Matter of: Luedtke Engineering Company File: B-249244.2; B-249244.3 Date: November 9, 1992

Matter of: Luedtke Engineering Company File: B-249244.2; B-249244.3 Date: November 9, 1992

PROCUREMENT Competitive Negotiation Contract awards Administrative discretion Where agency sustains agency-level protest against the cancellation of a solicitation for maintenance and repair services, issued under Office of Management and Budget A-76 Policies, agency reasonably concluded not to award a contract to the protester since the requirements that had not been performed in-house at the time of the decision would no longer be contracted for in accordance with an agency-wide policy against contracting for such services in effect at the time of the decision sustaining the protest.

Attorneys

DECISION Luedtke Engineering Company protests the failure of the United States Army Corps of Engineers to award it a contract for maintenance and repairs of breakwaters, jetties, piers, and revetments in Lakes Michigan and Huron. Luedtke essentially requests that we review the Corps' decision in response to the firm's agency-level protest that, notwithstanding the success of the protest on the merits, it would not award a contract to the protester. We deny the protest.

The Corps issued invitation for bids (IFB) No. DACW35-89-B-0056 for these services on August 28, 1989. The IFB sought bids for a base period which would run from the date of contract award through September 30, 1991, and 4 option years. The IFB was issued as part of the Corps' commercial activities program, which is conducted in accordance with the guidance and requirements of Office of Management and Budget Circular A-76. Accordingly, the IFB advised bidders that the agency would open an independent cost estimate of government performance at bid opening and would then compare the cost of performance under contract with the estimate of the costs of government or "in-house" performance.

The protester submitted the only responsive bid by the October 19, 1989, bid opening date. Luedtke's bid of $7,119,315 was lower than the government estimate of $7,470,226. Based on the apparent savings of $341,492, the agency decided to make award to Luedtke. On January 2, 1990, however, American Federation of Government Employees Local 2882 appealed the Corps' decision and by letter dated July 10, 1990, an agency appeals board denied the appeal. While the board found that the cost comparison should have included certain additional costs associated with contracting out the services, it concluded that award to Luedtke still represented an overall cost savings of $47,091 to the government.

On September 13, 1990, upon further review, the Corps found that certain contract administration costs should have been considered in determining whether contracting with Luedtke would be less expensive than in-house performance. According to the agency, these additional costs, coupled with those noted by the appeals board, rendered Luedtke's bid more expensive than performing the services in-house. Based on this new position, the Corps began the process of obtaining higher level approval to cancel the IFB. Although such approval was never given, the contracting officer canceled the IFB on July 18, 1991, based on her conclusion that in-house performance would be more economical.

By letter dated July 29, 1991, Luedtke filed a protest with the Corps alleging that "awarding the work to the government forces" violated the A- 76 program. After a protracted protest process in which numerous letters were exchanged between Luedtke and the Corps, the agency sustained that firm's protest on June 19, 1992. The decision stated that it was improper for the Corps to have considered administrative costs associated with Luedtke's performance in conducting its cost comparison. The decision concluded that the agency had improperly canceled the IFB.

Despite this conclusion, the Corps decided that it was unable to take any action to correct the improper cancellation for the following two reasons. First, the Corps pointed out that at the time of the decision, much of the work, including the base period requirements, had already been performed in-house. Thus, award of those requirements would "serve no purpose."

Second, with respect to any remaining, unperformed requirements, the Corps found that award to Luedtke would be inconsistent with a recently implemented agency policy. By memorandum dated January 3, 1992, the Corps had finalized an agency-wide policy various civil work functions, including those at issue here. The Corps found that, in some cases, cost comparison procedures "were not appropriate for making contract decisions." It found also that, for certain types of operation and maintenance work, "no long-term efficiencies can be gained by doing the work under contract, or that there are no private sector sources available to do the work." Finally, it noted that certain work may not be "contractible in nature." Accordingly, the agency determined that civil works functions such as those involved here no longer would be the subject of cost comparison studies under its commercial activities program. The Corps therefore concluded that it could not award Luedtke a contract for the requirements not already performed. This protest followed.

Luedtke puts forth numerous arguments in support of its position that the Corps' decision to cancel the solicitation was improper and that it could, in fact, perform the services more cheaply than the government. The protester also argues that since there are remaining option periods under the IFB, it should receive the award for those periods.

At the outset, we wish to point out that since both the Corps and Luedtke agree that the cancellation of the solicitation was improper and that under a proper cost comparison evaluation the protester would have received the award, there is no need to consider the detailed arguments made by the protester concerning the agency's cost comparison evaluation. We therefore will not address the merits of the agency-level protest. Rather, we view Luedtke's protest to our Office as essentially a challenge to the agency's conclusion that, under the particular circumstances surrounding the agency-level protest, no corrective action was available to Luedtke. As far as that decision is concerned, for the reasons set forth below, we have no legal basis to object to the agency's conclusion.

At the time the Corps issued its decision sustaining Luedtke's protest, much of the work, including that contemplated by the base period, had been performed by the Corps. While it is unfortunate that the agency protest process took so much time, it appears to us that the delay was attributable both to the agency and to Luedtke's submission of numerous letters. Nevertheless, by the time the decision was issued, there was simply no longer a need for that portion of Kaysam Worldwide, Inc., B-247743, June 8, 1992, 92-1 CPD Para. 500.

With respect to the portion of the work that had not been performed (those requirements represented by the remaining option periods), we also have no basis to object to the Corps' decision not to award those requirements to Luedtke. Prior to issuing the decision on Luedtke's agency -level protest, the Corps determined, as a matter of policy, that it would perform these and other related services in-house. As a general matter, we do not review such agency decisions to perform work in-house, since they are matters of executive branch policy. Griffin Servs., Inc., B-237268.2 et al., June 14, 1990, 90-1 CPD Para. 558. We will, however, examine the reasonableness of an agency's decision where either the protester argues or the record indicates that the agency's actual motivation was to avoid awarding the protester a contract or that the decision was made in response to the filing of a protest. Marann Inventories, Inc.--Recon., B-237651.4, July 20, 1990, 90-2 CPD Para. 54. Since the record shows that this policy applied to all Corps commands and there is nothing in the record which indicates that the decision was directed specifically at the procurement protested by Luedtke, we have no basis to object to this decision to perform these services in-house.

The protest is denied.

James F. Hinchman General Counsel

B-249244.2; B-249244.3

The Honorable Andy Ireland Ranking Minority Member Committee on Small Business House of Representatives

Dear Mr. Ireland:

We refer to your letter of September 18, 1992, expressing interest in the protest of Luedtke Engineering Company, concerning a decision by the Army Corps of Engineers not to award that firm a contract.

By decision of today, copy enclosed, we have denied the protest.

Sincerely yours,

James F. Hinchman General Counsel

Enclosure

B-249244.2; B-249244.3

The Honorable Guy Vander Jagt House of Representatives

Dear Mr. Vander Jagt:

We refer to your letter of July 7, 1992, expressing interest in the protest of Luedtke Engineering Company, concerning a decision by the Army Corps of Engineers not to award that firm a contract.

By decision of today, copy enclosed, we have denied the protest.

Sincerely yours,

James F. Hinchman General Counsel

Enclosure

B-249244.2; B-249244.3

The Honorable Carl Levin United States Senator 477 Michigan Avenue Detroit, MI 48226

Dear Senator Levin:

We refer to your letter of July 7, 1992, expressing interest in the protest of Luedtke Engineering Company, concerning a decision by the Army Corps of Engineers not to award that firm a contract.

By decision of today, copy enclosed, we have denied the protest.

Sincerely yours,

James F. Hinchman General Counsel

Enclosure

B-249244.2; B-249244.3

The Honorable Donald W. Riegle, Jr. United States Senator 309 East Front Street Traverse City, MI 49684

Dear Senator Riegle:

We refer to your recent expression of interest in the protest of Luedtke Engineering Company, concerning a decision by the Army Corps of Engineers not to award that firm a contract.

By decision of today, copy enclosed, we have denied the protest.