TITLE: B-310357, Essan Metallix Corporation, December 7, 2007
BNUMBER: B-310357
DATE: December 7, 2007
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B-310357, Essan Metallix Corporation, December 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: Essan Metallix Corporation

   File: B-310357

   Date: December 7, 2007

   Kevin M. Cox, Esq., and Nancy M. Camardo, Esq., Camardo Law Firm, P.C.,
   for the protester.

   Jason P. Matechak, Esq., Gregory S. Jacobs, Esq., and Steven D. Tibbets,
   Esq., Reed Smith LLP, for Maher, Ltd., an intervenor.

   Major Walter R. Dukes, and Leslie A. Nepper, Esq., Department of the Army,
   for the agency.

   Eric M. Ransom and Christine S. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preperation of the decision.

   DIGEST

   An agency may properly exclude a defaulted contractor from the competition
   for the reprocurement of the work remaining under the terminated contract.

   DECISION

   Essan Metallix Corporation protests the Department of the Army's failure
   to solicit it in the agency's reprocurement of British stainless steel
   tubes under solicitation No. W52H09-07-T-5765.

   We deny the protest.

   The protester here was the awardee of the previous contract for the
   requirement, awarded on August 31, 2005. The subject reprocurement began
   after the protester's contract was terminated for default[1] on January
   16, 2007. Agency Report (AR), Tab 10m, Award Modification 6, at 1. This
   termination followed a nearly year-long delay in the procurement in which
   the protester failed in each of four attempts to manufacture tubes to meet
   its contract's first article test requirements. AR, at 1; Tab 10l, Award
   Modification 5, at 3.

   After the termination of the protester's contract, the agency contacted
   all other producers of the tubes known to the agency at the time--Maher,
   Ltd., Essan's subcontractor under the terminated contract, and BAE
   Systems, a previous manufacturer.[2] The agency then began reprocurement
   via a two-stage process in which offerors were required to prove their
   capability to produce acceptable tubes under a five-tube production
   "prove-out" contract before being considered for the actual production
   contract. BAE did not submit a timely offer that met the government's
   needs for the prove-out contract.

   Maher was issued a purchase order for the five-tube prove-out quantity on
   February 8, 2007, and its second delivery of tubes was found acceptable on
   July 31. The present solicitation was issued to Maher on August 7, and
   Maher was awarded the production contract on September 5. An award
   synopsis was posted on FedBizOpps the same day and Essan filed this
   protest on September 17. Essan asserts that it was improperly excluded
   from the competition for the reprocurement, that the reprocurement was for
   a different item than the terminated contract, and that Maher's proposed
   price in the reprocurement was unreasonable.

   Generally, the statutes and regulations governing federal procurements are
   not strictly applicable to reprocurements of defaulted requirements. Bluff
   Springs Paper Co., Ltd./R.D. Thompson Paper Prod. Co., Joint Venture,
   B-286797.3, Aug. 13, 2001, 2001 CPD para. 160 at 2. Under the standard
   provisions applicable to fixed-price contracts, FAR sections 49.402-6(b)
   and 52.249-8, an agency may use any terms and acquisition method deemed
   appropriate for repurchase of not more than the undelivered quantity for
   which the contract was terminated, but must obtain competition to the
   maximum extent practicable. In this case, because the terminated contract
   was for the acquisition of commercial items, FAR sect. 49.402-6 is only
   applicable as guidance, and only to the extent that it does not conflict
   with the specific procedures applicable to commercial item acquisitions.
   FAR sect. 12.403(a). As applicable here, for commercial item acquisitions,
   FAR sect. 12.403(c)(2) provides that the government's rights after a
   termination for default include all the remedies available to any buyer in
   the marketplace, and that the government's preferred remedy will be to
   acquire similar items from another contractor and to charge the defaulted
   contractor with any excess reprocurement costs. These FAR provisions allow
   the agency to purchase the needed supplies as expeditiously as possible
   while preserving the government's right to seek excess reprocurement costs
   from the defaulted contractor.

   In Montage, Inc., B-277923, B-277923.2, Dec. 29, 1997, 97-2 CPD para. 176,
   our Office reexamined our previous view that a defaulted contractor may
   not be automatically excluded from a competition for the defaulted
   requirement because such an exclusion would constitute an improper
   premature determination of nonresponsibility. In recognition of the broad
   authority to reprocure accorded the contracting officer by FAR sect.
   49.402-6, we adopted the position that we would decline to review an
   agency's decision not to solicit a defaulted contractor in the
   reprocurement of work remaining under the defaulted contract. While the
   FAR provisions regarding the termination of contracts for commercial items
   use different concepts than those used in the standard default clauses,
   they clearly invest equal or greater latitude in the contracting officer
   to determine how to conduct a reprocurement after the termination of a
   contractor for default.[3] As a result, in accordance with our holding in
   Montage, Inc., we will not review the agency's decision to exclude Essan
   from the reprocurement here.

   Essan also asserts that the subject solicitation was for a different item
   than that to be supplied under the terminated contract and thus falls
   outside the agency's FAR sect. 12.402(c)(2) authority to acquire "similar
   items" from another contractor after a default. The agency argues that the
   specifications were essentially unchanged between the two procurements. We
   agree.

   The record here reflects that the subject solicitation requires Maher's
   tubes to conform to revision B of drawing 922423. AR, Tab 4, Solicitation,
   at 20-21. This version of the drawing differs from revision A, used in the
   Essan contract, only in that revision B allows the option of producing
   tubes to an "S" or "S1" condition, where revision A allowed only an "S1"
   condition.[4] Agency Supplement, at 4-5; Attach. 4, Revision B. However,
   the record also reflects that revision B of the drawing was created in
   July 2006, on Essan's request, and that the agency allowed Essan the
   option of producing tubes to the "S" condition under the terminated
   contract. Id. Thus, in our view, there is no support in the record for the
   protester's contention that the reprocurement is not for the same item as
   the terminated contract.[5]

   Essan's final argument is that Maher's price for the required tubes was
   unreasonable. Given our conclusion that the agency properly excluded Essan
   from the reprocurement, Essan is not an interested party to raise this
   issue, since, even if its protest were sustained on this issue, Essan
   would not be eligible to compete for the award. See 4 C.F.R.
   sect. 21.0(a)(1) (2007); Four Winds Servs., Inc., B-280714, Aug. 28, 1998,
   98-2 CPD para. 57.

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] The protester's terminated contract was a contract for commercial
   items and thus included the "termination for cause" clause specified by
   Federal Acquisition Regulation (FAR) part 12 for commercial item
   acquisitions (FAR sect. 52.212-4), rather than the standard "termination
   for default" clause (FAR sect. 52.249-8). Although Essan was terminated
   "for cause" under FAR part 12, Essan's termination resulted from its
   failure to comply with the delivery schedule in its contract, and Essan's
   termination is described, variously, as "for cause" or "for default" in
   the record. For consistency, we will refer to Essan's termination as "for
   default" throughout this decision.

   [2] Essan was the only firm to submit a quotation for the terminated
   contract.

   [3] For example, while, as noted above, FAR sect. 49.402-6(b) requires the
   agency to obtain competition to the maximum extent practicable, there is
   no parallel requirement in the FAR provisions relating to commercial item
   acquisitions.

   [4] The "S" and "S1" designations refer to hardness conditions required to
   allow the tubes to be bent into their final form. The "S" designation
   refers to the hardness condition required of a "flow formed" tube, while
   the "S1" designation refers to the hardness condition required of an
   "extruded" tube. Essan attempted to produce tubes by both methods, while
   Maher [DELETED]. In its supplemental comments, Essan asserts that it was
   limited to only one production method under its contract while Maher's
   contract allows for three production methods. Supplemental Comments, Tab
   1, Affidavit of Joseph Jankowski, at 5. We find no evidence in the record
   to support that assertion.

   [5] Essan also argued that the reprocurement is for a different item due
   to slight differences in the allowable wall thickness variance and
   chemical composition requirements between the contracts. Essan did not
   raise these allegations in particular except in an affidavit attached to
   its supplementary comments. Further, Essan has not directed our attention
   to where the allegations are supported in the record, and has not
   explained how slight (and more restrictive) changes to the allowable
   tolerances render the tubes required under Maher's contract different
   items. Based on our review of the record, we see no evidence to suggest
   that the reprocurement is not for the same or "similar items" under FAR
   sect. 12.403(c)(2).