force for software support services for the Air University
   Directorate of Communications and Information at Maxwell Air Force Base,
   Alabama. We dismissed both protests after the agency advised our Office
   that it would be taking corrective action by reevaluating the proposals.
   Diligent argues that its initial protest was clearly meritorious and that
   the agency unduly delayed taking corrective action until after the due
   date for the agency report and the protester had filed both comments on
   the agency report and a supplemental protest.

   We deny the request.

   On September 14, 2006, the Air Force issued the RFP as part of a
   competition under Office of Management and Budget Circular A-76 (Revised)
   to determine whether to contract out--rather than continue to have
   performed in-house by the Air Force--certain software support services.
   The RFP called for award of a fixed-price contract to the responsible
   service provider with the lowest-priced technically acceptable proposal
   that met or exceeded all the minimum mandatory criteria in the
   solicitation.

   The RFP required that private sector offers include at least one but not
   more than three "of the most recent (within 3 Years from the date of
   issuance of the solicitation) and relevant contract or project references
   (. . . for the prime service provider, and significant subcontractors)."
   RFP at 9. Past performance of subcontractors proposed to perform major or
   critical aspects of the requirement would be considered "as highly as"
   past performance information for the offeror. Id. at 13.

   Amendment 1 to the RFP stated that the agency would conduct a price
   realism analysis as follows:

     Realism -- Realism will be based on evaluation of proposed prices to
     determine if they are compatible with the scope of effort, reflect a
     clear understanding of the requirement, and are neither excessive nor
     insufficient for the effort to be accomplished.

   RFP, Amend. 1 at 2.

   By the RFP's closing date of October 20, the agency received proposals
   from two private sector offerors, the protester, who was the incumbent
   contractor, and Software Engineering Services (SES), as well as an agency
   tender based upon the government's most efficient organization. The
   protester's proposal included past performance information for itself and
   two subcontractors. With regard to the price realism analysis called for
   by the RFP, the final price competition memorandum Agency Report, Tab 13,
   at 4-5, states as follows:

     A realism analysis was conducted by the technical team to assess the
     compatibility of each service provider's proposed labor category
     descriptions and qualifications and projected annual man-hours for each
     labor category in their cost proposals to their technical proposals. The
     technical evaluation team reviewed each service provider's price
     proposal and validated the personnel and costs cited to reasonably
     perform their technical approach and processes. Each service provider's
     proposed labor category descriptions and qualifications, and projected
     annual man hours for each labor category were consistent with the scope
     of work in [the performance work statement]. Each service provider's
     technical proposal adequately described their recruiting, hiring,
     training, security limitations, and any other special considerations to
     accommodate a phase-in period consistent with CLIN 0001. As a result,
     the proposed prices of each service provider were determined to be
     realistic; compatible with the scope of effort, reflected a clear
     understanding of the requirement, and were neither excessive nor
     insufficient for the effort to be accomplished.

   Diligent was advised by letter dated March 6, 2007, that award had been
   made to SES. Diligent requested a debriefing and received it on March 13.
   The protester alleges that during the debriefing an agency official
   remarked that "no `methodology' was utilized to determine price realism."
   [1] Protest at 5. In its protest, filed with our Office on March 16, the
   protester alleged that the agency failed to conduct the required price
   realism analysis and that the awardee "does not possess the necessary
   corporate experience to satisfy the past performance standard established
   by the RFP." [2] Id. at 6.

   The agency submitted its agency report, due April 16, on April 5. On April
   16, the protester filed a supplemental protest arguing that, when
   adjustments to its price required by the RFP were made, SES had not
   submitted the low priced offer, and that the agency failed to properly
   document the source selection decision. The protester filed its comments
   to the agency report on April 17, having been granted a 1-day extension
   for that filing.

   By letter dated April 17, the agency indicated that it was taking
   corrective action by reevaluating the proposals and that the corrective
   action was prompted solely by the issues raised in the supplemental
   protest. We concluded that the reevaluation of proposals rendered
   Diligent's protests academic, and on April 20 we dismissed the protests.

   Diligent now requests that our Office recommend that the agency reimburse
   the protester's costs of filing and pursuing both protests. Diligent
   argues that the agency unduly delayed in taking corrective action, as
   evidenced by its failure to do so until after the filing of the agency
   report on its initial protest and the submission of comments by the
   protester, and that the protest was clearly meritorious. The agency
   opposes the protester's request, arguing that the initial protest was not
   clearly meritorious. With regard to the supplemental protest, the agency
   asserts that it acted promptly given that it informed our Office and the
   parties of its decision to take corrective action within 1 day after the
   supplemental protest was filed. The protester disagrees, arguing that the
   relevant time for measuring whether the agency acted promptly is the
   filing date of the initial protest. As explained below, we see no basis to
   conclude that the protester should be reimbursed its costs for either
   protest.

   Under the Competition in Contracting Act of 1984 (CICA), our Office may
   recommend that protest costs be reimbursed only where we find that an
   agency's action violated a procurement statute or regulation. 31 U.S.C.
   sect. 3554(c)(1) (2000). Our Bid Protest Regulations further provide that
   where the contracting agency decides to take corrective action in response
   to a protest, we may recommend that the protester be reimbursed the costs
   of filing and pursuing its protest, including reasonable attorneys' fees.
   4 C.F.R. sect. 21.8(e). Our Regulations do not contemplate a
   recommendation for the reimbursement of protest costs in every case in
   which an agency takes corrective action, but rather only where an agency
   unduly delays taking corrective action in the face of a clearly
   meritorious protest.[3] Information Ventures, Inc.--Costs, B-294580.2 et
   al., Dec. 6, 2004, 2004 CPD para. 244 at 2. Thus, as a prerequisite to our
   recommending the reimbursement of costs where a protest has been settled
   by corrective action, not only must the protest have been meritorious, but
   it also must have been clearly meritorious, i.e., not a close question.
   PADCO, Inc.--Costs, B-289096.3, May 3, 2002, 2002 CPD para. 135 at 3. A
   protest is clearly meritorious where a reasonable agency inquiry into the
   protester's allegations would reveal facts showing the absence of a
   defensible legal position. Yardney Technical Prods., Inc., B-297648.3,
   Mar. 28, 2006, 2006 CPD para. 65 at 4. The mere fact that an agency
   decides to take corrective action does not also establish that a statute
   or regulation clearly has been violated. Id.

   In its initial protest, Diligent argued that the agency failed to conduct
   the required price realism analysis and that SES lacked the relevant
   experience to satisfy the past performance standard established by the
   RFP. In our view, the record here does not show that the allegation that
   the agency failed to conduct a price realism analysis is clearly
   meritorious. As noted above, the agency produced in its report a
   contemporaneous price realism analysis. The alleged comment by an agency
   official at the protester's debriefing notwithstanding, the agency has a
   colorable legal defense to this allegation--the record of its price
   realism analysis--and it produced that analysis in the agency report.

   The other timely issue raised in the initial protest--that the awardee
   lacked the relevant experience necessary to satisfy the past performance
   requirement of the RFP--likewise is not clearly meritorious. As an initial
   matter, the allegation is not legally sufficient to form the basis of a
   protest. Our Bid Protest Regulations, 4 C.F.R. sect. 21.1(c)(4) and (f),
   require that a protest include a detailed statement of the legal and
   factual grounds for protest, and that the grounds stated be legally
   sufficient. These requirements contemplate that protesters will provide,
   at a minimum, either allegations or evidence sufficient, if
   uncontradicted, to establish the likelihood that the protester will
   prevail in its claim of improper agency action. Id. In this case, because
   the RFP states that an offeror may submit past performance of its own
   and/or its qualifying subcontractors, the protester's allegation that the
   awardee itself lacks the requisite experience to be rated acceptable for
   past performance, even if correct, does not state a valid basis of
   protest. Moreover, even assuming that the allegation was legally
   sufficient, it is not clearly meritorious. The agency's colorable legal
   defense, to reiterate, is that even an offeror that does not itself have
   sufficient past performance may be rated acceptable for past performance
   on the strength of its subcontractors' past performance. In fact, the
   protester itself offered just such subcontractor experience to satisfy the
   past performance requirement.

   With respect to the supplemental protest, the protester argues that in
   view of its decision to take corrective action, the agency "apparently
   concedes" that the supplemental protest raised clearly meritorious
   grounds. We disagree. As noted above, the fact that the agency decided to
   take corrective action does not also establish that a statute or
   regulation clearly has been violated, Yardney Technical Prods., Inc.,
   supra, let alone that a protest ground was clearly meritorious.

   With respect to timing, Diligent asserts that our Office will recognize
   the filing date of the initial protest as "the appropriate date for
   determining whether subsequent corrective action was taken promptly, if
   `there is a nexus between the protest grounds set forth and the corrective
   action.'" Protester's Response, May 16, 2007 at 4-5 (citations omitted).
   In this regard, while, as Diligent points out, both protests raised issues
   relating to the price evaluation of the awardee's proposal, the arguments
   raised in the two protests are clearly distinct. As noted above, the
   initial protest raised a general argument that the agency had failed to
   perform any price realism analysis. In contrast, in the supplemental
   protest Diligent asserted that the agency had failed to take into account
   certain health benefits costs when evaluating the awardee's price and
   argued that the awardee did not in fact offer a fixed price because its
   proposal stated that it would charge the government at cost for any
   travel, material, and other direct costs incurred. Accordingly, there is
   no basis in the record here to conclude that the initial protest
   identified the issue on which the corrective action was based, such that
   it would be appropriate to measure the promptness of the agency's
   corrective action from the filing date of the initial protest. See J. A.
   Jones Mgmt. Servs., Inc.--Costs, B-284909.4, July 31, 2000, 2000 CPD para.
   123 at 3.

   The request that we recommend reimbursement of costs is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] The agency denies that any official made such a statement, and, as
   discussed above, the record shows that the agency had in fact performed
   and documented a price realism analysis.

   [2] The protester also challenged the agency's decision not to include in
   the evaluation of SES's proposal the expense to the agency of having the
   protester continue performance during the phase-in period. As it makes
   clear in its protest, the protester was on notice as early as October 17,
   2006, that the agency would not consider the cost of transition services
   provided by the protester as part of its price evaluation. Protest at 4.
   To be timely, this challenge to the terms of the solicitation should have
   been raised prior to the time set for receipt of initial proposals (2 p.m.
   on October 20, 2006). See 4 C.F.R. sect. 21.2(a)(1) (2007). Since the
   protest was not filed until March 16, 2007, this issue clearly was
   untimely.

   [3] As a general rule, so long as an agency takes corrective action in
   response to a protest by the due date of its protest report, we regard
   such action as prompt and decline to consider favorably a request to
   recommend reimbursement of protests costs. The Sandi-Sterling
   Consortium-Costs, B-296246.2, Sept. 20, 2005, 2005 CPD para. 173 at 2-3.
   Here, as noted above, the agency did not advise our Office of its intent
   to take corrective action until after the due date for the agency report
   and after the protester had submitted comments on the report.