B-227003.2, Aug 11, 1987, 87-2 CPD 149

B-227003.2: Aug 11, 1987

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PROCUREMENT - Competitive Negotiation - Requests for proposals - Amendments - Competitive restrictions - Domestic sources DIGEST: Protest that the Navy after submission of initial offers unreasonably restricted competition to United States firms for construction of Navy housing in the Philippines is denied. The Secretary of the Navy made the requisite determination under the Competition in Contracting Act that the restriction was in the public interest because hiring of foreign firms could jeopardize vital United States bases in the Philippines. The RFP was issued in June 1986. All proposals were considered in the competitive range. The SSB considered this design inappropriate for "the Subic Bay climate and terrain which is prone to landslides and flooding during the monsoon season.".

B-227003.2, Aug 11, 1987, 87-2 CPD 149

PROCUREMENT - Competitive Negotiation - Requests for proposals - Amendments - Competitive restrictions - Domestic sources DIGEST: Protest that the Navy after submission of initial offers unreasonably restricted competition to United States firms for construction of Navy housing in the Philippines is denied. The Secretary of the Navy made the requisite determination under the Competition in Contracting Act that the restriction was in the public interest because hiring of foreign firms could jeopardize vital United States bases in the Philippines.

Zublin Delaware, Inc.:

Zublin Delaware, Inc. protests the Navy's issuance of amendment Nos. 0004 and 0005 to request for proposals No. N62742-86-R-0081 for the design, construction and installation of family housing units at the United States Naval Base at Subic Bay, Republic of the Philippines. Zublin argues that these amendments, issued after the closing date for receipt of initial offers, improperly excluded Zublin from further participation in this procurement. The amendments restricted competition for this procurement to United States prime contractors. Zublin, which submitted an initial offer determined by the Navy to be in the competitive range, seeks proposal preparation costs and the cost of pursuing its protest.

We deny Zublin's protest and its claim for costs.

The RFP was issued in June 1986, and established a closing date for receipt of initial proposals of September 10, 1986. Five firms, including Zublin, submitted initial proposals. All proposals were considered in the competitive range; however, the source selection board (SSB), after evaluating proposals, had serious concerns about the "liveability" of the housing units as proposed.

For example, Zublin offered a design for "downhill units" with the living areas at the upper entry level and the sleeping area located in the lower level. The SSB considered this design inappropriate for "the Subic Bay climate and terrain which is prone to landslides and flooding during the monsoon season." The Navy reevaluated the specifications and concluded that revisions to the specifications were necessary to meet the Navy's needs. The Navy sent offerors a letter dated January 9, 1987, setting forth the contemplated specification changes. During this period, the Philippine government expressed concern with other than Philippine or United States firms performing contracts in the Philippines and the United States, due to the changes in the political situation in the Philippines, announced a policy of supporting the Philippine government in its efforts to bolster its failing economy. To implement this United States policy, on March 19, 1987, the Secretary of the Navy made a "Determination and Findings" (D&F) to restrict competition under the RFP to United States companies. This action was taken pursuant to the Competition in Contracting Act, 10 U.S.C. Sec. 2304(c)(7) (Supp. III 1985), which, in pertinent part, permits the award of a contract when

"the head of the agency-- (A) determines that it is necessary in the public interest to use procedures other than competitive procedures in the particular procurement concerned. ..."

The Secretary of the Navy determined that in order to continue to operate United States bases in the Philippines which are "vitally important to the national defense" it was crucial that the Philippines have a stable political and economic situation. The D&F issued by the Secretary notes that no proposals were received from Philippine companies. The Secretary reports that award of this contract to non United States and non- Philippine firms "could provoke an unfavorable reaction from parties in the Philippines who seek to end or reduce United States presence there." The Secretary's concern was that such a reaction could undermine the Philippines government's stability and, thus, the Secretary concluded that it was essential that only those proposals from United States companies be given further consideration. The Secretary also required, where feasible, that all work on this project, including supplies, services, labor and materials be subcontracted to Philippine sources.

Amendment Nos. 0004 and 0005 contain provisions implementing the Secretary of the Navy's determination. Amendment No. 0004, issued on March 26, 1987, provides that the RFP is restricted to "United States prime contractors" in accordance with the Secretary's determination of March 19, and also contains a requirement that the contractor use Philippine sources to perform this contract to the maximum extent feasible. Amendment No. 0005, issued on April 29, further clarified the definition of "United States contractor." The amendment required that key management personnel including the project manager, architect, engineer and superintendent be United States citizens to meet the RFP definition of a United States contractor.

Zublin contends that the amendments unreasonably restrict competition and violate CICA provisions for full and open competition. Zublin specifically protests as unduly restrictive the definition of a United States contractor.

After the submission of initial offers, the Secretary of the Navy, faced with changed political and economic conditions in the Philippines, made a decision to restrict competition to United States firms. The Secretary of the Navy found that award to a non-United States or non-Philippine company could provoke an unfavorable reaction from parties in the Philippines who seek to end or reduce United States presence in the Philippines, thus jeopardizing United States bases in the Philippines.

Zublin does not rebut this basis for the Navy's decision to limit competition. It states, however, that although it is a Delaware corporation with United States officers and employees and has paid United States taxes for 2 years, it is excluded by the RFP's United States contractor definition. The specific definition provision which concerns Zublin is the requirement that "key management personnel," including the project manager, architect, engineer and superintendent, be United States citizens.

We think the requirement is reasonable in view of the Secretary's concern that foreign companies not be employed in the Philippines at this time. /1/

The designated key management personnel positions entail work which includes supervision of, and coordination with, the Philippine subcontractor labor force. In our view, since the intent is to limit friction and resentment resulting from the use or presence of other than American or Philippine individuals it is reasonable to limit the key management people who will be working in the Philippines to United States citizens since these are precisely the employees who will live, work, and interrelate with the Philippine people. See, e.g., A.T. Kearney, Inc., B-205898.2, Feb. 28, 1983, 83-1 CPD Para. 190.

Zublin also argues that the amendments were improper because they were issued after the firm submitted its initial proposal. An RFP, however, may be revised after receipt of initial proposals when such action is necessary to ensure the government's needs will be satisfied. See Kisco Co., Inc., B-216953, Mar. 22, 1985, 85-1 CPD Para. 334; Sub-Sea Systems, Inc., B-195741, Feb. 12, 1980, 80-1 CPD Para. 123. Here, the amendment was related to the agency's needs, and Zublin does not allege, nor do we find, that the Navy, prior to issuing the RFP, was aware of the conditions which resulted in the need to restrict this procurement to United States firms. There is also no indication of bad faith on the part of the Navy.

With respect to Zublin's request for proposal preparation costs and the costs of pursuing its protest, since we find the amendment reasonable and deny Zublin's protest, we also deny its claim for costs. See 4 C.F.R. Sec. 21.6(d) (1987); ADAK Communication Systems, Inc., B-222546, July 24, 1986, 86-2 CPD Para. 103.

/1/ The D&F indicates a preference for Philippine firms for this contract. However, United States personnel apparently are considered unobjectionable because the work is to be performed on a United States base.