B-230121.2, B-230121.3, May 19, 1988, 88-1 CPD 477

B-230121.2,B-230121.3: May 19, 1988

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PROCUREMENT - Bid Protests - Prime contractors - Contract awards - Subcontracts - GAO review DIGEST: Protests of rejection of offers from competitive range for a subcontract to be awarded by a government prime contractor are dismissed as outside General Accounting Office jurisdiction where subcontractor selection is not made by or for the government. Is not serving as a middleman or mere conduit between the government and the subcontractor where there is no indication that the subcontract will in effect be awarded on behalf of the government. The government is not actively and directly involved in selection of the subcontractor. The NSF is responsible for the management. Except where services are funded or provided by other government agencies.

B-230121.2, B-230121.3, May 19, 1988, 88-1 CPD 477

PROCUREMENT - Bid Protests - Prime contractors - Contract awards - Subcontracts - GAO review DIGEST: Protests of rejection of offers from competitive range for a subcontract to be awarded by a government prime contractor are dismissed as outside General Accounting Office jurisdiction where subcontractor selection is not made by or for the government; prime contractor, while having some management responsibilities under cost reimbursement contract, is not serving as a middleman or mere conduit between the government and the subcontractor where there is no indication that the subcontract will in effect be awarded on behalf of the government, and the government is not actively and directly involved in selection of the subcontractor.

Edison Chouest Offshore, Inc.:

Edison Chouest Offshore, Inc., and Polar Marine Partners protest the rejection of their offers and exclusion from the competitive range under request for proposals (RFP) No. 778-052, issued by ITT Antarctic Services, Inc., a prime contractor performing services for the National Science Foundation (NSF). The RFP called for a time charter of a research vessel with icebreaking capability to support the United States Antarctic Research Program (USARP). No award has been made under the RFP.

We dismiss the protests for lack of jurisdiction.

The NSF is responsible for the management, administration and funding of the United States Antarctica Research Program, including scientific research programs and logistic support, except where services are funded or provided by other government agencies. In November 1979, NSF awarded ITT a cost-reimbursement contract (the prime contract) under which ITT was to provide all necessary support services required for the scientific research activities of the program. The terms of the contract required ITT to provide logistics support (such as furnishing personnel and procuring materials, supplies and equipment), and construction management and engineering services, and to operate and manage facilities at various Antarctic stations, as well as the research vessel Hero (later replaced by the Polar Duke). The prime contract provided that capital equipment with a cost of $1,000 or more and an expected service life of 1 year or more was to be procured by ITT with prior NSF approval.

The procurement here reflects a NSF decision to obtain for the program the services of a scientific research vessel with icebreaking capability. In this regard, NSF personnel provided ITT with basic scientific and operational requirements for the vessel; after hiring naval architects to convert the requirements into a detailed specification, ITT issued the RFP for the vessel on September 1, 1987. The RFP requested offerors to propose daily charter rates on two bases: 1) a 6-year time charter with an option for 4 additional years and another option for ITT to buy the vessel; and 2) a time charter with a purchase price fixed at 6, 8 and 10 years, with the vessel to be sold to ITT at the conclusion of one of the time periods. The solicitation included vessel lease and operation specifications, including 11 mandatory technical requirements, and award was to be based upon the greatest value, with technical considerations of primary importance.

Both protesters contend that NSF improperly evaluated their proposals and thus improperly eliminated them from the competitive range. NSF maintains that the evaluations were proper, but also argues that the protests should be dismissed because they involve an intended subcontract award over which our Office does not take jurisdiction. We agree with this latter argument.

Our Office does not review subcontract awards by government prime contractors except where the award is by or for the government. Bid Protest Regulations, 4 C.F.R. Sec. 21.3(m)(10) (1988). This limitation on our review is derived from the Competition in Contracting Act of 1984, 31 U.S.C. Sec. 3551 et seq. (Supp. III 1985), which provides for our consideration of bid protests concerning solicitations issued by federal agencies. In the context of subcontractor selections, we interpret the Act to authorize our Office to review protests only where, as a result of the government's involvement in the award process or the contractual relationship between the prime contractor and the government, the subcontract in effect is awarded on behalf of" by or for"-- the government.

For example, we will consider protests regarding subcontracts awarded by prime contractors operating and managing Department of Energy facilities; purchases of equipment for government-owned, contractor-operated plants; and procurements by construction management prime contractors. Ocean Enterprises, Ltd., 65 Comp.Gen. 585 (1986), 86-1 CPD Para. 479, aff'd on reconsideration, 65 Comp.Gen. 683 (1986), 86-2 CPD Para. 10. In each of these situations, the prime contractor principally provides large-scale management services to the government and, as a result, generally has an ongoing purchasing responsibility. In effect, the prime contractor acts as a middleman, or conduit, between the government and the subcontractor and, as a result, the subcontract is said to be awarded "for" the government. Id.

Here, the protesters primarily argue that ITT is providing large scale management services and has on-going purchasing responsibility, and thus in effect the prime contractor acts as a middleman between the government and the subcontractor here. Polar Marine argues that ITT is merely acting as a leasing or purchasing agency for the NSF, whose role as the real party in interest and the direct beneficiary of this procurement is evidenced by the subcontract provisions authorizing ITT to assign the contract to NSF, and the fact that ITT's prime contract is of the cost- reimbursement type.

While the prime contract provides for management responsibilities by ITT, the contract is not solely for management and, in fact, management responsibilities appear to account for only a limited percentage of the total contract.

/1/ In any event, even if the prime contract provided for extensive management activities, we do not believe that factor is dispositive here. We view as more important the lack of any indication that ITT is merely acting as a middleman or conduit between the government and the subcontractor. The subcontract for the research vessel clearly is incidental to ITT's support function to supply necessary equipment, including capital equipment. Regardless of whether ITT chose to build the vessel itself or to subcontract (the option ITT chose), ITT is responsible under its contract with NSF for providing the vessel required, and the subcontractor will be contractually obligated to ITT, not to NSF. /2/ See Rhode & Schwartz-Polarad, Inc.-- Reconsideration, B-219108.2, July 8, 1985, 85-2 CPD Para. 33.

The provision in the subcontract allowing for a future assignment of the subcontract to the government in no way alters the obligations of the contracting parties; this provision merely operates to preclude a subcontractor objection if any future assignment occurs. Contrary to the implication of the protesters' position, the subcontract assignment provision does not establish any right for ITT to assign the charter agreement to NSF, and in no way suggests that an assignment is contemplated or likely. Rather, the clause derives from the provision of the prime contract governing termination for default or for the convenience of the government. Upon a termination of the prime contract, this provision directs the prime contractor to terminate subcontracts and assign them to the government. The government then has the right to settle or pay claims arising out of the terminated subcontracts. Accordingly, the assignment provision appears to be a means of easing the settlement of subcontractor claims in the event of a termination of the prime contract. /3/ Further, the fact that the prime contract is a cost reimbursement-type contract is not by itself evidence that ITT is a mere conduit.

Rhode & Schwartz-Polarad, Inc.-- Reconsideration, supra. We conclude that the real party in interest under the subcontract will be ITT, not NSF, and that ITT is not acting as a middleman or conduit between the government and the subcontractor such that our review would be warranted.

We further reject the protesters' secondary argument that NSF's participation in the procurement and selection process renders the intended subcontract one essentially awarded "by" the government, since it is clear that the agency will have taken no part in the selection process here. While the NSF provided basic vessel requirements, ITT itself developed them into design specifications (by hiring naval architects). Similarly, ITT developed the evaluation provisions, and conducted the evaluation on its own terms, with no interference or involvement (other than final approval) by NSF. Neither the mere providing of technical assistance in the way of basic requirements nor the approval by the government of the final selection of the subcontractor, establishes the active and direct participation in subcontractor selection process required before we will find that a procurement essentially has been conducted by the government. American Nuclear Corp., B-228028, Nov. 23, 1987, 87-2 CPD Para. 503; University of Michigan et al., B-225756 et al., June 30, 1987, 66 Comp.Gen. ***, 87-1 CPD Para. 643.

We conclude that the procurement here is not by or for the government and that review of the protests by Edison and Polar Marine therefore is not appropriate.

/1/ The prime contract provides that ITT's performance will be evaluated (for award fee purposes) with a weight of only 20 percentage points for program management.

/2/ While Edison Chouset further asserts that the prime contract must be amended to include funds for the intended subcontract, the agency has informed us that under current budget projections there will be sufficient funds for the contract within the scop of the original prime contract.

/3/ Since the subcontractor under a prime contract would have no contractual rights against the government upon termination of a prime contract, prime contracts typically provide for assignment of any subcontracts thereunder to the government. See Federal Acquisition Regulation Sec. 52.249-6 (FAC 84-16).