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. FitNet Purchasing Alliance.
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. Saint Augustine, FL 32095
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904.599.9920
866.381.0908
Phone
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RESPONSE TO ARMY AGENCY REPORT
To: Pedro Briones email: brionesp@gao.gov
Company General Accounting Office Army Attorney: james.nelson3@us.army.mil
From: Raul Espinosa Date: 12/9/2011
Re: Protest B-406075
. . . . . . . . . .
The FitNet Purchasing Alliance (FitNet) although grateful to GAO for denying the Army’s motion to dismiss’
on the grounds that ‘FitNet is not an interest party to bring up this protest,’ is nevertheless, disappointed
because GAO chose only to ask GSA and not SBA for its views on this protest. Both the SBA and the Office
of Advocacy, which represent the interests of small businesses, have views quite opposite to GSA on the
subject of the statutes demonstrated on their historic February 2007 Opinion to GAO1. Both the SBA and
the U.S. Office of Advocacy views are critical to the subject of fair ‘access to contracts’ for small
businesses. With that said, let me begin, by stating my expectation of the outcome of this protest:
Through its ruling, I expect GAO to advice the Army to cancel and re-issue the
solicitation under protest as a ‘set-aside’ for small business and order the Army to
coordinate ALL of its future contracts between $3,000 and $150,000 - as required by
the Statutes and regulation procedures - through the SBA PCR community whose role
in small business coordination are being ignored. The Fedbid reverse auction own
rules has always allowed teaming arrangements on its ‘GSA Schedule Only Buys’
between non-GSA FSS holders that are members of the Fedbid Community and GSA
Schedule holders, many of whom are not. Additionally, the FAR Interim ruling now
allow set-asides on the GSA Federal Supply Schedule as well. Regardless of the above,
the Fedbid Reverse Auction Rules, do require an overhaul to make sure they are all
compliant with all the statutes, the FAR and the SBA regulations which they do not
appear to be.
1
The February 2007 SBA Opinion solicited by GAO.- http://bit.ly/rkHKvg
In its instructions, GAO told the Army to focus its Agency Report and its Case on the following
points:
1) The protest grounds and arguments2;
a) FitNet protested the terms of the solicitation to improperly use non-mandatory
Federal Supply Schedule procedures to procure commodities rather than using
a set-aside where the applicable statute – the Small Business Act – and
implementing regulations require the Army to use such set-aside where the
statutory prerequisitives are met.
b) FitNet protested the reverse auction own rules which allow the Army to
circumvent the mandated set-aside requirements of the Small Business Act and
the statutory prerequisitives and procedures that protect small businesses.
c) The GSA Federal Supply Schedule (FSS) circumvents the mandated
requirements of The Small Business Act statutes as they relate to small
businesses as both the GAO Delex3 and the GAO Aldevra4 decisions have
determined.
d) FitNet is an interested party on this protest by the fact that it is a member of
the Fedbid community; eligible to team up with GAO Schedule Suppliers
through the Fedbid own rules and with the ‘ability’ to participate in the Fedbid
‘GSA Schedule Bids Only’ solicitation or ‘Buys’
2) The protester's rebuttal (issues) Against the Army Request for
Dismissal5;
a) FitNet is an interested party and eligible to bid on the Buy in questions
because it is a member of the Fedbid Community and many GSA Schedule
holders with the commodity being sought - are neither Members of the Fedbid
Community or do not know of the Fedbid Buy which was not advertised on
Fedbizopps and allowed to be on the Fedbid community for less than five (5
days) for a response.
b) FitNet is an interested party because it has the ‘ability’ to enter into a
compliant teaming arrangement - with GSA Schedule holders - that meet not
only the FAR 9.603 guidance, but the DoD guidance6 as well as the SBA
guidance as well.7
2
Text of GAO Protest B-406075 - http://bit.ly/tNWXFp
3
The GAO Delex decision. - http://www.gao.gov/decisions/bidpro/400403.pdf
4
The GAO Aldevra Case. - http://www.gao.gov/decisions/bidpro/405271.pdf
5
Text of Espinosa Rebuttal to the Army’s Motion to Dismiss. – Refer to the Attachments
6
DoD Guidance on Teaming Arrangements. - http://1.usa.gov/tospc1
7
SBA Guidance on Teaming Arrangements. - http://1.usa.gov/vFaf3T
c) FitNet is an interested party because it has already participated in numerous
Fedbid ‘GSA Schedule Bids Only’.
d) FitNet is an interested party because it has even won awards on the Fedbid
Buy type under dispute.
e) FitNet is an interested party because it is a member of the Fedbid community
whose rules have prejudiced FitNet’s own ability to contract with the
government as confirmed by the SBA Office of Advocacy r3 Initiative and as
noted on a document outlining such abuses. and
3) Whether it is permissible in a procurement conducted under FSS
procedures to allow FSS vendors to team with non-FSS firms. In
this regard, the agency should address the language in the RFQ that
the "seller must be able to document its ability to act as an agent of
a partners schedule."
a) Is an offer on a Fedbid ‘Buy’ which complies with the Fedbid rules and the
FAR (Part 9.603) including the SBA guidance, subject to the rules of the GSA
CTA , which - by its own nature - was designed solely to promote business
among GSA FSS sellers? If the answer is YES, then the Fedbid rule(s)
which allows such a teaming arrangement is unlawful and requires an
overhaul as the SBA Office of Advocacy r3 Initiative has proposed.
b) Is the Fedbid reverse auction rule that permits a simple ‘teaming
arrangement’ between a non-GSA Schedule holder who is a member of the
Fedbid Community and a GSA Schedule holder, many of whom are not
members of the Fedbid community or do not know about the Buy, not
subject to the GSA CTA, then the GSA CTA is NOT compliant with FAR 9.603
and not in alignment with the SBA rules that promote ‘teaming
arrangements’ to allow small businesses to get a larger share of the federal
contracts.
c) If GSA controls the FSS Program, it also controls their ‘small business
coordination’ which their program has avoided doing, as confirmed by the
SBA PCR community. This is noted in the correspondence provided on the
Exhibits. The same thing is taking place with Buys on Reverse Auctions.
There are no references on the FAR as far as ‘reverse auctions’ and
Agencies are purposely avoiding small business coordination on Fedbid
Buys. An SBA Opinion - which GAO chose to not to seek - will have shown
that the entire GSA FSS Program is inconsistent with applicable laws and
regulations d at giving small businesses a fair share of government
contracts.
d) Refer to the ‘Backgrounder’ on the GSA Schedule available on the Exhibits
for details on the issues claiming that the Program is abusive towards small
businesses.
The Army Main Argument on its Agency Report
Any time a business whose rights – granted by the statutes of the Small
Business Act and by FAR Part 19 - are violated, it is competitively prejudiced.
The reverse auction own rules - as confirmed by the SBA Office of Advocacy r3
Initiative8 and referenced on the document demanding transparency9 -
circumvent FAR 19 and the rules that protect the rights of small businesses to
access federal contracts.
Through both the GAO Delex decision10 and the GAO Aldevra decision11, GAO has
ruled on the inconsistency of the FAR exemptions with applicable law. Such
inconsistency has resulted on the unfair diversion of $44 Billion, annually, in GSA
contracts away from the small business reservation and this unlawful pattern of
abuse has been allowed to go on for over a decade. If such pattern of abuse is
not ‘prejudice,’ please give me a ticket to leave the country, because America
does not offers due process nor justice.
8
The SBA Office of Advocacy r3 Initiative referencing Reverse Auctions. – Refer to attachments
9
Petition to the Army to bring transparency. – Refer to the Attachments
10
The GAO Delex decision. - http://www.gao.gov/decisions/bidpro/400403.pdf
11
The GAO Aldevra decision. - http://www.gao.gov/decisions/bidpro/405271.pdf
The Agency Secondary Arguments
1. Decision not to set-aside solicitation for small businesses
The SBA PCR assigned to Fort Carson has gone on record objecting to the KO not
to set-aside their eligible procurements, as called for by FAR Part 19, for small
business and purposely avoid relying on the SBA PCR for small business
coordination. Currently, a KO choice to rely on either the FAR Part 8 venue
and/or the Fedbid reverse auction procurement vehicle has allowed the Army to
purposely avoid SBA PCR coordination and/or a SBA PCR challenge for those
decisions.
The amended KO Statement of Facts dated Nov. 2nd (Tab 2) claimed he received
its ‘concurrency’ not to set-aside the solicitation from his own small business
coordinator. What the KO failed to admit was that the Army ‘market research’
was prejudiced in terms of its accuracy and obvious objective to support the
end-user desire to offer preferential treatment to a large business. (non-
compliant with FAR Part 10)
The Army ‘market research’ as demonstrated by the documents we have
supplied, demonstrate that there are not seven (7) as the Army claims, but 168
small businesses on the CCR database as well as fifteen (15) small businesses on
the GSA FSS list capable of fulfilling the needs of the Buy in question.
Additionally, the market research avoids acknowledging that the Fedbid rules
have always allowed ‘set-asides’ on their ‘GSA Schedule only Buys’ and the fact
that there is a FAR interim ruling that allows for ‘set-asides’ on the GSA FSS at
the discretion of the Agencies.
On Tab 2, the KO contradicted himself. On the one hand, he said, “I did not
coordinate with SBA,” yet he also said, “Even though the coordination
requirements aren’t required for an FSS purchase, I did comply with them
(meaning the regulations.)”.
When it comes to the Fedbid reverse auction Buys, including the Buy in question,
both the SBA PCR community, as well as the OSDBU community have publicly
gone on record complaining that Federal Agencies, especially DoD Agencies,
have been circumvent the requirements of FAR 19 and the SBA regulations by
avoiding coordinating ‘Buys’ through the SBA PCR community; by avoiding
posting the Buys on Fedbizopps; by allowing very few days (less than 5) for
responding to Buys and by restricting Buys between $3,000 and $150,000 a
unrestricted and/or ‘sole brands’ without higher-up approvals and without
publication of the required justifications. The Fedbid rules allow those and a
whole array of other violations as referred on the document submitted with the
Objection to the Motion to Dismiss.12
On the Amended ‘Statement of Facts’ (Tab 2,) the KO avoid accepting
responsibility for what has become an endemic abusive pattern against the
rights of small businesses by saying, “the lack of SBA participation and
concurrence was consistent with applicable regulations,”
The Army should have known that one of the few ‘good things’ that the Fedbid
rules does is to allow ‘set-asides’ on their GSA Schedule Buys, yet the Army did
not set aside the Buy as a set-aside as they are required by the statutes and by
the regulations as the SBA has expressed on its 2007 legal opinion.13
The FAR does now allow – through an interim rule – ‘set-asides’ on the GSA FSS,
although such rule is “at the discretion of the Agency.” 14 FPA and its coalition
totally oppose such ruling because it is not only unfair, but unethical and
discriminatory. It’s like allowing the government to offer justice - one of the
inalienable rights of its citizens - but only “at their discretion.”
12
Document Submitted with the Protestor Objection. – Refer to Attachments
13
The SBA 2007 Legal Opinion. - .- http://bit.ly/rkHKvg
14
The FAR interim Rule which allows set-aside on the FSS. - http://1.usa.gov/s17BOx
2. FitNet has failed to document that it has a ‘teaming
arrangement’ in place
The Fedbid reverse auction rule states solely that the seller must be able to
document its ”ability” to act as an agent of a partner’s Schedule. The Merriam-
Webster’s definition of ‘ability’15 is limited to having ‘competence,’ ‘capability,’
‘skill’ or ‘acquired proficiency’ to perform a task. FitNet demonstrated that it did
have such an ability by supplying numerous instances of having done so.
3. GAO has settled the case that FAR Part 19 does not
apply to FSS under FAR Part 8
The Army allegation is wrong. Both the GAO Delex case16 as well as the Aldevra
case 17 decisions demonstrated that GAO has already ruled that the set-aside
statutes of the Small Business Act and similar legislation requires that ALL
solicitations are subject to the set aside provisions of the Act and similar
legislations.
The SBA Legal Opinion of February 2007, sought by GAO18, had confirmed that
“according to statute and regulations, small business set asides are mandatory
for acquisitions valued from $3,000 to $150,000 (upgraded in 2011) and take
priority over GSA Schedule contracts. This interpretation is consistent with the
declared and unambiguous intent of Congress as it relates to Federal
procurement and small businesses.” In other words, Agencies do not have any
discretion on the matter.
15
Merriam-Webster definition of ‘ability.’ - http://www.merriam-webster.com/dictionary/ability
16
The GAO Delex Case.- http://www.gao.gov/decisions/bidpro/400403.pdf
17
The GAO Aldevra Case. - http://www.gao.gov/decisions/bidpro/405271.pdf
18
The SBA Legal Opinion of February 2007. - http://bit.ly/rkHKvg
4. FitNet cannot enter into a GSA Contractor Teaming
Arrangement (CTA)
FitNet does not dispute the Agency allegation that FitNet does not have a CTA.
Frankly, FitNet and the entire small business community consider the GSA CTA
discriminatory towards them because the CTA violates the guidance of FAR 9.603
and the SBA approved provisions on teaming arrangements.
The Fedbid solicitation or ‘Buy,’ does not require a CTA, which is a “teaming
agreement between Schedule holders.”
The Fedbid reverse auction does, however, allow basic teaming agreements
between “non-schedule sellers and GSA Schedule suppliers” as long as the non-
schedule holder is a member of the Fedbid community. For the record, many of
the GSA Schedule holders are not members of the Fedbid community and/or
those who might be, might not be aware of many Fedbid Buys that are posted,
purposely, without any publicity on fedbizopps and/or with very short responses
(i.e., less than five days)
The Army does not dispute that Fedbid does allow teaming arrangements and
the fact that FitNet has participated on such teaming arrangements before.
5. FitNet must have an “Agent Authorization Letter” to
become an agent of a FSS holder.
The Agency assumption is wrong. First of all, the Fedbid reverse auction does not
require an “Agent Authorization Letter” for the Buy in question. Fedbid does
allow, however, for a ‘teaming arrangement’ and the FAR 9.603 policy states
that “the government will not encourage the dissolution of contract teaming
arrangements “ that are entered by contractors.
The Agency assumption is wrong. The Fedbid requirement is restricted to
documenting the non-schedule supplier’s ‘ability’ which, as stated previously, is
limited to having ‘competence,’ ‘capability,’ ‘skill’ or ‘acquired proficiency’ to
enter into a teaming arrangement to perform a task.
The Agency assumption is wrong. FitNet has demonstrated that it did have such
‘ability’ by supplying numerous instances of having entered into such
agreements, even though such proof is in the form of email, letters and/or
acknowledgements.
The GSA CTA is not compliant with FAR 9.603, the DoD and SBA guidance of
‘teaming arrangements.’
6. FitNet’s documentation regarding its ability to
participate on the ‘Buy’ under protest does not refer to
Schedule 7830, consequently, FitNet has not
established that it is an interested party.
Again, the Fedbid requirement refers solely to the “ability” of the non-GSA
schedule holder to team with a Schedule supplier, which has the commodity
being sought on their own schedule. The Army’s own ‘market research,’ (Tab 4)
as demonstrated on Exhibit XX, is, frankly, prejudiced against small businesses
and does not comply with the requirements of FAR Part 10. The documentation
required by Fedbid ( on their Buy ) to demonstrate the seller’s ‘ability’ to team
up is limited to listing the GSA Schedule Contract number of the proposed GSA
Schedule partner, even if the GSA Schedule holder is not a member of the Fedbid
community, which FitNet has done numerous times on its ‘teaming
arrangements.’
The Army market research documentation, on the Agency Report Tab 4 ) only
demonstrates how the Army’s end-users or program staff circumvented the
market Research requirements of FAR Part 1019 by selecting the Fedbid reverse
auction procurement vehicle whose unlawful rules20, circumvent FAR 19 and the
regulations that protect small businesses.
The Fedbid reverse auctions allow preferred brands or suppliers to be sought
through their Buys in numerous fashions as noted on the original protest, and
through the Objection to the Army Motion to Dismiss (See Exhibit XX.)
19
FAR Part 10 . - https://acquisition.gov/far/html/Subpart%2010_0.html
20
SBA Office of Advocacy 2008 r3 Initiative reference on reverse auctions. – Refer to attachments
OFPP, through four (4) separate directives addressing the subject of ‘unfair
justifications’21 has attempted to prevent the contracting community to solicit
preferred brands which the Fedbid rules does allow. Among the ways, listed on
the document submitted on the Objections to the Army’s Motion to dismiss are
the following: a) unrestricted acquisitions on the ‘GSA Schedule Only’ Buys ; b)
‘exact match’ with no pre-approved and published justification; d) no publicity
on fedbizopps; very short (less than 5 days) responses.
Conclusion
FitNet trust that the above explanations, will be sufficient to convince GAO that FitNet is, not only an “interested party” in
terms of bidding on GSA Schedule Buys on the FedBid Community, but eligible to request for GAO to rule in a fashion similar
to our expectations:
Advice the Army to cancel and re-issue the solicitation under protest as a ‘set-aside’ for small
business and order the Army to coordinate ALL of its future contracts between $3,000 and
$150,000 - as required by the Statutes and regulation procedures - through the SBA PCR
community whose role in small business coordination are being ignored. The Fedbid reverse
auction own rules has always allowed teaming arrangements on its ‘GSA Schedule Only Buys’
between non-GSA FSS holders that are members of the Fedbid Community and GSA Schedule
holders, many of whom are not. Additionally, the FAR Interim ruling now allow set-asides on
the GSA Federal Supply Schedule as well. Regardless of the above, the Fedbid Reverse Auction
Rules, do require an overhaul to make sure they are all compliant with all the statutes, the FAR
and the SBA regulations which they do not appear to be.
FitNet appreciates the opportunity to present its case to GAO and trust that GAO will still secure the SBA and the Office of
Advocacy views on the subjects of the protest. Thank you for the opportunity to make a difference,
Raul Espinosa
President
21
Procurement Advisory summarizing the subject of Unfair Justifications. - http://bit.ly/Unfair_Justifications