B-298364.6; B-298364.7, TYBRIN Corporation, March 13, 2007
DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective Order. This redacted version has been approved for public release.
Agency’s award of a contract under a solicitation set aside for small businesses was improper where the awardee’s proposal as submitted clearly did not meet the material solicitation requirement that at least 50 percent of the cost of contract performance incurred for personnel be expended for employees of the small business awardee, notwithstanding the United States Small Business Administration’s (SBA) issuance of a Certificate of Competency to the small business awardee because SBA found that the awardee would be able to comply with the subcontracting limitation during the performance of the contract.
TYBRIN Corporation protests the award of a contract to The CENTECH GROUP under request for proposals (RFP) No. FA9300-04-R-0040, issued by the Department of the Air Force, for advisory and assistance services to support the Aerospace Research, Development, Test and Evaluation (RDT&E) activities at the Air Force Flight Test Center, Edwards Air Force Base, California. TYBRIN argues, among other things, that CENTECH’s proposal was unacceptable because it exceeded the limitation on subcontracting included in the RFP.
The RFP, issued on
The RFP provided for the award of a “hybrid” contract on a cost-plus-fixed-fee basis for the non-personal advisory and assistance services, a cost basis for other direct costs such as travel and materials, and a fixed-price-plus-award-fee basis for the phase-in period. The solicitation stated that award of the contract would be made to the offeror submitting the proposal representing the best value to the government, based upon various identified evaluation factors.
The RFP incorporated by reference the “Notice of Total Small Business Set‑Aside” clause, Federal Acquisition Regulation (FAR) sect. 52.219-6, and the “Limitation on Subcontracting” clause, FAR sect. 52.219-14. RFP at 29. These clauses put the offerors on notice that the procurement was set aside exclusively for small business concerns, and with respect to the limitations on subcontracting, that “[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).
The agency received proposals from four small business
offerors, including TYBRIN and CENTECH.
The proposals were evaluated, discussions were conducted, and final
proposal revisions were requested and received from the four offerors. The agency selected CENTECH’s proposal for award,
and after requesting and receiving a debriefing, TYBRIN filed a protest with
our Office on
In its first supplemental protest, filed on June 29, TYBRIN argued, among other things, that CENTECH’s proposal should have been found unacceptable by the agency because the proposal provided that approximately 44 percent of the cost of contract performance incurred for personnel would be for CENTECH personnel, with the remaining 56 percent of the cost of contract performance for personnel being incurred for CENTECH’s subcontractors.
In response, the Air Force conceded that CENTECH’s proposal provided that only 43.2 percent of the cost of contract performance incurred for personnel would be for CENTECH personnel. The Air Force noted, however, that two of CENTECH’s proposed subcontractors were also small businesses, and that an additional 23 percent of the cost of contract performance incurred for personnel would be for the personnel of these two small businesses. The Air Force concluded that because CENTECH’s proposal provided that the “collective efforts” of CENTECH and its small business subcontractors would amount to “66.2% of the cost of contract performance for personnel,” the proposal evidenced compliance with the Limitation on Subcontracting clause. Agency Report (AR) (B-298364.2) at 2; Contracting Officer’s Statement (B-298364.2) at 4.
As support for this conclusion, the Air Force pointed to a
memorandum issued by the Air Force Materiel Command (AFMC) on
Our Office solicited the views of the United States Small
Business Administration (SBA) on this matter.
The SBA advised that, contrary to the AFMC Memorandum, “in general, a
small business receiving a prime contract award as a result of a solicitation
set aside for [small business concerns] must meet the subcontracting limitation
set forth in statute and regulations itself.”
SBA Memorandum (
Shortly after its receipt of the SBA’s memorandum, the Air Force informed our Office and the parties that it had “decided to reconsider whether CENTECH meets the requirements for award of the contract . . . to include the standards articulated in SBA’s [memorandum],” and that the Air Force would “stay performance on this contract until this issue is resolved.” AR (B-298364.6), Tab 5, Notice of Corrective Action. Given that, as a result of the Air Force’s corrective action, it was no longer clear whether CENTECH would remain the awardee, our Office dismissed TYBRIN’s protests as academic.
The cognizant Air Force contracting officer subsequently executed a “Determination of Non-Responsibility,” stating that “[b]ased solely on the information received from [CENTECH] with [its] proposal, CENTECH will perform 43.2% of the work with personnel of their concern.” The contracting officer concluded here “that CENTECH does not meet the subcontracting limitation requirements as set forth in statute and regulation and as such is considered nonresponsible and is not eligible to receive the contract award for the ARDTEAS effort.” AR (B-298364.6), Tab 9, Determination of Non-Responsibility.
Two days later, the contracting officer informed CENTECH
that “[b]ased solely on the information received with your proposal, CENTECH
will perform 43.2% of the work,” and that because of this, “the CENTECH GROUP
does not meet the subcontracting limitation requirements set forth in statute
and regulation.” This memorandum added
that the Air Force had “decided to rescind the award” of the contract to
CENTECH, and that the matter of CENTECH’s compliance with the subcontracting
limitation would be referred to the SBA for consideration under the SBA’s
certificate of competency (COC) procedures.
AR (B‑298364.6), Tab 10, Memorandum from the Contracting Officer
to CENTECH, Rescission of Contract (
By memorandum dated
By letter dated December 4, 2006, the SBA, while conceding that “the Centech Group’s numbers” set forth in its proposal provided that “around 42%” of the cost of contract performance incurred for personnel would be expended for CENTECH employees, nevertheless informed the Air Force that, in the SBA’s view, CENTECH would indeed comply with the subcontracting limitation during its performance of the contract, and that the SBA found CENTECH responsible and had issued a COC to CENTECH. This conclusion was based in part on the SBA’s consideration of material provided by CENTECH during the COC process (including its plans for staffing the contract), from which the SBA found that CENTECH would be able to meet this limitation. AR (B-298364.6), Tab 16, SBA COC and Rationale. 
TYBRIN argues that because CENTECH’s proposal clearly provided that only 43.2 percent of the cost of contract performance incurred for personnel would be expended for CENTECH employees, the proposal should have been evaluated as unacceptable by the Air Force, such that CENTECH’s proposal could not form the basis for award. We agree.
As a general matter, an agency’s judgment as to whether a
small business offeror will be able to comply with a subcontracting limitation
presents a question of responsibility for review by the SBA. See 13 C.F.R. sect. 125.6(f); Spectrum
Sec. Servs., Inc., B-297320.2; B-297320.3,
As set forth above, the record establishes that it was clear to the Air Force that CENTECH’s proposal as submitted and as evaluated provided that 43.2 percent of the cost of contract performance incurred for personnel would be expended for CENTECH employees and, accordingly, that “the CENTECH GROUP did not meet the subcontracting limitation requirements set forth in statute and regulation.” AR (B-298364.6), Tab 9, Determination of Non-Responsibility; see Tab 10, Memorandum from the Contracting Officer to CENTECH, Rescission of Contract (Sept. 8, 2006); Tab 12, Request for COC (Sept. 15, 2006); AR (B-298364.2) at 2; Contacting Officer’s Statement (B-298364.2) at 4. Given the Air Force’s determination that CENTECH’s proposal failed to comply with a material term of the solicitation (the subcontracting limitation) and, accordingly, that the proposal could not form the basis for award under the RFP, the agency should have found CENTECH’s proposal to be unacceptable, rather than finding CENTECH nonresponsible and forwarding the matter to the SBA for its consideration. See Continental Staffing, Inc., supra; National Med. Staffing, Inc.; PRS Consultants, Inc., supra.
The fact that the SBA has now determined CENTECH to be a responsible contractor does not alter our view here. Although the SBA’s determinations of responsibility and its issuance of COCs are generally not for review by our Office, Bid Protest Regulations, 4 C.F.R. sect. 21.5(b)(2) (2006), the issues of a proposal’s acceptability and the award of a contract to an offeror based upon a proposal that fails to comply with a material term of a solicitation are matters initially within the purview of the contracting agency and subject to review by our Office. See, e.g., L-3 Communications Westwood Corp., B‑295126, Jan. 19, 2005, 2005 CPD para. 30 at 5; CACI Techs., Inc., B-296946, Oct. 27, 2005, 2005 CPD para. 198 at 5.
The SBA disagrees
with our Office’s view that where a proposal, on its face, should lead the
contracting agency to the conclusion that an offeror has not agreed to comply
with the subcontracting limitation, the matter is one of the proposal’s
acceptability, rather than the offeror’s responsibility. SBA Submission (
Accordingly, we sustain the protest on this basis. While we find that CENTECH’s proposal could not form the basis for award under this RFP, the record reflects that CENTECH submitted its proposal with the understanding that it would be found to meet or exceed the subcontracting limitation requirement, given the AFMC memorandum that allowed for the performance of work requirement imposed by the Limitation on Subcontracting clause to be met by the “cooperative efforts” of CENTECH and its small business subcontractors. Additionally, although discussions were held with the four offerors that had submitted proposals, the matter of CENTECH’s proposal’s compliance with the requirements of the Limitation on Subcontracting clause was never raised with CENTECH during discussions because of the Air Force’s reliance on the AFMC memorandum. Accordingly, CENTECH was deprived of meaningful discussions regarding its proposal’s failure to comply with the requirements of the Limitation on Subcontracting clause. See FAR sect. 15.306(d)(3); Lockheed Martin Corp., B-293679 et al., May 27, 2004, 2004 CPD para. 115 at 7; see Special Operations Group, Inc., B-287013; B-287103.2, Mar. 30, 2001, 2001 CPD para. 73 at 7 (awardee whose proposal should have been rejected for failing to comply with a material term of the solicitation was deprived of meaningful discussions where this issue was not raised by the agency during its conduct of discussions).
We recommend that the Air Force reopen discussions and request and review revised proposals, evaluate those submissions consistent with the terms of the solicitation, and make a new source selection decision. In the event a proposal other than CENTECH’s is found to represent the best value to the government, CENTECH’s contract should be terminated and the contract awarded to the successful offeror in accordance the terms of the RFP. We also recommend that the agency reimburse TYBRIN for its costs of filing and pursuing its protest challenging the award to CENTECH, including reasonable attorneys’ fees. 4 C.F.R. sect. 21.8(d)(1). TYBRIN’s certified claim for costs, detailing the time expended and costs incurred, must be submitted directly to the Air Force within 60 days of receiving this decision. 4 C.F.R. sect. 21.8(f)(1).
Gary L. Kepplinger
The AFMC policy memorandum setting forth the Air Force’s interpretation of the
Small Business Act’s limitation on subcontracting by small business concerns
was posted on the Federal Business Opportunities web site on
 The Air Force subsequently rescinded the AFMC policy memorandum.
The record reflects that in accordance with the SBA’s COC procedures, CENTECH
applied for a COC, and its application (which was considered by the SBA in
issuing the COC) included numerous documents not included in CENTECH’s
proposal, such as narratives, a “compliance matrix,” and spreadsheets, all of
which purported to demonstrate that CENTECH would comply with the requirements
of the Limitation on Subcontracting clause during its performance of the
ARDTEAS contract. SBA Report
(B-298364.6), Tab B, CENTECH COC Application (
 Because we sustain TYBRIN’s protest and recommend the reopening of discussions, we need not resolve TYBRIN’s allegations regarding the evaluation of its and CENTECH’s proposals and the selection of CENTECH’s proposal for award, or its allegations that the evaluation evidences bias against TYBRIN, that CENTECH has an organizational conflict of interest that renders it ineligible for award, that CENTECH was improperly permitted by the SBA to alter its proposal and status after the agency had received and evaluated the offerors’ proposal revisions, or that the Air Force had deprived TYBRIN of meaningful discussions. However, as the Air Force proceeds with its corrective action, it may want to be mindful of the issues raised by TYBRIN in its protests, including TYBRIN’s assertion that the agency failed to adequately consider potential organizational conflicts of interest related to [DELETED] (one of TYBRIN’s proposed subcontractors).