B-232431.5, May 16, 1989, 68 Comp.Gen. 435

B-232431.5: May 16, 1989

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Procurement - Bid Protests - GAO procedures - GAO decisions - Reconsideration Request for reconsideration is denied where protest presents no statement of facts or legal grounds warranting reversal. Guidance was not binding and provision was unobjectionable because it did not establish impermissible penalty for defective performance. In which we denied the firm's protest that various solicitation provisions were deficient in invitation for bids (IFB) No. The specific deduction provisions complained of were for maintenance of government-furnished equipment and hazardous waste handling and disposal. Crown argued that the only proper element of cost for consideration when establishing the deduction provision should have been labor cost.

B-232431.5, May 16, 1989, 68 Comp.Gen. 435

Procurement - Bid Protests - GAO procedures - GAO decisions - Reconsideration Request for reconsideration is denied where protest presents no statement of facts or legal grounds warranting reversal, but merely restates arguments considered, and rejected, by the General Accounting Office in denying the original protest. Procurement - Sealed Bidding - Invitations for bids - Terms - Liquidated damages - Propriety Agency's failure to adhere to executive branch guidance in formulating deduction provision does not render the provision improper; guidance was not binding and provision was unobjectionable because it did not establish impermissible penalty for defective performance.

Crown Management Services, Inc.-- Reconsideration:

Crown Management Services, Inc., requests reconsideration of our decision Crown Management Services, Inc., B-232431.2 B-232431.3, Jan. 24, 1989, 89-1 CPD Para. 64, in which we denied the firm's protest that various solicitation provisions were deficient in invitation for bids (IFB) No. M00681-88-B-0019, issued by the United States Marine Corps for laundry and dry cleaning services at Camp Pendleton, California.

We deny the request.

The firm's protest included an allegation, at issue here, that the solicitation improperly permitted deductions from contract payment for deficient performance in excess of the value of the tasks actually performed, and thus constituted a punitive deduction, prohibited by the Federal Acquisition Regulation (FAR), subpart 12.2 ("Liquidated Damages"). The specific deduction provisions complained of were for maintenance of government-furnished equipment and hazardous waste handling and disposal. Crown argued that the only proper element of cost for consideration when establishing the deduction provision should have been labor cost, and that the agency improperly considered the criticality of the services to be performed and the value of the government-furnished equipment to be maintained.

We denied the protest, generally finding the deduction provision unobjectionable, on the ground that the deduction formula provided for contract price deductions proportional to the number of defects in the sample, and not flat deductions for any defects. For example, the deduction provision for maintenance permitted a maximum deduction of 22 percent of the monthly contract invoice price if the acceptable quality level (AQL) was exceeded and the entire sample inspected was found defective, but also provided that if less than 100 percent of the sample was found defective, a correspondingly smaller deduction would be made. We further found nothing improper in the agency's consideration of elements other than labor cost in computing the value of the service foregone in establishing the deduction percentage. We thus determined that the deduction provision was not a punitive deduction.

In its request for reconsideration, Crown argues that our decision erroneously considered only the propriety of deduction percentages provided for the maintenance and hazardous waste services, and not the deductions for the remaining 16 required services. Crown also specifically alleges that there is no indication in our decision that we considered the applicable guidance, cited in its protest, on the subject of payment deduction analysis, contained in "A Guide for Writing and Administering Performance Statements of Work for Service Contracts," October 1980, Office of Federal Procurement Policy Pamphlet No. 4, Supplement No. 2 to Office of Management and Budget Circular No. A-76. The protester maintains that according to this guidance labor cost should be the sole basis for determining how much each specific service costs in relation to the total job in computing the value of the service foregone, and the corresponding deduction percentage for the particular service.

It was not clear from Crown's protest that the firm was challenging the deduction percentages for all 18 required services. However, the deduction amounts under the other 16 remaining services also appear to be unobjectionable. In this regard, just as we found in our decision that Crown had not shown that the percentages for the maintenance and hazardous waste services were improper, Crown also presented no evidence that would lead us to object to the percentages for the remaining 16 services; Crown also has not presented such evidence in connection with this reconsideration request. Thus, we conclude, as we did in our original decision, that the deduction provision, including the percentages for each of the services, is unobjectionable; it provides for deductions based both on the number of defects in a sample and, as we find here, on the importance of a particular service relative to the overall contract.

As for the guidance referenced by the protester, we did review it in reaching our prior decision, but in the final analysis the agency's alleged failure to adhere to it was not dispositive of the protest. While the guidance could be instructive to the agency, it was in no way binding, i.e., there is nothing in the Guide or in applicable regulations that required the agency to develop a deduction provision with reference to the Guide. Rather, as indicated in our decision, the propriety of the deduction provision turned solely on whether the provision was punitive in nature; we determined it was not.

In any event, the Guide does not prohibit consideration of relevant elements other than labor cost in computing the value of services foregone for the purpose of establishing a deduction percentage for a particular service. In our decision, we determined that under the circumstances presented in the record it was clear that the value of the services foregone would represent more than just labor and repair, as suggested by the protester; proper maintenance of the laundry facility was considered critical since it was the only facility available to support all Marine Corps activities in southern California, and much of the equipment, valued in excess of $1 million, was nearly new and the agency wished to ensure proper maintenance to extend its projected service life. It remains our view that these considerations properly may be for factored into the deduction formula. While Crown obviously disagrees with our conclusion, it has not established that our conclusion is incorrect. See Bid Protest Regulations, 4 C.F.R. Sec. 21.12(a) (1988); R.E. Scherrer, Inc.-- Request for Reconsideration, B-231101.3, Sept. 21, 1988, 88-2 CPD Para. 274.

The request for reconsideration is denied.