Leader essentially argues
that the solicitation required only that offerors have
received verification from DCAA that their accounting
systems had been audited and determined adequate, but did
not require the submission of any documentation from DCAA
itself. Protest at 5-6; Comments at 3-4. In this regard,
Leader contends that its elimination from the competition
was unreasonable because Leader met the RFP’s requirement
by providing its own unambiguous statement that its
accounting system had been audited and approved by DCAA,
along with the 2008 DCAA audit report number and
additional information. Id. In Leader’s view, this
information was sufficient for the agency itself to
independently confirm with DCAA the verification and audit
of its accounting system. Id.
In response, the agency acknowledges that a DCAA audit
report would have been an acceptable source of
verification; however, it explains that the solicitation
expressly required offerors to furnish verification from
DCAA with its proposal. AR, MOL at 8; AR, see also Supp.
MOL at 3-6. In this regard, the agency also explains that
the solicitation did not permit offerors to essentially
self-verify the adequacy of their accounting systems.
Rather, by requiring offerors to provide verification from
DCAA, the agency would obtain independent verification
that offerors’ accounting systems had been audited and
determined adequate. Id.
When a dispute arises as to the actual meaning of
solicitation language, our Office will resolve the matter
by reading the solicitation as a whole and in a manner
that gives effect to all provisions of the solicitation.
See Level 3 Commc’ns LLC, B-412854 et al., June 21, 2016,
2016 CPD ¶ 171 at 7; KAES Enters., LLC, B-411225 et al.,
June 18, 2015, 2015 CPD ¶ 186 at 5. A solicitation is not
ambiguous unless it is susceptible to two or more
reasonable interpretations. WingGate Travel, Inc.,
B-412921, July 1, 2016, 2016 CPD ¶ 179 at 7. If the
solicitation language is unambiguous, our inquiry ceases.
Id.
On this record, we find that the agency’s interpretation
of the solicitation, when read as a whole, is reasonable,
whereas the protester’s interpretation is not reasonable.
Here, the solicitation stated that an offeror “must have
verification from [DCAA]. . . of an accounting system that
has been audited and determined adequate” in order to be
eligible for award. Id. at L-17 (emphasis added). The
solicitation also advised that the agency would “evaluate
evidence that the [o]fferor . . . [has] an adequate
accounting system . . . as required under Section
L.3.1.h.” Id. at M-3 (emphasis added). Finally, the
solicitation cautioned that failure to “furnish
verification of an adequate cost accounting system” would
result in a rating of unacceptable and render the proposal
ineligible for award. Id. (emphasis added). As explained
by the agency, contrary to Leader’s contentions, the
solicitation did not contemplate that an offeror could
simply provide a declarative statement in lieu of the
submission of evidence from DCAA verifying the adequacy of
the offeror’s accounting system. See AR, Supp. MOL at 5.
On this record, we find that the agency followed the clear
and unambiguous terms of the solicitation and reasonably
found Leader’s proposal unacceptable because it did not
provide verification from DCAA that its accounting system
had been audited and deemed adequate.
Leader also argues that its proposal should nonetheless
have been accepted because it satisfied the agency’s
actual and reasonable needs, its acceptance would not
result in unfair prejudice to other offerors or provide
Leader with a competitive advantage, and it contained
sufficient information for the agency to obtain additional
verification or confirmation with DCAA. See Protest at 6;
Comments at 7-8. We disagree.
Clearly stated RFP requirements are considered material to
the needs of the government, and a proposal that fails to
conform to such material terms is unacceptable and may not
form the basis for award. AttainX, Inc.; FreeAlliance.com,
LLC, B-413104.5, B-413104.6, Nov. 10, 2016, 2016 CPD ¶ 330
at 5; TYBRIN Corp., B-298364.6, B-298364.7, Mar. 13, 2007,
2007 CPD ¶ 51 at 5; National Shower Express, Inc.; Rickaby
Fire Support, B-293970, B-293970.2, July 15, 2004, 2004
CPD ¶ 140 at 4-5. As explained by the agency, here, the
requirement to provide verification from DCAA was a
material requirement, the waiver of which would result in
an inconsistent and unfair evaluation, thereby prejudicing
other offerors. See AR, MOL at 6-7; AR, Supp. MOL at 7.
Accordingly, we have no basis to sustain the protest.
(Leader Communications, Inc.
B-413104.9: Mar 17, 2017)
CAE also contends that SAIC's proposal
was unacceptable and should have been rejected because
SAIC's accounting system had not been approved by DCAA as
required by the RFP. Protester's Second Supp. Comments at
13. The protester states that, although DCAA had performed
a limited scope survey in 2009 indicating that SAIC's
accounting system was acceptable for award, SAIC
subsequently and fundamentally changed its accounting
system and that DCAA had not yet completed an ongoing
audit. Protester's Comments at 16.
As noted above, the RFP required offerors to inform the
agency as to whether their accounting systems had been
approved by DCAA as adequate for determining costs
applicable to the contract. In its proposal, SAIC provided
a March 20, 2009, DCAA report, which stated that SAIC's
accounting systems had been determined to be adequate for
determining costs applicable to cost-type contracts. AR,
Tab 33, DCAA Audit Report, at 2. That report specifically
noted that SAIC was in the process of changing its
accounting system and was performing a time phased
implementation of the changeover to the new system by
business unit so that both accounting systems were
operational. Id. at 3. The report noted that as a result
of SAIC's change in accounting systems, DCAA's "audit
opinions of [SAIC's] accounting systems are pending and
control risk in DCAA audits is assessed at the maximum
(increased substantive testing is performed in all
audits)." Id.
SAIC also provided a Defense Contract Management Agency (DCMA)
report that noted SAIC's completion of its accounting
system change and that DCAA had reviewed the SAIC's new
system and issued the Statement of Condition and
Recommendation on January 21, 2011. See AR, Tab 35, DCMA
June 20, 2011 Letter, at 1. DCMA states that based upon
their review and in accordance with Defense Federal
Acquisition Regulation Supplement Subpart 242.75
(Contractor Accounting Systems and Related Controls), DCMA
approved SAIC's accounting system pending DCAA
verification of corrective actions implemented by SAIC and
DCAA validation of the effectiveness of these corrective
actions. Id. at 2.
The SSA in making his source selection decision recognized
that SAIC had changed its accounting system. The SSA
further recognized that DCAA had performed a limited-scope
pre-award system survey on SAIC's new system and that the
system had been approved by DCMA pending further audit by
DCAA. AR, Source Selection Decision, at 31. In this
regard, the SSA recommended that the contracting officer
request that DCAA provide a completion date for a full
audit of SAIC's accounting system. Id.
We find that the agency reasonably concluded that SAIC's
accounting system was adequate for determining costs in a
cost-type contract. The determination regarding the
adequacy of an offeror's cost accounting system is a
matter of an offeror's responsibility. See
McKissack+Delcan JV II, B-401973.2, B-401973.4, Jan. 13,
2010, 2010 CPD ¶ 28 at 6. The determination of a
prospective contractor's responsibility rests within the
broad discretion of the contracting officer, who, in
making that decision, must necessarily rely on his or her
business judgment. Id. We find no basis here to question
the SSA's judgment. (CAE
USA Inc., B-405659, B-405659.2, B-405659.3, Dec 2,
2011) (pdf)
As noted above, the solicitation
provided that "[a]n offeror's accounting system shall be
adequate for determining costs applicable to the
contract," and directed each offeror to "provide evidence
of their accounting system being adequate in accordance
with FAR [sections] 16.301-3, 16.403-1 and in compliance
with FAR [Part] 31, Contract Cost Principles and
Procedures." RFP at 226, 228.
In responding to these solicitation provisions, KMS's
proposal directed the agency's attention to a Defense
Contract Audit Agency (DCAA) audit, performed in September
2006, which had concluded that KMS's cost accounting
system was adequate for performing cost reimbursement
contracts. AR, Tab 16, KMS Proposal, Vol. 6 at 59.
Notably, KMS's proposal made no reference to any
subsequent DCAA audit.
Following submission of KMS's proposal in February 2011,
the cost/price evaluation team (CPET) chair contacted DCAA
personnel to obtain an update on the status of KMS's
accounting system. AR, Tab 25, DCAA Email at 4. DCAA
responded that it had, in fact, performed an audit of
KMS's accounting system in 2010, and that a final report
had been issued in March 2011. Id. Notwithstanding the
failure of KMS's proposal to disclose any information
regarding the 2010 DCAA audit, the CPET chair's inquiries
revealed the following chronology of prior events.
From May 25 through July 2, 2010, DCAA conducted an audit
of KMS's cost accounting system during which DCAA
identified multiple aspects of KMS's system that it
characterized as "inadequate procedures" or
"deficiencies." AR, Tab 24, DCAA Audit Report No.
02171-2010C17740004 at 4, 29-62. Specifically, the audit
identified deficiencies and inadequacies related to KMS's
accumulation and segregation of costs, as well as to its
billing system for preparation of reimbursement claims.
Id. at 29-62.
On July 20, 2010, the agency conducted an exit interview
with KMS personnel, and provided a draft copy of its
"Results of Audit and Statement of Conditions and
Recommendations" to KMS at that time. Id. at 5. On October
12, 2010, KMS formally responded to that DCAA document.
Id. at 27-62. In its response, KMS concurred with many of
the identified deficiencies, but stated that it did not
concur, in whole or in part, with several others,
specifically including DCAA's findings with regard to
inadequate procedures for [deleted], improper [deleted],
and non-compliance with FAR provisions regarding
[deleted]. Id.
On March 7, 2011, DCAA issued its final report affirming
its earlier findings and stating that there are
"significant deficiencies that are considered to be
material weaknesses in KMS accounting system that could
result in misstated costs." Id. at 2. The report concluded
that "[KMS's] accounting system and billing procedures are
inadequate," and recommended "suspension of a percentage
of progress payments or reimbursement of costs." Id.
Based on the information provided by DCAA, including the
audit report and KMS's October 2010 response rejecting
several of DCAA's findings and recommendations, the CPET
concluded that KMS's accounting system was inadequate for
purposes of awarding a cost-reimbursement contract. CPET
Report Addendum at 3. In reaching that conclusion, the
CPET referred to the specifically identified DCAA findings
with which KMS had non-concurred, characterizing those as
"material deficiencies that go to the heart of an adequate
cost accounting system, [which] present significant cost
risk to the government, and are inappropriate for the
award of an ID/IQ contract for which cost-type task orders
are contemplated." Id.
KMS protests that the agency's determination of inadequacy
regarding KMS's cost accounting system was improper for
various reasons. We disagree.
KMS first maintains that the determination regarding the
adequacy of an offeror's cost accounting system is a
matter of an offeror's responsibility, see
McKissack+Delcan JV II, B-401973.2, B-401973.4, Jan. 13,
2010, 2010 CPD para. 28 at 6, and asserts that the agency
improperly treated the issue as a matter of proposal
acceptability. The agency responds that, although the
adequacy of an offeror's cost accounting system is
generally a matter of responsibility, where a solicitation
provides for evaluation of offerors' accounting systems
under a stated evaluation factor, the issue becomes a
matter of the proposal's acceptability. See A‑TEK, Inc.,
B-299557, May 3, 2007, 2007 CPD para. 89 at 3-4. The
agency maintains that the solicitation here provided for
evaluation of offerors' accounting systems under the cost
evaluation factor and, thus, converted the issue to a
matter of proposal acceptability.
We need not resolve whether the terms of this solicitation
converted the adequacy of KMS's accounting system from a
matter of responsibility to a matter of proposal
acceptability because, even assuming that they did not,
and that this issue properly constituted a matter of
responsibility as KMS asserts, the agency's actions
reasonably constituted a nonresponsibility determination.
As KMS asserts, questions regarding an offeror's
capability to perform a contract involve matters of
responsibility, and an agency's responsibility
determinations may be based on information received up to
the time of award. American Tech. & Analytical Servs.,
Inc., B‑282277.5, May 31, 2000, 2000 CPD para. 98 at 3.
However, an agency need not permit an offeror unlimited
opportunities to address responsibility concerns.
Sygnetics, Inc., B-404535.5, Aug. 25, 2011, 2011 CPD para.
164 at 5; Kilgore Flares Co., B‑292944 et al., Dec. 24,
2003, 2004 CPD para. 8 at 10-11. The determination of a
prospective contractor's responsibility rests within the
broad discretion of the contracting officer, who, in
making that decision, must necessarily rely on his or her
business judgment. We therefore will not question a
negative determination of responsibility unless the
determination lacks a reasonable basis. Oertzen & Co.
GmbH, B‑228537, Feb. 17, 1988, 88-1 CPD para. 158 at 3.
Referring to our decision in McKissack, supra, KMS
suggests that the agency should have "open[ed] a dialogue"
with KMS following the agency's discovery of the 2010 DCAA
audit. Protest, July 12, 2011, at 23-24. To the extent
KMS's protest relies on McKissack to maintain that an
agency must engage in a post-closing date dialogue with
offerors before making a nonresponsibilty determination,
it misreads our decision. In McKissack, we found that an
agency's nonresponsibility determination, which was based
on the inadequacy of the protester's accounting system,
did not have a reasonable basis. Accordingly, we sustained
the protest and noted that an agency "may open a dialogue"
to address responsibility concerns without such dialogue
necessarily constituting discussions. McKissack at 9.
While noting that such dialogue is permissible, we did not
conclude that it is required where an agency has an
otherwise reasonable basis for assessing the adequacy of
an offeror's accounting system.
Here, we believe the agency had a reasonable basis for
evaluating the adequacy of KMS's accounting system. Based
on our review of the record, we find no basis to question
the substantive support for the agency's determination
that KMS's accounting system was inadequate to perform a
cost reimbursement contract. As discussed above, the DCAA
audit specifically identified multiple deficiencies in
KMS's cost accounting system, including KMS's inadequate
procedures for [deleted], its improper [deleted], and its
non‑compliance with FAR provisions governing [deleted].
The CPET specifically considered these particular
deficiencies, as well as KMS's express non-concurrence
with those DCAA findings, in determining that KMS's system
was inadequate. In pursuing this protest, KMS has not
meaningfully challenged the substance of the DCAA's
findings of deficiencies and inadequacies. Accordingly,
even assuming that the agency's assessment constituted a
nonresponsibilty determination, we find no basis to
question that determination.
Alternatively, KMS asserts that the agency's reliance on
the final DCAA audit report issued in March 2011, along
with KMS's non-concurrence with several of the DCAA‑identified
deficiencies constituted improper reliance on "outdated
information." Protest, July 12, 2011, at 24. Specifically,
KMS refers to FAR sect. 9.105-1(b)(3), which states:
"Information on financial resources and performance
capability shall be obtained or updated on as current a
basis as is feasible up to the date of award." KMS asserts
that the agency failed to properly seek updated
information from KMS prior to determining that KMS's
accounting system was inadequate.
In the context of the facts presented here, we find KMS's
assertion that the 2010-11 data was "outdated" to be truly
remarkable. That is, KMS is asserting that it properly
directed the agency's attention to a 2006 DCAA audit for
purposes of complying with the solicitation's requirement
that KMS "provide evidence of [its] accounting system
being adequate," yet maintains that the agency's
consideration of the data from DCAA's 2010 audit
(including the final audit report issued less than 4
months before the agency's award determinations), was
improper because that information was "outdated." Protest,
July 12, 2011, at 23-25; KMS Comments, Aug. 1, 2011, at
27‑29. KMS's inconsistent positions regarding what
constitutes sufficiently recent information undermines its
assertion that the 2010-11 dated was "outdated," and we
reject KMS's assertion that the agency failed to comply
with FAR sect. 9.105-1(b)(3).
As noted above, an agency need not provide an offeror
unlimited opportunities to address responsibility
concerns. Sygnetics, Inc., supra; Kilgore Flares Co.,
supra. Here, we conclude that KMS was given ample
opportunity to provide meaningful, current, and updated
information to demonstrate the adequacy of its cost
accounting system, and that it failed to do so. We further
conclude that the agency reasonably considered the
substance of the 2011 DCAA report, along with KMS's
non‑concurrence with several of the DCAA-identified
deficiencies. We note that, in pursuing this protest, KMS
has not meaningfully challenged the substantive bases
underlying the DCAA's determination that KMS's accounting
system contained deficiencies and inadequacies. On this
record, we find no merit in KMS's assertion that the
agency improperly determined that KMS's cost accounting
system was inadequate. Accordingly, we find that the
agency reasonably rejected KMS's proposal. (KMS
Solutions, LLC, B-405323.2; B-405323.3, October 6,
2011) (pdf)
We first note that FTA's rejection of
PMO-JV's proposal due to evaluated problems in its
accounting system concerns a matter of a prospective
contractor's responsibility, not technical acceptability.
See Pacificon Prods., Inc., B-196371, July 22, 1980, 80‑2
CPD para. 58 at 4. In this regard, Federal Acquisition
Regulation (FAR) sect. 9.104(e) provides that "to be
determined responsible, a prospective contractor must . .
. have the necessary organization, experience, accounting
and operational controls, and technical skills, or the
ability to obtain them." FAR sect. 16.301-3(a)(1) states
that a cost-reimbursement contract may only be used when a
contractor's accounting system is adequate for determining
costs applicable to the contract.
Responsibility is to be determined based on any
information received by the agency up to the time award is
proposed to be made. American Tech. & Analytical Servs.,
Inc., B-282277.5, May 31, 2000, 2000 CPD para. 98 at 3. In
this regard, FAR sect. 9.105-1(b)(3) requires that
information on financial resources and performance
capability shall be obtained or updated on as current a
basis is as feasible up to the date of award. The
determination of a prospective contractor's responsibility
rests within the broad discretion of the contracting
officer, who, in making that decision, must necessarily
rely on his or her business judgment. We therefore will
not question a negative determination of responsibility
unless the determination lacked any reasonable basis.
Oertzen & Co. GmbH, B-228537, Feb. 17, 1988, 88-1 CPD para.
158 at 3. In this respect, while a contracting officer has
significant discretion in this area, a negative
responsibility determination will not be found to be
reasonable where it is based primarily on unreasonable or
unsupported conclusions. Decker and Co.;
Baurenovierungsgesellschaft, m.b.H., B‑220807 et al., Jan.
28, 1986, 86-1 CPD para. 100 at 7. Moreover, an agency's
reliance upon the advice of an auditor, such as the
Defense Contract Audit Agency, does not insulate the
agency from responsibility for error on the part of that
advisor. See ASRC Research & Tech. Solutions, LLC,
B‑400217, B-400217.2, Aug. 21, 2008, 2008 CPD para. 202 at
11 n.12.
As noted, FTA now asserts that PMO-JV's accounting system
is inadequate because PMO-JV's failure to submit a unique
indirect rate for the joint venture violates CAS 401. CAS
401 states:
(a) A contractor's practices
used in estimating costs in pricing a proposal shall be
consistent with his cost accounting practices used in
accumulating and reporting costs.
(b) A contractor's cost accounting practices used in
accumulating and reporting actual costs for a contract
shall be consistent with his practices used in
estimating costs in pricing the related proposal.
(c) The grouping of homogeneous costs in estimates
prepared for proposal purposes shall not per se be
deemed an inconsistent application of cost accounting
practices under paragraphs (a) and (b) of this section
when such costs are accumulated and reported in greater
detail on an actual cost basis during contract
performance.
48 C.F.R. sect. 9904.401-40 (2009). That is, CAS 401
requires a contractor's accounting practices in
estimating costs for a proposal to be consistent with
cost accounting practices used by the contractor in
accumulating and reporting costs. 48 C.F.R. sect.
9904.401-20. This requirement is imposed because "[c]onsistency
in the application of cost accounting practices is
necessary to enhance the likelihood that comparable
transactions are treated alike," so that, among other
things, there is "financial control over costs during
contract performance." Id.
FTA has provided a
memorandum from BMC in support of its argument that PMO‑JV's
failure to submit a unique indirect rate for the joint
venture violates CAS 401, which states that "the
contractor's proposal did not comply with CAS 401
as the contractor's proposal failed to identify a unique
rate structure, for the [joint venture] which an
independent and professionally operated organization would
have established in the regular course of doing business.
. . . The CAS/FAR noncompliance issue is not the number of
indirect rates," but rather PMO-JV's "failure to identify
its own rate structure for allocating costs to
Government contracts." BMC Memorandum (Dec. 16, 2009)
at 2.
However, CAS 401 is clearly inapplicable to PMO-JV because
FTA has conceded that PMO-JV is a small business concern.
AR, Tab 5, Contracting Officer Determination and Findings,
Source Selection Decision, at 3. The applicable
regulation, 48 C.F.R. sect. 9903.201-1(b)(3), states: "The
following categories of contracts and subcontracts are
exempt from all CAS requirements: (3) Contracts and
subcontracts with small businesses." The agency
nevertheless argues that "if the current award is $7.5
million or more the award is CAS covered. . . . Even if
the proposer would otherwise be entitled to claim
exemption from CAS as a small business, the [$7.5 million]
trigger applies and the award would be CAS covered."
This argument represents a misunderstanding of the CAS
regulations. The "trigger" relied upon by FTA is set forth
in 48 C.F.R. sect. 9903.201(b)(7), which exempts "from all
CAS requirements" "[c]ontracts or subcontracts of less
than $7.5 million, provided that, at the time of award,
the business unit of the contractor or subcontractor is
not currently performing any CAS-covered contracts or
subcontracts valued at $7.5 million or greater." That is,
as indicated by the provision itself, this section is
another exemption from all CAS requirements, not a
rationale for ignoring the small business exemption. Since
PMO‑JV is a small business for which CAS does not apply,
the agency's rationale for excluding PMO-JV on the basis
of CAS 401 is unreasonable.
In any case, except for the conclusory statements made by
BMC quoted above, neither FTA nor BMC has provided any
analysis or legal authority as to why the PMO-JV indirect
rate structure, which adopts the individual overhead rates
of the joint venture partners for PMO-JV's own use and
describes how the rates will be applied, violates CAS 401.
Nor is it apparent to our Office why this would violate
CAS 401, given that FTA and BMC have not explained why the
particular overhead rate structure proposed by PMO-JV
would lead to an inconsistency in the application of cost
accounting practices or a loss of financial control over
costs during contract performance. In this regard, it is
notable that BMC's audit report and FTA's determination
and findings supporting the rejection of PMO-JV's proposal
because of its unacceptable accounting system did not make
any mention of a CAS 401 violation. Moreover, we have
found no other authority that explicitly prohibits PMO-JV's
proposed rate structure.
Finally, the agency improperly failed to consider the
"weighted average" overhead rate that combined the various
overhead rates of the joint venture partners, which the
contracting officer requested PMO-JV to submit a month
prior to rejecting PMO‑JV's proposal. As noted above, this
is a matter that concerns PMO-JV's responsibility. An
agency can and should reverse a previous
non-responsibility determination based on additional
information brought to its attention prior to award. Henry
Spen & Co., Inc., B‑183164, Jan. 27, 1976, 76-1 CPD para.
46 at 4. In this regard, where an agency requests
information pertaining to an offeror's responsibility, it
is required to reasonably consider this information if
there is sufficient time to do so prior to making award.
See Tomko, Inc., B-210023.2, B‑212217, Feb. 13, 1984, 84-1
CPD para. 202 at 3-4. While the agency has not responded
to this protest basis, it may be that the agency believed
considering this information would constitute discussions
that would require opening discussions with all
competitive range offerors. However, communicating with an
offeror concerning its responsibility, that is, addressing
agency concerns about the offeror's ability to perform, do
not constitute discussions, so long as the offeror does
not change its proposed cost or otherwise materially
modify its proposal. See Luhr Brothers, Inc.--Recon.,
B‑248423.2, Nov. 9, 1992, 92-2 CPD para. 328 at 3-4. It
appears that considering and accepting a weighted average
overhead rate would not constitute discussions because
this would only involve a change to PMO-JV's accounting
system, not its cost proposal.
While the agency acted properly in choosing to investigate
whether or not PMO-JV had an adequate accounting system to
support this cost-reimbursement contract, the FTA has not
provided on this record a reasonable explanation why PMO‑JV's
accounting system was unacceptable. FTA also unreasonably
failed to consider additional information pertaining to
this issue that it specifically requested from PMO-JV, and
we sustain the protest on these bases.
We recommend that FTA reevaluate PMO-JV's accounting
system to determine whether it is adequate. In so doing,
we note that if the agency has problems with PMO-JV's
accounting system, it may open a dialogue to resolve these
issues without such dialogue necessarily being considered
discussions, given that this is a matter relating to PMO-JV's
responsibility, so long as PMO-JV does not change its
proposed cost or otherwise materially modify its proposal.
If PMO-JV's accounting system is found adequate, the
agency should determine whether PMO-JV's proposal is
otherwise acceptable and in line for award, and if so
award should be made to that firm. If PMO-JV's accounting
system is found inadequate and its proposal rejected for
this reason, the matter, which involves the responsibility
of a small business concern, must be referred to the Small
Business Administration for a Certificate of Competency (COC)
determination. We also recommend that the agency reimburse
the protester for the reasonable costs of filing and
pursuing the protest, including reasonable attorneys'
fees. Bid Protest Regulations, 4 C.F.R. sect. 21.8(d)(1)
(2009). The protester's certified claims for cost,
detailing the time expended and costs incurred, must be
submitted directly to the agency within 60 days of
receiving this decision. 4 C.F.R. sect. 21.8(f)(1).
The protest is sustained. (PMO
Partnership Joint Venture, B-401973.3; B-401973.5,
January 14, 2010) (pdf)
We first note that FTA's rejection of
MD-JV's proposal due to evaluated problems in its
accounting system concerns a matter of a prospective
contractor's responsibility, not technical acceptability.
See Pacificon Productions, Inc., B-196371, July 22, 1980,
80-2 CPD para. 58 at 4. In this regard, Federal
Acquisition Regulation (FAR) sect. 9.104(e) provides that
"to be determined responsible, a prospective contractor
must . . . have the necessary organization, experience,
accounting and operational controls, and technical skills,
or the ability to obtain them." FAR sect. 16.301-3(a)(1)
requires that cost-reimbursement contracts are only used
when a contractor's accounting system is adequate for
determining costs applicable to the contract.
Responsibility is to be determined based on any
information received by the agency up to the time award is
proposed to be made. FAR sect. 9.105-1(b)(3); American
Tech. & Analytical Servs., Inc., B-282277.5, May 31, 2000,
2000 CPD para. 98 at 3. The determination of a prospective
contractor's responsibility rests within the broad
discretion of the contracting officer, who, in making that
decision, must necessarily rely on his or her business
judgment. We therefore will not question a negative
determination of responsibility unless the determination
lacked any reasonable basis. Oertzen & Co. GmbH, B-228537,
Feb. 17, 1988, 88-1 CPD para. 158 at 3. In this respect,
while a contracting officer has significant discretion in
this area, a negative responsibility determination will
not be found to be reasonable where it is based primarily
on unreasonable or unsupported conclusions.[8] Decker and
Co.; Baurenovierungsgesellschaft, m.b.H., B‑220807 et al.,
Jan. 28, 1986, 86-1 CPD para. 100 at 7. Moreover, an
agency's reliance upon the advice of DCAA does not
insulate the agency from responsibility for error on the
part of DCAA. See ASRC Research & Tech. Solutions, LLC,
B-400217, B-400217.2, Aug. 21, 2008, 2008 CPD para. 202 at
11 n.12.
As noted, during the development of this protest, FTA has
abandoned many of the reasons it previously advanced
regarding why it believed MD-JV's accounting system was
inadequate. FTA now asserts that MD-JV's accounting system
is inadequate because MD-JV's failure to submit a unique
indirect rate for the joint venture violates CAS 401.
CAS 401 states:
(a) A contractor's practices
used in estimating costs in pricing a proposal shall be
consistent with his cost accounting practices used in
accumulating and reporting costs.
(b) A contractor's cost accounting practices used in
accumulating and reporting actual costs for a contract
shall be consistent with his practices used in
estimating costs in pricing the related proposal.
(c) The grouping of homogeneous costs in estimates
prepared for proposal purposes shall not per se be
deemed an inconsistent application of cost accounting
practices under paragraphs (a) and (b) of this section
when such costs are accumulated and reported in greater
detail on an actual cost basis during contract
performance.
48 C.F.R. sect. 9904.401-40 (2009). That is, CAS 401
requires a contractor's accounting practices in
estimating costs for a proposal to be consistent with
cost accounting practices used by the contractor in
accumulating and reporting costs. 48 C.F.R. sect.
9904.401-20. This requirement is imposed because "[c]onsistency
in the application of cost accounting practices is
necessary to enhance the likelihood that comparable
transactions are treated alike," so that, among other
things, there is "financial control over costs during
contract performance." Id.
FTA has provided a DCAA
memorandum from the Branch Manager of DCAA's Reston,
Virginia branch office in support of its argument that
MD-JV's failure to submit a unique indirect rate for the
joint venture violates CAS 401. DCAA simply states that
"the contractor's proposal did not comply with CAS 401
because the contractor's proposal did not contain a unique
rate structure, which an independent and professional
operated organization would have in the regular course of
business. . . . The CAS/FAR noncompliance issue is not the
number of indirect rates," but rather that "MD-JV does not
have its own indirect rate structure for allocating costs
to Government contracts." DCAA Memorandum (Dec. 15, 2009)
at 2.
Except for the foregoing conclusory statements, neither
FTA nor DCAA has provided any analysis or legal authority
as to why the MD-JV indirect rate structure, which adopts
the individual overhead rates of the joint venture
partners for MD-JV's own use and describes how the rates
will be applied, violates CAS 401. Nor is it apparent to
our Office why this would violate CAS 401, given that
neither agency has explained why the particular dual
overhead rate structure proposed by MD-JV would lead to an
inconsistency in the application of cost accounting
practices or a loss of financial control over costs during
contract performance. In this regard, it is notable that
DCAA's audit report and FTA's determination and findings
supporting the rejection of MD-JV's proposal because of
its unacceptable accounting system did not make any
mention of a CAS 401 violation. Moreover, we have found no
other authority that prohibits MD-JV's proposed dual
overhead rate structure.
While the agency acted properly in choosing to investigate
whether or not MD-JV had an adequate accounting system to
support this cost-reimbursement contract, FTA has not
provided on this record a reasonable explanation why
MD‑JV's accounting system was unacceptable, and we sustain
the protest on this basis.
We recommend that FTA reevaluate MD-JV's accounting system
to determine whether it is adequate. In so doing, we note
that if the agency has problems with MD-JV's accounting
system, it may open a dialogue to resolve these issues
without such dialogue necessarily being considered
discussions, given that this is a matter relating to
MD-JV's responsibility, so long as MD-JV does not change
its proposed cost or otherwise materially modify its
proposal. If MD-JV's accounting system is found adequate,
the agency should determine whether MD-JV's proposal is
otherwise in line for award and if so award should be made
to that firm. We also recommend that the agency reimburse
the protester for the reasonable costs of filing and
pursuing the protest, including reasonable attorneys'
fees. Bid Protest Regulations, 4 C.F.R. sect.
21.8(d)(1)(2009). The protester's certified claims for
cost, detailing the time expended and costs incurred, must
be submitted directly to the agency within 60 days of
receiving this decision. 4 C.F.R. sect. 21.8(f)(1).
The protest is sustained. (McKissack+Delcan
JV II, B-401973.2; B-401973.4, January 13, 2010) (pdf)
The
evaluation here was reasonable. The RFP unequivocally
required offerors to have DCAA or other federal audit
agency verification that the firm’s accounting system had
been audited and determined adequate for determining costs
applicable to the solicited work in accordance with FAR
sect. 16.301-3(a)(1). Contact with DCAA revealed that A-TEK
did not have any cost-reimbursement contracts in place;
had never been audited by DCAA; and had never been subject
to a pre-award survey of its accounting system. Further,
A-TEK’s submission of provisional rates was not relevant
because it lacked any existing cost-type contracts. Agency
Report, exh. D, at 3. Further, while the Deltek software
is widely used by companies with adequate accounting
systems, use of the software alone did not constitute
verification that A‑TEK’s accounting system had been
audited and verified as adequate. Id. With regard to A‑TEK’s
other contracts, GSA learned that those contracts
contained provisions that specifically prohibited the firm
from submitting a proposal for a cost‑reimbursement-type
task order because it had not had its accounting system
audited and deemed adequate for those contracts. Id. at
3-4. While A-TEK also submitted a letter from its
accountant, the agency found that it was insufficient to
meet the RFP’s requirements because it was not from a
federal audit agency, it clearly stated that the
accountant had not audited A-TEK’s accounting system, and
it failed to state that A-TEK’s system had been deemed
adequate for this contract. In short, A-TEK failed to
provide any information that satisfied the RFP
requirement. Based on A-TEK’s failure to provide the
required information, the agency reasonably concluded that
the firm lacked a properly audited accounting system, and
thus reasonably rejected the firm’s proposal. (A-TEK,
Inc., B-299557, May 3, 2007) (pdf) |
