Link: GAO Opinion
Agency: Department of the Army
Disposition: Protest denied.
Keywords: Contractor Responsibility
General Counsel P.C. Highlight: In making a negative responsibility determination, a contracting officer is vested with a wide degree of discretion and, of necessity, must rely upon his or her business judgment in exercising that discretion. Although the determination must be factually supported and made in good faith, the ultimate decision appropriately is left to the agency, since it must bear the effects of any difficulties experienced in obtaining the required performance.
M. Erdal Kamisli Co. Ltd. (ERKA Co., Ltd.) (ERKA) protests the rejection of its proposal and the award of contracts to five other firms, under a request for proposals (RFP), issued by the Department of the Army, for real property repair, maintenance, construction, and related services.
The RFP provided for multiple awards of indefinite-delivery/indefinite-quantity (ID/IQ), task order contracts for real property repair and maintenance, environmental work, force protection, and construction services. The RFP included detailed specifications and technical requirements for contractors and required contractors to establish and maintain effective quality control systems, comply with safety and occupational health requirements, and adhere to the project schedule. With regard to the experience factor, the RFP instructed offerors to identify up to 10 projects that demonstrate the extent of their relevant experience. The RFP provided that these projects would also be evaluated under the past performance factor. The agency conducted discussions and informed ERKA that, among other things, the agency found an unsatisfactory level of risk arising from the firm’s performance of one project that was terminated for default. The agency asked ERKA to provide any information that would mitigate this risk and describe steps taken to address the issues that led to the contract termination. ERKA responded that the contract should not have been terminated for default because of excusable delays that were not attributable to ERKA and that it was only a “junior member” of the joint venture contractor.
The CO established a second competitive range that included the proposals of five offerors but not ERKA’s. After an initial protest the agency decided to include ERKA’s proposal in the revised competitive range. The agency conducted a second round of discussions and informed ERKA that ERKA was being given another opportunity to address its past performance issues. In response ERKA again stated that its recent past performance, including projects in Africa, Iraq, and Romania, demonstrated its commitment to providing timely, quality work. With respect to the defaulted contract, ERKA submitted the identical explanation it had provided during the first round of discussions. Again, ERKA’s response did not change the agency’s assessment that the firm’s past performance history presented an unsatisfactory performance risk or change its marginal past performance rating.
As part of her source selection decision, the CO evaluated the responsibility of the competitive range offerors. She considered, among other things, the standards for responsible, prospective contractors specified in the Federal Acquisition Regulation (FAR), including whether contractors could comply with the required delivery schedule and had a satisfactory performance record. Based primarily on ERKA’s past performance record, the CO determined that ERKA’s proposal represented a high performance risk and that the contractor was not responsible, and therefore not eligible to receive award.
ERKA complains that the CO’s negative determination of ERKA’s responsibility ignored the firm’s positive performance history on projects in Romania, Iraq, and Africa. ERKA also argues that it was improper for the agency to consider the default termination of a contract because the matter is currently under appeal to the ASBCA. Moreover, ERKA asserts that it should not be held accountable for this contract, because it was only a junior member of the joint venture holding that contract. GAO states that in making a negative responsibility determination, a contracting officer is vested with a wide degree of discretion and, of necessity, must rely upon his or her business judgment in exercising that discretion. Although the determination must be factually supported and made in good faith, the ultimate decision appropriately is left to the agency, since it must bear the effects of any difficulties experienced in obtaining the required performance. For these reasons, GAO generally will not question a negative determination of responsibility unless the protester can demonstrate bad faith on the part of the agency or a lack of any reasonable basis for the determination. GAO’s review is based on the information available to the contracting officer at the time the determination was made.
Here, the CO’s negative determination of ERKA’s responsibility was reasonable. The record shows the CO’s consideration of all ERKA’s past performance and supports her determination that ERKA had performance problems under at least four construction contracts for requirements that were similar to those solicited here. With respect to the specified contract that was terminated for default, for example, the contractor’s performance was found unsatisfactory with regard to quality control, timeliness, cooperation and responsiveness, resource management, jobsite supervision, non-payment of subcontractors, site cleanup, and compliance with safety standards. The record also shows that with respect to other contracts ERKA was issued numerous non-compliance reports. As described above, the protester had several opportunities to address its performance of the defaulted contract or to explain what efforts the firm would take to mitigate future performance risks. ERKA’s responses to the agency’s discussions, however, neither demonstrate why it should not be held responsible for the default termination nor provide any statement as to how the firm would mitigate future performance risk to the agency.
With respect to the CO’s consideration of the specified contract, GAO disagrees with ERKA that the agency could not properly consider this termination in its responsibility determination because the matter has been appealed to the ASBCA. An agency may properly rely upon its reasonable perception of a contractor’s inadequate performance even where the contractor disputes the agency’s position. Furthermore, GAO disagrees with ERKA that the agency could not consider the protester’s performance as a joint venture. In this regard, the record does not support ERKA’s assertion that it was only a junior venture partner. Rather, the firm’s joint venture agreement for this project shows that ERKA was a 50% partner at the time of contract award. The protest is denied.