B-293105.18; B-293105.19, Greenleaf Construction Company, Inc., January 17, 2006

B-293105.18; B-293105.19, Greenleaf Construction Company, Inc., January 17, 2006 TITLE: B-293105.18; B-293105.19, Greenleaf Construction Company, Inc., January 17, 2006 BNUMBER: B-293105.18; B-293105.19 DATE: January 17, 2006 ******************************************************************************** B-293105.18; B-293105.19, Greenleaf Construction Company, Inc., January 17, 2006 DOCUMENT FOR PUBLIC RELEASE The decision issued on the date below was subject to a GAO Protective Order. This redacted version has been approved for public release. Decision Matter of: Greenleaf Construction Company, Inc. File: B-293105.18; B-293105.19 Date: January 17, 2006 Margaret A. Dillenburg, Esq.; Alexander Brittin, Esq.; and Jonathan D. Shaffer, Esq., Smith, Pachter, McWhorter & Allen, for the protester. James S. DelSordo, Esq., and Russell J. Gaspar, Esq., Cohen Mohr, for Chapman Law Firm Company, LPA, an intervenor. R. Rene Dupuy, Esq., Department of Housing and Urban Development, for the agency. David A. Ashen, Esq., and John M. Melody, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision. DIGEST 1. Department of Housing and Urban Development's evaluation of awardee's proposal for contract to provide single-family home management and marketing services was unreasonable where it was based on awardee's proposal of key personnel and an electronic monitoring system that awardee should have known--more than 2 months prior to final evaluation and award--would not be available, and awardee never advised agency of the material change in circumstances. 2. Protest is sustained where Department of Housing and Urban Development failed to reasonably consider or evaluate potential organizational conflict of interest arising due to the fact that the owner of the management and marketing (M&M) services contractor in Ohio will be receiving payments from the owner of the closing agent contractor for Ohio, the activities of which the M&M contractor will oversee. 3. Affirmative determination of awardee's financial responsibility was not reasonable where, despite knowing awardee had sold an affiliated company, contracting officer nevertheless based responsibility determination on financial capability assessment by Defense Contract Audit Agency that was based in significant measure on financial resources of company that had been sold. DECISION Greenleaf Construction Company, Inc. protests the Department of Housing and Urban Development's (HUD) award of a contract to Chapman Law Firm Company, LPA (CLF) under request for proposals (RFP) No. R-OPC-22505, for single-family home management and marketing (M&M) services. Greenleaf asserts that CLF materially misrepresented in its proposal the resources it would use in performing the contract, and that, in any case, award to CLF was precluded by an impermissible organizational conflict of interest (OCI). In addition, Greenleaf challenges HUD's affirmative determination of CLF's responsibility. We sustain the protest. BACKGROUND The solicitation, issued August 6, 2003, contemplated the award of indefinite-delivery, indefinite-quantity, fixed-unit-price contracts in 24 geographic regions for M&M services in connection with the disposition of single-family homes. These properties are acquired or retained in custody by HUD pursuant to the Federal Housing Authority's (FHA) role in administering the single-family home mortgage insurance program. FHA insures approved lenders against the risk of loss on loans extended to home buyers; in the event of a default on a loan insured by FHA, the lender acquires title to the property through foreclosure or other procedure, and then conveys the title to HUD in exchange for the payment of insurance benefits. As a result of this program, HUD has a sizable inventory of single-family homes that it needs to maintain and dispose of through sale. The solicitation was issued to meet HUD's requirement to maintain and sell these properties. At issue in this protest is the contract for the properties in the Ohio/Michigan area (Philadelphia Home Ownership Center area 2, or P-2). For this area (as for 13 other areas), the RFP provided that the award of the contract would follow a cascading procedure under which any award would first be made on the basis of competition considering only eligible small business concerns. If adequate competition between small business concerns did not exist--that is, if there were not "[a]t least two competitive offers . . .