TITLE: B-309972.3, Deva & Associates PC, April 29, 2008
BNUMBER: B-309972.3
DATE: April 29, 2008
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B-309972.3, Deva & Associates PC, April 29, 2008

   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: Deva & Associates PC

   File: B-309972.3

   Date: April 29, 2008

   Leigh T. Hansson, Esq., Gregory S. Jacobs, Esq., and Steven D. Tibbets,
   Esq., Reed Smith LLP, for the protester.

   Jeffrey C. Morhardt, Esq., and Antoiner White, Esq., Department of
   Education, for the agency.

   Paul E. Jordan, Esq., and John M. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Agency decision to cancel request for quotations (RFQ) and recompete for
   accounting services was reasonable where agency's original (small business
   set-aside) requirement for financial statement preparation decreased and
   (unrestricted) requirement for credit reform reporting services
   significantly increased, and agency intended to combine all services under
   single task order, set aside for small businesses.

   DECISION

   Deva & Associates PC protests the Department of Education's cancellation
   of request for quotations (RFQ) No. ED-06-Q-0008, for financial advisory
   services. Deva asserts that the agency lacked a reasonable basis to cancel
   the RFQ and issue a new solicitation.

   We deny the protest.

   As originally issued, the RFQ sought quotations from vendors holding
   contracts under General Services Administration (GSA) Federal Supply
   Schedule (FSS) 520-7. It contemplated the issuance--on a time and
   materials basis--of three task orders (TO). TO No. 1 was set aside for
   small businesses and concerned financial statement preparation, analysis,
   reconciliation services, and other projects including Office of the Chief
   Financial Officer (OCFO) Procedures that Work preparation, and budget
   service support. RFQ app. 1, at 1-2. TO No. 2 concerned improving the
   agency's capacity to analyze financial data relating to student loan
   programs as they relate to credit reform. TO No. 3 concerned documenting
   internal control over financial reporting in management statements in
   accordance with Office of Management and Budget Circular A-123. Id. at 7.

   Quotations were to be evaluated under five factors--technical/management
   solution, performance metrics, small business strategy, past performance,
   and price. Under the technical/management factor, a vendor's proposed
   approach for each TO was to demonstrate its ability to perform the tasks
   as evidenced by past performance. Separate subfactors were included for
   each TO and were applied depending upon the TOs quoted. Price was to be
   evaluated on the basis of the proposed labor mix and total price for all
   options and transition periods. Non-price factors, combined, were of
   significantly greater importance than price. Task orders were to be issued
   made on a "best value" basis.

   Deva submitted a quotation only for TO No. 1 and it was one of three
   included in the competitive range. After discussions and the evaluation of
   revised quotations, the contracting officer, as source selection
   authority, concluded that Cotton & Company's quotation, with its higher
   evaluation score and lowest estimated base-year pricing, was the best
   value. Deva protested the issuance of TO No. 1 to Cotton and the agency
   filed an administrative report. After Deva submitted comments and a
   supplemental protest, the agency decided to take corrective action in the
   form of reevaluating the TO No. 1 quotations. We dismissed the protest as
   academic (B-309972, Sept. 26, 2007).[1]

   From September into December 2007, the technical evaluation panel met and
   reevaluated the three competitive range quotations. As part of this
   process, the agency asked all three vendors whether they would be able to
   perform TO No. 1 as proposed if the agency's resources were reduced below
   an earlier agency estimate of 25,500 labor hours. Deva requested
   clarification and, after the agency advised that any reductions were
   solely at the vendor's discretion, submitted a revised quotation with a
   more competitive price than it initially submitted.

   The agency subsequently decided to cancel the RFQ and resolicit its
   requirements. The agency based its determination on a variety of reasons
   including its finding that the original statement of work (SOW) was
   outdated and failed to emphasize its needs for credit reform reporting;
   its plan to merge the requirements of TO No. 1 with TO No. 2; and the fact
   that only Deva was left in the competition, since Cotton and the third
   vendor were no longer eligible small businesses. The agency later issued a
   bridge contract to Cotton to perform both TO Nos. 1 and 2 pending the
   resolicitation. Upon learning of the agency's decision to cancel the RFQ,
   Deva filed this protest.

   Deva asserts that the agency's decision to cancel the original RFQ lacks a
   reasonable basis. In the protester's view, the SOW encompassed the
   agency's requirements for credit reform work under both TOs, and there is
   no evidence of any significant change in the agency's requirements.

   A contracting agency need only establish a reasonable basis to support a
   decision to cancel an RFQ. Surgi-Textile, B-289370, Feb. 7, 2002, 2002 CPD
   para. 38 at 2. A reasonable basis to cancel exists when, for example, an
   agency determines that a solicitation does not accurately reflect its
   needs, or where there is a material increase in the services needed to
   satisfy the agency's requirements; in such cases, cancellation of the
   solicitation and issuance of a revised solicitation is appropriate.
   Logistics Solutions Group, Inc., B-294604.7, B-294604.8, July 28, 2005,
   2005 CPD para. 141 at 3

   The agency's decision to cancel the RFQ was reasonable because the record
   shows that its requirements have changed. While the original SOW
   encompassed credit reform work, it was specifically described only under
   TO No. 2, and the RFQ provided for issuance of a task order for the credit
   reform work to a separate vendor. However, the agency states that it now
   recognizes that "it would be unacceptable for the Department to revert to
   the practice of using two different contractors . . . because of the
   possibility of increased time and cost involved in monitoring the
   activities of each contractor to ensure the smooth exchange of information
   and cooperation between the two contractors." Financial Management
   Operations (FMO) Director Declaration 3, para. 10.

   In addition to combining its requirements under a single task order, the
   agency explains that its quantity requirements for financial statement and
   credit reform tasks have materially changed since it first issued the RFQ.
   In this regard, under the original TO No. 1, the agency estimated a need
   for 25,500 hours to perform financial statement preparation, analysis, and
   reconciliation services, and only 1,000 hours for credit reform work under
   TO No. 2, a total of 26,500 hours. Under its planned resolicitation, the
   agency anticipates a combined total of only [deleted]  to [deleted] hours
   for both sets of tasks in each of 4 years, with credit reform making up an
   increasing percentage of the work. For example, under the original RFQ,
   credit reform work represented less than 4 percent of the total estimated
   hours under TO Nos. 1 and 2. Under the resolicited TO, the agency
   estimates that [deleted] hours ([deleted] percent of the total) will be
   devoted to credit reform tasks in the first year, rising to [deleted]
   hours ([deleted] percent of the total) in the third and fourth years.[2]
   In our view, the significant increase in credit reform work and decrease
   in financial statement work represent material changes in the agency's
   requirements and form a reasonable basis for canceling the original RFQ.

   Deva asserts that credit reform work is within the scope of TO No.1 and
   that the agency should simply negotiate its "minor modifications" with the
   firm. Specifically, it notes that TO No. 1 includes assistance with
   correcting reportable conditions identified in independent financial
   statements, that credit reform reporting has been a reportable condition
   for the agency since 2003, and that the bridge contractor has performed
   credit reform work, identified as OCFO management support, under TO No. 1.
   Initial Comments at 4; First Supplemental Comments at 5. We disagree. The
   credit reform reporting tasks under the original TO No. 2 encompass tasks
   not covered by TO No. 1, including assisting the agency in improving the
   analytical tools used in the loan estimation process; ensuring that the
   tools reconciled with one another; assisting in the documentation of
   programs written to develop assumptions for the Student Loan Model;
   assisting in the development of detailed operating procedures for the loan
   estimation process; and assisting in efforts to more fully implement
   cohort reporting. RFQ app. 1, at 6. Further, the agency states that the
   new solicitation will include a new requirement to develop periodic
   informational reports that capture key highlights of the student loan
   programs. FMO Director Declaration 1, para. 11. While Deva notes that its
   revised quotation refers to its personnel's "extensive knowledge" and
   being "well qualified" to assist, implement, and comply with provisions of
   federal financial management legislation including the Credit Reform Act
   of 1990, its quotation for TO No. 1, as revised, does not otherwise
   address the credit reform requirements of TO No. 2. [3] In any case, while
   Deva asserts that the agency should negotiate with it as the sole,
   remaining vendor under TO No. 1, it ignores the agency's legitimate plan
   to seek competition among small business vendors. See VSE Corp.,
   B-290452.2, Apr. 11, 2005, 2005 CPD para. 111 at 6 (agency's decision to
   cancel and resolicit is reasonable where it presents the potential for
   increased competition). Here, the agency has identified some 21 local
   small business FSS vendors, including Deva, who could be solicited.

   In our view, since the agency's new SOW will include performance of credit
   reform tasks not included in Deva's quotation and, as discussed above,
   will include significantly more hours devoted to those tasks, the agency's
   changes represent more than "minor modifications," and thus justify
   cancellation of the initial RFQ.

   Our conclusion is not changed by Deva's assertion that the agency's
   proffered rationales for cancellation are merely a pretext to avoid
   awarding a task order to Deva in connection with the agency's promised
   corrective action of reevaluating quotations. Government officials are
   presumed to act in good faith and, where a protester contends that
   contracting officials are motivated by bad faith, it must provide
   convincing proof; our Office will not attribute unfair or prejudicial
   motives to procurement officials on the basis of inference and
   supposition. Logistics Solutions Group, Inc., supra, at 4; American
   Artisan Prods., Inc., B-292559, B-292559.2, Oct. 7, 2003, 2003 CPD
   para. 176 at 9.

   Here, there is no evidence of pretext. For example, Deva asserts that the
   agency knew or should have known of all its bases for canceling the RFQ
   well before deciding to do so, including its needs for credit reform
   reporting, concerns over when a new vendor is introduced during the audit
   cycle, the comprehensiveness of the original SOW, and cost estimate
   issues. Initial Comments at 17-18. Apart from its suspicions regarding the
   timing of the decision to cancel and resolicit, Deva provides no evidence
   of pretext and the timing of the decision alone is insufficient. Where, as
   here, a reasonable basis exists to cancel a solicitation, an agency may
   cancel the solicitation regardless of when the information first surfaces
   or should have been known, even if the solicitation is not canceled until
   after proposals have been submitted and evaluated, or even if discovered
   during the course of a protest. See Rice Servs., Inc.; Watson Servs.,
   Inc., B-293861 et al., June 15, 2004, 2004 CPD para. 167 at 4; Global
   Solutions Network, Inc., B-289342.4, Mar. 26, 2002, 2002 CPD para. 64 at
   3.

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] The agency subsequently reimbursed Deva for attorneys' fees and costs
   expended in bringing its original protest.

   [2] Deva asserts that, since 2,000 hours of credit reform--OCFO management
   support--work under the resolicitation fall within the scope of the
   original TO No. 1, they should not be relied upon by the agency to justify
   cancellation. First Supplemental Comments at 5. In our view, even if these
   hours were not considered, the increase in other credit reform work
   remains a material change. For example, considering only [deleted] of the
   [deleted] hours of credit reform work in year 1 represents [deleted]
   percent of the new total requirement as compared with the less than 4
   percent that work represented under the original RFQ.

   [3] In this regard, the agency requires that any vendor performing the new
   requirement be "sufficiently knowledgeable in credit reform accounting so
   that the Department can maintain continuity [ ] for credit reform
   improvements." FMO Director Declaration 3, para. 10.