NVT Technologies, Inc., B-292302.3, October 20, 2003

B-292302.3: Oct 20, 2003

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Where the agency reasonably determined that the bonds were necessary to protect substantial and mission-critical infrastructure that will be entrusted by the agency to the contractor in order to perform the contract. NVT is a small business concern currently performing real property management services at an HHS facility in North Carolina. The agency has improperly bundled requirements for real property management services that are currently being performed by small businesses. The RFP was issued on an unrestricted basis on May 15. The amended closing date for receipt of initial proposals was July 29. Protest at 3. /1/ FAR Para. 7.107(e) states as follows: Substantial bundling is any bundling that results in a contract with an average annual value of $10 million or more.

NVT Technologies, Inc., B-292302.3, October 20, 2003

DIGEST

Attorneys

DECISION

NVT Technologies, Inc. protests the terms of request for proposals (RFP) No. 263-03-P(BC)-0044, issued by the Department of Health and Human Services (HHS) pursuant to Office of Management and Budget Circular A-76 and the Circular's Revised Supplemental Handbook, to determine whether it would be more economical to perform a broad range of real property management services in-house at five HHS facilities in the states of Maryland, North Carolina, and Montana, or to contract for these services under the referenced solicitation. NVT is a small business concern currently performing real property management services at an HHS facility in North Carolina. NVT argues that under this RFP, the agency has improperly bundled requirements for real property management services that are currently being performed by small businesses, like itself, and has imposed unreasonable bond requirements which unduly restrict small business participation in this procurement.

We deny the protest.

The RFP was issued on an unrestricted basis on May 15, 2003. Under the RFP, if a private-sector offeror successfully competed against the government's "most efficient organization," i.e., the government's in-house staffing plan, the agency would award a contract for a 2-year base period and three 1-year option periods. As relevant here, the RFP contained requirements for performance and payment bonds, with each bond having to be in an amount equal to 50 percent of the original contract price. The agency has estimated the annual acquisition value to be $100 million. Contracting Officer's Statement at 4. The amended closing date for receipt of initial proposals was July 29. NVT did not submit a proposal.

BUNDLING ISSUE

In its protest filed with our Office on July 29, NVT argued that the agency failed to justify its decision to bundle in accordance with the "substantial bundling" analysis required by Federal Acquisition Regulation (FAR) Sec. 7.107(e). Protest at 3. /1/

FAR Para. 7.107(e) states as follows:

Substantial bundling is any bundling that results in a contract with an average annual value of $10 million or more. When the proposed acquisition strategy involves substantial bundling, the acquisition strategy must-

(1) Identify the specific benefits anticipated to be derived from bundling;

(2) Include an assessment of the specific impediments to participation by small business concerns as contractors that result from bundling;

(3) Specify actions designed to maximize small business participation as contractors, including provisions that encourage small business teaming;

(4) Specify actions designed to maximize small business participation as subcontractors (including suppliers) at any tier under the contract or contracts that may be awarded to meet the requirements; and

(5) Include a specific determination that the anticipated benefits of the proposed bundled contract justify its use. /2/ On July 31, the agency sent to the protester a 5-page determination and findings document that was captioned "Documentation of Acquisition Strategy Relating to Substantial Bundling as Required by FAR [Sec.] 7.107(e)." In this document, the agency addressed each provision of FAR Sec. 7.107(e), as set forth above. (This document was executed in May 2003, a few days after the RFP was issued; this document was signed by the contracting officer, the HHS small business specialist,
and the Small Business Administration procurement center
representative.) By letter dated July 31, the protester advised our
Office that the agency "ha[d] satisfied NVT's Document Production
Request through the submission of documents on this date." Letter
from Protester to GAO, July 31, 2003.

On August 29, the agency filed its administrative report, which
included a copy of the May 2003 substantial bundling analysis document
previously provided to NVT on July 31. The agency pointed out that
contrary to NVT's position, the agency did in fact comply with FAR
Sec. 7.107(e) by performing a substantial bundling analysis. In its
comments on the agency's administrative report filed on
September 10, /3/ NVT, for the first time, challenged in a number of
respects the merits of the agency's May 2003 substantial bundling
analysis. This September 10 challenge, made more than 10 days after
NVT received on July 31 the agency's substantial bundling analysis
document, is untimely.

Our Bid Protest Regulations contain strict rules for the timely
submission of protests. Under these rules, a protest based on other
than alleged improprieties in a solicitation must be filed not later
than 10 calendar days after the protester knew, or should have known,
of the basis for protest, whichever is earlier. 4 C.F.R.
Sec. 21.2(a)(2) (2003). Our timeliness rules reflect the dual
requirements of giving parties a fair opportunity to present their
cases and resolving protests expeditiously without unduly disrupting
or delaying the procurement process. Dominion Aviation, Inc.--Recon.,
B-275419.4, Feb. 24, 1998, 98-1 CPD Para. 62 at 3. Here, NVT
acknowledged receipt on July 31 of the agency's document addressing
the regulatory requirements for a substantial bundling analysis.
However, since NVT did not challenge the merits of the agency's
substantial bundling analysis until more than 10 days after it
received the relevant document, we will not consider NVT's protest in
this regard.

In addition, in its September 10 comments, NVT argued for the first
time that the agency's bundled solicitation violates the Competition
in Contracting Act of 1984, 41 U.S.C. Sec. 253(a)(1) (2000), which
generally requires that solicitations permit full and open competition
and contain restrictive provisions and conditions only to the extent
necessary to satisfy the needs of the agency. We will not consider
this argument, based on an alleged solicitation impropriety, because
it was not timely raised prior to the July 29 amended closing date for
receipt of initial proposals. 4 C.F.R. Sec. 21.2(a)(1).

BOND REQUIREMENTS ISSUE

NVT argues that the agency abused its discretion by requiring
performance and payment bonds, with the penal sum of each bond having
to be in an amount equal to 50 percent of the contract price. NVT
maintains that these bond requirements unduly restrict the ability of
a small business, like itself, to compete under this procurement.

An agency has the discretion to impose bond requirements in
appropriate circumstances as a necessary and proper means to secure
fulfillment of the contractor's obligations. While generally an
agency should not require bonds for other than construction contracts,
the FAR recognizes, and NVT acknowledges, Protest at 4, that FAR Sec.
28.103-2 permits the use of bonds for nonconstruction contracts when
it is necessary to protect the government's interests, such as where
government property is being provided to the contractor for use in
performing the contract. In reviewing the bond requirements contained
in a particular solicitation, we look only to see if they are
reasonably imposed. American Artisan Prods., Inc., B-292380,
July 30, 2003, 2003 CPD Para. 132 at 4. Here, we conclude that the
agency had a reasonable basis to impose bond requirements under this
RFP.

More specifically, the agency explains in its administrative report
that performance and payment bonds are necessary because the agency
will be entrusting a substantial amount of infrastructure to the
contractor and the continuous operation of this infrastructure is
critical to the agency's mission. Under the RFP, the contractor will
be responsible for the care and maintenance of major research
laboratories and critical care centers that must run 24 hours per day,
365 days per year. The contractor will be required to operate systems
that provide life support for patients and laboratory animals and that
protect research materials. For example, the RFP requires the
contractor to operate the National Institutes of Health (NIH) campus
in Bethesda, Maryland, which includes more than 70 buildings and
8 million gross square feet of building space on 300 acres; the
contractor will be required to continuously maintain utility plants,
clinical care centers, and research facilities. The RFP also requires
the contractor to maintain the Research Triangle Park, North Carolina
campus of the National Institute of Environmental Health Sciences
(NIEHS), which is a facility of over 1 million square feet on 504
acres; the contractor will be required to run the central utility
plant, a medical-pathological incinerator, and a hazardous waste
facility that supports not only the NIEHS, but also the Environmental
Protection Agency. The RFP further requires the contractor to operate
the Rocky Mountain Labs in Hamilton, Montana, which include over
30 buildings and 220,000 square feet of space on 33 acres; these labs
contain critical vaccine and biodefense research. In addition, the
RFP requires the contractor to maintain the NIH Animal Center in
Poolesville, Maryland, which is a 513-acre site used for animal and
quarantine studies. Finally, the RFP requires the contractor to
maintain the Gerontology Research Center at the Johns Hopkins Bayview
campus in Baltimore, Maryland, which includes approximately 220,000
gross square feet of space for science and clinical research
laboratories, animal holding and procedure rooms, and freezers for
long-term specimen storage. Memorandum of Law at 6.

In sum, the record shows that the agency imposed bond requirements
because the contractor will be responsible for maintaining substantial
and critical HHS facilities that are involved in highly sensitive
medical research and because a contractor's failure to properly
perform real property management services at these facilities would
seriously compromise the agency's mission. In these circumstances,
where NVT has not provided any meaningful rebuttal to the agency's
position, we have no basis to question the reasonableness of the
agency's determination to impose bond requirements.

To the extent NVT complains that these bond requirements, including
the penal sums, will effectively preclude small businesses, like
itself, from competing under this RFP as prime contractors, we point
out that although a bond requirement may restrict competition and may
even exclude some small businesses, that possibility alone, absent a
finding of unreasonableness, does not render a bond requirement
improper. American Artisan Prods., Inc., supra, at 5; see also J & J
Maint., Inc., B-239035, July 16, 1990, 90-2 CPD Para. 35 at 2-3
(GAO held that there was nothing inherently unreasonable in the
agency's determination to require a 100-percent performance bond where
continued performance of services essential to the operation of a
major installation was necessary).

Finally, our analysis of the bond requirements leads us to conclude
that NVT is not an interested party to raise other challenges to the
RFP. In several places in its comments, NVT effectively concedes that
it would not submit a proposal so long as the bond requirements
remained in the RFP. For example, NVT states that "while [it] was
disadvantaged by the consolidated nature of this procurement, it would
nonetheless have submitted a proposal had the penal sums on the bonds
been eliminated." Protester's Comments at 6. In other words, NVT
concedes that the bond requirements had to be eliminated in order for
the firm to compete under this RFP. In light of this concession and
our conclusion, as discussed above, that the bond requirements were
reasonably imposed, we conclude that NVT is not an interested party to
challenge any of the other terms of the RFP (e.g., terms involving the
applicable wage determination and an evaluation factor related to
small business subcontracting requirements) because NVT, absent the
elimination of the bond requirements, admits that it cannot compete as
prime contractor and, as a result, is not a prospective offeror under
this RFP. 4 C.F.R. Sec. 21.0(a).

The protest is denied.

/s/
Anthony H. Gamboa
General Counsel

1. In its July 29 protest, while NVT made other general allegations concerning bundling, NVT's allegation that the agency did not perform a substantial bundling analysis in accordance with regulatory requirements was the only specific bundling issue raised by the firm.

2. FAR Sec. 7.107(h) does not exempt A-76 competitions from the substantial bundling analysis required by FAR Sec. 7.107(e).

3. NVT requested, and our Office granted, a 1-day extension for the filing of comments.

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