THIS OPINION WAS ISSUED IN REDACTED FORM ON JUNE 22, 1993. A SECOND REDACTED OPINION IS BEING RELEASED TO THE PUBLIC ON AUGUST 20, 1993 GRANTED: May 14, 1993 GSBCA 12408-C(12322-P) XEROX CORPORATION, Protester, v. GOVERNMENT PRINTING OFFICE, and DEPARTMENT OF DEFENSE, Respondents. Frederick W. Claybrook, Jr., James J. Regan, Stephanie B. N. Renzi, Devon Engel, and John E. McCarthy, Jr., of Crowell & Moring, Washington, DC; and Harry C. Orenstein and Robert J. Patton of Xerox Corporation, McLean, VA, counsel for Protester. Drew Spalding, Thomas Kelly, Roy E. Potter, and Kerry L. Miller, Office of the General Counsel, Government Printing Office, Washington, DC, counsel for Respondent Government Printing Office. Clarence D. Long, III, and Richard P. Castiglia, Office of the General Counsel, Department of the Air Force, Washington, DC, counsel for Respondent Department of Defense. Before Board Judges DEVINE, WILLIAMS, and GOODMAN. WILLIAMS, Board Judge. On April 28, 1993, Xerox Corporation (Xerox) filed a consent motion for an award of its bid and proposal costs incurred in responding to solicitation number 902-S issued by the Government Printing Office (GPO) on behalf of the Air Force. Respondents have admitted a violation of regulation and do not oppose this motion. Findings of Fact On May 20, 1992, GPO issued solicitation number 902-S on behalf of the Air Force for a requirements contract providing services to satisfy technical and administrative information publishing needs throughout the Department of Defense. On February 17, 1993, GPO announced that, at the request of the Department of Defense, the 902-S solicitation was canceled. By protest of March 3, 1993, Xerox complained to the Board that the 902-S solicitation was issued, continued, and canceled in violation of procurement law and regulation because the Government failed to perform required acquisition planning prior to issuing the 902-S solicitation; the Government lacked a definite intent to award a contract, both at the outset and throughout the procurement process; the Government failed to cancel earlier than it did when its requirements substantially changed; the Government failed to obtain approval from its central printing authority prior to contracting and repeatedly throughout the contracting process; the Government failed to treat bidders fairly and equitably; and the contracting officer failed to exercise any discretion in making the determination to cancel. Xerox requested, inter alia, recovery of approximately $4,700,000 in proposal costs and recovery of its protest costs. The Department of Defense was joined to this protest as a party respondent by Board order dated March 23, 1993. On March 24, 1993, Xerox filed an amended complaint adding allegations that the Department of Defense failed to obtain proper approvals and to provide proper notification to Congress; the Government failed to provide a realistic estimate of the total quantity of services under the 902-S solicitation; the Government failed to notify prospective offerors of its decision to change the 902-S solicitation; and the Government failed to maintain adequate internal controls over the 902-S solicitation. By settlement agreement dated April 2, 1993, respondents agreed to pay Xerox the sum of $2,000,000 in lost bid and proposal costs to resolve all of the issues in the protest. On April 5, 1993, the Government retained Grant Thornton (GT) to assist it in reaching a settlement with Xerox regarding the canceled 902-S procurement. The parties submitted both the GT report as well as the underlying documentation to the Board in this case. GT performed two days of field work and issued its report on April 7, 1993. Given the time constraints in the project as well as the volume of information provided by Xerox in support of its bid and proposal preparation claim, GT used a statistical sampling approach to conduct its analysis. Using this approach, GT concluded as follows: 1. The Direct Labor charges of for the GT relevant timeframe were supported by the documentation provided to us by Xerox; 2. The Non-Labor charges of for the GT relevant timeframe were supported by the documentation provided to us by Xerox; 3. Therefore, the total direct costs of for the GT relevant timeframe were supported by the documentation provided to us; 4. If the Xerox . . . actual indirect rates for fringe benefits ; labor overhead ; and C&M for fiscal year 1992 are to be applied to the aforementioned costs, then indirect costs of would be added to the direct costs of for a total of f o r t h e G T r e l e v a n t timeframe.[[foot #] 1] 5. In the event the latest Xerox . . . claimed indirect rates for labor overhead ; and C&M are to be applied to the direct costs of , then indirect costs of would be added for a total of for the GT relevant timeframe (Exhibit 10).[[foot #] 2] 6. Assuming application of the claimed indirect rates is appropriate, and referencing Exhibit 10, expanding the relevant timeframe to include the month of September 1992 would result in total direct costs of ; total indirect costs of ; for a total of $2,002,296 ----------- FOOTNOTE BEGINS --------- [foot #] 1 By letter dated April 15, 1993, Xerox explained that its actual 1992 rates of for fringe benefits and for labor overhead should be applied to Xerox' claim for proposal costs because they represented Xerox' actual costs for the 902-S procurement; respondents' counsel was satisfied with this explanation. Letter to Clarence D. Long, III, Esq., from John Iverson dated April 15, 1993; Consent Motion for Award of Costs, Exhibit F. [foot #] 2 As explained further in Xerox' letter of April 15, 1993, Consent Motion for Award of Costs, Exhibit F. ----------- FOOTNOTE ENDS ----------- for the expanded timeframe. Please note that our population for sampling purposes did not include September 1992 data. Consent Motion for Award of Costs, Exhibit G at 11-12. On April 21, 1993, the parties filed a joint motion to dismiss the protest, along with an executed settlement agreement. In the joint motion to dismiss, respondents stated in pertinent part: Respondent admits that it violated FAR 15.606(b)(4) by substantially changing its requirements on or about October 1, 1992, without canceling the 902-S Solicitation. This is substantiated by, inter alia, a September 28, 1992, Air Force memorandum that Respondent faced cancellation of the 902-S Solicitation and the Air Force's October 9, 1992, Management Plan, reflecting the already established intent of the Department of Defense to change the 902-S contract from a requirements contract to an indefinite delivery/indefinite quantity contract. Despite this violation of regulation, Respondent failed to instruct Xerox to discontinue its proposal preparation efforts and did not cancel the 902-S Solicitation until February 17, 1993. To resolve all of the issues in this protest, Respondent agrees to pay Xerox the sum of $2,000,000 in lost bid and proposal costs. Xerox will file a motion to recover these costs once this proceeding is dismissed without prejudice. Xerox waives its right to recover protest costs, including reasonable attorneys' fees. Respondent agrees that it will have no objection to Xerox's motion for costs consistent with this motion and waives the 20-day period prescribed by Board Rule 35 for responding to Xerox's motion for costs. Respondent hired Grant Thornton as an independent auditor to conduct a review of the bid and proposal costs incurred by Xerox in responding to the 902-S Solicitation. Respondent agrees, as confirmed by Grant Thornton, that Xerox has adequate substantiation for the incurrence of its bid and proposal costs and that the costs are reasonable. The Government's needs changed substantially over the course of the procurement. The Government has not resolicited its revised requirements, has no present intent to do so, and may not do so for some time, if ever. If it does so, the revised requirements that reflect the Government's actual minimum needs will likely be substantially different than those solicited under the 902-S Solicitation. As a result, it is presumed that the proposal efforts expended by Xerox in responding to the 902-S Solicitation have been wasted under the standard set out by the Board in Data/Ware Development, Inc., GSBCA No. 9945-C, 90-2 BCA 22,742 (1990). On April 27, 1993, the Board dismissed the protest without prejudice and on May 5, 1993, the dismissal was converted to one with prejudice. Discussion It is well settled that when this Board determines that an agency action which has been challenged in a protest violates statute, regulation, or the terms of a delegation of procurement authority, the Board "may further declare an appropriate interested party to be entitled to the costs of . . . bid and proposal preparation." 40 U.S.C. 759(f)(5)(C)(ii) (1988). However, "we do not award proposal preparation costs unless the Government has by violating statute or regulation caused the successful protester to incur such costs unnecessarily." Recognition Equipment, Inc., GSBCA 9408-C(9363-P), 1988 BPD 228, at 3, 89-1 BCA 21,281, at 107,351. Thus, in order to award bid and proposal costs, this Board must find that a violation of statute, regulation, or a delegation of procurement authority occurred, that protester's bid and proposal costs were wasted or rendered unnecessary by virtue of the violation, and that the costs claimed are accurate and reasonable. In the instant case, these requirements have been met. First, the Board reviewed the documents which formed the basis of the agency's admission of a violation, and accepts the stipulation of the parties that the requisite violation occurred. Second, we accept the Government's counsel's representation that the Government has no present intent to resolicit its revised needs and may not do so for some time, if ever. We further accept their representation that if there is a resolicitation, the revised requirements will likely be substantially different than those solicited under the 902-S solicitation. See Joint Motion to Dismiss 9. Turning to the final element we must consider in determining whether to award costs, the reasonableness of the costs claimed, we conclude that the costs claimed were actually incurred on the 902-S project and were reasonable. In reaching this conclusion, we have independently reviewed documentation supporting these costs submitted by Xerox, as well as the GT report. Decision Protester's unopposed motion for its award of bid and proposal costs in the amount of $2,000,000 is GRANTED. This award is to be paid, without interest, from the permanent indefinite judgment fund, 31 U.S.C. 1304 (1982). 40 U.S.C. 759(f)(5)(C). _____________________________ MARY ELLEN COSTER WILLIAMS Board Judge We concur: ____________________________ ____________________________ DONALD W. DEVINE ALLAN H. GOODMAN Board Judge Board Judge