Highlights
Kompania e Sigurimeve Eurosig Sh.a, of Pristina, Republic of Kosovo, protests the award of a contract to SIGMA Interalbanian Vienna Insurance Group J.S.C. Kosovo, also of Pristina, Republic of Kosovo, under request for proposals (RFP) No. SKV42017R0003, issued by the Department of State (DOS) for health insurance services. Eurosig asserts that the agency unreasonably found the company to be nonresponsible, and therefore ineligible for award.
We dismiss the protest in part and deny the protest in part.
Decision
Matter of: Kompania e Sigurimeve Eurosig Sh.a
File: B-414561.2; B-414561.4
Date: January 9, 2018
Agena Stratoberdha, for the protester.
Dennis J. Gallagher, Esq., Department of State, for the agency.
Noah B. Bleicher, Esq., and Peter H. Tran, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protest of delay in publicizing contract award on FedBizOpps website is dismissed as legally insufficient because delay in posting award notice is a procedural defect that does not affect the validity of the contract award.
2. Protest challenging agency’s negative responsibility determination is denied where protester fails to show that agency acted in bad faith or that determination was unreasonable in light of firm’s overall financial posture.
DECISION
Kompania e Sigurimeve Eurosig Sh.a, of Pristina, Republic of Kosovo, protests the award of a contract to SIGMA Interalbanian Vienna Insurance Group J.S.C. Kosovo, also of Pristina, Republic of Kosovo, under request for proposals (RFP) No. SKV42017R0003, issued by the Department of State (DOS) for health insurance services. Eurosig asserts that the agency unreasonably found the company to be nonresponsible, and therefore ineligible for award.
We dismiss the protest in part and deny the protest in part.
BACKGROUND
The agency issued the solicitation on January 19, 2017, seeking proposals for health insurance services for the locally hired employees of the U.S. mission in Kosovo. Agency Report (AR), Tab 2, RFP, at 1, § B.1. The RFP contemplated the award of a requirements contract under which the agency would issue fixed-price task orders, for a base year and four option years. Id. §§ B.2.2, B.2.8. Pursuant to the solicitation, the contract was to be awarded to the responsible offeror that submitted the lowest-priced, technically acceptable proposal. Id. § M.3.1.
As part of the discussion of how proposals would be evaluated, the RFP advised that the DOS would make a responsibility determination by analyzing whether the apparent successful offeror complied with the requirements of Federal Acquisition Regulation (FAR) subpart 9.1, Responsible Prospective Contractors, to include demonstrating:
Adequate financial resources or the ability to obtain them;
Ability to comply with the required performance period, taking into consideration all existing commercial and governmental business commitments;
Satisfactory record of integrity and business ethics;
Necessary organization, experience, and skills or the ability to obtain them;
Necessary equipment and facilities or the ability to obtain them; and
Be otherwise qualified and eligible to receive an award under applicable laws and regulations.
Id. § M.2. The RFP further instructed that, if requested by the contracting officer, the offeror was to provide a current statement of its financial condition, certified by a third party. Id. § L.9. The solicitation explained that DOS would use the information to determine the offeror’s financial responsibility and ability to perform under the contract. Id.
The financial statement was to include an income statement, a balance sheet, and a cash flow statement. RFP § L.9.
Seven offerors, including Eurosig, submitted proposals prior to the March 2 submission deadline. Contracting Officer’s Statement (COS) at 6. Thereafter, the agency established a competitive range and issued a discussion letter to Eurosig inviting a revised price proposal and requesting certified financial statements from the previous 2 years. AR, Tab 8, Discussion Letter, Mar. 30, 2017, at 1. In response, Eurosig submitted auditors’ reports from 2014 and 2015. See AR, Tab 10, Grant Thornton Audit Report, 2014, at 1-43; Tab 11, Deloitte Audit Report, 2015, at 1-41.
The contracting officer reviewed the audit reports and noted that the reports identified “operating losses and significant accounts receivable problems.” COS at 7. The contracting officer issued a second discussions letter to Eurosig, requesting, as follows:
Please provide the auditors[’] notes with a brief management discussion on the companies’ [sic] current financial performance and health. The management discussion memo should also address the large accumulated losses and an explanation for capital infusion required to meet the central Bank of Kosovo capital reserve requirements.
AR, Tab 12, Discussion Letter, June 7, 2017, at 1. By letter of June 13, Eurosig provided additional information about the company and its financial trends. Specifically, Eurosig asserted that it was the “leader in sales for all classes of insurance” in Kosovo in 2016. AR, Tab 13, Eurosig Response to Second Discussion Letter, at 1. The firm also explained that, in October 2016, the company was restructured and “new highly professional management [was] in place.” Id. In addition, the firm acknowledged that the Central Bank of Kosovo had requested a capital infusion of €1.8 million be added to Eurosig’s cash reserves, and that the company was planning to do so in installments. Id. at 2. The offeror also submitted statements from the “leading hospitals in Kosovo about Eurosig’s history of prompt claims settlement and efficient claims adjudication process.” Id.
Ultimately, due to concerns with Eurosig’s financial capacity and stability, the contracting officer determined that Eurosig was not a responsible offeror and, consequently, rated its lowest-priced proposal as unacceptable. COS at 7; AR, Tab 14, Award Notice Letter, at 1-2. On September 3, DOS awarded the contract to SIGMA Interalbanian, the responsible offeror that submitted the next lowest-priced proposal, for €3,454,750. AR, Tab 14, Award Notice Letter, at 1. Following receipt of a written debriefing, Eurosig protested to our Office. See AR, Tab 15, Eurosig Debriefing, at 1-2.
Eurosig’s total evaluated price for the insurance services was €2,369,056. AR, Tab 15, Eurosig Debriefing, at 1.
DISCUSSION
Eurosig protests the agency’s negative responsibility determination. The firm maintains that it is financially viable and a market leader in Kosovo. Protest at 3-4. According to Eurosig, the nonresponsibility determination was unreasonable because the company maintains “more than adequate reserves to pay its claims.” Id. at 4. Separately, Eurosig also protests the agency’s failure to timely publicize the contract award on the FedBizOpps website, the governmentwide point of entry. Protest at 5-6; Supp. Protest at 1-2.
First, we address the protester’s objection to the agency’s delay in publicizing the award to SIGMA. The record confirms that while DOS awarded the contract on September 3, the agency published its award notice on October 4, after Eurosig filed the instant protest. See Supp. Protest, encl. 1, FedBizOpps posting. Regardless, notwithstanding any delay in publicizing the award to SIGMA on FedBizOpps, Eurosig’s protest allegation fails to include sufficient information to establish the likelihood that the agency in this case violated applicable procurement laws or regulations in a way that affected the validity of its award decision.
Our Bid Protest Regulations require that a protest include a detailed statement of the legal and factual grounds for the protest, and that the grounds stated be legally sufficient. 4 C.F.R. § 21.1(c)(4), (f). These requirements contemplate that protesters will provide, at a minimum, either allegations or evidence sufficient, if uncontradicted, to establish the likelihood that the protester will prevail in its claim of improper agency action. See Midwest Tube Fabricators, Inc., B‑407166, B‑407167, Nov. 20, 2012, 2012 CPD ¶ 324 at 3. Here, Eurosig has failed to show how any lack of, or delay in, public notice affected the agency’s earlier award decision. In this respect, defects in post‑award notices (like defects in debriefings and related communications) are procedural matters that do not involve the validity of an award. Flexsteel Industries, Inc., B-254771, B‑254771.2, Jan. 18, 1994, 94-1 CPD ¶ 21 at 7; Defense Sys. Concepts, B-242755.2, July 1, 1991, 91-2 CPD ¶ 2 at 10; See also Office Design Grp., Inc.--Costs, B-413166.6, Nov. 17, 2016, 2016 CPD ¶ 336 at 3‑4. This protest ground therefore is dismissed without further action. See 4 C.F.R. § 21.5(f).
We note further that the agency’s September 13 award notice to Eurosig provided the firm with actual knowledge of the agency’s decision to award the contract to SIGMA, such that the protester was not prejudiced by any delay in posting the award on FedBizOpps. See Jensco Marine, Inc., B-278929.7, Feb. 11, 1999, 99-1 CPD ¶ 32 at 3‑4 (protester not prejudiced by lack of pre-award notice of contract award).
Next, we turn to the agency’s negative responsibility determination. Contracts may only be awarded to responsible prospective contractors. FAR § 9.103(a). In order to be found responsible, a firm must, among other things, affirmatively demonstrate that it has “adequate financial resources to perform the contract, or the ability to obtain them.” FAR §§ 9.104-1(a), 9.104-3(a); International Shipbuilding, Inc., B‑257071.2, Dec. 16, 1994, 94-2 CPD ¶ 245 at 5. Absent such a showing, the FAR requires the contracting officer to determine a firm nonresponsible. FAR § 9.103(b).
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. Torres Int’l, LLC, B‑404940, May 31, 2011, 2011 CPD ¶ 114 at 4. 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. Id. For these reasons, we 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. Bilfinger Berger AG Sede Secondaria Italiana, B-402496, May 13, 2010, 2010 CPD ¶ 125 at 3.
Here, we find that the contracting officer’s negative determination of Eurosig’s responsibility was reasonable and not made in bad faith. In this respect, as noted above, the contracting officer reviewed 2 years of financial audits, which documented “substantial losses” and “insufficient cash reserves.” COS at 2, 7. The contracting officer subsequently learned that Eurosig had been placed under the administration of the Central Bank of Kosovo (CBK) “around March 2017,” and that the principal reason was the “significant financial problems on [Eurosig’s] financial statements and the fact that they were not maintaining the minimum amount of capital on hand of 3.2 Million Euros.” Id. at 7-9. As acknowledged by Eurosig, the CBK administrator sought an initial capital infusion of €1.8 million, and the contracting officer highlights that Eurosig still has not shown evidence of reaching the €3.2 million in required capital. Id. at 9; AR, Tab 13, Eurosig Response to Second Discussion Letter, at 2.
In explaining the significance of a company being placed under CBK administration, the agency cites Kosovo law, which states that the CBK may place an insurer under provisional administration “to restore the insurer in a stable financial situation.” See AR, Tab 16, Kosovo Law 05L-45, at 55. When a company falls under CBK administration, an administrator takes over all management and operational decisions of the company. See id.
The contracting officer further explains that, “at some time in the future,” the CBK executive board will decide whether to extend the appointment of the administrator, remove Eurosig from CBK administration, or liquidate the company. COS at 9. Significantly, the contracting officer expresses concern that due to the “significant financial losses” that have been made public in Eurosig’s quarterly financial statements, the company is in danger of being shuttered by the CBK and having its assets liquidated. Id.
On this record, we have no basis to question the contracting officer’s determination that Eurosig was not a responsible offeror. As the agency explains, failure of a local health insurance provider would not only entail financial loss and administrative disruption to the government, but also delays and losses to the insured local employees and their dependents that may adversely affect their health care. See id. at 10. Eurosig’s record of recent financial losses and CBK administration justified the contracting officer’s concern as to the financial stability of the company. The contracting officer sought additional information from Eurosig. While the information submitted suggested a positive financial trend and that Eurosig had been successfully providing insurance for two hospitals, Eurosig’s response did not counter the contracting officer’s initial concerns regarding the financial stability of the firm or dispute that it was under CBK administration and that capital infusion was still to be provided. Ultimately, Eurosig’s disagreement with the agency’s assessment does not demonstrate that the contracting officer acted in bad faith or made an unreasonable responsibility determination. As such, the information described above reasonably supports the contracting officer’s determination that Eurosig could not be deemed responsible for award.
Moreover, in our review of negative responsibility determinations, we consider only whether the determination was reasonably based on the information available to the contracting officer at the time it was made. SeeAcquest Dev. LLC, B-287439, June 6, 2001, 2001 CPD ¶ 101 at 3. Contracting officers are generally given wide discretion in determining the amount of information that is required to assess an offeror’s responsibility. SeeTrailblazer Health Enters., LLC, B-407486.2, B-407486.3, Apr. 16, 2013, 2013 CPD ¶ 103 at 11, citingImpresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1334-35 (Fed. Cir. 2001). In this regard, while Eurosig maintains that it is on track to fulfill its obligations to CBK and be removed from CBK administration, and that the firm is profitable in 2017, the negative responsibility determination here is unobjectionable based on the information considered by the contracting officer at the time of his review. See Comments at 3; encl. 1, Quarterly Progress Report, at 1-5. More specifically, Eurosig’s future fate is uncertain; it may emerge from administration as a financially secure enterprise, or it may fail to resolve its financial difficulties and be placed in liquidation. See MOL at 12. An agency is not required to delay award indefinitely until an offeror cures the causes of its nonresponsibility. International Shipbuilding, Inc., supra, at 6.
We also find no merit to the protester’s claim that it was improper for the agency to even request the financial information from Eurosig or base its nonresponsibility determination on the financial information. See Protest at 2. First, as noted above, the FAR mandates that “[n]o purchase or award shall be made unless the contracting officer makes an affirmative determination of responsibility.” FAR § 9.103(b). Moreover, here, the solicitation expressly provided that the award would be made only to a responsible offeror, and the RFP outlined what the agency would consider in making its responsibility determination. RFP § M.2. Adequate financial resources was specifically identified in the solicitation. See id. As the agency highlights, the disruptions and health risks that a sudden failure of an insurer would entail justified requiring financial soundness and stability from the insurer. See MOL at 11. Given that the FAR and the RFP explicitly required the contracting officer to make a responsibility determination, and such determination was to contemplate an offeror’s financial resources, we find this line of Eurosig’s arguments to be wholly unpersuasive.
To the extent the protester, instead, complains about the propriety of the contracting officer’s request for financial audits, which was undertaken pursuant to section L of the solicitation, such objection amounts to a challenge to the plain language of the solicitation. See RFP § L.9. As such, to be timely, a protest on this basis should have been filed prior to the deadline for the submission of proposals. See 4 C.F.R. § 21.2(a)(1).
Simply put, a nonresponsibility determination is a matter where the contracting officer is vested with broad discretion in exercising his or her business judgment, and Eurosig has not shown that the contracting officer here abused that discretion or that his determination had no reasonable basis. SeeKilgore Flares Co., B-292944 et al., Dec. 24, 2003, 2004 CPD ¶ 8 at 6; Rotech Healthcare, Inc., B‑409020, B-409020.2, Jan. 10, 2014, 2014 CPD ¶ 28 at 11 (responsibility determinations are inherently judgmental). Accordingly, we deny this basis of Eurosig’s protest.
The protest is dismissed in part and denied in part.
Thomas H. Armstrong
General Counsel
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