AIU North America, Inc., B-283743.2, February 16, 2000

B-283743.2 Feb 16, 2000 Jump To VIEW DECISION DOWNLOADS RELATED PAGES GAO CONTACTS Highlights A firm protested a Department of State contract award for insurance, contending that State's technical evaluation was not consistent with stated evaluation factors. GAO held that State failed to comply with solicitation requirements in evaluating proposals. Accordingly, the protest was sustained, and GAO recommended that State: (1) reopen negotiations with the offers to permit submission of revised proposals; and (2) reimburse the protester for its protest costs. View Decision Matter of: AIU North America, Inc. File: B-283743.2 Date: February 16, 2000 DIGEST Attorneys DECISION AIU North America, Inc. protests the Department of State's (DOS) award of a contract to Ace International under solicitation No. S-OPRAQ-98-R-0040 to provide workers' compensation insurance coverage for certain DOS contractors. AIU protests various aspects of the agency's proposal evaluation, the final assessment that all proposals were technically equal, and the resulting award determination. We sustain the protest. BACKGROUND The Defense Base Act of 1941 (DBA), 42 U.S.C. Secs. 1651-1654 (1994), mandates a broad form of workers' compensation insurance coverage for non-U.S. government contractor personnel working on certain government contracts outside the United States. By regulation, DOS has extended the required coverage to virtually all service and construction contracts which require contractor employees to work abroad. 48 C.F.R. Sec. 628.305 (1998). In 1990, the DOS Office of Inspector General (OIG) issued a report reflecting an audit of DOS contractors' DBA insurance coverage. At that time, DOS contractors obtained DBA insurance independently, and their individual insurance rates varied because of differential factors such as contractor size, claims history, and work location. The OIG report concluded that DBA insurance costs could be significantly reduced if DOS awarded a blanket insurance contract to a single provider. Accordingly, DOS conducted a competition for a requirements contract under which an insurance company would guarantee uniform DBA insurance rates for all DOS contractors. Under that procurement, DOS awarded a contract to CIGNA Property and Casualty Insurance Company in May 1992; that contract was the predecessor to the contract at issue here. /1/ In 1997, the DOS OIG conducted a review of CIGNA's DBA contract. That review was conducted because "the cost of DBA insurance [under CIGNA's contract] had increased substantially . . . and Department [of State] officials had received complaints from construction contractors that the Department's DBA rates were no longer competitive." DOS OIG Report No. 97-PP-016, June 1997, at 1. /2/ The OIG reviewed the DOS contract procedures, as well as procedures used by the Department of Defense and the U.S. Agency for International Development--agencies that had similar DBA insurance requirements--and concluded: "we found that the [DOS] contracting officer had not monitored contractors' claims histories to determine whether trends exist and whether corrective actions are needed to reduce claims." /3/ Id. at 2. The OIG report contained two recommendations, the first of which stated: We recommend that the Office of Acquisition monitor claims under the Defense Base Act insurance contract to identify trends and initiate needed improvements. DOS OIG Report at 7. /4/ The DOS Office of Acquisition agreed with the OIG recommendations, and responded to the recommendation regarding monitoring DBA claims, stating: The [DOS] Office of Acquisition agrees with the OIG's recommendation to monitor claims under the Defense Base Act insurance contract. [The] Chief, Overseas Acquisition Branch will be assigned responsibility to establish a monitoring system to identify possible trends and develop appropriate improvements. DOS OIG Report, app. C, Memorandum from DOS Office of Acquisition to DOS OIG attach (April 25, 1997). The record shows that DOS did not, in fact, monitor the contract as it represented that it would. In responding to this protest, DOS states: "The Department . . . concedes that it has not implemented the recommendations of its Inspector General . . . that the workmen's compensation claims experience of particular Department contractors be scrutinized to see if corrective action . . . is needed." Agency Report at 30-31. On June 15, 1998, DOS issued the request for proposals (RFP) for the contract at issue here. That RFP provided for award of a fixed-price requirements contract for a 2-year base period with three 1-year option periods and stated that, in selecting an awardee, technical merit would be more important than cost/price. /5/ RFP Sec. M.2. The solicitation also contained reporting requirements which DOS describes as "substantially expanded" from the reporting requirements under CIGNA's predecessor contract. /6/ Agency Report at 7.