TITLE: B-299880, Kemron Environmental Services, Inc., September 7, 2007
BNUMBER: B-299880
DATE: September 7, 2007
****************************************************************
B-299880, Kemron Environmental Services, Inc., September 7, 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: Kemron Environmental Services, Inc.

   File: B-299880

   Date: September 7, 2007

   Kevin R. Armbruster, Esq., and Jason C. Grech, Esq., Cushing, Morris,
   Armbruster & Montgomery, LLP, for the protester.

   Kenneth A. Redden, Esq., Environmental Protection Agency, for the agency.

   Mary G. Curcio, Esq., and John M. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest that agency's inadvertent disclosure of protester's price
   information, which was limited in scope, resulted in unfair competition is
   denied where record does not demonstrate that protester was competitively
   harmed.

   DECISION

   Kemron Environmental Services, Inc. protests the award of a contract to
   WRS Infrastructure & Environment, Inc. under request for proposals (RFP)
   No. PR-R4-06-10166, issued by the Environmental Protection Agency (EPA)
   for superfund emergency and rapid response services for the removal of
   hazardous substances. Kemron argues that, because EPA disclosed certain of
   its price information to WRS in the course of the procurement, the agency
   should be required either to cancel the solicitation and resolicit for its
   needs or award a contract to Kemron.

   We deny the protest.

   The RFP provided for the award of up to three
   indefinite-delivery/indefinite-quantity time and material contracts to the
   lowest-cost, technically acceptable offerors. RFP sect. M at 1. The RFP
   provided a list of 15 labor categories, with the maximum number of hours
   required annually for each, and 73 items of equipment, with the maximum
   number of days annually that each piece of equipment would be in use. RFP
   sect. L at 5-8. With respect to price, offerors were required to propose a
   loaded fixed hourly rate for each identified labor category, and a fixed
   daily use rate for each piece of equipment. RFP sect. L at 30, 31. In
   evaluating price, the agency would multiply the loaded rates by the
   estimated maximum number of labor hours, and the daily equipment rates by
   the estimated maximum number of days, and add the resulting prices to
   arrive at a total price. RFP sect. L at 31.

   On March 6, 2007, the agency sent each offeror in the competitive range an
   e-mail containing discussion items to address. On March 7, WRS advised the
   agency by telephone that it had received Kemron's discussion letter. WRS
   explained that the company treasurer received the e-mail and started
   scanning it, but noticed that the letter referred to companies that were
   not named in its proposal. Agency Report (AR) at 2. At that point, the
   treasurer looked at the top of the letter and found that it was addressed
   to Kemron. After telephoning the company president for instructions on how
   to proceed, he sent the e-mail back to the agency and destroyed all
   copies. The treasurer advised EPA that he did not recall any specific
   information from the letter. Subsequently, on March 19, the agency
   received revised proposals and, on April 5, final proposal revisions
   (FPR). After evaluating the FPRs, the agency selected the three
   lowest-priced proposals for award, including WRS's, which was the second
   lowest priced proposal. Kemron's proposal was fourth-low, and the firm
   complains that it was harmed by the disclosure of its pricing.[1]

   The disclosure of proprietary or source selection information, including
   an offeror's price, to an unauthorized person during the course of a
   procurement is improper. Information Ventures, Inc., B-241441.4,
   B-241441.6, Dec. 27, 1991, 91-2 CPD para. 583 at 4; Motorola, Inc.,
   B-247937.2, Sept. 9 1992, 92-2 CPD para. 334 at 9. Where an agency
   inadvertently discloses an offeror's proprietary information, the agency
   may choose to cancel the procurement if it reasonably determines that the
   disclosure harmed the integrity of the procurement process. Information
   Ventures, Inc., supra, at 4-5; Norfolk Shipbuilding & Drydock Corp.,
   B-247053.5, June 11, 1992, 92-1 CPD para. 509 at 4-5. Where an agency
   chooses not to cancel the procurement after such a disclosure, we will
   sustain a protest based on the improper disclosure only where the
   protester demonstrates that the recipient of the information received an
   unfair advantage, or that it was otherwise competitively prejudiced by the
   disclosure. Motorola, Inc., supra, at 9; Gentex Corp.--Western Operations,
   B-291793 et al., Mar. 25, 2003, 2003 CPD para. 66 at 8-9. Here, the record
   shows that Kemron was not competitively prejudiced by the disclosure.

   EPA reviewed WRS's revised proposal and FPR prior to making its award
   decisions, found that WRS did not use Kemron's price information, and
   concluded that cancellation of the RFP thus was not warranted. In this
   regard, the agency explains that the Kemron discussion letter WRS received
   included Kemron's rates for only 1 of 15 labor categories (equipment
   operator), and for only 7 of 73 pieces of equipment. AR at 4. With respect
   to the labor category, in its revised proposal WRS reduced all of its
   labor rates based on instructions EPA had provided in WRS's own discussion
   e-mail. AR at 4. Specifically, in its initial proposal WRS included the
   cost of personal protective equipment in its loaded hourly labor rate
   before applying profit (calculated as a percentage of the loaded hourly
   rate). During discussions, the agency informed WRS that the cost of
   personal protective equipment should be added after applying profit to the
   hourly rate; WRS changed its labor rates in its revised proposal
   accordingly. AR at 4. WRS did not then change any labor rates in its FPR.
   Regarding equipment, WRS's revised proposal increased the daily rates for
   two of the seven items for which Kemron's prices were revealed--a pickup
   truck and an excavator. WRS explained that it was raising the daily rate
   for the truck (its rate already had been higher than Kemron's) from
   [DELETED] to [DELETED], to correct a miscalculation, and for the excavator
   from [DELETED] to [DELETED], because its initial price incorrectly had
   been based on owning the excavator, rather than leasing it from Hertz, as
   was intended. AR at 4-5. In its FPR, WRS lowered the rates for four pieces
   of equipment and raised the rate for four. These changes included only one
   rate--for the excavator--that had been revealed to WRS; WRS raised the
   excavator rate to [DELETED] because Hertz raised the rental rate. AR at 6.
   The agency concluded that, given the nature of the changes in WRS's
   proposal, there was no basis for finding that Kemron was prejudiced by the
   disclosure.

   Kemron argues that it suffered competitive harm from--and, more generally,
   that the integrity of the procurement system was harmed by--the disclosure
   because, despite EPA's explanation, the information disclosed was
   sufficient to allow WRS to "reverse engineer" Kemron's prices, and then
   adjust its price so that it would be as high as possible without exceeding
   Kemron's price. Kemron notes, in this regard, that the price difference
   between the two proposals decreased from four percent in the initial
   offers to only one percent in the FPRs.

   Kemron's arguments do not persuade us that WRS gained a competitive
   advantage, that it was otherwise competitively prejudiced, or that the
   integrity of the procurement system suffered harm as a result of the
   disclosure of Kemron's prices. First, Kemron's total price was not
   disclosed, and Kemron has not explained, and we fail to see, how WRS would
   be able to derive Kemron's total price from only 1 of Kemron's 15 labor
   rates, and only 7 of its 73 equipment rates. Kemron's mere assertion in
   this regard, without any supporting explanation or evidence, is not
   sufficient to establish that WRS was able, even theoretically, to
   ascertain Kemron's total price from the disclosed information. Moreover,
   even if we assume that WRS was able to determine Kemron's initial total
   price, there is no evidence supporting Kemron's claim that WRS was then
   somehow able to target its FPR price to a level just below Kemron's. In
   this regard, in order for WRS to accomplish this result, WRS would have
   had to know how Kemron would revise its price following discussions.[2]
   Since WRS was not provided any revised proposal or FPR price information,
   we fail to see, and the protester has not shown, how WRS could have
   targeted its price in this manner.

   Further, we note that Kemron's argument is premised on the idea that WRS
   knew it would be assured of an award if it targeted its FPR price to a
   level just below Kemron's. In fact, there is no reasonable basis for
   assuming that WRS proceeded in this manner, since it did not know the
   number, identities, or prices of other offerors in the competition; WRS
   presumably would have been aware that keying its price to Kemron's could
   have left it in an unfavorable competitive position vis-a-vis any other
   offerors. In addition, while the difference in Kemron's and WRS's prices
   was reduced from four to one percent between the initial proposals and
   FPRs, this difference was not simply the result of WRS's increased price;
   rather, it was the result of a combination of WRS's raising its price and
   Kemron's lowering its own.

   Finally, regarding the alleged harm to the procurement system, it is
   undisputed that the disclosure of Kemron's information was inadvertent,
   and that the agency and WRS proceeded appropriately once the disclosure
   was discovered. Since, as discussed above, we find that Kemron was not
   competitively harmed by the disclosure, there is no basis for finding the
   agency's actions objectionable based on harm to the procurement system.

   We conclude here that there is no basis for finding that Kemron was
   competitively prejudiced by the agency's inadvertent, limited disclosure
   of the firm's pricing information.

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] EPA notified Kemron of the disclosure and Kemron expressed concern
   that it could be competitively harmed as a result, and Kemron and the
   agency had some discussion about how to remedy the issue before EPA
   ultimately determined that corrective action was not called for.

   [2] Kemron lowered its total price from $138,094,578 (initial) to
   $136,593,925.38 (revised) to $134,989,931.25 (FPR), while WRS raised its
   price from $132,479,860.65 to $133,800,005.05 to $133,817,830.41.