B-297320.2; B-297320.3, Spectrum Security Services, Inc., December 29, 2005
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Decision
Matter of: Spectrum Security Services, Inc.
Timothy
H. Power, Esq., for the protester.
John
S. Pachter, Esq., and Jonathan D. Shaffer, Esq., Smith Pachter McWhorter &
Allen, PLC, for Ahuska Security Corporation, the intervenor.
Aaron
T. Marshall, Esq., Department of Homeland Security, and Kenneth Dodds, Esq.,
and John W. Klein, Esq., Small Business Administration, for the agencies.
Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Where an agency fails to provide pre-award notification of the identity of the prospective awardee on a small business set-aside and the awardee is ultimately found by the Small Business Administration to be other than small based upon a timely size protest filed after award, the agency should terminate the contract and obtain the services from a small business offeror.
2. Protest that awardee’s proposal, on its face, shows that the awardee would not comply with the solicitation’s subcontracting limitation is denied, where the solicitation for services provided for the evaluation of base and option requirements and the awardee proposed to perform more than 50 percent of the personnel costs of the contract, considering the entire contract period.
3. Protest that agency improperly considered the corporate experience and past performance of awardee’s proposed subcontractor is denied, where the solicitation encouraged offerors to submit such information.
DECISION
Spectrum Security Services, Inc. protests the award of a contract to Ahuska Security Corporation under request for proposals (RFP) No. HSCEOP-05-R-00001, issued as a small business set-aside by the U.S. Immigration and Customs Enforcement (ICE), Department of Homeland Security, for detention officer and transportation services. Spectrum complains that, as found by the Small Business Administration (SBA), Ahuska is not a small business concern for this procurement.[1] Spectrum also challenges the evaluation of Ahuska’s proposal.
We sustain the protest in part and deny it in part.
The RFP provided for the award of an indefinite-delivery, indefinite-quantity contract for the provision of detention officer and transportation services for a base and 4 option years. Offerors were informed that to satisfy the agency’s responsibility for “the detention, health, welfare, transportation and deportation of immigrants in removal proceedings and immigrants subject to final order of removal,” a contractor was sought to provide uniformed detention officers on a 24-hour per day, 7-day per week basis. RFP, Statement of Work, at 6.
The RFP incorporated by reference the standard “Notice of Total Small Business Set‑Aside” clause, Federal Acquisition Regulation (FAR) sect. 52.219-6, and “Limitations on Subcontracting” clause, FAR sect. 52.219-14. Thus, offerors were informed that the procurement was set aside exclusively for small business concerns and that, with respect to the limitations on subcontracting, “[a]t least 50 percent of the cost of contract performance incurred for personnel shall be expended for employees of the concern.” FAR sect. 52-219-14(b)(1).
Offerors were informed that award would be made on a “best value” basis, considering the following factors: (1) corporate experience, (2) past performance, (3) contractor’s work plan, (4) personnel, (5) training, (6) transportation, and (7) price. Offerors were also informed that factors (1) through (4) were of equal importance and were slightly more important than factors (5) and (6), which were identified as being equal in importance to each other. All of the technical factors, when combined, were stated to be slightly more important than price. RFP at 77. The solicitation also incorporated by reference the standard “Evaluation of Options” clause, FAR sect. 52.217-5, which informed offerors that the agency would evaluate offers for award purposes by adding the total price for all options to the total price for the basic requirement.
The agency received offers from three firms, including Spectrum and Ahuska. Following discussions and proposal revisions, the technical proposals were evaluated as follows:
Offeror |
Corporate Experience |
Past Performance |
Work Plan |
Personnel |
Training |
Transportation |
Ahuska |
Outstanding |
Good |
Outstanding |
Outstanding |
Outstanding |
Outstanding |
Spectrum |
Outstanding |
Outstanding |
Outstanding |
Outstanding |
Good |
Good |
Offeror A |
Outstanding |
Good |
Outstanding |
Outstanding |
Good |
Outstanding |
Agency Report
(AR), Tab 9, Source Selection Decision, at 2.
The contracting officer selected Ahuska’s proposal for award, stating
that “[Ahuska] received the highest technical rating and is the lowest overall
price.”[2]
Although the RFP
was set aside for small businesses, the agency failed to provide offerors with
pre-award notice of the prospective awardee, as required by FAR sect. 15.503(a)(2). Following notice of award on September 23 and
a debriefing on September 26, Spectrum timely protested Ahuska’s size status to
the contracting officer on September 29.[3] The contracting officer forwarded Spectrum’s
size protest to SBA, which received it on October 7.
On September 30,
Spectrum protested to our Office, challenging the evaluation of Ahuska’s
proposal under the corporate experience and past performance factors. On October 19, prior to submitting its report
on Spectrum’s protest to our Office, ICE determined in writing that it would
authorize performance of Ahuska’s contract as being in the best interests of
the United States, notwithstanding Spectrum’s protest that triggered a stay of
performance under the Competition in Contracting Act of 1984 (CICA). Authority to Continue Performance of Award to
Ahuska in Face of GAO Protest; see 31 U.S.C. sect. 3553(d)(3)(A)
(2000). On October 28, SBA determined
that Ahuska was not a small business concern for this procurement. On November 14, Spectrum filed a timely supplemental
protest with our Office, arguing that, as found by SBA, Ahuska was not a small
business concern for this procurement and therefore Ahuska’s contract should be
terminated. On November 15, Ahuska
appealed the size determination to SBA’s Office of Hearings and Appeals (OHA). On December 20, OHA affirmed the determination
that Ahuska was not a small business concern.
As noted above,
under FAR sect. 15.503(a)(2), in procurements that have been set aside for small
businesses, the contracting agency is required to inform each unsuccessful
offeror, in writing, of the identity of the apparent successful offeror prior
to making award.[4] The purpose for this pre-award notice is to
allow unsuccessful offerors the opportunity to have SBA review the prospective
awardee’s size status before award. Science
Sys. and Applications, Inc., B-236477,
Here, ICE violated
the pre-award notice regulation, thus precluding Spectrum from being able to
file a size status protest until after award and denying SBA the opportunity to
issue its size determination before award.
Under similar circumstances where the agency failed to give the required
pre-award notice, we have sustained protests and recommended the termination of
contracts awarded to the concerns that were determined to be large businesses. See, e.g., Tiger Enters.,
Inc., B-292815.3, B-293439,
ICE nevertheless
argues that termination of Ahuska’s contract is not appropriate despite SBA’s
determination that Ahuska is not a small business concern for this procurement.[5] ICE first points out that the FAR allows the
contracting officer to make award pending SBA’s size determination after 10
business days have expired since SBA’s receipt of the size protest, see
FAR sect. 19.302(h)(1), and that, here, SBA took 14 business days to issue its
size determination.[6] ICE suggests that SBA’s failure to issue its
size determination within 10 business days excuses the agency’s failure to
provide the pre-award notice.
We disagree. As we have noted in prior decisions, we are
unwilling to speculate whether SBA would not have provided its formal
determination within 10 business days of receipt had ICE complied with the
pre-award notice requirement. See
Science Sys. & Applications, Inc., supra, at 4. Rather, we think it is more reasonable to
assume--given that the 10-day period for SBA’s size decisions is premised upon
agency compliance with the pre-award notice requirement--that SBA would have
issued its size determination within the 10-day period had the agency been
delaying award pending SBA’s determination.
ICE also points
out that (as noted above) the FAR allows a contracting officer to make award,
despite a timely size protest, where the contracting officer determines in
writing that an award must be made to protect the public interest. ICE contends that the “best interest”
override determination, which the agency executed after award to allow performance
of Ahuska’s contract during our consideration of Spectrum’s protest, is
tantamount to a determination that award had to be made to protect the public
interest. See Agency Reply to
Protester’s Comments at 4.
There are several
problems with ICE’s argument. First, the
agency made no such public interest determination with regard to the size
protest but only postulates that it would have made such a determination. In fact, the agency’s “best interest” override
determination here was premised upon the agency’s judgment that, given the
agency’s immediate need for these services, the agency could not await our
decision, which was required to be issued by
In conclusion, we
find that, in the absence of countervailing reasons, it is inconsistent with
the integrity of the Small Business Act, 15 U.S.C. sect. 631 et seq.,
to permit a large business, which was ineligible under the terms of the
solicitation, to continue to perform the contract. In this regard, a formal size determination
by SBA becomes effective immediately and remains in full force and effect
unless and until reversed by SBA’s OHA, 13 C.F.R. sect. 121.1009(g)(1), and here
OHA has affirmed the determination that Ahuska is not a small business concern.
Spectrum also
protests that Ahuska’s proposal was unacceptable because the proposal, on its
face, showed that Ahuska would not comply with the RFP’s subcontracting
limitation. Specifically, Spectrum
argues that Ahuska has proposed the use of a large business subcontractor,
which would incur more than 50 percent of the personnel costs in the base contract
period. The agency and SBA contend that
Ahuska’s proposal shows that, taking into account performance of the base and
option periods, Ahuska would perform more than 50 percent of the personnel costs
of the contract, and therefore Ahuska’s proposal does not show that the awardee
would violate the subcontracting limitation.
Generally, an
agency’s judgment as to whether a small business offeror will comply with the subcontracting limitation is a matter of responsibility, to be finally determined by SBA
in connection with its certificate of competency proceedings. See 13 C.F.R. sect.
125.6(f); Mechanical Equip. Co., Inc., et al., B-292789.2 et al.,
Dec. 15, 2003, 2004 CPD para. 192 at 18. However, where a
proposal, on its face, should lead an agency to the conclusion that an offeror
could not and would not comply with the subcontracting
limitation, the proposal may not form the basis for an award. KIRA Inc., B-287573.4, B-287573.5,
Here, Spectrum
admits that Ahuska’s proposal shows that the awardee would perform more than 50
percent of the personnel costs over the life of the contract, considering both
the base period and options. Protester’s
Comments (Dec. 5, 2005) at 3. Spectrum
nevertheless argues that, although the solicitation provided for the evaluation
of the base and option years and Ahuska would perform more than 50 percent
of the cost of the work over the entire contract, Ahuska’s price proposal is
materially unbalanced because Ahuska only begins performing more than 50 percent
of the cost of the work when the fourth option period is considered. In Spectrum’s view, because Ahuska’s price
proposal is materially unbalanced, we should conclude that Ahuska violated the
solicitation’s subcontracting limitation.
We find this argument to be without merit.[8]
Notwithstanding Spectrum’s argument, according
to SBA’s regulations, where a solicitation provides for the price evaluation of
base and option requirement, the entire contract period will be reviewed to
determine compliance with the subcontracting limitation.[9] 13 C.F.R. sect. 125.6(g); see also
Parmatic Filter Corp., B‑285288, B-285288.2, Aug. 14, 2000, 2000
CPD para. 185 at 9‑10 (subcontracting limitation does not apply to
individual line items, but to the contract as a whole); Lockheed Martin
Fairchild Sys., B-275034, Jan. 17, 1997, 97‑1 CPD para. 28 at 5 (subcontracting limitation applies to the contract as a whole and does not require that each delivery order
placed under the contract satisfy the requirements of the clause).
Spectrum also
challenges ICE’s assessment that Ahuska’s proposal should be rated
“outstanding” and “good” under the corporate experience and past performance
factors, respectively. Specifically,
Spectrum argues that the agency improperly considered the corporate experience
and past performance of Ahuska’s proposed large business subcontractor in
evaluating Ahuska’s proposal under these factors. This argument is also without merit. The RFP specifically encouraged offerors to
provide past performance and experience information for subcontractors. See RFP at 78. Thus, ICE appropriately considered the
corporate experience and past performance of Ahuska’s proposed subcontractor in
evaluating Ahuska’s proposal under these factors. See ROCA Mgmt. Educ. & Training
Inc., B-293067,
The protest is sustained
in part and denied in part.
We recommend that
Ahuska’s contract be terminated and that the agency consider award to Spectrum
or the other small business offeror.[10] We
further recommend that the agency reimburse Spectrum the reasonable costs of
filing and pursuing the protest, including reasonable attorneys’ fees, with
respect to the issue sustained in this decision. 4 C.F.R. sect. 21.8(d)(1). The protester’s certified claim for costs,
detailing the time spent and costs incurred, must be submitted to the agency
within 60 days of receiving this decision.
4 C.F.R. sect. 21.8(f)(1).
Anthony H. Gamboa
General Counsel
[1] In response to our request, SBA provided its views on this procurement.
[2] Spectrum’s and Ahuska’s proposals were both evaluated as “outstanding” overall. See AR, Tab 14, Agency Debriefing Notes.
[3] Under SBA’s regulations, to be timely, a size status protest in a negotiated procurement must be filed with the contracting officer within 5 working days after notification of the awardee’s identity. See 13 C.F.R. sect. 121.1004(a)(2), (5) (2005).
[4] FAR sect. 15.503(a)(2)(iii) provides that pre-award notice is not required when the contracting officer determines in writing that the urgency of the requirement necessitates award without delay. Here, no such written urgency determination was executed, nor does the agency argue that urgency prevented it from providing the required notice.
[5]
ICE states that it will not exercise the options in Ahuska’s contract. Agency Letter to GAO,
[6] SBA received the size protest from ICE on October 7, but did not issue a formal size determination until October 28, which ICE received by certified mail on October 31.
[7] Spectrum, as a subcontractor under the Corps of Engineers contract, actually provided the detention officer services to ICE. See Authority to Continue Performance of Award to Ahuska in Face of GAO Protest at 3.
[8] To the extent that Spectrum is protesting that Ahuska’s proposal should be rejected as materially unbalanced, this protest ground, which was raised more than 10 days after receipt of the agency’s report, is untimely and is dismissed. 4 C.F.R. sect. 21.2(a)(2) (2005).
[9] We note that one factor considered by SBA and OHA in determining that Ahuska was not a small business concern was its extensive subcontracting with its large business subcontractor that evidenced an “ostensible subcontractor affiliation” between Ahuska and the large business subcontractor. However, as noted by OHA, an offeror’s compliance with the subcontracting limitation on a service contract is not controlling in determining the existence of an “ostensible subcontractor affiliation.”
[10]
In accordance with CICA, where an agency has authorized performance of a
contract based upon a determination that the best interests of the