TITLE: B-311332; B-311332.2, Corcel Corporation, June 13, 2008
BNUMBER: B-311332; B-311332.2
DATE: June 13, 2008
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B-311332; B-311332.2, Corcel Corporation, June 13, 2008

   Decision

   Matter of: Corcel Corporation

   File: B-311332; B-311332.2

   Date: June 13, 2008

   Ray Corona for the protester.
   Warren D. Leishman, Esq., Agency for International Development, for the
   agency.
   Eric M. Ransom, Esq., and Christine S. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Agency reasonably concluded that it had a compelling reason to cancel
   an invitation for bids after bid opening where the solicitation's
   specifications were inadequate to meet the agency's needs.

   2. Agency did not improperly make an award during the pendency of the
   protest where the order was issued under an existing
   indefinite-delivery/indefinite-quantity contract for a different type of
   product.

   DECISION

   Corcel Corporation protests the decision of the United States Agency for
   International Development (USAID) to cancel, after the opening of the
   bids, that portion of invitation for bids (IFB) No. 294-2008-001 seeking
   bids for valves. Corcel also protests the agency's replacement procurement
   for the valves under an existing indefinite-delivery/indefinite-quantity
   (ID/IQ) contract.

   We deny the protests.

   BACKGROUND

   The challenged procurement is for approximately 62 kilometers of pipe and
   pipeline supplies intended to provide drinking water to the south Nablus
   villages in the West Bank. According to the agency, there are currently no
   fixed water supplies in the 10 villages targeted by this procurement. The
   installation of this pipeline will provide over 100,000 households with
   better access to clean water.

   USAID issued the IFB on December 17, 2007, soliciting sealed bids for
   three "bills of quantities" (BOQ): pipes, valves, and fittings. Bidders
   were free to bid on any or all items listed on these three BOQs. IFB at
   L.8. The IFB included a preference for United States suppliers. IFB
   Amendment Notice 1.

   As relevant to this protest, "BOQ B" of the solicitation set forth the
   requirement for valves. This consisted of seven types of Class 300 buried
   gate valves, 215 in total. With regard to the specific technical
   requirements, BOQ B stated that a bidder must "[s]upply flanged Gate
   Valves with all required accessories and parts for buried applications."
   IFB, Attachment 3D, BOQ B, at 1. In detailed technical specifications
   attached to BOQ B, USAID also listed further requirements for Class 300
   gate valves for buried applications. These specifications stated that
   Class 300 valves must be "[s]uitable for buried water service," and that
   the approved manufacturers and products were "Velan" valves, or equal. Id.
   at 5.

   The BOQ and technical specifications were provided to USAID engineers by
   the Palestinian Water Authority (PWA). Contracting Officer's Statement of
   Facts, at 2. The contracting officer has represented that these
   specifications are standard and widely used in the West Bank, and that
   since the year 2000, most local organizations have been using these
   specifications. Id. As a measure of quality assurance, USAID engineers
   sent the BOQ and specifications to CH2M Hill, USAID's construction
   management firm in the West Bank. Engineer's Statement of Facts, at 2.
   USAID and CH2M Hill suggested minor changes in the specifications, and
   obtained the PWA's agreement before incorporating BOQ B and specifications
   into the solicitation package. Id.

   Three firms submitted bids in response to the IFB by the January 18, 2008
   bid opening. Two of the firms bid on all items on the three BOQs, while
   the third firm, Corcel, bid on BOQ B only. With regard to BOQ B, one firm
   bid a foreign product, and among the two firms bidding United States
   products, Corcel bid the lowest price. Contracting Officer's Statement of
   Facts, at 2-3. However, upon review, USAID's engineers determined that
   Corcel had not provided sufficient information in its bid to enable USAID
   to determine whether the proposed valves met the required specifications.
   Engineer's Statement of Facts, at 2.

   On January 28, USAID requested that Corcel provide additional information
   to confirm that its offered valves were suitable for buried water service,
   and advised Corcel that a "non-rising stem valve is the only type valve
   that should be used in buried applications."[1] Engineer's Statement of
   Facts, Tab A. Corcel responded on the same day that it proposed to provide
   "outside screw and yoke" Class 300 gate valves, and disputed that NRS
   valves were the only valves suitable for buried applications. Id., Tab B.
   Citing the BOQ and technical specifications, Corcel maintained that there
   was no requirement in the IFB that the Class 300 gate valves be NRS, and
   confirmed that its proposed custom valves were in full compliance with the
   requirement that all Class 300 valves be suitable for buried water
   service. Id. On January 30, Corcel sent USAID further information,
   including pictures, drawings, and diagrams.

   USAID engineers shared this information with specialty engineers from the
   PWA and two U.S. engineering firms, including CH2M Hill. Id. at 3. All the
   engineers concluded that Corcel was offering RS valves. Id. On February 4,
   the PWA sent a letter to USAID stating that RS valves were not acceptable
   to the PWA, and that all buried application gate valves "should be non
   rising stem according to PWA technical specifications and standards." Id.,
   Tab D. Based on this concern, the contracting officer determined that the
   specifications needed review, and sent the specifications to another
   independent U.S. engineering firm. Contracting Officer's Statement of
   Facts, at 3. That firm determined that the IFB had not clearly specified
   that the Class 300 gate valves were to be NRS. Id. The firm suggested that
   USAID consider adding an NRS requirement to its specifications. Engineer's
   Statement of Facts, at 7. The contracting officer then determined that,
   with regard to BOQ B, the IFB was ambiguous and inadequate. On February
   26, USAID informed the bidders that it was rejecting all bids for BOQ B
   and canceling that portion of the IFB because it had been determined that
   the specifications were inadequate, as they failed to state that NRS
   valves were required. Agency Report (AR), Tab 9.

   Corcel filed its protest with our Office on March 6, alleging that the
   agency's decision to cancel the solicitation was improper because the
   solicitation was not ambiguous and NRS valves were not necessary to meet
   the agency's needs. Also in March, USAID began to pursue an alternative
   procurement for the required valves by issuing a task order to CH2M Hill
   under the firm's existing ID/IQ contract for construction management
   services. The task order provided funding for the procurement of water
   valves for the south Nablus villages project, but only authorized CH2M
   Hill to conduct market research by soliciting and evaluating quotes. AR,
   Tab 11, at 2. CH2M Hill was required to request additional authorization
   from USAID before procuring the valves. Id.

   On March 18, Corcel learned from one of its manufacturers that CH2M Hill
   was soliciting quotes for valves for the south Nablus project. On March
   20, Corcel filed a second protest, alleging that USAID was improperly
   circumventing the protest process and excluding Corcel from the bidding
   process by attempting to procure the required valves though CH2M Hill.

   ANALYSIS

   With regard to the cancellation of the IFB, a contracting agency must have
   a compelling reason to cancel an IFB after bid opening because of the
   potential adverse impact on the competitive bidding system of
   resolicitation after bid prices have been exposed. Federal Acquisition
   Regulation (FAR) sect. 14.404-1(a)(1); HDL Research Lab, Inc., B-254863.3,
   May 9, 1994, 94-1 CPD para. 298 at 5. Where a solicitation contains
   inadequate or ambiguous specifications, or otherwise does not contain
   specifications that reflect the agency's actual needs, the agency has
   sufficient reason to cancel. FAR sect. 14.404-1(c)(1); Days  Inn  Marina,
   B-254913, Jan. 18, 1994, 94-1 CPD para. 23 at 2. Contracting officials
   have broad discretion to determine whether a compelling reason to cancel
   exists, and our review is limited to considering the reasonableness of
   their decision. Chenega Mgmt., LLC, B-290598, Aug. 8, 2002, 2002 CPD para.
   143 at 2.

   USAID first contends that its decision to cancel BOQ B was reasonable
   because the specifications for Class 300 gate valves were ambiguous with
   regard to whether NRS or RS gate valves were required. USAID states that
   the omission of language specifying NRS valves likely arose because the
   shortcomings of RS valves in buried applications appeared self-evident to
   USAID's engineers and outside technical staff. AR, Tab 3, Memorandum, at
   5. Thus, to these engineers, specifying that the project was for buried
   water lines meant that only NRS valves were suitable. USAID therefore
   argues that the specifications were ambiguous because its engineers
   interpreted the specification language to mean that only NRS valves would
   work, while to Corcel, the specification of a buried application did not
   eliminate RS valves from consideration.

   Specifications must be sufficiently definite and free from ambiguity so as
   to permit competition on an equal basis. Hebco, Inc., B-228394, Dec. 8,
   1987, 87-2 CPD para. 565 at 2-3. An ambiguity exists if a solicitation
   requirement is subject to more than one reasonable interpretation when
   read in the context of the solicitation as a whole. Phil Howry Co.,
   B-245892, Feb. 3, 1992, 92-1 CPD para. 137 at 2-3. Based on our
   examination of the record here, we do not agree with the agency that the
   specifications were ambiguous in the context of the solicitation as a
   whole. Rather, as explained below, we conclude that Corcel's
   interpretation of the solicitation, as written, was the only reasonable
   interpretation.

   The specification requirements for Class 300 gate valves, as relevant
   here, were limited to the statement that the valves must be suitable for
   buried service. However, the specification document attached to the BOQ
   also contained requirements for other types of valves, and in a
   specification for lower pressure valves, the specification document
   explicitly required that the valves be "[s]uitable for buried service with
   non-rising stem." AR, Tab 5, at 5 (emphasis added). By clearly requiring
   NRS valves in a specification for lower pressure buried gate valves, but
   not clearly requiring NRS valves for the Class 300 gate valve requirement,
   the solicitation suggested that any type of Class 300 gate valves suitable
   for buried service would be acceptable.

   Furthermore, the specifications listed "Velan" as an approved manufacturer
   of the required Class 300 valves. As pointed out by Corcel, Velan does not
   manufacture a Class 300 NRS gate valve, although it does manufacture a
   Class 300 RS gate valve. Comments at 4. The agency does not dispute this
   fact.[2]

   Under these circumstances, we think that Corcel's interpretation of the
   specifications, that the valves needed only to be suitable for buried use
   and were not required to be NRS, is the only reasonable interpretation.
   Therefore, we conclude that there was no ambiguity in the specifications
   that would justify cancellation of BOQ B of the IFB.

   USAID next contends that its decision to cancel BOQ B was reasonable
   because, if Corcel's interpretation of the solicitation was the only
   reasonable reading, then the specifications failed to meet the agency's
   needs for the intended project. We agree.

   An IFB may be canceled after bid opening, and all bids rejected, where an
   award under the IFB would not serve the government's actual needs, Eastern
   Technical Enter., Inc., B-281319, B-281320, Jan. 22, 1999, 99-1 CPD para.
   17 at 2, and our Office will defer to the agency and to the technical
   expertise of its engineering personnel in defining the government's needs.
   Corbin Superior Composites, Inc., B-242394,

   Apr. 19, 1991, 91-1 CPD para. 389 at 5; Kings Point Mfg. Co., Inc.,
   B-210757, Sept. 19, 1983, 83-2 CPD para. 342 at 3. Accordingly, we will
   question that determination only where it is shown to have no reasonable
   basis.

   Although Corcel has zealously advocated the technical merits of its
   customized RS valves, we conclude from the record that an award under BOQ
   B of the IFB would not have met the agency's needs, and that the
   cancellation of BOQ B of the IFB was therefore reasonable. Based on our
   review of the record, and specifically of the statements of the
   contracting officer, the USAID engineer, the PWA, and the independent
   engineering firms consulted by USAID, it is clear that all parties to the
   approval of the solicitation understood the specifications to require NRS
   gate valves. These parties understood NRS gate valves to be necessary to
   the project due to their perceptions of the inherent shortcomings of RS
   valves in buried applications and their understanding of the PWA's
   technical standards, and clearly did not anticipate that a bidder would
   offer RS valves customized for buried applications.

   According to the agency, standard off-the-shelf RS valves are not suitable
   for buried applications due to several concerns. First among these is that
   the threaded stem of a RS valve is at least partially outside the valve
   body itself, and if buried, would be directly exposed to dirt and debris
   that would jam and corrode the mechanism. Engineer's Statement of Facts,
   at 4. Second, RS valves have more maintenance issues as they require
   periodic lubrication, which would be impossible in the case of a buried
   valve. Id. Third, due to their rising mechanism, RS valves are greater in
   height than NRS valves, which imposes restrictions on their use,
   especially where pipelines are to be buried in roads.

   Corcel's customized valves claim to address the major shortcomings of RS
   valves in buried uses by equipping the standard RS valve with custom stem
   enclosures, sealed lubrication housings, and a separately manufactured
   valve box. However, these customizations do not allay all of the agency's
   concerns about the use of RS valves in buried applications, and introduce
   some additional concerns.

   For example, the agency remains concerned about the lubrication needs of
   RS stem valves, and how those needs would be met once the valves were
   buried. Agency Technical Supplement, at 3. In response, Corcel has
   referred to its manufacturer's catalog sheet on "adapto-gear actuators"
   which are "fully enclosed light weight, maintenance free, bevel gear units
   for valves that require gearing to facilitate operation." Comments, at 8;
   Corcel Supplementary Response, at 4. Corcel highlights the assurance that
   these parts are "maintenance free." However, this claim relates to the
   adapto-gear actuator, an accessory item, and not the RS valves themselves.
   See Comments, Tab 12. It is unclear that such an accessory, for valves
   that require gearing, would be suitable or necessary for the valves
   required under the BOQ. Protest, Tab 3, at 1. Furthermore, the agency is
   reasonably concerned that these customizations and accessories may
   themselves add an unnecessary maintenance burden on the PWA, and that the
   addition of such customizations and accessories will further exacerbate
   the height drawback inherent to RS valves. Agency Technical Supplement, at
   3. Finally, despite Corcel's customizations, Corcel is still offering RS
   valves, which the agency is reasonably concerned will not be acceptable to
   the PWA. Contracting Officer's Statement of Facts, at 4; Engineer's
   Statement of Facts, Tab D.

   In light of the foregoing concerns and the clear statement of the PWA that
   only NRS valves are acceptable, we think that the USAID engineering
   personnel had a reasonable basis to conclude that NRS valves were
   necessary to meet the agency's needs for this project. On that basis, and
   also considering the clear consensus that a requirement for NRS valves had
   been intended in pre-solicitation planning, we conclude that the agency
   had a compelling reason to cancel the BOQ B portion of the IFB.

   With regard to Corcel's second protest, Corcel essentially alleges that
   the agency's issuance of a task order to CH2M Hill for the procurement of
   valves for the south Nablus project circumvents the competitive bidding
   process by excluding Corcel. As a preliminary matter, we note that agency
   has not yet issued the notice to proceed with the actual procurement of
   valves under the ID/IQ contract, and is withholding the issuance of that
   notice during the pendency of this protest. AR, Tab 3, Memorandum, at 8.
   Moreover, Corcel offers no support, and we see none, for its assertion
   that the agency's use of an existing ID/IQ contract is improper in this
   case. On the contrary, an ID/IQ contract, by definition, is to be used to
   place orders with the contractor for items within the scope of the
   contract, as USAID apparently plans to do here. See 41 U.S.C. sect.
   253h(a) (2000); FAR sect. 16.504(a).

   >

   The protests are denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] In a non-rising stem (NRS) gate valve, the stem is threaded into a
   shaft in the gate. Engineer's Statement of Facts, at 3. As the hand wheel
   on the stem is rotated, the gate travels up or down the stem on the
   threads, while the stem itself remains vertically stationary. Id. In a
   rising stem (RS) valve, the stem is attached to, but not threaded into the
   gate. Id. As the hand wheel on this type of valve is turned, the stem
   itself rises out of the valve, thereby also raising the attached gate. Id.
   This type of valve is generally used where it is important to know on
   visual inspection whether the valve is open or closed. Id.

   [2] The agency suggests that the listing of Velan as an approved
   manufacturer of the NRS Class 300 gate valves was an oversight,
   incorporated into the solicitation from a template that has been in use
   since at least the year 2000.