FAR Restrictions on Limiting Sources in FSS Orders

Orders placed under the FSS, while streamlined, are considered to satisfy the full and open competition requirements of FAR Part 6. 41 U.S.C. § 152(3) (2006 & Supp. V); FAR § 6.102(d)(3).

Moreover, orders or blanket purchase agreements established under the FSS are exempt from the specific requirements in FAR Part 6, including the requirements for justifying restrictions to full and open competition. FAR § 8.405-6. However, to limit sources in FSS orders--such as a brand name requirement--ordering activities are required to justify the restriction in accordance with the procedures set out in FAR § 8.405-6. Id. § 8.405-6(b)(2).

When an ordering activity restricts competition on a brand name basis, the contracting officer is required to document in the justification a description of the reason why the particular brand name, product or feature is essential to the government’s requirements, and the market research that indicates that a similar product does not meet, or cannot be modified to meet, the agency’s needs. Id. § 8.405-6(b). In this regard, the FAR states:

Brand name specifications shall not be used unless the particular brand name, product, or feature is essential to the Government’s requirements, and market research indicates other companies’ similar products, or products lacking the particular feature, do not meet, or cannot be modified to meet, the agency’s needs.

Id. § 8.405-6(b)(1). In addition, for acquisitions exceeding the simplified acquisition threshold, as is the case here, such a justification must also include “a demonstration of the proposed contractor’s unique qualifications to provide the required supply or service,” id. § 8.405-6(c)(2)(iv), as well as a “description of the supplies or services required to meet the agency’s needs.” Id. § 8.405-6(c)(2)(iii).

We will review an agency’s use of a limited source justification under FAR part 8.4 for reasonableness. See XTec, Inc., B-405505, Nov. 8, 2011, 2011 CPD ¶ 249 at 5; Systems Integration & Mgmt., Inc., B-402785.2, Aug. 10, 2010, 2010 CPD ¶ 207
at 2-3.

(section deleted)

Inadequate Description of the Agency’s Needs

Next, based on our review of the record, we conclude that the agency does not adequately describe its requirements for a mass notification system, or why [AtHoc Mass Notification System] AtHoc is essential to the government’s requirements. The solicitation, under “Description of Requirement,” states that “DCMA plans to establish a Task Order against a GSA Federal Supply Schedule (FSS) contract for AtHoc Mass Notification Software Maintenance and Support.” RFQ amend. 1 at 8. The limited source justification states that “DCMA requires an emergency notification management system . . . to notify DCMA end users on short notice via phone, pager, email, etc. of continuity of operations (COOP), natural disasters, circuit and enterprise application outages, and a myriad of other scenarios that may occur on day-to-day basis.” AR, Tab E, Justification at 1. This general description, however, fails to identify unique features of the AtHoc software system particular to the agency’s needs. See FAR § 8.405-6(c)(2)(iii)-(iv).

DCMA also argues that its requirement is “to maintain the current AtHoc brand since a large percentage of its workforce was already trained and using this system on a regular basis.” Supp. AR at 3. This rationale, however, is not supported by the record. Essentially, the agency raises a circular argument: only the AtHoc system meets the agency’s needs, because the agency does not want to change from the AtHoc system it currently uses. Other than this general rationale, however, the record does not include a definition of DCMA’s requirement or needs that supports the agency’s assertion that the agency’s needs can be met only by the AtHoc software system.

Instead, the record merely establishes that the agency is procuring a mass notification system in order to comply with DOD Instruction 6055.17. Neither the justification, nor the record submitted in response to this protest, however, state any rationale explaining why the AtHoc software system is the only system that can meet DCMA’s requirement to comply with DOD Instruction 6055.17 or that DCMA considered other similar systems, but found them insufficient to comply with the DOD Instruction. In this regard, the agency has failed to comply with the requirements of FAR § 8.405-6.

The record also fails to support the agency’s contention that limiting the acquisition to AtHoc software is reasonable because its staff has already been trained on the software.  The protester argues that the solicitation’s inclusion of multiple CLINs for training conflicts with the agency’s statement that having personnel already trained on the AtHoc software is justification for limiting the competition. Protest at 2. In response, the agency concedes that although the agency currently has approximately 300 personnel who have been trained on the 2009 version of the AtHoc software, the “DCMA workforce is not static,” and that training for new personnel will be required:

As new personnel join the agency and others depart there exists a requirement that these new employees receive training,” and that “the use of [the AtHoc software] is a perishable skill and employees who were trained on this system in previous years could benefit from refresher training provided by the vendor.

Supp. AR at 3.


The protester contends that the agency’s arguments do not support the brand name limitation. We agree. Four of the RFQ’s ten CLINs are dedicated to training. RFQ at 64-65. In fact, the training CLINs make up a substantial portion of the total contract value. Order No. S5121A-13-F-0007 at 3-42. Given the amount of training that the contract requires, in combination with the agency’s recognition that it will be required to re-train its staff even if it purchases the AtHoc software system, we find that the agency’s justification limiting the procurement on this basis is insufficient and unreasonable.

Another reason stated in the limited source justification for limiting the competition is that DCMA will save costs and time by upgrading its existing AtHoc system and relying on personnel already trained for that system. AR, Tab E, Justification at 1; see also AR at 3. FAR subpart 8.4, however, does not cite cost or time savings as a basis for restricting sources. See FAR § 8.405-6. Moreover, the agency has not provided any support for this rationale, either in the justification or its response to the protest. In contrast, the protester asserts that it can provide an upgrade to DCMA’s current installed software by replacing the software system with its current v5.x DISA approved software, and that based on its published FSS pricing, its Desktop Alert software system would cost the Government 20 percent less than the award price to the intervenor. Protest at 2; Protester’s Comments at 1. The protester argues that since the original award in 2009, mass notification systems have improved significantly, and generally, the cost has been decreasing. Protest at 2.

Finally, as the protester notes, only two of the RFQ’s ten CLINs are AtHoc brand name items or services. The other eight CLINs, which comprise more than half of the total contract value, consist of telephony and open market training.  RFQ at 64; Order No. S5121A-13-F-0007 at 3-42. There is nothing in the justification, or elsewhere in the record, that explains why DCMA limited the acquisition of these eight CLINS to AtHoc resellers.

Inadequate Market Research

Next, we conclude that the justification also fails to adequately comply with the market research requirement of FAR § 8.405-6, which requires documentation of the agency’s finding that “other companies’ similar products, or products lacking the particular feature, do not meet, or cannot be modified to meet, the agency’s needs.” FAR § 8.405-6(b)(1). Specifically, the justification fails to show whether DCMA conducted market research concerning other companies’ products. Instead, the agency’s justification merely states that, based upon market research, “the purchase of the AtHoc brand name represents the best value solution” as it exceeds the technical specifications, reduces training, allows the agency to provide quick alerts, and provides a high level ease-of-use at a very competitive price. AR, Tab E, Justification at 1. This analysis does not support the brand name restriction, because, for example, it does not discuss any “technical specifications” that the AtHoc software system exceeds.

Additionally, as noted above, the justification cites as support for the brand name limitation the agency’s finding that only AtHoc was an approved source. The record, however, demonstrates that Desktop Alert was listed on DISA’s Approved Product List as an authorized vendor of mass notification systems prior to the date that the contracting officer signed the justification.[9] AR, Tab J, DISA APL Integrated Tracking System (Apr. 18, 2013). The protester asserts that its mass notification system “meets the requirements established in DOD Instruction 6055.17” and that the “Desktop Alert mass notification system and support is available on a GSA schedule.” Protester’s Comments at 1. The record also establishes that Desktop Alert is currently providing its mass notification system to other DOD agencies in accordance with the DOD Instruction, including to the Army installation at Fort Lee, Virginia, which is located in the same building where DCMA’s headquarters are located, and that the contracting officer was aware of this fact prior to the closing date for receipt of quotations. AR, Tab F, Agency Protest at 1; Tab G, Agency Protest Decision at 1. On this record, we conclude that the agency did not conduct adequate market research to determine whether Desktop Alert’s, or any other vendors’, mass notification software systems could meet DCMA’s requirement.

SUMMARY AND RECOMMENDATION

We find the agency’s limited source justification fails to comply with requirements of FAR § 8.405-6, and is therefore unreasonable. DCMA did not adequately define its requirements or specify any special features of the AtHoc supplies and services that make this brand name essential to the agency’s needs. DCMA also did not demonstrate with adequate market research or otherwise that it considered whether other companies’ similar products, or products lacking a particular feature, do not meet, or cannot be modified to meet, the agency’s needs. On this record, we sustain the protest.

Because DCMA failed to adequately justify its limitation of the procurement on a brand name basis, the award to Reliable was improper. However, because DCMA moved forward with contract award due to urgent and compelling circumstances, we do not recommend the termination of the contract with Reliable. See Resource Dimensions, LLC, B-404536, Feb. 24, 2011, 2011 CPD ¶ 50 at 8; Charles Snyder, B-235409, Sept. 1, 1989, 89-2 CPD ¶ 208 at 5. Instead, we recommend that the options under Reliable’s contract not be exercised and that the agency assess and define its requirements for an emergency notification management system, and either properly justify its need to limit competition to a single brand name system, or recompete its requirement beyond the base year. We further recommend that the agency reimburse the protester the costs of filing and pursuing its protest, including reasonable attorneys’ fees. The protester’s certified claim for costs, detailing the time expended and the costs incurred on this issue, must be submitted to the agency within 60 days of receiving this decision. Bid Protest Regulations, 4 C.F.R. § 21.8(f)(1) (2013).  (Desktop Alert, Inc., B-408196, Jul 22, 2013)  (pdf)

The protester challenges the reasonableness of the agency’s limited source justification, arguing that the agency does not require software that is compatible with that used by the Navy’s clinics.

Although orders under the FSS are generally exempt from the competition requirements of FAR part 6, ordering activities are required to justify limited source orders. FAR § 8.405-6. We will review an agency’s use of a limited source justification under FAR part 8.4 for reasonableness. See XTec, Inc., B-405505, Nov. 8, 2011, 2011 CPD ¶ 249 at 5; STG, Inc., B-405082, B-405082.2, July 27, 2011, 2011 CPD ¶ 155 at 3.

Here, we find the agency’s limited source justification to be reasonable. The record documents the VA’s need for emergency communication software that performs a number of required functions and is compatible with the system used by the Navy facilities comprising FHCC. See AR, Tab 4, Limited Source Justification, at 5-6. Kingdomware does not contend that its software is compatible with the system used by the Navy clinics, but instead argues, without support or explanation, that the VA does not require software that is compatible with that used by the Navy’s clinics. See Comments at 9. Although Kingdomware does not agree that the VA requires compatible software to meet its needs at the FHCC, the protester has failed to show that this is not a reasonable requirement.

The protest is denied.  (Kingdomware Technologies, B-407757, Jan 31, 2013)  (pdf)

FAR sect. 8.405-6 (FAC 2005-50), May 16, 2011 (emphasis added). The information required for inclusion in a limited source justification, now set forth in FAR sect. 8.405-6(c), is nearly identical to that required in the prior FAR provision.

In its protest, XTec argued that the limited source justification was unreasonable for various reasons, and quoted the language in the justification citing the older FAR provision GSA relied on. GSA asked us to dismiss the allegation as lacking a valid basis because XTec did not dispute that the task order was a logical follow-on to the prior FSS order or challenge GSA's legal authority under this FAR provision. In its motion, GSA cited to and quoted the now-effective FAR provision, which includes the "in the interest of economy and efficiency" clause. GSA Motion to Dismiss, Aug. 24, 2011, at 2. In response, XTec seized upon this clause and argued that the justification was unreasonable in light of that language. XTec Opposition to Motion, Aug. 31, 2011, at 1-3. GSA replied by arguing that XTec was relying on the wrong FAR provision, although this was the one that GSA itself had cited in its motion to dismiss. GSA asserted that the controlling provision was the one in effect when the justification was signed in 2010. GSA Reply to XTec Opposition to Motion, Sept. 1, 2011, at 1-2. XTec countered that the current FAR provision is controlling because the justification was published after its effective date. XTec Sur-Reply in Opposition to GSA Motion, Sept. 6, 2011, at 1-3.

The Federal Register notice publishing the interim rule stated that the effective date for the rule was May 16, 2011. 76 Fed. Reg. 14,548, supra. As relevant here, the notice further stated that the changes in the rule applied to (1) solicitations issued and contracts awarded on or after May 16, 2011, and (2) orders issued on or after the effective date of this regulation, without regard to whether the underlying contracts were awarded before May 16, 2011. Id. Here, GSA issued its task order to [HP Enterprise Services, LLC] HPES on July 25, 2011. Since the order was issued after the effective date of the regulation, the current FAR provision applies.

Reasonableness of Limited Source Determination

XTec challenges the reasonableness of the limited source justification, and argues that it has not been shown to be "in the interest of economy and efficiency." GSA responds that, whichever FAR provision applies, the agency fully documented its justification considering economy and efficiency.

We will review an agency's use of a limited source justification under FAR Part 8.4 for reasonableness. See STG, Inc., B‑405082, B-405082.2, July 27, 2011, 2011 CPD para. 155 at 3; Systems Integration & Mgmt., Inc., B‑402785.2, Aug. 10, 2010, 2010 CPD para. 207 at 2-3. We agree with GSA that the justification was reasonable and in the interest of economy and efficiency.

After explaining the history of GSA's acquisition of these services and its plans for the future, the limited source justification stated:

This acquisition is suited to a logical follow-on in accordance with [FAR sect.] 8.405-6(b)(2) as the new work is for the continued development or production of a major system, USAccess, and the original order was awarded competitively and placed in accordance with applicable FSS ordering procedures. Award to another source is likely to result in disruption of GSA customer agencies' Logical/Physical access deployments, substantial duplication of costs to the Government not expected to be recovered through competition, and unacceptable delays in the transition of this service. Any new end-to-end solution would require a similar process of development and deployment that would unavoidably increase cost. The MSO has chosen to minimize its risk by keeping the core service intact and migrating the system in an orderly way, in accordance with the developing IT Strategic Plan.

[HPES] developed and deployed the USAccess system and has operated it for the past 3 years. The present system took more than a year to develop and two more to deploy. The incumbent contractor is the most familiar with the customer population, operational considerations, and technical challenges. The primary reason for pursuing this strategy is to reduce risk. The largest risk identified by the MSO is that the 500,000 current cardholders will not have working cards upon the close of the current contract. Over 90 customer agencies, commissions, and boards who are issuing PIV [personal identity verification] cards for logical and physical access are in varying stages of completion, ranging from less than 5% to over 90% of government and contract employees having been issued and activated cards. Changing contractors when at least the majority of customer agency employees have either not been badged or are in the process of being badged would create substantial disruptions of their missions.

AR, exh. 24, Justification para. IV.b.2. The justification went on to explain that GSA's market research had shown that even using government furnished facilities or equipment would still require a different contractor to integrate its own offering with the existing data and customer base, and thereby greatly increase the risk to the MSO and its customers. Id. para. VI. Using a logical follow-on to continue the core services while separating and competing the external services, along with developing a longer-term strategy for using a fully-competed contract or contracts, represented the highest likelihood of success with the lowest program risk. This transition strategy would enable GSA to achieve a more flexible and competition-friendly HSPD-12 service. Id.

XTec argues that no evidence supports GSA's assertion that a transition to a new contractor would entail substantial duplication of costs or new development expenses. The protester contends that it already has a system ready to deliver; the protester acknowledges that certain equipment might need new software patches to interface with XTec's solution, or replacements, but contends that these would be minor in scope and less expensive than recreating the entire infrastructure. XTec Comments, Sept. 23, 2011, at 9-11.

That XTec has a system to provide these services is not in dispute. Instead, the agency's concern is that any other vendor's system would have to be integrated into the system already provided by HPES, and that this integration process would result in disruption, transition delays, duplication of costs, and new costs.

The contracting officer explains that GSA did not acquire a system under the prior task order, but used the services HPES offered. CO's Declaration para. 14. The core service is built around a proprietary set of technologies that combine databases and middleware to provide a managed service for the MSO to provide its customer agencies and, apart from a few items, GSA does not own any of the hardware. Id. Not only is a major data migration involved, but also a substantial hardware infrastructure, multiple interfaces, and countless service considerations. Id. para. 15. The hardware, software, and communications infrastructure that supports the solution, as well as an infrastructure upgrade, was procured and implemented by HPES, with the costs recovered through the service-based pricing. Id. para. 18.

The contracting officer also states that more than 200 HPES-procured and implemented shared fixed credentialing center configurations are integrated into the application and infrastructure, and many of these would have to be replaced if an alternate solution were implemented. Id. para. 19. As HPES notes, this hardware replacement would likely result in a duplication of costs. HPES Comments, Sept. 23, 2011, at 18. In addition, the contracting officer states that most customers have slightly different requirements for interface with their internal systems, each of which required HPES to develop and deploy a custom interface, so any contractor attempting to provide the core services would have to provide not only the basic hardware necessary for the service but also the interfaces to each customer's computer systems. CO's Declaration para. 15. This would, as HPES asserts, likely involve a significant investment of time--and thus transition delay and potential disruption--and money. HPES Comments at 18-19.

XTec's assertions that it could provide a seamless transition, notwithstanding these issues, is not sufficient to find GSA's justification, which is in substance based on concerns about economy and efficiency, unreasonable.

The contracting officer also explains that GSA and its customers have invested significantly into customer-directed enhancements to HPES's proprietary application, totaling $6,973,624 in enhancements through 366 chargeable change requests, which required 57,127 hours of customization work. She states that all of this work and investment would have to be replicated and duplicated if an alternate solution were implemented. CO's Declaration paras. 21, 22.

XTec asserts that it is "far from clear" how much of this would need to be duplicated, speculating that, for example, some change orders might have installed functionality that XTec's solution already possesses. XTec Comments, Sept. 23, 2011, at 11. However, this speculation does not provide a basis to find that the agency's concern about duplication of costs and disruption—in other words, economy and efficiency—was unreasonable.

XTec challenges the justification's statement that there was a risk that the 500,000 current cardholders would not have working cards upon the close of the initial task order, arguing that the cards are interoperable regardless of the system used to issue them. XTec also disputes the agency's characterization of the progress made toward card issuance. Id. at 7-9

As HPES notes, however, while the cards once produced and activated may be interoperable, the systems that produce, manage, and maintain the cards are not. That is the reason XTec would have to duplicate the software customization efforts already taken by HPES. HPES Comments, Sept. 23, 2011, at 15-17. The contracting officer explains that each of GSA's customers was on-boarded using agency-specific configuration data. She states that agency cards cannot be printed and subsequently activated without this unique configuration data and would have to be re-initialized if an alternate solution were implemented. CO's Declaration para. 20. While XTec disagrees, here, too, it has not shown the agency's concerns are not valid.

In sum, we find that the agency's limited source justification to extend the HPES task order based was reasonable and was made in the interest of economy and efficiency, as required by the now-applicable FAR provision.  (XTec, Inc., B-405505, November 8, 2011)  (pdf)

The protester argues that the agency improperly issued the short-term order to MANCON on a sole-source basis. SIM contends in this connection that MANCON is not the only firm capable of furnishing the needed services.

The 3-month task order, which has a value of $71,920, was placed against MANCON's Federal Supply Schedule (FSS) contract. Federal Acquisition Regulation (FAR) sect. 8.405-6 exempts orders placed under Federal Supply Schedules from the competition requirements of FAR Part 6, but requires that an ordering activity "justify its action when restricting consideration of . . . schedule contractors to fewer than required in 8.405-1 or 8.405-2." FAR sect. 8.405-6(a)(1). Circumstances justifying such a restriction include where an urgent and compelling need exists and following the ordering procedures would result in unacceptable delays. FAR sect. 8.405-6(b)(3). Where an ordering activity restricts competition on the basis of urgent and compelling need, the contracting officer is required to document the circumstances in writing. FAR sect. 8.405-6(c), (f).

Here, the contracting officer determined that the maintenance services were urgently required, and that MANCON, which had been providing the services for the preceding 2 months, had the required personnel in place. The contracting officer noted that conducting a competition for the interim services would require the Marine Corps to prepare and publish an RFQ, wait a reasonable time for vendors to respond, and evaluate the responses, which would take a period of weeks. Agency Report, Tab 9, Limited Sources Justification, at 1. According to the contracting officer, "the only reasonable solution to avoid an interruption in the services [was] to award a short-term (90 days) bridge contract to the current incumbent, MANCON, without competition, until a properly competed contract [could] be awarded." Id.

The protester disputes the agency's finding, arguing that issuance of a task order to MANCON was not the only means by which the agency could have avoided an interruption in services. SIM contends that it too could have begun performance immediately. The protester points out in this connection that it was performing the services prior to issuance of the now-terminated task order to MANCON, and that all of the MANCON employees were previously SIM employees.

We agree with the protester that the record does not demonstrate that MANCON is the only firm capable of performing the services without interruption; we nonetheless think that issuance of the order to MANCON was unobjectionable given the agency's findings that the services were needed immediately and that conducting a competition for them would take a period of weeks. As noted above, FAR sect. 8.405-6(b)(3) specifically authorizes restricting competition where, as here, an urgent and compelling need exists and following the FSS ordering procedures would result in unacceptable delays. To the extent that the protester is disputing the agency's judgment as to the time period required to conduct a competition for the interim services, a protester's mere disagreement does not show that the agency's judgment was unreasonable. Richard Bowers & Co., B‑400276, Sept. 12, 2008, 2008 CPD para. 171 at 2. Further, to the extent that SIM is arguing that it, not MANCON, should have been considered the incumbent contractor given that the task order issued to MANCON was terminated--and that, as the incumbent, it should have received the sole-source order for interim services--even assuming that the agency might reasonably have issued an order for the interim services to the protester, this does not demonstrate that it was unreasonable for it to issue an order to MANCON instead.

SIM also argues that the urgency here was the result of a lack of advance planning on the part of agency officials in that there would have been no need for the agency to terminate the task order issued under the RFQ and resolicit the requirement--and thus no need for the 3-month order for services during the interim period while the resolicitation is conducted‑-had the agency engaged in adequate planning prior to issuing the RFQ. We are not persuaded by the protester's argument; we do not consider an immediate need for services that arises as a result of an agency's implementation of corrective action in response to a protest to be the result of a lack of advance planning. See Chapman Law Firm Co., LPA, B-296847, Sept. 28, 2005, 2005 CPD para. 175 at 3; Computers Universal, Inc., B-296536, Aug. 18, 2005, 2005 CPD para. 160 at 3.

Finally, the protester points out that the limited sources justification document was not executed until June 7, 2010, approximately a week after it filed its protest with our Office (and more than 2 weeks after the bridge task order was issued to MANCON). FAR sect. 8.405-6 requires that the agency document in writing the basis for its decision to limit competition, but it does not require that the justification be executed prior to award. Moreover, where circumstances sufficient to support a justification are present, the lack of a contemporaneous written justification is not a sufficient reason for sustaining a protest. See General Elec. Med. Sys., B-231342, Aug. 26, 1988, 88-2 CPD para. 185 at 3.  (Systems Integration & Management, Inc., B-402785.2, August 10, 2010)  (pdf)

While the requirements of the Competition in Contracting Act (CICA), 10 U.S.C. sect. 2304(c)(1) (2000), which limits obtaining goods or services noncompetitively unless supported by a written justification, does not apply to orders placed against FSS contracts, Commercial Drapery Contractors, Inc., B-271222 et al., June 27, 1996, 96-1 CPD para. 290 at 3 n.1, Federal Acquisition Regulation (FAR) sect. 8.405-6 provides that sole-source orders from FSS contracts be supported by sole-source justifications that contain much of the same information required to be contained in justifications for sole-source contracts subject to CICA. Based on the record here, in particular the very limited duration of the contract extension, we think the agency has established a reasonable basis for this latest noncompetitive extension of abcISP’s purchase order under its FSS contract until CUI’s currently pending protest of the competitive procurement is resolved and award made under the protested solicitation. CUI has not shown that it is practicable for the agency to obtain a different contractor for these bridge contract services for this limited period of time. Unlike the situation in VSE Corp.; Johnson Controls World Services, Inc., B‑290452.3 et al., May 23, 2005, 2005 CPD para. 103 (cited by the protester), where the agency noncompetitively extended a contract that had been noncompetitively awarded 4 years earlier for another 18 months with no justification and approval for this action and the extension was result of a lack of advanced procurement planning, the protested extension here is of a purchase order under the FSS to which the CICA requirements (applied in the VSE case) do not apply, and, in any case, the extension was not the result of a lack of advanced procurement planning, but was caused by a series of protests, and the agency has supported this latest extension with an approved justification. (Computers Universal, Inc., B-296536, August 18, 2005) (pdf)