TITLE: B-310737.3; B-310737.4; B-310737.5, Native American Industrial Distributors, Inc., April 15, 2008
BNUMBER: B-310737.3; B-310737.4; B-310737.5
DATE: April 15, 2008
*************************************************************************************************
B-310737.3; B-310737.4; B-310737.5, Native American Industrial Distributors, Inc., April 15, 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: Native American Industrial Distributors, Inc.

   File: B-310737.3; B-310737.4; B-310737.5

   Date: April 15, 2008

   Lee P. Curtis, Esq., Anthony L. Steadman, Esq., and Troy E. Hughes, Esq.,
   Perkins Coie LLP, for the protester.

   James L. Weiner, Esq., Department of the Interior, for the agency.

   William K. Walker, Esq., Walker Reausaw, for Chenega Federal Systems, LLC,
   an intervenor.

   Paul N. Wengert, Esq., and Ralph O. White, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Protest that agency unreasonably made award of a contract under a Buy
   Indian Act set-aside because there are no American Indians holding
   management positions in the company is denied where the solicitation did
   not impose a specific test for eligibility for award, and the agency
   reasonably interpreted the Buy Indian Act as allowing the company to
   qualify for award, since the company is a wholly-owned subsidiary of an
   Alaska Native Corporation pursuant to the Alaska Native Claims Settlement
   Act.

   2. Protest that agency improperly selected for award proposal that failed
   to provide letters of commitment for key personnel is sustained where
   solicitation specifically required offerors to submit letters of
   commitment for all key personnel.

   DECISION

   Native American Industrial Distributors, Inc. (NAID), a small business,
   protests the award of a contract to Chenega Federal Systems, LLC, by the
   Department of the Interior, Bureau of Indian Affairs (BIA), under request
   for proposals (RFP) No. RBK00070010 for information technology
   infrastructure services. NAID objects that the contract award was
   improperly made to a firm that does not meet the requirements of the Buy
   Indian Act, 25 U.S.C. sect. 47, and that the agency overlooked the
   omission of required letters of commitment from the Chenega proposal that
   should have rendered the proposal unacceptable.

   We sustain the protest.

   BACKGROUND

   The BIA issued the RFP on July 3, 2007, seeking fixed-price proposals to
   provide information technology support services in twelve functional
   areas, ranging from applications and database support to private branch
   exchange (telephone), video teleconferencing, and network support
   services. Performance Work Statement at 5-33. The RFP provided for a base
   period of 12 months, followed by four optional 12-month extensions.

   The RFP provided that award of the contract[1] would be based on
   evaluation of five factors, which were listed in descending order of
   importance: technical approach, past performance, personnel resources,
   corporate experience, and "price/cost." RFP attach. 3, Evaluation Factors,
   at 1.[2] With respect to the personnel resources factor, the RFP specified
   that the evaluation would consider

     The degree to which the staffing approach satisfies the requirements
     defined in this document. Include the following: 1. a staffing plan
     which addresses capabilities and experience relating to the attached
     Statement of Work; 2. resumes for key personnel with letters of
     commitment.

   Id. at 2.

   The RFP also indicated that all contractor personnel (whether key or not)
   would be required to submit a signed nondisclosure agreement, and provided
   a nondisclosure agreement form. RFP attach. 1, Performance Based Statement
   of Work, at 49 ("The Government will provide a Non-Disclosure Statement to
   be signed by each Contractor personnel"). The employee nondisclosure
   agreement form provided, in relevant part, as follows:

     I, _________, am an employee of or a subcontractor to [Contractor Name]
     , a contractor acting under contract to the __________ under Prime
     Contract No. ____, through Task Order ___. I understand that in the
     performance of this task, I may have access to sensitive or proprietary
     business, technical, financial, and/or source selection information
     belonging to the Government or other contractors. . . . I agree not to
     discuss, divulge, or disclose any such information or data to any person
     or entity except those persons directly concerned with the performance
     of this task order. . . .

     In the event that I seek other employment, I will reveal to any
     prospective employer the continuing obligation in this agreement prior
     to accepting any employment offer.

   RFP attach. 2, Non Disclosure Agreement Form, at 1.

   As issued, the RFP notified offerors that it was set aside for
   service-disabled veteran-owned small business concerns (SDVOSBC), RFP at
   95, while also advising that "[t]his acquisition will be a 100% Buy Indian
   set-aside under the Buy Indian Act." RFP attach. 4, Instructions to
   Offerors, at 1. In response to questions from prospective offerors, the
   BIA attempted to clarify its instructions as follows:

     No, the [SDVOSBC set-aside] clause was not in error. Buy Indian Act is
     the #1 set-aside and preference. Anyone not qualifying under the Buy
     Indian Act will be disqualified. Any subcontracting preference is to be
     given first to Buy Indian qualified firms and then to Service Disabled
     Veteran Owned businesses.

   RFP attach. 8, Responses to Offeror Questions, at 14; see also id. at 11,
   16, 17, 29 (similar questions and responses).

   Five firms submitted proposals, including NAID and Chenega. While we
   understand that Chenega's initial proposal included signed nondisclosure
   agreements, it did not include letters of commitment for any of the key
   personnel identified in the proposal.[3] The BIA evaluators rated
   Chenega's proposal as acceptable, and the contracting officer (CO)
   ultimately determined that it provided the best value overall. By letter
   dated October 25, 2007, the BIA notified NAID that the agency had selected
   Chenega's proposal for award. NAID filed a protest of that award decision
   with our Office on October 30, and the BIA then took voluntary corrective
   action before the due date for an agency report. As a result, we dismissed
   as academic the earlier challenge to this procurement. Native Am. Indus.
   Distrib., Inc., B-310737, Nov. 20, 2007.

   The agency's corrective action primarily involved amending the RFP to
   delete the SDVOSBC set-aside, and stating the numerical weighting for the
   evaluation factors. RFP amend. Nov. 14, 2007, at 1.[4] After requesting
   revised proposals, the BIA received and evaluated final proposal
   revisions.

   Once again, Chenega's revised proposal did not include letters of
   commitment. However, under the heading "Key Personnel," it did include 23
   resumes and 22 nondisclosure agreements (that is, the proposal included a
   nondisclosure agreement for all but one of the employees identified). In
   the certifications section of the proposal, included as required by FAR
   sect. 52.212-3, Chenega marked the block to certify that it was a Native
   American firm. Supplemental CO Statement at 3. The revised proposal also
   stated that Chenega Federal Systems was a wholly-owned subsidiary of
   Chenega Corporation, an Alaska Native Corporation. Chenega Revised
   Proposal at 3 (Cover Letter). The proposal also included a copy of the
   Certificate of Eligibility issued by the BIA on November 18, 1974,
   recognizing the Native Village of Chenega, Alaska as an eligible
   beneficiary under the Alaska Native Claims Settlement Act. Chenega Revised
   Proposal at A-33.

   In evaluating Chenega's revised proposal, the evaluators again did not
   identify the absence of letters of commitment for Chenega's key personnel.
   As relevant here, the final ratings for the NAID and Chenega proposals
   were as follows:

   +------------------------------------------------------------------------+
   |       |Technical|   Past    |Personnel|Corporate Experience|   Price   |
   |       |Approach |Performance|Resources|                    |           |
   |-------+---------+-----------+---------+--------------------+-----------|
   |NAID   |  42.0   |   28.0    |   7.6   |        3.8         |$46,718,554|
   |-------+---------+-----------+---------+--------------------+-----------|
   |Chenega|  47.2   |   33.4    |   7.8   |        5.0         |$51,649,723|
   +------------------------------------------------------------------------+

   Agency Report, Tab 9, Source Selection Decision, at 6, 18.

   After first concluding that Chenega was eligible for award, the CO
   concluded that Chenega's higher-rated proposal was worth its higher price.
   Id. at 21-22. On December 28, the BIA once again awarded the contract to
   Chenega. After NAID received a letter dated December 31 that was labeled
   as a combined notice of award and written debriefing, NAID filed this
   protest with our Office.

   During the development of the record for this protest, NAID inquired about
   the absence of Chenega's letters of commitment from the agency report. In
   response, the BIA informed counsel for NAID by telephone on March 6 that
   Chenega had not provided letters of commitment with its revised proposal.
   NAID raised this issue as a supplemental basis of protest on March 7.
   Supplemental Protest at 1 n.1. Shortly thereafter, Chenega provided copies
   of letters of commitment for its key personnel to our Office and to
   counsel for the other parties.

   In the BIA report addressing this supplemental protest, the CO provided an
   explanation of his views about the acceptability of Chenega's proposal
   with respect to key personnel, despite the omission. Specifically, the CO
   stated that Chenega's revised proposal was acceptable because "The
   Government viewed [Chenega's] proposed key personnel as unchanged from the
   original proposal since the Government received the letters of commitment
   in the first proposal." Supp. CO Statement at 4. A day later, however,
   counsel for the BIA discovered that the CO's representation was incorrect.
   Counsel promptly acted to correct the record by acknowledging that the BIA
   had never received the letters of commitment from Chenega during the
   procurement process. Instead, the BIA acknowledged that it first received
   these letters when they were produced by counsel for Chenega during the
   course of this protest.

   DISCUSSION

   NAID argues that the evaluation of revised proposals was unreasonable in
   several respects, and that discussions were inadequate. NAID also argues
   that Chenega is ineligible for award under the Buy Indian Act set-aside,
   and that Chenega engaged in a bait-and-switch of key personnel. During the
   protest, NAID withdrew the bait-and-switch allegations, and instead
   supplemented its protest to argue that the BIA had overlooked the omission
   of required letters of commitment from Chenega's revised proposal. We
   conclude that the BIA reasonably found Chenega to be eligible for award of
   a Buy Indian Act set-aside contract, but unreasonably failed to consider
   Chenega's omission of the required key personnel letters of commitment,
   and we sustain the protest on this basis.[5]

   First, we consider the argument that Chenega is ineligible for award under
   a procurement conducted as a Buy Indian Act set-aside. Citing a court case
   and decisions by our Office under Buy Indian Act set-asides, NAID
   maintains that, in order to be eligible for award under a Buy Indian Act
   set-aside, a firm must have: (1) at least 51 percent American Indian
   ownership; (2) American Indians involved in the daily management of the
   firm; and (3) an American Indian recipient of the majority of the firm's
   accrued earnings. Protester's Comments at 8 (citing Colorado Constr.
   Corp., B-290960, Sept. 6, 2002, 2002 CPD para. 162 at 1, and other cases).
   NAID argues that neither the individual who serves as president and chief
   executive officer of Chenega, nor the individual who serves as the manager
   of day-to-day operations, is an American Indian. Id. Therefore, NAID
   contends that Chenega is not eligible for award.

   The BIA and Chenega argue that the 3-part test cited by NAID is not
   required by either the Buy Indian Act or the terms of the RFP. Rather, the
   BIA emphasizes first that, regardless of whether American Indians are
   involved in the firm's management, Chenega is a wholly-owned subsidiary of
   an Alaska Native Corporation (ANC). See Chenega Revised Proposal at 3
   (Cover Letter). As a result, the BIA contends that it reasonably concluded
   Chenega is an eligible offeror pursuant to the Buy Indian Act.

   In considering the application of the Buy Indian Act, we have recognized
   that the BIA is entitled to considerable deference in determining the
   standards to apply, and the evaluation of whether a particular firm meets
   those standards. Cheyenne, Inc., B-260328, June 2, 1995, 95-2 CPD
   para. 117 at 4. Unlike the solicitations in the decisions cited by NAID,
   the RFP here provided no specific criteria by which eligibility for the
   set-aside would be determined. Nor does the statute itself require the BIA
   to use particular criteria. Rather, the operative language simply provides
   that "[s]o far as may be practicable Indian labor shall be employed, and
   purchases of the products . . . of Indian industry may be made in open
   market in the discretion of the Secretary of the Interior." 25 U.S.C.
   sect. 47 (2000 & Supp. V 2005).

   While the protester correctly points out that the BIA has used the 3-part
   test in solicitations for services and supplies in the past, we believe
   the general statutory scheme provides sufficient discretion for the BIA to
   consider Chenega to be an eligible offeror under the Buy Indian Act,
   simply because it is the wholly-owned subsidiary of an Alaska Native
   Corporation.[6] Accordingly, we deny this ground of protest.

   Next, NAID objects that Chenega failed to submit letters of commitment for
   its key personnel, and argues that the BIA failed to consider this fact in
   its evaluation of Chenega's revised proposal, while the same problem was
   labeled as a deficiency for another firm, and contributed to that firm's
   proposal being found unacceptable.

   The BIA argues that the lack of letters of commitment was actually an
   insignificant matter, while Chenega argues that it viewed the
   nondisclosure agreements as the "functional equivalent of letters of
   commitment," particularly since the RFP did not further describe the
   requirement for letters of commitment. E-mail from Counsel for Intervenor
   (Mar. 12, 2008) at 1; Intervenor's Second Supplemental Comments at 2.
   Moreover, the BIA argues that NAID was not competitively prejudiced by the
   agency's relaxation of this requirement in favor of Chenega. According to
   the BIA, even if the omission had been identified as a deficiency for
   Chenega under the personnel resources factor, Chenega would nevertheless
   have been rated superior to NAID overall under the other non-price
   factors, and still would have received the contract award.

   We disagree on each of these points, which we will address in turn. First,
   we note that the purpose of a requirement for an offeror to provide
   letters of commitment for key personnel is to preclude an offeror from
   proposing an impressive array of employees, being evaluated on that basis,
   and receiving award, even where the persons proposed had never committed
   themselves to the offeror, and may have had no intention of doing so. Xeta
   Int'l Corp., B-255182, Feb. 15, 1994, 94-1 CPD para. 109 at 9; cf. Science
   Applications Int'l Corp., B-290971 et al., Oct. 16, 2002, 2002 CPD
   para. 184 at 6-7.[7] We also find no basis in the record for the BIA's
   claim that omission of the letters of commitment could properly be
   considered an insignificant matter. The record here shows that the BIA
   overlooked the issue entirely in evaluating both Chenega's initial and
   revised proposals. We also note that the BIA's arguments that the omission
   of the letters of commitment is insignificant[8]--and that Chenega would
   have received the award, even if the agency had noticed the omission of
   the letters of commitment--are contrary to how the agency evaluated
   another offeror. They are, in essence, new assessments made in the heat of
   litigation, and are therefore entitled to little weight in our
   deliberations. Boeing Sikorsky Aircraft Support, B-277263.2, B-277263.3,
   Sept. 29, 1997, 97-2 CPD para. 91 at 15.

   Second, we think the form nondisclosure agreements here cannot reasonably
   be seen as substitutes for letters of commitment. The nondisclosure
   agreement was limited to just that--a promise not to disclose information.
   An employee with little or no intention of working on the contract could
   sign the nondisclosure agreement without contradicting that intention.
   More generally, neither the BIA nor Chenega has shown anything in
   Chenega's revised proposal that could be construed as a substitute for a
   letter of commitment from each of the key personnel listed.

   Third, even though the RFP did not specify the form or exact content of
   letters of commitment, and did not further explain the requirement in the
   instructions to offerors, we do not think these facts excuse the omission
   of some form of a letter of commitment; that is, a signed statement by
   each key employee (or prospective key employee) whose resume is submitted,
   which generally confirms that he or she has made a commitment to work for
   the offeror on the pending contract if its proposal is successful.

   Finally, with respect to the BIA's assertion that NAID has not been
   competitively prejudiced here, we again disagree. Our Office will not
   sustain a protest unless the protester demonstrates a reasonable
   possibility that it was prejudiced by the agency's actions, that is,
   unless the protester demonstrates that, but for the agency's actions, it
   would have had a substantial chance of receiving the award. McDonald
   Bradley, B-270126, Feb. 8, 1996, 96-1 CPD para. 54 at 3; see Statistica,
   Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed. Cir. 1996). We conclude
   that the misevaluation was prejudicial to the protester based on our
   review of the evaluation record, which shows that the evaluators
   considered the omission of letters of commitment by another offeror to be
   a significant deficiency. Accordingly, if the BIA had noticed the omission
   of these letters from Chenega's proposal, Chenega too could have been
   assessed a deficiency in this area--and like that offeror might have been
   found unacceptable for the omission--while NAID, with its lower overall
   price, could have received the award. Thus, we sustain the protest on this
   basis.

   CONCLUSION AND RECOMMENDATIONS

   During the development of the protest, the BIA reported that it had
   learned from Chenega that "most of" its proposed key personnel remained
   available (implying that some were not), and that the BIA was prepared to
   proceed under the contract awarded to Chenega because the person proposed
   as the program manager was still available. Supplemental CO Statement at
   4. The BIA's position suggests that the agency may have overstated its
   requirements with respect to key personnel by requiring offerors to
   provide letters of commitment for all key personnel. Accordingly, the BIA
   should first determine whether the requirement for letters of commitment
   for all key personnel represents the agency's actual needs. If the BIA
   concludes that the RFP requirement for letters of commitment for all key
   personnel reflects its needs, we recommend that the agency reevaluate the
   existing proposals according to the evaluation criteria in the RFP, and
   make a new source selection decision. If, however, the agency concludes
   that it does not need letters of commitment--or does not need them for all
   key personnel--we recommend that the BIA amend the RFP to accurately state
   its requirements, state the basis on which offerors will be evaluated, and
   request revised proposals.

   With respect to reopening this competition, we note that both the
   protester and the intervenor have raised questions about whether the
   information provided to each of them before the submission of the final
   proposal revisions adequately communicated to them the areas of their
   respective proposals requiring correction or amplification. Although we do
   not reach any conclusion on the merits about whether these exchanges
   constituted discussions--and if so, whether the discussions were
   adequate--the BIA should consider conducting discussions with all
   competitive range offerors before requesting final proposal revisions.[9]

   We also recommend that the protester be reimbursed its costs of filing and
   pursuing the protest, including reasonable attorneys' fees. Bid Protest
   Regulations, 4 C.F.R. sect. 21.8(d)(1) (2007). The protester should submit
   its certified claim, detailing the time expended and costs incurred,
   directly to the contracting agency within 60 days of receiving this
   decision. 4 C.F.R. sect. 21.8(f)(1).

   The protest is sustained.

   Gary L. Kepplinger
   General Counsel

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

   [1] Numerous conflicting statements in the RFP caused offerors to ask the
   BIA what type of contract would be issued. The BIA responded that the
   "contract will be FFP [firm fixed price] Completion IDIQ using FFP task
   orders" (with no explanation of the meaning of "Completion" here). See RFP
   attach. 8, Responses to Offeror Questions, at 16, 26. Although portions of
   the RFP, including the evaluation factors document, refer to the award of
   "this task order," there now appears to be no dispute that the BIA
   intended to award a single contract.

   [2] The RFP also incorporated contradictory provisions with respect to the
   evaluation of options under the price/cost factor: Federal Acquisition
   Regulation (FAR) sections 52.217-3, 52.217-4 and 52.217-5. RFP at 107. It
   appears from the record that the BIA may have intended to incorporate only
   FAR sect. 52.217-5, because it evaluated prices by including the option
   years, although it did make certain price adjustments, based on the
   potential of deleting some services from the contract scope. While we note
   these issues, they are not raised in the protest, and we do not address
   them further.

   [3] Since our review was focused on the sufficiency of the later source
   selection decision, the record of the evaluation of initial proposals was
   not fully developed. However, it appears that the BIA evaluators did not
   notice the absence of letters of commitment from the Chenega proposal in
   this initial evaluation. In contrast, the record reflects that the absence
   of letters of commitment in a third offeror's proposal was cited as a
   "deficiency" under the personnel resources factor (along with other
   concerns), which then resulted in a rating of "unacceptable" under that
   factor. Agency Report, Tab 8, Evaluation Panel Consensus Report, at 9.

   [4] Although there was more than one amendment to the RFP, the individual
   amendments were not numbered; however, they were dated. Accordingly, we
   have used the date to identify the specific amendment.

   [5] As a threshold matter, BIA argued throughout this protest that NAID is
   not an interested party to challenge this award because even if Chenega
   were found unacceptable, another offeror's technical score was superior to
   NAID's technical score. BIA's contention overlooks the fact that this was
   a best value procurement and NAID proposed a lower total price than either
   Chenega or the other competitive range offeror. Therefore, the BIA could
   have selected NAID under the award criteria by concluding that its lower
   price made it the best value, or that the higher-rated proposals of the
   other two offerors were not worth their higher prices. For this reason, we
   conclude that NAID is an interested party here.

   [6] In its comments on this ground of protest, Chenega points out that
   several federal government regulatory schemes would all consider a firm in
   Chenega's position to be an eligible Indian entity for their respective
   programs. Chenega argues that these include: (1) the Small Business
   Administration regulations, 13 C.F.R. sect. 124.109(a)(4); (2) the
   implementation of the Department of Interior Indian preference in the
   agency FAR supplement, 48 C.F.R. sections 1452.226-70 and 1452.226-71; and
   (3) the FAR implementation of the Indian Incentive Program, FAR
   sect. 26.101.

   [7] The BIA cites for support of its position our decision in Science
   Applications Int'l Corp., in which the solicitation required each offeror
   to submit key personnel resumes and a "written agreement . . . to work for
   the offeror effective at contract award." In that decision, our Office
   concluded that the key personnel resumes met this requirement where each
   resume was signed by the employee, each employee involved was already
   employed by the offeror, and each employee included a statement of
   personal commitment to the contract effort on the face of the resume. By
   contrast, neither the resumes (which are not signed) nor the nondisclosure
   agreements here contain any similar statement; furthermore, the resumes
   indicate that significantly less than half of the key personnel are
   current employees of Chenega or its team members.

   [8] We also think that the BIA's claim--i.e., that Chenega's failure to
   provide the required letters of commitment is immaterial--is significantly
   undercut by the argument the agency made earlier in the development of
   this protest. When NAID first objected that Chenega's revised proposal did
   not contain the required letters of commitment, the BIA argued that the
   omission was inconsequential because the required letters had been
   provided in Chenega's initial proposal. It was only after conceding that
   the letters were never submitted during the competition that the BIA
   argued that the omission could be properly waived.

   [9] In this regard, we anticipate that the BIA may want to consider the
   letters of commitment that were submitted by Chenega during this protest.
   To do so, it appears the BIA will need to reopen discussions with all
   offerors remaining in the competitive range to avoid allowing only one of
   them (Chenega) to provide information that has a significant bearing on
   the evaluation (that is, the letters of commitment). See Corporate Am.
   Research Assocs., Inc., B-228579, Feb. 17, 1988, 88-1 CPD para. 160 at 3
   (agency receipt of letters of commitment after closing date for submission
   of proposals necessitated holding discussions with all offerors).