FEDERAL CONTRACT LAW

GAO decisions remake the rules for schedule buys

Joseph J. Petrillo

One case at a time, the rules governing how agencies place orders under the General Services Administration's schedule contracts continue to evolve.

In recent months the General Accounting Office has issued two important decisions in this area.

The first, in May, concerned Computer Products Inc. The protest grew out of an agency's competition among schedule contractors for 11,955 hours of financial services.

Agencies need not conduct competitions under GSA's schedule program. But when they do, GAO enforces the ground rules. GAO's decisions don't cover the full panoply of procedures under Federal Acquisition Regulation Part 15, which outlines the rules for contract negotiations. Instead, the congressional watchdog agency is most concerned with whether or not a buying agency has adhered to notions of fundamental fairness.

In this particular case, the agency fell short of GAO's simple test. Its invitation to submit bids ranked price as the least important evaluation factor after past performance and the experience of personnel. Yet when it came to picking a winner, the agency made its award on the basis of price'the lowest.

In deciding the protest, GAO looked at the evaluators' blithe conclusion that there were no important noncost differences among the bidders. But GAO was convinced otherwise by evaluating documentation; it concluded that the protesting vendor's proposal offered some real advantages and that those advantages might justify its higher price.

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In the record the agency failed to explain why these benefits had no weight.

The upshot: GAO sustained the protest.

Agencies that consider competition under the schedule program too troublesome should review a second GAO decision. In the case of Delta International Inc., GAO heard a protest of a schedule order for bomb detecting X-ray equipment. An agency had bought the equipment through a sole-source contract after determining that only one company's equipment met its requirement.

The crux of the determination was that only the company to whom the agency made the award offered what the agency called fully digital equipment. What the phrase 'fully digital' meant and why it was important shifted throughout the protest. But GAO's decision ultimately has wider implications than settling on a definition of state-of-the-art bomb detection gear.

For its ruling, GAO reached back to the statutory provision authorizing GSA to negotiation schedule contracts. According to law, schedule orders meet the government's requirement for full-and-open competition only when they pass two tests. The first, that all responsible sources can participate, is built into the GSA program. The second test is not: The order must result in the lowest overall cost alternative meeting the government's requirement.

GAO based its review of the procurement on the latter test and on the fundamental principle of government accountability. Proceeding from this basis, GAO examined the reasons given by the agency for its sole-source contract for the X-ray equipment. It found the agency's justifications conflicting and unreasonable.

The specifics of GAO's ruling are rooted in the arcane technical details of X-ray devices. Its significance, however, lies in the resurrection of the statute governing schedule orders.

If GAO continues to apply this test, agencies might need to take better care with the documentation they use to support and justify their schedule orders. Current FAR procedures for schedule orders are sketchy, perhaps even anemic if agencies must be prepared to prove that an order is the lowest overall cost alternative.

Because of the relatively low friction of most schedule buys, the Federal Supply Service program has grown enormously in the last few years.

Schedule orders now run into the billions of dollars every quarter. But the tidy world of easy schedule buys might be getting a bit messier.

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

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