Federal Contract Law | New rules throw a wrench into FSS buys

Although it is seems to be hitting a plateau, the Federal Supply Schedule contract program run by the General Services Administration still accounts for over $30 billion each year. Information technology'hardware, software and services'makes up about half that amount.

Federal agencies like the program for several reasons. A perceived advantage is that they can limit a competition to specific group of invited companies. Another reason is the streamlined ordering process, with fewer rules and restrictions than traditional procurements.

The main disadvantage of the program is that procuring agencies can only buy from companies with Federal Supply Schedule contracts, and only goods and services listed in those contracts. Another downside is that GSA's fees inflate the price somewhat.

As the jurisprudence develops for FSS buys, those buys are becoming more and more like other contracting methods. As is well known, the basic attributes of a competitive procurement system apply when the government invites FSS contractors to submit proposals for a specific order or BPA. Decisions of the Government Accountability Office and the Court of Federal Claims have said this for many years.

At a minimum, agencies must tell competitors what they are seeking and how they will evaluate proposals. The source selection must be consistent with the ground rules, and it must be fair.

But the applicable requirements keep growing beyond these fundamentals. For instance, in late 2003, the Small Business Administration made stricter rules against contract bundling applicable to FSS orders. This set up a conflict with the Federal Acquisition Regulation, which says that most small-business programs don't apply to FSS buys.

In the case of Sigmatech Inc., B-296401, Aug. 19, 2005, GAO applied SBA's bundling rules to an FSS acquisition. The Army sought to roll up a variety of systems engineering and technical assistance projects, including some performed by small businesses, into a single large FSS order. Notwithstanding the FAR, GAO applied the SBA rules. It sustained the protest since the Army hadn't done the required analysis, nor had it sent advance notice to SBA and the incumbent small-business contractor.

Another such decision is the ruling of the Court of Federal Claims in Systems Plus Inc. vs. United States, 69 Fed. Cl. 757 (2006). That complicated case involved an FSS buy by the Labor Department for a variety of information technology services. The protester tried to have the winning offeror disqualified because of an organizational conflict of interest. The court applied the FAR rules on such conflicts to the FSS buy. However, it denied the protest, holding that there wasn't enough evidence to find an improper conflict.

These and other decisions show that the FSS program is far from protest-proof. However, there is one way ordering agencies can greatly limit the scope of a protest, as demonstrated by GAO's July 13, 2005 decision in a protest by Metro Business Systems LLC (B-296371.2).

There the agency reviewed the product literature for copiers, and discussed them with five FSS vendors. The agency then asked for price quotations from the five vendors for particular models that the agency specified. The agency didn't disclose its needs or say how it would select the winning vendor. And, since the agency selected the models, it didn't invite proposals beyond the mere price quotes.

GAO ruled that, when an agency doesn't invite FSS contractors to select what they choose to offer, it need not disclose its requirements or selection methodology. The agency's award decision passes muster so long as it is rational. In the Metro Business Systems case, the losing vendor's complaint that it didn't know what the agency was looking for fell on deaf ears.

This method might work for simple, off-the-shelf products. But without proposals, it is unsuited for acquiring complex or modified products, or virtually any service. So, most large FSS buys are bound to grow more complex and more contentious.

Joseph J. Petrillo is a lawyer with the Washington law firm Petrillo & Powell. E-mail him at jp@petrillopowell.com.

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