Phil Howry Company

B-291402.3; B-291402.4, Phil Howry Company, February 6, 2003

Decision


Matter of: Phil Howry Company

File: B-291402.3; B-291402.4

Date: February 6, 2003

Kathleen C. Little, Esq., and Robert J. Rothwell, Esq., Vinson & Elkins, for the protester.
Keith S. Francis, Esq., Department of the Army, and Laura Mann Eyester, Esq., and John Klein, Esq., Small Business Administration, for the agencies.
Sharon L. Larkin, Esq., and James A. Spangenberg, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protest sustained where agency effectively determined small business, which submitted sole proposal on section 8(a) set-aside, to be nonresponsible based solely on what amounted to pass/fail evaluation of the protester's past performance, without referring the matter to the Small Business Administration under certificate of competency procedures.

DECISION

Phil Howry Company (PHC) protests the United States Army Corps of Engineers' decision not to award PHC the contract under request for proposals (RFP) No. DACW64-02-R-0008 for construction of a health care facility at the Port Isabel Service Processing Center in Los Fresno, Texas, and the subsequent cancellation of the RFP.

We sustain the protests.

BACKGROUND

The RFP was issued as a section 8(a) set'aside.[1] It provided for the award of a fixed'price contract to the responsible bona fide 8(a) Offeror Region 6 whose proposal, conforming to the Solicitation, is fair and reasonable, and has been determined to be the most advantageous to the Government, Past Performance, price, and other factors considered. RFP 00120 7.0.

The RFP provided for three phases of evaluation: a proposal compliance review (to ensure that proposals met all pro forma requirements of the RFP), a quality evaluation (to evaluate past performance), and a price evaluation. RFP 00120 2.0. Past performance and price were of equal importance. RFP 00120 7.3.
The sole purpose of the past performance evaluation was to make an overall risk assessment of the Offeror's ability to perform the work required by the Solicitation. . . . The assessment represents the evaluation team's judgment of the probability of an Offeror successfully accomplishing the work required by the solicitation, based on the Offeror's demonstrated past performance. RFP 00120 2.2.2.1.1; see RFP 00110 2.2.3.2.

For past performance, offerors were required to [p]rovide a list of at least five (5), but no more than ten (10), of the most relevant contracts performed for Government or commercial customers within the last 5 years involving construction of a 50-100 bed hospital or large clinic. Relevant contracts were defined as construction projects that would be considered similar in scope and magnitude to this project; vertical construction consisting of buildings with structural steel frame masonry exteriors and low slope single roofs, and within the range of $5,000,000 to $10,000,000. RFP 00110 2.1.1(a).

Only one offeror, PHC, submitted a proposal. PHC's proposed price of $6,332,078 was approximately $2 million less than the Government estimate of $8,487,198. Agency Report (AR), Tab R, Memorandum for Record, at 2. However, PHC was not awarded the contract because its past performance was rated as marginal/little confidence. By letter dated September 11, 2002, the agency notified PHC that award would not be made to PHC. The letter explained that:

[PHC's past performance information was for projects that were] significantly below the estimated range of $5 to $10 million for the cost of the work as set forth in Sec. 00110, Para. 2.1.1(a), . . . and did not involve medical construction. Based upon the foregoing, the technical evaluation panel determined that there is substantial doubt that your company will successfully perform the required work, and therefore, assessed the overall risk rating of marginal/little confidence. . . . Based on the above, the award of this project will not be made to your company.[2]
AR, Tab T, Agency Letter to Howry (Sept. 11, 2002).
On September 25, PHC filed a protest with this Office, primarily asserting that the rejection of its proposal constituted a de facto nonresponsibility determination, which must be referred to the Small Business Administration (SBA) under its certificate of competency (COC) procedures. The agency submitted a report responding to the protest, and the protester filed its comments on the report.[3] Thereafter, the agency canceled the RFP because [o]nly one proposal was received and it was determined not to have met the technical evaluation factors set out in the [RFP]. Agency's Cancellation Notice (Nov. 12, 2002). On November 25, PHC filed a timely supplemental protest challenging the cancellation.

By letter dated December 20, the agency provided additional information to ensure that the General Accounting Office . . . is fully informed regarding the status of the solicitation and project, although it stated that the agency's original decision to cancel the solicitation remains in effect. This information concerned the agency's stated intent to re'design and re-solicit the construction project. Agency's Letter (Dec. 20, 2002) at 1.

On December 23, PHC challenged the reasonableness of this new apparent basis for the cancellation, which we docketed as a supplemental protest.[4] The agency filed a report on January 9, 2003, explaining that its December 20 letter was only an informational letter on the project status and that the agency's decision to cancel the solicitation, as communicated in the Corps' 12 November 2002 letter, remained unchanged. Agency Supplemental Report (Jan. 9, 2003) at 2. The agency's report further confirmed that:

[t]he solicitation was cancelled in November 2002 solely for the reason stated in the 12 November 2002 letter from the Contracting Officer to [PHC]. His stated reason was [o]nly one proposal was received and it was determined not to have met the technical evaluation factors set out in the Request for Proposals (RFP). No further reason for the cancellation was being proffered in the 20 December letter.
Id. at 3.; see also id. at 4 (agency did not offer the 20 December letter to the GAO as evidence in support of the cancellation); id. at 5 (sole basis for cancellation of the solicitation was that '[o]nly one proposal was received and it was determined not to have met the technical evaluation factors set out in the [RFP]). Finally, the Corps explained the purpose of the December 20 informational letter was so that this Office could consider the project status issues in fashioning any recommendation in resolving the protests.[5] Id. at 3.

ANALYSIS

As noted, PHC argues that the agency's decision not to award the contract to PHC, based solely on its evaluation of past performance, constitutes a de facto nonresponsibility determination, which must be referred to the SBA under its COC procedures.[6] The agency contends that it was merely performing a comparative best value evaluation and that PHC's proposal was not selected for award because it failed to meet the past performance requirements of the RFP, which is a matter of relative merit, not nonresponsibility. [7] Contracting Officer's Statement 17, 18.

Under the Small Business Act, agencies may not find a small business nonresponsible without referring the matter to the SBA, which has the ultimate authority to determine the responsibility of small businesses under its COC procedures. 15 U.S.C. 637(b)(7) (2000); FAR Subpart 19.6; Federal Support Corp., B-245573, Jan. 16, 1992, 92-1 CPD 81 at 4. Past performance traditionally is considered a responsibility factor, that is, a matter relating to the offeror's ability to perform the contract. See FAR 9.104-1(c); Sanford and Sons Co., B-231607, Sept. 20, 1988, 88-2 CPD 266 at 2. Traditional responsibility factors may be used as technical evaluation factors in a negotiated procurement, but only when a comparative evaluation of those areas is to be made. See, e.g., Medical Info. Servs., B'287824, July 10, 2002, 2001 CPD 122 at 5; Nomura Enter., Inc., B-277768, Nov. 19, 1997, 97'2 CPD 148 at 3. Comparative evaluation in this context means that competing proposals will be rated on a scale, relative to each other, as opposed to a pass/fail basis. Ducosort, Inc., B'254852, Jan. 25, 1994, 94-1 CPD 38 at 6. We have cautioned that an agency may not find a small business nonresponsible under the guise of a relative assessment of responsibility-based technical factors in an attempt to avoid referral to the SBA. Federal Support Corp., supra, at 4; Sanford and Sons Co., supra, at 3. That appears to be what occurred here.

Here, the agency did not, and could not, perform a comparative evaluation. The only technical evaluation factor, past performance, a traditional responsibility factor, was evaluated for the sole purpose of making an assessment of the Offeror's ability to perform.[8] RFP 00120 2.2.2.1.1. As essentially conceded by the agency, PHC's proposal was rejected because PHC allegedly failed to meet the RFP requirements that the offeror have past performance experience in medical construction on projects of 50 to 100 bed hospitals or large clinics valued at between $5 and $10 million. Because of this, past performance was clearly evaluated on a pass/fail basis. Under the circumstances, the agency's rejection of PHC's proposal amounted to a determination of nonresponsibility, which required referral to the SBA for a possible COC. See Federal Support Corp., supra, at 4 (protest sustained where regardless of how the evaluation criteria was characterized in either the RFP or in the evaluation, determination of technical unacceptability was nonresponsibility determination); Modern Sanitation Sys. Corp., B-245469, Jan. 2, 1992, 92-1 CPD 9 at 3 (technical unacceptability based on go-no go evaluation of responsibility criteria, without regard to how the rest of the proposal was judged, constitutes nonresponsibility determination that must be referred to the SBA); Clegg Indus., Inc., B'242204.3, Aug. 14, 1991, 91-2 CPD 145 at 3 (same).

We also find unreasonable the agency's basis for canceling the RFP, given that the November 12 cancellation notice provides the same reason as why the agency rejected PHC's proposal.[9] Moreover, given the timing of the cancellation, which occurred only after receipt of the agency report and comments, it would appear that the agency may have canceled the solicitation in order to avoid referring this matter to the SBA. See Griffin Servs. Inc., B'237268.2 et al., June 14, 1990, 90-1 CPD 558 at 3 (protest sustained where protester alleged cancellation was pretext to avoid SBA referral and there was no reasonable basis for agency's cancellation of solicitation).

In light of the foregoing, we recommend that the agency rescind the cancellation and refer the matter to the SBA, in accordance with the SBA's COC procedures, for a determination as to whether PHC is responsible to perform the contract. FAR Subpart 19.6. If the SBA issues a COC, we recommend that the agency award PHC the contract; or, if award of the contract is not appropriate (in light of the agency's project status concerns[10]), then we recommend that the agency award PHC its proposal preparation costs. Additionally, we find that PHC is entitled to its costs incurred in pursuing all four of its protests, including attorneys' fees. PHC should submit its certified claim for costs, detailing the time expended and costs incurred, directly to the agency within 60 days of receipt of this decision. 4 C.F.R. 21.8(f)(1).

The protests are sustained.

Anthony H. Gamboa
General Counsel