TN maintains that the agency improperly is using the delivery order at issue to acquire, on a sole-source basis, what is known as e-mail-as-a-service (EaaS). Whereas, the agency’s prior e-mail capabilities are based on software licensed to the agency that is installed on the agency’s computing assets (principally desktop computers, laptop computers and servers), EaaS is a cloud-based subscription service or product that does not involve installing software on the agency’s computing assets. Instead, the service is hosted in a Microsoft-owned cloud computing environment that provides both the functionality of the agency’s requirements, along with remote storage of the agency’s data. TN argues that, if the agency is interested in acquiring an EaaS capability, it must compete its requirements among vendors capable of providing the service. TN maintains that its Google-offered products will meet the agency’s requirements for EaaS.

The agency denies that it has acquired an EaaS capability, and maintains instead that it simply has upgraded its licenses to the latest version of Microsoft’s products. The contracting officer specifically represents as follows:

Nowhere in the delivery order 0004 has the IRS purchased Microsoft Office 365 or EaaS (See delivery order 0004, mod 0001 and 0002). The IRS has purchased Office Pro Plus licenses on a term basis within delivery order 0004 which all reside on locally installed desktops/laptops (delivery Order 0004). The IRS had 117,500 Office Professional Plus licenses in its inventory since at least March 2013. (See BPA pg 11). The IRS is merely continuing to use comparable software licenses or the “latest and greatest” version of Office Professional as it has done for years which it is authorized to do under the BPA. Further, the IRS has purchased Microsoft Exchange licenses within modification 0002 to delivery order 0004. (See Do 4 mod 2). All of the Exchange licenses are deployed locally on premise at the IRS and there has been no deployment to a cloud for any user’s email within the IRS. The IRS has had Microsoft Exchange licenses within its inventory since at least March 2013 (See BPA pg 10).

Contracting Officer’s Statement at 8.

The Competition in Contracting Act generally requires “full and open competition” in government procurements as obtained through the use of competitive procedures. 41 U.S.C. § 3301. FSS delivery orders that are outside the scope of the underlying BPA are similarly subject to the requirement for competition. See Onix Networking Corp., B-411841, Nov. 9, 2015, 2015 CPD ¶ 330 at 6-7. In determining whether a delivery order is outside the scope of an underlying contract (or in this case, a BPA), our Office considers whether there is a material difference between the delivery order and the underlying BPA. Id. Evidence of a material difference is found by reviewing the BPA as awarded, and the terms of the delivery order issued, and considering whether the original solicitation adequately advised offerors of the potential for the type of work contemplated by the delivery order. Id. The overall inquiry is whether the delivery order is of a nature that potential offerors reasonably would have anticipated competing for the goods or services being acquired through issuance of the delivery order. Id.

Here, the record belies the agency’s representations to our Office during the protest concerning what it was acquiring and how it intended to deploy what it had acquired.

As noted above, the contracting officer represents that the agency acquired “Office Pro Plus” licenses on a term basis, but that this was unobjectionable because the agency had a quantity of “Office Professional Plus” licenses in its inventory, and the “Office Pro Plus” licenses are simply the ‘latest and greatest’ version of its “Office Professional Plus” licenses. The record shows, however, that the “Office Pro Plus” product is, in fact, an Office 365 cloud-based product, which is distinct from the “Office Professional Plus” licenses owned by the agency. See AR, exh. E, Delivery Order, at Contract Line Item Nos. 0007, 1004, 2004; exh. L, Softchoice’s FSS Price List, at 440.[5] Thus, the contracting officer’s representation that the agency is merely acquiring the latest--or upgraded--version of its “Office Professional Plus” licenses is factually inaccurate.

The record includes corroborating evidence demonstrating that the agency understood that it was acquiring a cloud-based solution using Microsoft’s Office 365 product line, and was not merely upgrading its inventory of “Office Professional Plus” licenses. In this connection, the record includes an e-mail sent by one of the agency’s senior information technology (IT) officials noting the fact that she (and others) had not been advised that the agency had acquired Office 365 subscriptions. The e-mail in question states:

I am not sure what factors were considered when it was prematurely decided that the 30,000 Detroit mailboxes would move to the cloud. I was also not privy to the procurement of the 90k [90,000] Office 365 licenses. From a few meetings I have been involved in, I believe inaccurate and/or incomplete information has been provided to the IT Executives and the CTO [Chief Technology Officer] regarding a cloud solution for email.

AR, exh. H, Miscellaneous Agency Correspondence, at H-271.

The record therefore demonstrates that under the delivery order, the agency acquired “Office Pro Plus” subscriptions--a cloud-based Microsoft Office 365 product--even though the portfolio of software assets identified in the BPA did not include any cloud-based products.

The record also shows that when the agency issued Modification No. 2 to the original delivery order (exercising the first option year under the delivery order) it added several line items to acquire “Exchange Plan 2” monthly subscriptions. AR, exh. E.2, Modification No. 2, Line Item Nos. 1008, 2006. The part number for this product corresponds to a product identified in Softchoice’s FSS contract as “Exchange Online Plan 2.” AR, exh. L, Softchoice’s FSS Price List, at 439. These subscriptions allow the agency to migrate e-mail users to the cloud. In this connection, the modification provides as follows:

Exchange Online: Exchange licenses can be used on premises or in the O365 Government Community Cloud. . . . The contractor will facilitate the migration of IRS user mailboxes based upon a mutually agreed upon migration plan at no additional charge.

AR, exh. E.2, Modification No. 2, at 9; see also id., Softchoice Letter Accompanying the Modification, at 2 (“Exchange Plan 2 licenses can be used on premises or in the Office 365 Government Community Cloud.”).

Although the contracting officer states that the IRS has Microsoft Exchange licenses in its inventory, those licenses are identified as “Exchange Standard Client Access Licenses” in the BPA. AR, exh. D, BPA at 10. Those licenses are different from the online subscription service being acquired by the agency under the modification. Microsoft’s product literature describes “Exchange Client Access Licenses” as software licenses that enable users to access an organization’s network server, in this case, the IRS’s own servers. See https://www.microsoft.com/en-us/Licensing/product-licensing/client-access-license.aspx (last visited June 13, 2016). In contrast, Microsoft’s Exchange Online service is described in Microsoft’s product literature as a product designed to host e-mail on Microsoft’s servers, that is, in the cloud. See https://products.office.com/en-us/exchange/exchange-online (last visited June 13, 2016).

Microsoft’s Exchange Online service also may be deployed in a “hybrid” environment. In this latter connection, the record shows that the agency is interested in a “hybrid” e-mail solution, which would allow the agency to have certain e-mail users’ accounts hosted on the agency’s own servers--based on the identified users’ requirements for enhanced security--while allowing the majority of the agency’s e-mail accounts to be hosted in the cloud. See AR, exh. H, Miscellaneous Agency Correspondence, at 201, 203 (“IRS may require a hybrid EaaS cloud environment up to 10,000 Exchange users remaining on premises.”). Microsoft’s product literature explains that the Microsoft Exchange Online environment allows for customization of the e-mail environment:

Exchange lets you tailor your solution based on your unique needs and ensures that your communications are always available, while you remain in control. Move to the cloud overnight, deploy on-premises, or manage a hybrid deployment with mailboxes that are both online and on-premises.

See https://products.office.com/en-us/exchange/microsoft-exchange-features-email-for-business (last visited June 13, 2016).

The record therefore shows that under the modification, the agency acquired “Exchange Online” subscriptions--a cloud-based Microsoft Office 365 product--even though the portfolio of software assets identified in the BPA did not include any cloud-based products.

As a final matter, we have no basis to question the contracting officer’s representation that, at this time, all of the software the agency has acquired is being used only in the IRS-owned computing environment. However, the record shows that the decision to deploy the software only within the IRS computing environment was made in reaction to TN’s protest. In this connection, the record includes an e-mail from an IRS employee discussing the agency’s course of action in response to the protest. The e-mail provides as follows:

[J]ust had a meeting . . . dealing with an external protest for our award 9 months ago to utilize a hybrid Microsoft cloud solution to deliver the NARA [National Archives and Record Administration] requirements by the end of this year. There were no good options in dealing with the protest, but we have a path in which we will go forward with the software but stay on irs-owned equipment and premises. The team needs to look at the costs and schedule which may be significant, but would be minimal compared to the long term delay (year +) options of competing the requirements to handle the protest.

Will loop you into the conversation when we see the revisions from the strategic decision to reverse course to utilize the hybrid approach.

AR, exh. H, Miscellaneous Agency Correspondence, at H-13.

In sum, the record shows that the agency used the delivery order to acquire a “hybrid” cloud-based solution for its e-mail requirements. However, the acquisition of products or services to implement a cloud-based solution is outside the scope of the underlying BPA which, by its terms, is limited to acquiring updated or replacement versions of the agency’s preexisting software portfolio that is installed in the agency’s own computing environment. We note as well that the fact that the agency has at the present time decided not to deploy to the cloud--a decision made in direct response to the TN protest--does not mean that it has not acquired a cloud-based suite of products. It follows that the delivery order at issue in the protest amounts to an improper, out-of-scope, sole-source award. In light of the foregoing considerations, we sustain TN’s protest.  (Tempus Nova, Inc. B-412821: Jun 14, 2016)  (pdf)

As to our review of the procedures for establishing BPAs under FSS contracts, FAR § 8.405-3 provides express guidance on these procedures. Paragraph (a) under FAR § 8.405-3, entitled “Establishment,” begins with an enumeration of the requirements applicable to each and every BPA established under the FSS. The subsection then describes the required competitive procedures applicable to BPAs for supplies and for services that do not require a statement of work (§ 8.405-3(b)(1)), and the required competitive procedures applicable to BPAs for services requiring a statement of work, because the services are “priced at hourly rates” (§ 8.405-3(b)(2)).

Within the over-arching principles set forth at the beginning of the FAR’s guidance applicable to establishing BPAs under the FSS, agencies are required to “establish the BPA with the schedule contractor(s) that can provide the supply or service that represents the best value.” FAR § 8.405-3(a)(1). Moreover, price is the one common element that must always be part of any best value determination in establishing a BPA. FAR § 8.405-3(a)(2) (“[i]n addition to price (see 8.404(d) and 8.405-4), when determining best value, the ordering activity may consider” various other enumerated factors); See also Cyberdata Techs., Inc., B-406692, Aug. 8, 2012, 2012 CPD ¶ ___ at 4 (protest sustained where agency eliminated protester’s quotation from consideration--and subsequently issued FSS BPAs--without meaningfully considering prices). Finally, the FAR requires that agencies “shall, to the maximum extent practicable, give preference to establishing multiple-award BPAs, rather than establishing a single-award BPA.” FAR § 8.405-3(a)(3)(i). As a result, we find that USAID’s arguments are at odds with the clear requirements for these instruments set forth in the FAR.

To be meaningful, a best value determination requires a weighing of the value and benefits associated with a firm’s approach against their associated cost to the government. See TtEC-Tesoro, JV, B-405313, B-405313.3, Oct 7, 2011, 2012 CPD ¶ 2 at 9. In a best value procurement, it is the function of the source selection authority to perform a tradeoff between price and non-price factors, that is, to determine whether the superiority of one proposal (or as here, quotation) under the non-price factor(s) is worth a higher price. Even where, as here, price is stated to be of less importance than the non-price factors, an agency must meaningfully consider cost or price to the government in making its selection decision. See e-LYNXX Corp., B-292761, Dec. 3, 2003, 2003 CPD ¶ 219 at 7. Thus, before an agency can select a higher-priced proposal that has been rated technically superior to a lower-priced but acceptable one, the decision must be supported by a rational explanation of why the higher-rated proposal is, in fact, superior, and explaining why its technical superiority warrants paying a price premium. See Coastal Env’ts, Inc., B-401889, Dec. 18, 2009, 2009 CPD ¶ 261 at 4.

In contrast to these requirements and the terms of the RFQ, the contracting officer acknowledged here that “there were no direct comparisons on evaluated prices between vendors.” Contracting Officer’s Statement at 3. That is, notwithstanding the purported “consideration” of vendors’ pricing submissions, the agency did not (and indeed, takes the position it could not) draw any conclusion about vendors’ prices--not even whether the costs to the government associated with any given vendor’s quotation were likely to be higher than, lower than, or equal to the costs of any other vendor.

In explaining why it could not comply with the general requirements applicable to the establishment of all BPAs--i.e., the requirements to consider price and consider best value in selecting BPA recipients--USAID argues that these considerations would have been inappropriate in a competition where the agency was not required to have a statement of work. In this regard, USAID contends that this was a procurement conducted under the authority of § 8.405-3(b)(1).

As set forth above, after the “Establishment” paragraph (§ 8.405-3(a)), the FAR guidance on establishing BPAs under the FSS turns to the competition requirements that apply to different BPA types. As also set forth above, there are separate competition requirements applicable to BPAs for supplies and for services that do not require a statement of work (§ 8.405-3(b)(1)), and to BPAs for services requiring a statement of work, because the services are “priced at hourly rates” (§ 8.405-3(b)(2)).

Of relevance here, paragraph 8.405-3(b)(1) explains:

The procedures of this paragraph apply when establishing a BPA for supplies and services that are listed in the schedule contract at a fixed price for the performance of a specific task, where a statement of work is not required (e.g., installation, maintenance, and repair).

USAID argues that this provision is applicable to its competition despite the fact that the record shows that this competition does not involve services that are listed in the FSS at a fixed price for the performance of a specific task; rather, the prices listed in the vendors’ schedules are plainly priced at hourly rates.

During the course of this protest, our Office sought the views of the GSA as to whether USAID had followed the rules applicable to establishing BPAs under the FSS. GSA expressed its view that USAID’s requirement was for services requiring a statement of work, and that FAR 8.405-3(b)(2)(vi) thus applied. [7] Once GSA noted that this competition required the use of a statement of work, it noted that this “implies more is required . . . than relying on the base pricing in a GSA Schedule as being fair and reasonable.”[8] Letter from GSA to GAO, July 18, 2012, at 2. GSA further stated that it would defer to our Office’s views as to whether USAID had met the applicable legal standard. Id.

For our purposes--as a forum limited to resolving the disputes raised by protesters--we need not address whether USAID was required to develop a statement of work before holding this BPA competition. Instead, we are able to conclude, on this record, that the agency gave no meaningful consideration to cost/price in selecting the BPA recipients, in violation of the requirement at FAR § 8.405-3(a)(2) that price be meaningfully considered in establishing BPAs. We reach this conclusion because the requirements of FAR § 8.405-3(a) apply to all BPAs established under the FSS, regardless of the BPA type--and regardless of the competition requirements that apply to each BPA type. In addition, USAID failed to make a proper best value decision before it excluded Glotech from consideration for a BPA.  (Glotech, Inc., B-406761, B-406761.2, Aug 21, 2012)  (pdf)

Significant Issue Exception to Timeliness Requirements

As an initial matter, our Bid Protest Regulations provide that protests based upon alleged improprieties in a solicitation which are apparent prior to closing shall be filed prior to closing. 4 C.F.R. § 21.2(a)(1) (2012). However, our Regulations also provide that GAO may consider a protest that raises issues significant to the procurement system. 4 C.F.R. § 21.2(c). In this regard, what constitutes a significant issue is to be decided on a case-by-case basis. Pyxis Corp., B-282469, B-282469.2, July 15, 1999, 99-2 CPD ¶ 18 at 4. We generally regard a significant issue as one of widespread interest to the procurement community and that has not been previously decided. Satilla Rural Electric Membership Corp., B-238187, May 7, 1990, 90-1 CPD ¶ 456 at 3.

Here, while we have previously addressed the requirement that price or cost be considered before a technically acceptable proposal (or quotation) can be excluded from consideration for award, see Kathpal Tech., Inc.; Computer & Hi-Tech Mgmt., Inc., B-283137.3 et al., Dec. 30, 1999, 2000 CPD ¶ 6 at 9, we have not previously considered this issue in the context establishing a BPA under the FSS. In addition, as set forth more fully below, the Federal Acquisition Regulation (FAR) imposes specific requirements applicable to best value decisions related to the creation of BPAs under the FSS. See FAR § 8.405(a). Given these requirements, and given the extensive reliance on BPAs in federal procurement, we think an agency’s decision to ignore the role of price or cost in excluding technically acceptable vendors from further consideration for receipt of a BPA under the FSS is too fundamental to ignore. Accordingly, even though this solicitation sufficiently placed vendors on notice that the agency would not consider price in “downsizing” the competition, we find that this situation is appropriate for the use of the significant issue exception to our bid protest timeliness rules.

GSA’s “Downsizing” Decision Improperly Ignored Prices

As discussed above, there is little dispute in this record that Cyberdata was excluded from the competition without consideration of its price. Vendors were specifically advised that the agency “will downsize the quotations to the most favorably evaluated quotations based on the technical quotation only.” RFQ amend. No. 1, Questions and Answers, at 2. In addition, the best value determination, submitted as part of the agency report, indicated that in fact “[p]ricing was not used in determining the top twelve (12) most technically favorable quotations.” Best Value Determination at 1. Likewise, the contracting officer reports that “[t]he Government used the overall technical ranking to determine which twelve [v]endors would be invited to deliver oral presentations.” CO’s Statement at 3.

The FAR, however, requires with regard to creating BPAs under the FSS that: “[o]rdering activities shall establish the BPA with the schedule contractor(s) that can provide the supply or service that represents the best value.” FAR § 8.405-3(a)(1). Further, the FAR indicates with regard to establishing a BPA that “[i]n addition to price (see 8.404(d) and 8.405-4), when determining best value, the ordering activity may consider [various other enumerated factors.]” FAR § 8.405-3(a)(2). Thus, under the FAR, price is the one factor that, at a minimum, must always be considered when determining best value for purposes of establishing a BPA under the FSS.

Moreover, we have previously held that a best value analysis necessarily encompasses consideration of an offeror’s price or cost since, to be meaningful, a best value determination requires a weighing of the value and benefits associated with a firm’s approach against their associated cost to the government. See TtEC-Tesoro, JV, B-405313, B-405313.3, Oct 7, 2011, 2012 CPD ¶ 2 at 9. In a best value procurement, it is the function of the source selection authority to perform a tradeoff between price and non-price factors, that is, to determine whether one proposal’s superiority under the non-price factor is worth a higher price. Even where, as here, price is stated to be of less importance than the non-price factors, an agency must meaningfully consider cost or price to the government in making its selection decision. See e-LYNXX Corp., B-292761, Dec. 3, 2003, 2003 CPD ¶ 219 at 7. Thus, before an agency can select a higher-priced proposal that has been rated technically superior to a lower-priced but acceptable one, the decision must be supported by a rational explanation of why the higher-rated proposal is, in fact, superior, and explaining why its technical superiority warrants paying a price premium. See Coastal Environments, Inc., B-401889, Dec. 18, 2009, 2009 CPD ¶ 261 at 4.

Here, the agency’s elimination of technically acceptable quotations, such as Cyberdata’s, without consideration of their price, was inconsistent with the requirement that price be considered in a best value analysis. See System Eng’g Int’l, Inc., B-402754, July 20, 2010, 2010 CPD ¶ 167 at 5 (protest sustained where record shows that agency in best value procurement performed tradeoff between two higher-rated, higher-priced quotations, but did not consider the lower prices submitted by other lower-rated but technically acceptable vendors); Coastal Environments, Inc., supra (protest sustained where agency conducted a tradeoff between the two highest-rated, highest-priced proposals, but did not consider the lower prices offered by other lower-rated, but technically acceptable offerors); Kathpal Tech., Inc.; Computer & Hi-Tech Mgmt., Inc., supra, at 9 (agency cannot eliminate a technically acceptable proposal from consideration for award without taking into account the relative cost of that proposal to the government). We therefore sustain the protest on the basis that GSA failed to evaluate quotations consistent with the FAR requirement that BPAs established with FSS contractors must provide the supply or service that represents the best value. FAR § 8.405-3(a).  (Cyberdata Technologies, Inc., B-406692, Aug 8, 2012)  (pdf)
 

Turning to the issue of whether AF&S’s products met the solicitation’s “salient characteristics,” the term “salient characteristics” generally refers to the essential characteristics of a product that must be met for another product to be considered equal to a specified name brand product. See Federal Acquisition Regulation (FAR) § 52.211-6. In general, the particular features of the brand name item identified in the solicitation as salient characteristics are presumed to be material and essential to the government’s needs, and quotations offering other than the brand name product that fail to demonstrate compliance with the stated salient characteristics are properly rejected as unacceptable. Sourcelinq, LLC--Protest and Costs, B-405907.2 et al., Jan. 27, 2012, 2012 CPD ¶ 58 at 4.

Here, there was no indication that the agency intended to permit variation from requirements defined as salient characteristics, such as the requirement that the item 11 towel dispensers be capable of dispensing towels of adjustable lengths.[7] In the foregoing connection, the protester asserts that the dispenser product sample submitted by AF&S was generic and provided no indication of compliance with the salient characteristics associated with item 11. More significantly, there is no indication in the record that the evaluators considered AF&S’s compliance with this salient characteristic in their review of AF&S’s sample. Accordingly, based on the record before us, we are unable to conclude that the agency had a reasonable basis for determining that the towel dispenser offered by AF&S under item 11 complied with the stated salient characteristics pertaining to that item.

Also, it is apparent from the record here that the agency failed to account for variation in product size. In this regard, the agency’s response to vendor question 38 placed vendors on notice that to the extent they offered products differing from the stated size, the differences were to be reflected in the vendor’s pricing. Thus, it was incumbent upon the agency to take such variations into account in comparing vendors’ prices to ensure that vendors were competing on an equal basis. The record, however, does not reflect that the agency actually accounted for such variation, notwithstanding the material impact on vendors’ pricing. For example, with respect to item 2, which called for 2000-sheet rolls of toilet tissue, AF&S offered a product with 1210 sheets per roll. There is no evidence in the record that AF&S, or the agency, adjusted for the fact that the rolls proposed by AF&S are only 3/5 the specified length. Accordingly, we find the record of the agency’s evaluation deficient in this respect as well.  (The Clay Group, LLC, B-406647, B-406647.2, Jul 30, 2012)  (pdf)

Turning then to the protester's complaints regarding the evaluation of Privasoft's quotation, AINS's chief argument is that it was improper for the agency to enter into a BPA with Privasoft Corp. because it was Privasoft, Inc. that submitted the original quotation. AINS contends that permitting Privasoft Corp. to step into the shoes of Privasoft, Inc. constitutes an improper substitution of offerors. DOJ argues in response that it is clear from the documentation submitted by Privasoft that Privasoft Corp. submitted the original quotation, that Privasoft Corp. will function as the contractor, and that Privasoft Corp. merely used Privasoft, Inc. as its instrument for submission of the quotation.

The record clearly establishes that Privasoft, Inc. submitted the original quotation and that it was the entity seeking to enter into a BPA with the agency. The original BPA (i.e., the BPA that was the subject of AINS's first protest) was between DOJ and Privasoft, Inc. AR, Tab 17. In addition, Privasoft responded to the agency's first request for clarification by explaining that since Privasoft Corp.'s FSS contract indicated that orders were to be placed with Privasoft, Inc., it was reasonable for the quotation to have been submitted by, and the BPA to be established with, Privasoft, Inc. Also, Privasoft posed the following question in response to the agency's request for revised quotations: "Does DOJ have any concern regarding the administrative structure of our bid and of the contract, with Privasoft Corp. as the holder of the GSA Schedule 70 contract, and Privasoft, Inc. as the holder of the BPA?" AR, Tab 10, Privasoft Email, Dec. 11, 2008.

Although Privasoft, Inc. submitted the original quotation, under the facts here we see no basis to object to the establishment of a BPA with Privasoft Corp., the vendor holding the FSS contract. A BPA is not a contract, and orders placed against an FSS BPA are placed against the underlying FSS contract. Canon USA, Inc., B-311254.2, June 10, 2008, 2008 CPD para. 113 at 3. That is the situation here: the quotation submitted by Privasoft, Inc. was for the establishment of a BPA under Privasoft Corp.'s FSS contract. As noted above, Privasoft Corp.'s FSS contract identified Privasoft, Inc. as the entity through which ordering and payment transactions would be effected. Under these circumstances, we do not think that the roles of the two different corporate entitities are a basis for us to sustain the protest.  (AINS, Inc., B-400760.2; B-400760.3, June 12, 2009) (pdf)
 

In February 2004, pursuant to Federal Acquisition Regulation (FAR) sect. 8.405-3, the Army established blanket purchase agreements (BPA) with eight contractors holding Group 36 General Services Administration (GSA) Federal Supply Schedule (FSS) contracts for photocopiers. Canon was one of the eight contractors, and was issued a BPA on February 23. The BPA had a 5-year term. In September 2007, Canon and GSA began to negotiate the renewal of Canon’s FSS contract, which was set to expire on October 31. These negotiations ultimately failed. On September 27, concerned about the effect that the expiration of the FSS contract would have on its BPA, Canon contacted the Army to determine whether any action was required to maintain its BPA as a viable ordering vehicle. In response, the Army’s contract specialist advised Canon by email that “[a]ccording to our contract . . . the Term of the BPA is 5 years from date of award. This would make your BPA W911SE-04-A-0005 valid until 22 FEB 09 and any extension is unnecessary.” Opposition to Motion to Dismiss, Mar. 17, 2008, Tab 1, Email, at 1. Canon therefore took no further action with respect to the BPA or the expiration of the FSS contract, and on December 1, Canon’s FSS contract was modified to prohibit the placement of new orders.

On December 13, the Army issued the RFQ to the eight BPA holders. Canon submitted a timely offer under the RFQ, as did at least one other BPA holder, Sharp Electronics Corporation. On January 31, 2008, the Army announced that the order would be issued to Canon, the lowest-priced offeror. On February 15, Sharp filed a protest with our Office alleging that issuance of the order to Canon was improper because Canon’s FSS contract prohibited the placement of new orders. In response, the Army took corrective action by canceling the order. Our Office dismissed Sharp’s protest as academic on February 26.

On March 3, Canon filed this protest with our Office, alleging that cancellation of the order was improper because its BPA remained a valid ordering vehicle through the time the order was issued. Shortly thereafter, the agency filed a motion to dismiss the protest, arguing that Canon was not an interested party to protest the decision because Canon was not eligible to receive an order under its BPA due to the expiration of its FSS contract. Because the issue raised involves the FSS program, our Office solicited GSA’s views on the issue of the BPA’s validity. Consistent with the position taken by the Army, GSA’s view is that, when a BPA holder’s FSS contract expires, the BPA is no longer viable as there is no longer an active contract against which orders may be placed. Thus, in this case, when Canon’s FSS contract expired, its BPA, established pursuant to that FSS contract, also expired as a valid ordering vehicle for new photocopier service leases.

In response, Canon asserts that GSA fails to address the central issue in the protest, whether the BPA was established pursuant to, and is wholly dependent on, the FSS contract. On this issue Canon essentially contends that its BPA was not dependent on its FSS contract, but was a separate agreement against which orders could be placed and which was not made coterminous with Canon’s FSS contract by its own terms or by the FAR. We agree with Canon that an FSS BPA is a separate agreement from its associated FSS contract. Nevertheless, we conclude that when Canon’s FSS contract expired, Canon’s BPA ceased to be a valid procurement vehicle for the placement of new orders because, as explained below, an FSS BPA is in effect solely a pass-through to the BPA holder’s FSS contract and does not provide an independent foundation for issuing orders.

In order for any procurement to be valid, it must be conducted in accordance with the competition requirements set forth in the Competition in Contracting Act of 1984 (CICA), 10 U.S.C. sect. 2304(a)(1)(A) (2000), and FAR part 6. Under 10 U.S.C. sect. 2303(2)(c), contracts awarded under the FSS program pursuant to FAR part 8 satisfy the requirements for full and open competition. As relevant here, FAR sect. 8.405-3(a)(1) authorizes the establishment of BPAs under FSS contracts as a means to fill “repetitive needs for supplies or services.” It is well-settled, however, that a BPA itself is not a contract; rather, a contract is formed by the subsequent placement of a valid order against the BPA, or by the incorporation of the basic agreement into a new contract. See Envirosolve LLC, B-294974.4, June 8, 2005, 2005 CPD para. 106 at 3 n.3, citing Modern Sys. Tech. Corp. v. United States, 24 Cl. Ct. 360, 363 (1991). As with any contract, orders placed under an FSS BPA must satisfy the applicable statutory requirements for competition.

In this case, the record shows that the BPA was issued pursuant to Canon’s FSS contract, the plain language of Canon’s BPA states that it is established “[p]ursuant to GSA Federal Supply Schedule (FSS) Contract Number GS-25F-0023M,” Motion to Dismiss, Tab 1, Canon BPA, at 1, and Canon itself does not dispute that the BPAs here were all “initially awarded to vendors based on their then current GSA copier schedule contracts.” Protest at 5. It is therefore clear that Canon’s BPA is an FSS BPA, established under FAR part 8.4. Because use of the FSS procedures constitutes full and open competition under 10 U.S.C. sect. 2303(2)(c), orders placed under a valid FSS contract, whether directly or via a BPA, meet the CICA competition requirements. Conversely, in the absence of a valid FSS contract, any order placed under a BPA must independently satisfy the statutory competition requirements; that is, to be a valid ordering vehicle independent from an FSS contract, the BPA itself would have to have been established using procedures that satisfy the statutory requirements for competition. That clearly is not the case here, or in any FSS BPA of this type, given that the pool of vendors that could receive a BPA was limited to FSS contract holders, as directed by FAR sect. 8.404(a) (“ordering activities shall not seek competition outside of the Federal Supply Schedules”). Consistent with this interpretation, we have stated that an FSS BPA is not established with the contractor directly, but rather is established under the contractor’s FSS contract, such that FSS BPA orders “ultimately are to be placed against the successful vendor’s FSS contract.” Panacea Consulting, Inc., B-299307.4, B-299308.4, July 27, 2007, 2007 CPD para. 141 at 1-2 n.1; see also CMS Info. Servs., Inc., B-290541, Aug. 7, 2002, 2002 CPD para. 132 at 4 n.7. Thus, in our view, when, as in this case, an agency intends to place an order under an FSS BPA, the vendor must have a valid FSS contract in place because that contract is the means by which the agency satisfies the competition requirements of CICA in connection with any orders issued under the BPA.

Applying this analysis to the facts here, any order placed under Canon’s BPA must necessarily be placed through Canon’s FSS contract. On December 1, 2007, Canon’s FSS contract was modified to prohibit the placement of new orders. As of that date, Canon’s BPA was no longer a valid procurement vehicle for the placement of new orders, because new orders could not be placed through Canon’s FSS contract and because Canon’s BPA was not established pursuant to competitive procedures required to create a valid foundation for orders to be issued directly from the agency to Canon. Therefore, both on the date the RFQ was issued and on the date the order was issued, Canon was ineligible to receive the order. As a result, the agency’s decision to cancel the order to Canon was proper. (Canon USA, Inc., B-311254.2, June 10, 2008) (pdf)