TITLE: B-311242, Division Laundry and Cleaners, Inc., May 19, 2008
BNUMBER: B-311242
DATE: May 19, 2008
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B-311242, Division Laundry and Cleaners, Inc., May 19, 2008

   Decision

   Matter of: Division Laundry and Cleaners, Inc.

   File: B-311242

   Date: May 19, 2008

   David F. Barton, Esq., The Gardner Law Firm, for the protester.
   Gary R. Allen, Esq., Department of the Air Force, for the agency.
   Paula A. Williams, Esq., and Ralph O. White, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Agency had a reasonable basis to cancel small business set-aside and
   resolicit its requirement on an unrestricted basis where the record
   supports the reasonableness of agency's determination that prices offered
   by eligible small business concerns were unreasonable.

   DECISION

   Division Laundry and Cleaners, Inc. protests the Department of the Air
   Force's decision to cancel request for proposals (RFP) No.
   FA3047-08-R-0001, issued as a small business set-aside for commercial bulk
   laundry and dry cleaning services at Lackland Air Force Base and other
   locations in San Antonio, Texas. Division asserts that the cancellation
   was improper based on the agency's unreasonable determination that its
   proposed price was excessive.

   We deny the protest.

   As amended, the RFP anticipated award of a fixed-price requirements
   contract for a period of 4 years, to the offeror whose proposal was
   considered the "best value." RFP at 143. The RFP advised that award would
   be made without conducting discussions unless the agency otherwise
   determined discussions to be necessary. Id. at 147.

   Three offerors, including Division, submitted proposals by the closing
   date, one of which was rejected because the offeror was not a small
   business. The contracting officer (CO) reviewed the proposals of the two
   eligible small business concerns and concluded that each offeror's
   proposed price exceeded the government estimate by more than 35 percent.
   The CO also compared the small business offerors' prices to the proposed
   price of the ineligible large business firm in determining that the prices
   offered by both small business concerns were not fair and reasonable. CO's
   Statement at 3. After the CO concluded that she had no realistic
   expectation that the significant difference between the proposed prices
   and the government estimate could be negotiated to more reasonable prices
   through discussions, she canceled the solicitation. Agency Report (AR)
   exh. 8, Determination and Findings at 2-3. Thereafter, the CO sought and
   received approval from the Small Business Administration's small business
   specialist to withdraw the set-aside and resolicit the requirements using
   full and open competition procedures. Id. at 15.

   Division challenges the agency's decision to cancel the solicitation
   rather than conduct discussions, asserting that the Air Force improperly
   evaluated its price against a flawed estimate of the government's needs.
   In this regard, Division contends that the government estimate reflects
   considerably lower estimates for various solicitation requirements such as
   the pick-up and return laundry requirements at each location.
   Specifically, the protester asserts "on information and belief" that the
   incumbent contractor is not counting the actual number of items in each
   bundle of cleaning, as required by the canceled RFP which, if done
   according to the solicitation's requirements, would require more manpower
   and time, resulting in higher costs. Protester's Comments at 3-4.

   A determination of price reasonableness for a small business set-aside is
   within the discretion of a CO, and we will not disturb such a
   determination unless it is clearly unreasonable or there is a showing of
   fraud or bad faith on the part of contracting officials. A. Hirsh, Inc.,
   B-271829, July 26, 1996, 96-2 CPD para. 55 at 2. In making such a
   determination, the CO may consider such factors as the government
   estimate, the procurement history for the solicited services, the current
   market climate, and the "courtesy bid" of an otherwise ineligible large
   business offeror. Id.; Nutech Laundry & Textiles, Inc., B-291739, Feb. 10,
   2003, 2003 CPD para. 34 at 4; see also, Federal Acquisition Regulation
   (FAR) sections 19.202-6, 15.404-1(b).

   Furthermore, in view of the congressional policy favoring small
   businesses, contracts may be awarded under small business set-aside
   procedures to small business firms at premium prices, so long as those
   prices are not unreasonable. Hardcore DuPont Composites, LLC, B-278371,
   Jan. 20, 1998, 98-1 CPD para. 28 at 3.[1] The determination of whether a
   small business price premium is unreasonable depends on the circumstances
   of each case, Olsen Envtl. Servs., Inc., B-241475, Feb. 6, 1991, 91-1 CPD
   para. 126 at 2-3, and we have found cancellations proper where the
   protester's price exceeded the government estimate by as little as 7.2
   percent. See Building Maint. Specialists, Inc., B-186441, Sept. 10, 1976,
   76-2 CPD para. 233 at 4.

   The agency's explanation here provides a reasonable basis for the agency's
   decision to cancel the solicitation. As previously noted, the agency
   canceled the RFP after concluding that both small business offerors'
   prices were unreasonable, given that their proposed prices were each more
   than 35 percent above the government estimate for this requirement.[2]
   While Division challenges the reasonableness of the government estimate,
   the protester has provided no credible evidence that the government
   estimate was flawed or otherwise inaccurate. In any event, Division's
   challenge to the government estimate based on information and belief that
   the incumbent contractor is not performing the requirement that the
   contractor verify and count all laundry and dry cleaning items picked-up
   and returned to each location provides no basis to question the validity
   of the estimated solicitation requirements, or the agency's reliance on
   the government price estimate derived from those projections to determine
   the reasonableness of the protester's proposed price.

   Moreover, the agency also compared Division's price to the other offerors'
   prices. As stated previously, the FAR recognizes comparison of offerors'
   prices to one another as a permissible technique for determining price
   reasonableness. FAR sections 19.202-6, 15.404-1(b); Stitziel Co.,
   B-251560, Apr. 13, 1993, 93-1 CPD para. 315 at 2. Given that Division's
   offered price was significantly higher than the price of the other small
   business and the ineligible large business firm, the comparison of
   offerors' prices to one another clearly furnished the CO with an
   additional valid basis for finding that Division's price was unreasonable.

   Finally, the protester asserts that the agency was required to conduct
   discussions given the wide discrepancy in offered prices and the
   government estimate. Protester's Comments at 3. There is generally no
   obligation that a contracting agency conduct discussions where, as here,
   the RFP specifically informed offerors of the agency's intent to award a
   contract on the basis of initial proposals without conducting discussions.
   See Colmek Sys. Eng'g, B-291931.2, July 9, 2003, 2003 CPD para. 123 at 7.
   A CO's discretion in deciding not to hold discussions is quite broad, and
   our Office will review the exercise of that discretion only to ensure that
   it was reasonably based on the particular circumstances of the
   procurement. Id. Division has provided no basis, nor have we found one in
   the record, to call into question the agency's decision not to engage in
   discussions because of the CO's belief that negotiations would not result
   in obtaining reasonable prices from the small businesses.

   The protest is denied.[3]

   Gary L. Kepplinger
   General Counsel

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

   [1] We note that we have equated the concept of price reasonableness with
   "fair market price" in the context of a small business set-aside. See
   American Imaging Servs., B-238969, B-238971, July 19, 1990, 90-2 CPD para.
   51 at 2.

   [2] The amount by which the protester's price exceeded the government's
   estimate was redacted from the agency report in this protest. Because the
   agency anticipates conducting a recompetition here, we need not disclose
   the actual percentage by which the small business offerors' prices
   exceeded the government estimate. We have reviewed the numbers in camera,
   and the Air Force has agreed that we may disclose that both firms' prices
   exceeded the government estimate by at least 35 percent.

   [3] Regarding the protester's allegations of bias, government officials
   are presumed to act in good faith and we will not attribute unfair or
   prejudicial motives to procurement officials on the basis of inference or
   supposition. Advanced Sci., Inc., B-259569.3, July 3, 1995, 95-2 CPD para.
   52 at 17; Triton Marine Constr. Corp., B-250856, Feb. 23, 1993, 93-1 CPD
   para. 171 at 6. Here, the record does not support the protester's
   allegation of bias.