Shinwha Electronics, B-290603; B-290603.2; B-290931; B-290932, B-290932.2, B-291064, September 3, 2002

B-290603,B-290931,B-290603.2,B-290932,B-291064,B-290932.2: Sep 3, 2002

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Protest that offeror was improperly suspended from receiving government contracts is denied where there is no evidence that the agency acted arbitrarily to avoid making an award to an offeror otherwise entitled to award and where the minimum standards of due process have been met. 2. Will no longer review protests that an agency improperly suspended or debarred a contractor. As the contracting agency is the appropriate forum for suspension and debarment disputes. Shinwha was precluded from competing on the basis of its status as a suspended contractor. Shinwha contends that its suspension was improper. That the company's resulting exclusion from the competition was. Shinwha is not an interested party to maintain the protests.

Shinwha Electronics, B-290603; B-290603.2; B-290931; B-290932, B-290932.2, B-291064, September 3, 2002




Shinwha Electronics protests its exclusion from the competition for award of a contract under request for proposals (RFP) No. DAJB03-02-R-0084, issued by the Department of the Army for the maintenance and repair of fire alarm and detection systems at Kunsan Air Base, Korea. Shinwha was precluded from competing on the basis of its status as a suspended contractor. Shinwha contends that its suspension was improper, and that the company's resulting exclusion from the competition was, therefore, also improper. We deny this protest (B-290932).

Shinwha also filed five other protests raising issues in addition to those concerning its suspension. As explained below, we dismiss these protests on the ground that, as a suspended contractor, Shinwha is not an interested party to maintain the protests.

The RFP, issued on April 29, 2002, contemplated the award of a fixed-price contract for a 6-month base period, with one 3-month option period, to provide maintenance and repair services of fire alarm and detection systems at Kunsan Air Base, Korea. Six offerors, including Shinwha, submitted proposals by the amended closing date. The agency determined, after conducting an evaluation, that none of the proposals were technically acceptable and decided to clarify the technical requirements in a revised solicitation. Shinwha was precluded from further competition on the subject procurement on June 25 when the Army suspended the company and its president from receiving government contracts.

The Army notified Shinwha that the company had been suspended from government contracting, pending completion of a criminal investigation of fraud allegedly committed by Shinwha under contract No. DAJB03-00-D-0082, for the maintenance and repair of fire life safety systems at American military installations throughout Korea. According to the Army, the basis for the suspension was that "Shinwha, with the knowledge of [its president] and its other officers and managers, uttered and transmitted to the United States, with the intent of obtaining unearned payment, false records of and false invoices for work purportedly but not actually performed, and obtained payment for some of the work falsely alleged by Shinwha." /1/ Agency Report, July 22, 2002 (AR 1), Tab G, Notification of Suspension of Shinwha. The letter also stated that Shinwha was permitted to submit information and argument in opposition to the suspension.

On June 26, Shinwha advised the agency that it opposed the suspension and would prove the underlying allegations were wrong. Shinwha also asked the Army to provide it with a copy of all documents forming the basis of the suspension decision, and requested a fact-finding proceeding. AR 1, Tab F, Acknowledgment of Receipt of Suspension. In a subsequent letter, Shinwha requested greater specificity about the fraud allegations, asserted that certain information obtained as part of the Army's investigation of Shinwha violated attorney-client privilege, and alleged continuing misconduct against Shinwha by agency contracting officials. Agency Report, August 12, 2002 (AR 2), Tab F, Shinwha Letter to Suspending Official, July 12, 2002. Other than these tangential matters, however, Shinwha offered no specific information which purported to refute the substance of the fraud allegations. /2/ In its protest, Shinwha argues that its suspension from government contracting was improperly imposed. Specifically, Shinwha asserts that the allegations contained in the agency's suspension record are so vague as to be incompatible with due process. The protester also challenges the credibility of its former managers as well as the government employee who provided statements upon which the agency based its suspension decision. Shinwha also alleges that the Army both manipulated the facts to produce adequate evidence to suspend Shinwha and intentionally delayed awarding a contract under the solicitation until the suspension was issued. /3/

The Federal Acquisition Regulation (FAR) sets forth procedures for the suspension and debarment of contractors, and prohibits agencies from soliciting offers from, or making award to, suspended or barred contractors unless the agency's head or his or her designee determines that there is a compelling reason for such action. FAR Sec. 9.405(a).

Suspensions are imposed for a temporary period before suspected misconduct is proven or disproven, and while an investigation and any ensuing legal proceedings of the contractor are taking place. FAR Sec. 9.407-4(a). An agency may, upon "adequate evidence," suspend a contractor suspected of fraud or other misconduct indicating a lack of business integrity. FAR Sec. 9.407-2. "Adequate evidence" means information sufficient to support the reasonable belief that a particular act or omission has occurred. /4/ FAR Sec. 2.101(b). The FAR provides that, in assessing the adequacy of the evidence, agencies should consider, among other factors, "how much information is available, how credible it is given the circumstances, [and] whether or not important allegations are corroborated." FAR Sec. 9.407.1(b)(1).

Because suspensions are imposed in order to provide immediate protection of the government's interest where contractor misconduct is suspected, there is no requirement that a contractor be afforded an opportunity to be heard prior to the suspension. /5/ Following the imposition of a suspension, however, the contractor must be afforded an opportunity to submit information and argument in opposition to the suspension. See FAR Sec. 9.407-3(b).

In the past, our Office has generally declined to review protests of suspension or debarment decisions, since the appropriate forum for challenging the sufficiency or correctness of the agency's reasons for imposing the suspension or debarment is with the agency after notice of the suspension or proposed debarment has been given. FAR Sec. 9.407-3(b); SDA, Inc., B-253355 et al., Aug. 24, 1993, 93-2 CPD Para. 132 at 3-4. However, when a protester alleged that it had been improperly suspended or debarred during the pendency of a procurement in which it was competing, we have reviewed the matter (in a very few cases) to ensure that the agency has not acted arbitrarily to avoid making an award to an offeror otherwise entitled to award, and also to ensure that minimum standards of due process have been met. SDA, supra; TS Generalbau GmbH; Thomas Stadlbauer, B-246034 et al., Feb. 14, 1992, 92-1 CPD Para. 189 at 4. Applying this standard to the facts of this case, we conclude that the record does not show that the agency's suspension of Shinwha was improper. Further, as explained below, we are changing our scope of review for future cases.

In its protest, Shinwha contends that the allegations contained in the agency's suspension record are so vague as to be incompatible with due process. Specifically, Shinwha alleges that documents provided by the Army to the contractor lack the required degree of specificity necessary for the submission of a meaningful response. In response, the agency fully explained its rationale for determining the sufficiency of the due process afforded Shinwha here. Because Shinwha's comments did not contain any rebuttal to the agency's response, we consider this allegation abandoned. MPRI, Inc., B-289401, Feb. 20, 2002, 2002 CPD Para. 53 at 3 n.4.

In any event, we find that the protester was afforded the level of due process to which it is entitled. Due process for a suspension requires notice sufficiently specific of what action is proposed and the grounds therefor to allow the party to make a meaningful response to the notice. Alamo Aircraft Supply, Inc., B-252117, June 7, 1993, 93-1 CPD Para. 436 at 4. Here, in accordance with the FAR, the agency provided Shinwha both with notice of the suspension and the basis for imposing the suspension decision, as set forth above. Further, in accordance with the Defense FAR Supplement (DFARS) Appendix H, the Army provided Shinwha with a copy of the record that formed the basis for the suspension decision. DFARS Sec. H-101. Notwithstanding the protester's desire that the agency furnish it with additional detailed information--stating exactly what contractually required services were not provided on what date and at which location, but were included in which specific report or invoice, submitted to the government on what date--we conclude that the notice and information provided to Shinwha adequately enables the protester to marshal evidence on its behalf so as to make its suspension response opportunity meaningful. See TS Generalbau GmbH, supra, at 8-9.

Shinwha's second allegation, regarding the adequacy of the evidence generally and the credibility of the witnesses against it specifically, are matters generally outside the scope of our review. SDA, supra, at 4. As stated above, under the standard applied to this area in the past, our review has been limited to a consideration of whether the agency acted arbitrarily in its suspension of an offeror; our Office has not viewed itself as the appropriate forum to consider the adequacy or sufficiency of the evidence relied on by the agency for purposes of the suspension decision. Determinations regarding the credibility of witnesses, and the appropriate weight to be given to eyewitness statements in light of such credibility challenges, are matters for the suspending official, and not our Office, to examine. /6/

In sum, within the confines of the limited review we have in the past conducted in this area, Shinwha has not established that the Army acted improperly in suspending the contractor, and the protester's exclusion from the competition at issue was therefore also proper.

With respect to future cases, our Office will no longer review, even under a limited standard, protests that an agency improperly suspended or debarred a contractor from receiving government contracts. Because the FAR sets forth specific procedures for both imposing and challenging a suspension or debarment action, see FAR Secs. 9.406-3(b), 9.407-3(b), we conclude that the appropriate forum for resolving such disputes is with the contracting agency. See SDA, supra. To the extent that our prior decisions are inconsistent with our ruling here, we will no longer follow our prior decisions in this regard.

Shinwha also protests the cancellation of purchase order No. DAJB03-02-P-0830, issued by the Army to Shinwha for the replacement of the fire receiving alarm system at Camp Walker, Korea (B-290603; B-290603.2); the award of a contract to OCSE-GBI by the Army under request for quotations (RFQ) No. DAJB03-02-T-0356 for the replacement of fire alarm systems at Camp Eagle, Korea (B-290931); the evaluation of Shinwha's proposal under RFP No. DAJB03-02R-0084, issued by the Army for the maintenance and repair of firm alarm and detection systems at Kunsan Air Base, Korea (B-290932.2); and the expansion of work under contract No. DAJB-03-00-D-0061, issued by the Army to OCSE-GBI for engineering and design services (B-291064). Because the agency's suspension of Shinwha was proper, Shinwha is not an interested party to challenge these contract actions, since Shinwha would not be in line for contract award even if its protests were sustained. /7/ 4 C.F.R. Sec. 21.0(a) (2002); K&K Engineered Prods., Inc., B-239838.2, July 9, 1990, 90-2 CPD Para. 22; Space Dynamics Corp., B-220168.2, Nov. 29, 1985, 85-2 CPD Para. 620 at 1. Accordingly, we dismiss these protests.

The protest assigned file number B-290932 is denied; the other protests are dismissed.

Anthony H. Gamboa General Counsel

1. The evidence supporting the imposed suspension included detailed statements from several eyewitnesses, including the Army's chief fire inspector, Shinwha's two former regional managers, and Shinwha's former operations manager, all asserting that Shinwha, with the knowledge of the company's officers, was involved in the falsification of work performance records and invoices, thereby wrongfully obtaining payment for work not actually performed.

2. The agency suspending official determined that while the matters asserted in Shinwha's July 12 letter did not raise a genuine, disputed issue of material fact regarding the adequacy of the evidence, thereby making a fact-finding proceeding unnecessary, the agency would still consider any further matters submitted by Shinwha in opposition to the suspension. AR 2, Tab G, Letter from Suspending Official to Shinwha, July 24, 2002.

3. In its comments on the agency report, Shinwha argues that the agency's decision to suspend Shinwha was not based upon adequate evidence, given the witnesses' lack of credibility, and that the Army has acted in bad faith during the performance period of contract No. DAJB03-00-D-0082, under which both the fraud allegations and the suspension of Shinwha have arisen. Protester's Comments, August 23, 2002.

4. Adequate evidence" may be likened to a probable caused standard, necessary for the issuance of a search warrant. Electro-Methods, Inc., v. United States, 728 F.2d 1471, 1473 (Fed. Cir. 1984).

5. In contrast to suspensions, which serve as protective measures, debarments are imposed where contractor misconduct has been established. Where an agency proposes a contractor for debarment and, after proceedings where the contractor is afforded the opportunity to dispute material facts, the agency concludes that the cause of debarment has been established by a preponderance of the evidence, the agency may then debar the contractor for a period commensurate with the seriousness of the cause. FAR Secs. 9.406-3, 9.406-4.

6. Shinwha's remaining arguments regarding the agency's suspension decision are allegations of bad faith. Where a protester contends that contracting officials are motivated by bias or bad faith, it must provide convincing proof of such, since our Office will not attribute unfair or prejudicial motives to procurement officials on the basis of inference or suppositions. ACC Constr. Co., Inc., B-289167, Jan. 15, 2002, 2002 CPD Para. 21 at 4. Here, Shinwha has not provided convincing proof to support these allegations.

7. While an agency has the discretion to consider the proposals received from a suspended or debarred contractor whose ineligibility expires or is terminated prior to contract award, see FAR Sec. 9.405(b)(3), the mere possibility that a proposal could be considered is insufficient to make a suspended or debarred contractor an interested party for our purposes.