FEDERAL CONTRACT LAW

Procurement rules apply to FSS buys'but oddly

Joseph J. Petrillo

Now that the General Services Administration's Federal Supply Schedule is a multibillion-dollar program, the rules for using it are more important than ever, one would think. Finding details of the rules, however, involves not just knowledge of the regulations, but also of case law.

FSS started modestly enough as a mechanism for the government to pool its purchasing power. Through GSA, the government sought to get better discounts for commonly purchased items such as office furniture and equipment. In recent years, FSS has grown enormously to include computer hardware and software, a variety of services and practically anything else of a commercial nature. GSA contract specialists negotiate the contracts and the discounts from commercial pricing. The agency collects a 1 percent fee from the contractor whenever an agency places an order.

Ordering rules are set out in Subpart 8.4 of the Federal Acquisition Regulation. For orders larger than $2,500, the contracting officer is obligated to check three schedule contracts before settling on one vendor.

If the order exceeds the contract's maximum order threshold'a misnomer on its face'the contracting officer is supposed to check more than three contracts and ask for additional price concessions. When this is done, the acquisition meets the requirements of the Competition in Contracting Act for full-and-open competition. Why? Because the regulations say so.

Schedule orders are simple to place. They do not require a synopsis in Commerce Business Daily, a separate determination of price reasonableness, a small-business set-aside or a solicitation.

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Some agencies do issue abridged solicitations to schedule contractors. These are often called requests for quotations or requests for pricing. When agencies do this, however, they open the door to a protest.

Interestingly, the General Accounting Office, on the one hand, does not interpret the strict statutory limitation on protests against orders under task and delivery order contracts as applying to FSS. Therefore it will hear and decide protests resulting from such minicompetitions. On the other hand, GAO does not apply the full panoply of FAR Part 15 rules, either.

GAO recognizes that when an agency simply places a schedule order, there is no requirement that vendors receive any notice of the agency's needs or of its selection criteria. Indeed, there is no need for the buyer to notify anyone, other than the contractor, that an order has been placed.

But when the burden of deciding what to offer shifts to the vendor, because of a solicitationlike invitation, some of the rules of competitive procurements begin to apply. As noted, an agency needn't follow all the FAR 15 procedures. Instead, GAO decides case by case which principles and procedures govern FSS source selections. Lawyers call this approach common law.

In a recent decision, Ellsworth Associates Inc. vs. United States, the Court of Federal Claims upheld this approach.

GAO cases describe a kind of 'competition-lite.' For instance, the agency must generally describe its evaluation criteria and selection criteria, but it isn't required to give detailed criteria.

As in negotiated procurements, an agency usually can't accept an offer that deviates from the stated requirements. But there is an exception for FSS competitions when a deviating offer meets the agency's needs at the lowest overall cost. Then, the agency can accept the offer, at least when the protester doesn't offer the same item.

Buyers will find other differences. For example, the agency seems to have more latitude in conducting discussions. In one case, an agency was justified in communicating with one vendor to obtain clarification of its offer but not with others.

It is ironic that an agency wanting to inject competition into FSS buys runs a greater risk of losing a protest than if it simply issued an order to a preselected contractor. But that's the GAO case precedent, and agencies need to keep this common dynamic in mind when stretching their FSS procedures.

Joseph J. Petrillo is an attorney with the Washington law firm of Petrillo & Powell, PLLC. E-mail him at jp@petrillopowell.com.

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