Daisung Company, B-294142, August 20, 2004

B-294142 Aug 20, 2004 Jump To VIEW DECISION DOWNLOADS RELATED PAGES GAO CONTACTS Highlights Daisung Company protests the determination that it was not a responsible prospective contractor due to an unsatisfactory record of integrity and inadequate operational controls, under request for proposals (RFP) No. DABP01-03-R-0061, issued by the Department of the Army, Army Contracting Command, Korea, for inspection, cleaning and renovation of government-owned mattresses and box springs. The Army determined that Daisung was nonresponsible, and rejected its offer, based on Army Audit Agency (AAA) and Army Criminal Investigation Division (CID) findings. We deny the protest. View Decision B-294142, Daisung Company, August 20, 2004 Decision Matter of: Daisung Company File: B-294142 Date: August 20, 2004 Robert K. Tompkins, Esq. and Michael J. Nardotti, Jr., Esq., Patton Boggs, and Byoung Kook Min, Esq., First Law Offices Of Korea, for the protester. Maj. Gregg A. Engler, Department of the Army, for the agency. Jacqueline Maeder, Esq., and John M. Melody, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision. DIGEST Contracting officer's determination that protester was not a responsible prospective contractor was reasonable where the determination was based on audit and criminal investigation that resulted in specific findings of improper conduct by protester under recent contract for same requirement. DECISION Daisung Company protests the determination that it was not a responsible prospective contractor due to an unsatisfactory record of integrity and inadequate operational controls, under request for proposals (RFP) No. DABP01-03-R-0061, issued by the Department of the Army, Army Contracting Command, Korea, for inspection, cleaning and renovation of government-owned mattresses and box springs. The Army determined that Daisung was nonresponsible, and rejected its offer, based on Army Audit Agency (AAA) and Army Criminal Investigation Division (CID) findings. We deny the protest. In February 2003, the AAA in Korea initiated a performance audit on Daisung under its contract for mattress renovation services. During an April 22 unscheduled visit to the protester's mattress repair facility, the auditors observed that Daisung was not fulfilling its renovation responsibilities. Agency Report (AR), Tab 5, Final CID Report, exh. 12, at 1, exh. 14, at 1; AR, Factual Summary, at 2-5. Specifically, while the contract required Daisung to "renovate" each mattress by inspecting the inside of the mattress, and, if necessary, removing and replacing the old felt material with new material, the auditors observed Daisung's workers simply replacing the old mattress covers with new covers, without inspecting or renovating the mattresses. To confirm these observations, the auditors examined a mattress the workers had presented to them as fully renovated, and found that the inside of the mattress was filled with old material that should have been replaced. AR, Tab 5, Final CID Report, exh. 14, at 1; AR, Factual Summary, at 3-4. The auditors found that only the mattress cover had been changed. AR, Tab 5, Final CID Report, exh. 14, at 1. Additionally, the auditors discovered that Daisung was renovating cheaper mattresses to look like more expensive mattresses and then improperly charging the agency the rate for the more expensive mattress renovation. AR, Factual Summary, at 4. Specifically, the price to renovate a twin "blue and white striped" mattress under contract line item number (CLIN) 9AA was approximately27 lower than the price to renovate a twin "yellow-flowered" mattress under CLIN 9AM. AR, Tab 5, Final CID Report, exh. 12, at 1. The auditors reported that Daisung was replacing the 9AA striped mattress covers with 9AM flowered covers, returning the 9AA striped mattresses to the units as 9AM flowered mattresses, and improperly charging the agency for the renovation at the higher 9AM price. The auditors noted that this improper activity was facilitated by the Daisung supervisor's picking up mattresses for renovation directly from individual Army units, rather than through the installation's property book office, as required under the contract. AR, Tab 5, Final CID Report, exh. 14, at 1. Additionally, the auditors found that the contracting officer had not been "monitoring the performance of the contract correctly, if at all," and that Daisung was "taking advantage" of this lack of government oversight. AR, Tab 5, Final CID Report, exh.12, at 1; AR, Factual Summary, at 4-5. On September 18, CID initiated a criminal investigation based on the information obtained from the AAA auditors. The CID agents collected sworn statements and physical evidence, which were found to substantiate Daisung's improper actions under the contract.