B-239252, Aug 15, 1990, 90-2 CPD ***

B-239252, Aug 15, 1990, 90-2 CPD ***

PROCUREMENT - Competitive Negotiation - Competitive advantage - Corrective actions - Disqualification DIGEST: 1. A contracting officer may properly protect the integrity of the procurement system by disqualifying from the competition a firm which engaged in improper business conduct which may have afforded the firm an unfair competitive advantage. PROCUREMENT - Contractor Qualification - Responsibility - Administrative proceedings - Criteria 2. Because maintaining the integrity of the competitive process was the basis for the contracting officer's decision to disqualify a firm from the competition, and not the firm's integrity to perform if awarded the contract, a traditional element of responsibility, the contracting officer was not required to make a finding that the firm was nonresponsible.

Attorneys

Compliance Corporation:

Compliance Corporation protests the decision of the contracting officer to disqualify the firm from further participation in the competition for the acquisition of reports processing services to be performed at the Naval Electronics Systems Engineering Activity (NESEA) in St. Inigoes, Maryland under request for proposals (RFP) No. N00421 89-R-0014. The contracting officer disqualified Compliance because the results of an investigation by the Naval Investigative Service (NIS) revealed that an employee of Compliance improperly obtained, or attempted to obtain, proprietary proposal information from Eagan, McAllister Associates, Inc. (EMA), the incumbent contractor and a competing contractor under this RFP. Compliance challenges the contracting officer's decision to disqualify it as unreasonable.

We deny the protest.

The agency issued the solicitation as a total small business set aside on April 5, 1989. The RFP provided that the evaluation of proposals would be based on an offeror's technical approach, management approach, personnel, corporate experience, and cost realism. The RFP stated that the award would be made to that responsible offeror submitting a technically acceptable proposal with the lowest evaluated total estimated cost-plus- fixed fee.

Amendment No. 0004, issued in May, extended the closing date for receipt of proposals until June 16. On June 2, the president of EMA met with the contracting officer and reported that one of Compliance's employees had approached an EMA employee to obtain proprietary information concerning EMA's proposal for this solicitation. EMA's president alleged that its employee had prepared this information for the Compliance employee and may have actually provided this information to the Compliance employee. June 3, contracting officials met with NIS, and it was decided that NIS would investigate the matter to ascertain if any wrongdoing had occurred. On June 7, the agency issued amendment No. 0006 which indefinitely extended the closing date for receipt of proposals pending the NIS investigation.

On July 16, the agency issued amendment No. 0008 which established August 8 as the new closing date for receipt of proposals. On this date, the agency received proposals from four offerors-- Compliance, EMA, Systems Dynamics, Inc., and McNeil Technologies, Inc.

On August 9, NIS completed its investigation, and the following information was revealed. On April 23, /1/ Compliance's program director in charge of contracts approached EMA's assistant security manager (who had regular access to all proposal information generated by EMA and who was preparing EMA's proposal for this solicitation) to "discuss the proposal" and to obtain information concerning the reports processing contract for which EMA was the incumbent. The requested information included the salaries for current EMA employees, whether EMA employees would be interested in working for Compliance if it were awarded the follow-on contract for reports processing services, and a list of government-owned property used by EMA to perform the contract at NESEA.

On April 24, in the EMA employee's workspace, EMA officials discovered a packet of information which included EMA's technical proposal for this solicitation, other technical information including EMA's technical data and capabilities, the EMA employee's resume, a blank performance review preparation sheet, a marked statement of work for this solicitation, an uncompleted "Supplies or Services and Prices" worksheet, handwritten notes of the EMA employee's April 23 meeting with the Compliance director concerning salary rates for EMA employees, and copies of handwritten notes from other Compliance employees. EMA officials retained this packet of information.

On April 25, the EMA employee told EMA officials that she had been compromised regarding the reports processing solicitation due to her communications with the Compliance director. According to the president of EMA, she stated the Compliance director asked her to obtain information for use in preparing its proposal, and she was offered a job if she obtained this information. She admitted compiling the information to the NIS investigators, but denied she ever intended to deliver the information to the Compliance director. When asked about the unlikely presence of all of these documents together, she replied, "all the items and paper just fell in together." She did admit she gave the Compliance director salary scales of some EMA employees from 3 years ago. The Compliance director and EMA employee both denied that information concerning EMA's current contract and proposal was requested or that the Compliance director offered her a job if she obtained the information. The Compliance director also requested the Compliance telecommunications specialist to provide the names and phone numbers of all EMA employees currently performing the reports processing contract by using her access to a NESEA database under a contract Compliance had with NESEA to compile a phone directory of all employees working for the various contractors performing work at NESEA. This Compliance employee retrieved this information, along with the position descriptions of the EMA employees and the amount of time they spent working on the reports processing contract, wrote this information down, and gave this information to the Compliance director. copy of this information was included in the packet of information found in the EMA employee's workspace.

From August 9, 1989 until March 29, 1990, the agency conducted technical and cost evaluations of the four proposals received. On March 30, the agency included EMA (determined to be technically acceptable) and System Dynamics (determined to be technically unacceptable, but capable of being made acceptable) in the competitive range. The agency also determined Compliance was technically unacceptable, but capable of being made acceptable. However, by letter dated April 2, the contracting officer informed Compliance that based on the results of an NIS investigation which indicated that an employee of Compliance improperly obtained, or attempted to obtain, proprietary proposal information from EMA, a competing contractor for this acquisition, Compliance had to be disqualified from further participation in this acquisition in order to protect the integrity of the competitive process. /2/ This protest followed on April 12.

Compliance argues that the contracting officer lacked the authority and did not have a reasonable basis to disqualify it from the competition because the facts as revealed by the NIS investigation were not sufficient to show even the appearance of impropriety.

We disagree with Compliance's argument that the contracting officer lacked the authority to disqualify it from the competition.

Contracting officers are authorized, as well as required, to enter into contractual relationships that are in the best interests of the government. Federal Acquisition Regulation (FAR) Sec. 1.602 (FAC 84 33). In meeting their responsibility to safeguard the government's interests, contracting officers are granted "wide latitude to exercise business judgment." FAR Sec. 1.602-2; Devres, Inc.-- Recon., 2 228909.2, Apr. 1, 1988, 88-1 CPD Para. 329. A contracting officer may impose a variety of restrictions, not explicitly provided for in applicable regulations, where the needs of the agency or the nature of the procurement dictate the use of such restrictions. NKF Eng'g, Inc., 65 Comp.Gen. 104 (1985), 85-2 CPD Para. 638.

Further, a contracting officer may protect the integrity of the procurement system by disqualifying a firm from the competition where it reasonably appears that the firm may have obtained an unfair competitive advantage. See Brown Assocs. Management Servs., Inc.-- Request for Recon., B-235906.3, Mar. 16, 1990, 90-1 CPD Para. 299; Holmes and Narver Servs., Inc./Morrison-Knudson Servs., Inc., a joint venture; Pan Am World Servs., Inc., B-235906; B-235906.2, Oct. 26, 1989, 89-2 CPD Para. 379. Our review is to determine whether the contracting officer had a reasonable basis for his decision to disqualify the firm from the competition for improper business conduct engaged in by employees of the firm which may have afforded the firm an unfair competitive advantage. Id.; cf., Laser Power Technologies, Inc., B-233369; B-233369.2, Mar. 13, 1989, 89-1 CPD Para. 267. /3/ Actual impropriety need not be shown so long as the contracting officer's determination is based on facts and not mere innuendo or suspicion. NKF Eng'g, Inc., 65 Comp.Gen. 104, supra.

Here, to protect the integrity of the competitive process, the contracting officer properly relied on the report of the NIS investigation in making his determination to disqualify Compliance from the competition where it reasonably appeared that Compliance may have obtained an unfair competitive advantage. See The Department of the Air Force-- Request for Recon., 68 Comp.Gen. 677 (1989), 89-2 CPD Para. 228. /4/

Specifically, the NIS investigation revealed that two weeks before the closing date for receipt of proposals, a Compliance director in charge of contracts approached an EMA employee who was an assistant security manager with regular access to all of proposal information generated by EMA and who was responsible for preparing EMA's proposal for this solicitation "to discuss the proposal." The Compliance director sought information concerning the reports processing contract for which EMA was the incumbent, including proprietary salary information for EMA employees working on the existing reports processing contract at NESEA, whether EMA employees were interested in working for Compliance if it were awarded the follow-on contract for reports processing services, and a list of government-owned property used by EMA to perform the contract at NESEA. The day after the Compliance director met with the EMA employee, EMA officials found in the EMA employee's workspace EMA's technical proposal for this solicitation, EMA's technical data and capabilities, the EMA employee's resume, a performance review sheet, a marked statement of work for this solicitation, handwritten notes of the EMA employee's previous day's meeting with the Compliance director, and copies of handwritten notes from another Compliance employee.

The EMA employee admitted she spoke with the Compliance director, and although she admitted she compiled the described information found in her workspace, she offered no reasonable explanation for how this information all came together in one packet. The EMA employee also admitted to at least providing the Compliance director with an estimation of salary scales from 3 years ago (which would have covered the period of EMA's existing reports processing contract awarded on April 7, 1986 for 1 base- year plus 2 one-year options). There is also some indication in the report of the NIS investigation that the Compliance director offered the EMA employee a job if she obtained the information.

The NIS investigation also revealed that the Compliance director requested another Compliance employee to use her access to a NESEA database maintained by Compliance under a contract at NESEA to obtain information (which was subject to privacy laws), specifically the names and phone numbers of all EMA employees working on the existing reports processing contract. The Compliance employee provided a written list of the requested information to the Compliance director.

Given the circumstances disclosed by the NIS investigation, we find that the contracting officer had a reasonable factual basis, as described in the report of the NIS investigation, for concluding that the Compliance director improperly obtained, or attempted to obtain, proprietary proposal information from EMA which may have afforded Compliance an unfair competitive advantage in preparing its proposal for this solicitation. therefore find the contracting officer acted reasonably in disqualifying Compliance from the competition in order to protect the integrity of the competitive process.

Compliance also argues that the contracting officer's decision to disqualify it from the competition without making a determination that Compliance was nonresponsible was improper. We disagree. Compliance was disqualified from the competition because its improper business conduct affected the integrity of the procurement process in general and this procurement in particular. Because maintaining the integrity of the competitive process was the basis for the contracting officer's decision to disqualify Compliance, and not Compliance's integrity to perform if awarded the contract, a traditional element of responsibility, the contracting officer was not required to make a finding that Compliance was nonresponsible. See NKF Eng'g, Inc., 65 Comp.Gen. 104, supra. /5/ Accordingly, the protest is denied. /1/ These events occurred approximately two weeks before the original closing date for receipt of proposals (May 8).

/2/ To the extent Compliance complains that the contracting officer waited an inappropriate length of time to disqualify it from the competition (eight months from the time the agency received the results of the NIS investigation), the record shows that during this period the agency was evaluating proposals and that none of the offerors were requested to submit revised proposals at their expense during this time. The agency apparently believed that if Compliance's proposal was not found to be within the competitive range, the procurement could follow its normal course.

/3/ Compliance maintains that the alleged improper conduct which resulted in its disqualification amounts to no more than a dispute between private parties and accordingly, our Office does not have jurisdiction. disagree. Here, our review of the reasonableness of the contracting officer's decision to disqualify Compliance from the competition based on the agency's investigation is clearly within our jurisdiction since it is the agency's action we are reviewing.

/4/ Compliance challenges the adequacy of the NIS investigation, alleging that there were a number of deficiencies in the manner in which NIS conducted the investigation. The record shows that NIS interviewed relevant Compliance and EMA employees concerning the allegation that a Compliance employee obtained, or attempted to obtain, proprietary proposal information from an EMA employee. There is nothing in the record causing us to question the sufficiency or adequacy of the NIS investigation, and it is not our role to determine what investigative techniques NIS should use during an investigation. JWK Int'l Corp., B-234994.2, Oct. 17, 1989, 89-2 CPD Para. 359. We point out that at no time has Compliance ever disputed the underlying factual information contained in the report of the NIS investigation.

/5/ Compliance relies on Sanchez Porter's Co., B-238106; B-238257, Apr. 27, 1990, 69 Comp.Gen. ***, 90-1 CPD Para. 433, in arguing that the contracting officer should not have disqualified Compliance unless it found Compliance nonresponsible under applicable regulations. We find that Sanchez is distinguishable. We sustained the protest in Sanchez because the agency, using noncompetitive procedures to award a contract extension on a sole-source basis, failed to establish that the time constraints imposed by urgency prevented the agency from soliciting offers from other potential sources, including the protester. We held that unless the agency found Sanchez nonresponsible (based on its prior unsatisfactory performance and, thus, incapable of performing-- a traditional element of responsibility), Sanchez was a potential source entitled to compete. Sanchez is inapplicable to the instant protest because, as stated previously, Compliance's integrity to perform if awarded the contract, a traditional element of responsibility, was not the basis for its disqualification; rather, Compliance was disqualified due to its improper business conduct which compromised the integrity of the competitive process.

Accordingly, the protest is denied.

/1/ These events occurred approximately two weeks before the original closing date for receipt of proposals (May 8).

/2/ To the extent Compliance complains that the contracting officer waited an inappropriate length of time to disqualify it from the competition (eight months from the time the agency received the results of the NIS investigation), the record shows that during this period the agency was evaluating proposals and that none of the offerors were requested to submit revised proposals at their expense during this time. The agency apparently believed that if Compliance's proposal was not found to be within the competitive range, the procurement could follow its normal course.

/3/ Compliance maintains that the alleged improper conduct which resulted in its disqualification amounts to no more than a dispute between private parties and accordingly, our Office does not have jurisdiction. disagree. Here, our review of the reasonableness of the contracting officer's decision to disqualify Compliance from the competition based on the agency's investigation is clearly within our jurisdiction since it is the agency's action we are reviewing.

/4/ Compliance challenges the adequacy of the NIS investigation, alleging that there were a number of deficiencies in the manner in which NIS conducted the investigation. The record shows that NIS interviewed relevant Compliance and EMA employees concerning the allegation that a Compliance employee obtained, or attempted to obtain, proprietary proposal information from an EMA employee. There is nothing in the record causing us to question the sufficiency or adequacy of the NIS investigation, and it is not our role to determine what investigative techniques NIS should use during an investigation. JWK Int'l Corp., B-234994.2, Oct. 17, 1989, 89-2 CPD Para. 359. We point out that at no time has Compliance ever disputed the underlying factual information contained in the report of the NIS investigation.

/5/ Compliance relies on Sanchez Porter's Co., B-238106; B-238257, Apr. 27, 1990, 69 Comp.Gen. ***, 90-1 CPD Para. 433, in arguing that the contracting officer should not have disqualified Compliance unless it found Compliance nonresponsible under applicable regulations. We find that Sanchez is distinguishable. We sustained the protest in Sanchez because the agency, using noncompetitive procedures to award a contract extension on a sole-source basis, failed to establish that the time constraints imposed by urgency prevented the agency from soliciting offers from other potential sources, including the protester. We held that unless the agency found Sanchez nonresponsible (based on its prior unsatisfactory performance and, thus, incapable of performing-- a traditional element of responsibility), Sanchez was a potential source entitled to compete. Sanchez is inapplicable to the instant protest because, as stated previously, Compliance's integrity to perform if awarded the contract, a traditional element of responsibility, was not the basis for its disqualification; rather, Compliance was disqualified due to its improper business conduct which compromised the integrity of the competitive process.