Learning Center
Plans & pricing Sign in
Sign Out

GAO Protest B-406075 Decision

VIEWS: 165 PAGES: 33

GAO Dismisses Protest B-406075 without Addressing Two Government Blunders. Fairness of Government Protest System Questioned

More Info
									                                                                           Comptroller General
                                                                           of the United States
United States Government Accountability Office
Washington, DC 20548

         Matter of:    FitNet Purchasing Alliance

         File:         B-406075

         Date:         February 3, 2012

         Raul Espinosa for the protester.
         MAJ James W. Nelson, Department of the Army; Michael D. Tulley, Esq., General
         Services Administration; and John W. Klein, Esq., and Laura Mann Eyester, Esq.,
         Small Business Administration, for the agencies.
         Pedro E. Briones, Esq., and Guy R. Pietrovito, Esq., Office of the General Counsel,
         GAO, participated in the preparation of the decision.

         Protest challenging an agency’s decision not to set aside for small businesses an
         order under the Federal Supply Schedule (FSS) program is dismissed where the
         protester does not hold an FSS contract, and therefore is not an interested party to
         pursue this matter.

         FitNet Purchasing Alliance, a small business located in Saint Augustine, Florida,
         protests the terms of request for quotations (RFQ) No. W911RZ-12-T-0001, issued
         by the Department of the Army for a reverse auction among vendors holding
         Federal Supply Schedule (FSS) contracts for fitness equipment. FitNet argues that
         this requirement should be set aside for small businesses.

         We dismiss the protest. 1

          During the course of the protest we received the views of the General Services
         Administration (GSA), the Small Business Administration (SBA), and other industry
The RFQ was posted on the FedBid website for a reverse auction for a dual cable
cross machine for Fort Carson, Colorado. 2 RFQ at 1-2; Contracting Officer’s (CO)
Statement at 1. The solicitation restricted the competition to vendors holding
contracts under GSA’s FSS No. 7830, Recreational and Gymnastic Equipment. 3
RFQ at 1. The RFQ advised offerors that the FSS contract must either be in the
offeror’s name or that the offeror must be able to document its ability to act as an
agent on behalf of an eligible FSS vendor. See id., Instructions, at 1 (hereinafter,
offeror/agent provision).

FitNet, who does not hold a FSS contract, protests that the requirement must be set
aside for small businesses under the Small Business Act and contends that the
Army limited the competition to FSS vendors to circumvent the Act. See Protest
at 1. The protester urges that we recommend the Army cancel the RFQ and
reissue the solicitation as a set-aside for small businesses. Protester’s Comments
at 11.

The Army, citing FitNet Purchasing Alliance, B-309911, Nov. 2, 2007, 2007 CPD
¶ 201 at 2-3, and Edmond Computer Co.; Edmond Scientific Co., B-402863,
B-402864, Aug. 25, 2010, 2010 CPD ¶ 200 at 2-3, requests that we dismiss the
protest, because FitNet is not an interested party to protest the procurement given
that it does not hold a FSS 7830 contract. See Request for Dismissal at 3-4;
Agency Report (AR) at 5-6.

We agree with the Army that FitNet is not an interested party to challenge the terms
of this solicitation. As explained to FitNet in our prior decision on a nearly identical
protest, because FitNet does not hold an FSS contract, it is not an interested party
to challenge the agency’s decision not to set aside the FSS procurement for small
businesses. 4 FitNet Purchasing Alliance, supra, at 2, recon. denied, B-309911.2,
Jan. 29, 2008. Under the bid protest provisions of the Competition in Contracting

 FedBid, Inc., is a commercial online procurement services provider that runs a
website at, which among other things, hosts reverse auctions.
  The FSS program gives federal agencies a simplified process for obtaining
commonly used commercial supplies and services. Federal Acquisition Regulation
(FAR) § 8.402(a). The procedures established for the FSS program are set forth in
FAR subpart 8.4 and, although streamlined, they satisfy the requirement for full and
open competition. 41 U.S.C. § 152(3); FAR § 6.102(d)(3) (2010); Savantage Fin.
Servs., Inc., B-292046, B-292046.2, June 11, 2003, 2003 CPD ¶ 113 at 6; Delta
Int’l, Inc., B-284364.2, May 11, 2000, 2000 CPD ¶ 78 at 4.
 In our prior decision, we considered GSA’s and SBA’s views. SBA continues to
disagree with our conclusion that FitNet is not an interested party to challenge the
Army’s decision not to restrict the FSS procurement to small businesses.

Page 2                                                                          B-406075
Act of 1984, 31 U.S.C. §§ 3551-3556 (2006) (CICA), only an “interested party” may
protest a federal procurement. That is, a protester must be an actual or prospective
bidder or offeror whose direct economic interest would be affected by the award
of a contract or the failure to award a contract. Bid Protest Regulations, 4 C.F.R.
§ 21.0(a)(1) (2011). A protester is not an interested party where it would not be in
line for contract award were its protest to be sustained. Four Winds Servs., Inc.,
B-280714, Aug. 28, 1998, 98-2 CPD ¶ 57. Given that the decision was made to
procure via the FSS, FitNet, which does not hold a FSS contract, is not an
interested party to protest the terms of the solicitation. FitNet, supra, at 2-3; see
Edmond Computer Co.; Edmond Scientific Co., supra, at 2-3; accord K-Lak Corp. v.
United States, 93 Fed. Cl. 749, 755, 756 n.7 (2010) and 98 Fed. Cl. 1, 5, 6 n.7
(2011) citing, inter alia, FitNet.

FitNet argues that, even though it does not hold an FSS contract, it is “eligible to
participate in” the procurement under a contractor team arrangement (CTA) with
another FSS vendor, and is thus is an interested party. See Protest at 1;
Protester’s Response to GAO Interrogatory at 1. According to FitNet, an offeror
need not necessarily hold its own FSS contract to bid in this FedBid reverse
auction, because, as reflected in the RFQ’s offeror/agent provision, FitNet could act
as an agent for an FSS vendor. Protester’s Response to Request for Dismissal
at 3; RFQ at 1. FitNet contends that it has since 1995 bid on reverse auctions using
arrangements with fitness manufacturers who hold FSS contracts. 5 Protester’s
Response to GSA’s Comments at 3.

GSA disagrees with FitNet’s premise that it can compete for orders under the FSS
by teaming with another vendor that holds an FSS contract. Specifically, GSA
states that each member in a CTA must hold its own FSS contract. See GSA’s
Comments at 1. 6 With respect to allowing agents to bid on behalf of an FSS
vendor, GSA explains that an FSS vendor is permitted to use a consultant, or
agent, during or after award, but that the offeror must submit an agent authorization
letter in that regard pursuant to GSA multiple award schedule solicitation Clause
SCP-FSS-001, General Proposal Submission Instructions. 7 See id., Exhib. 4;

  FitNet provided, as examples of such arrangements, copies of a 2008 agency
order and vendor quotation, as well as various emails between FitNet and other
agency officials and vendors, which, according to FitNet, evidence that non-FSS
suppliers can team with FSS vendors. See Protester’s Response to GAO
Interrogatory at 1.
  See also GSA FSS schedule 78, Solicitation No. 3FNG-MG-060002-B, standard
clause I-FSS-40, Contractor Team Arrangements, at 58, available at https://
 FAR § 4.102(e) provides that an agent’s authorization to bind the principal must be
established by evidence satisfactory to the CO.

Page 3                                                                       B-406075
see, e.g., GSA Solicitation No. 3FNG-MG-060002-B, General Proposal Submission
Instructions, clause SCP-FSS-001, at iv; RFQ at 1. Moreover, GSA states that FSS
vendors may use dealers, but any participating dealer must be listed on the
vendor’s schedule price. See GSA’s Comments at 1-2. Simply put, GSA states,
without an FSS contract under Schedule 78, FitNet cannot be a CTA member and
absent documented authorization, FitNet may not act on behalf of a Schedule 78
contract holder as an agent. Id. at 2.

In our view, the protester misconstrues, and essentially conflates, the terms agent,
seller, and CTA, as those concepts apply to FAR part 8 procurements and,
ultimately, to our Bid Protest Regulations under CICA. As GSA indicates, contrary
to FitNet’s assertion, FitNet has not shown that it is, or could be, a CTA team
member. 8 Moreover, even if FitNet could show--which it has not--that it is an
authorized agent or participating dealer of a FSS vendor, FitNet would still not be an
interested party under our rules because FitNet itself would merely be the offeror’s
agent, not the actual or prospective offeror. 9 Although an agent may represent an
interested party in a protest where it files the protest on behalf of a specified
interested party and has been authorized to act for that party, see E & R, Inc.,
B-255868, Mar. 29, 1994, 94-1 CPD ¶ 218; Windet Hotel Corp., B-220987, Feb. 6,
1986, 86-1 CPD ¶ 138, the agent is not itself a prospective bidder or offeror and
thus is not an interested party to protest on its own behalf. Priscidon Enters., Inc.,
B-220278, Nov. 13, 1985, 85–2 CPD ¶ 549; see also Bulloch Int’l, B-265982,
Dec. 26, 1995, 96-1 CPD ¶ 5 (An authorized selling agent of a prospective offeror
under a solicitation is not itself a prospective offeror and thus, where the agent files
a protest of a solicitation on its own behalf, rather than on behalf of the prospective
offeror, the agent is not an interested party to pursue the protest.)

Also, while FitNet contends that this requirement must be set aside for small
businesses under the Small Business Act, it does not contend that, if the Small
Business Act is applicable to FSS procurements, the Army could not satisfy the

  We find no merit to FitNet’s objections to GSA’s views with regard to CTAs, see
Protester’s Response to GSA’s comments at 5-6. Although FitNet argues that there
is no regulatory requirement that each CTA member hold its own FSS contract, it is
beyond cavil that orders under the FSS must be awarded only to vendors holding
FSS contracts. See Brooks Range Contract Servs., Inc., B-405327, Oct. 12, 2011,
2011 CPD ¶ 216 at 4-5.
 FitNet has not provided any current authorization letters or any documentation
establishing that it is currently listed as a participating dealer under a FSS vendor’s
price schedule. Moreover, the documents submitted by FitNet to support its
argument that it was member of other CTAs with FSS vendors, actually show that
FitNet was acting as an agent for an FSS vendor.

Page 4                                                                         B-406075
Act’s requirements by restricting the FSS competition to small businesses. 10 In fact,
in another pending protest in which FitNet challenges a decision of the Department
of Veterans Affairs to not set aside an FSS procurement for small businesses
(B-406329), FitNet requested as relief that the agency either conduct the FSS
procurement as a small business set-aside or conduct a new procurement. See
Protest (B-406329), Jan. 11, 2012, at 1.

FitNet also contends that a number of recent decisions of our Office show that
FitNet is an interested party for the purpose of challenging the terms of the Army’s
FSS procurement here. See, e.g., Protest at 1, citing Delex Sys., Inc., B-400403,
Oct. 8, 2008, 2008 CPD ¶ 181, and Aldevra, B-405271, B-405524, Oct. 21, 2011,
2011 CPD ¶ 183. Neither of these decisions indicate that FitNet is an interested
party to challenge the terms of the RFQ here. In Delex, we found that the small
business set-aside provisions applied to competitions for task and delivery orders
under multiple-award contracts. In that case, the protester held a multiple-award
contract with the procuring agency. See Delex, supra, at 2 n.3. Without such a
contract, Delex too, would not have been an interested party to pursue its
challenge. See, e.g., Florida State Coll. at Jacksonville, B-402656, Jun. 24, 2010,
2010 CPD ¶ 146 at 6 n.5; Outdoor Venture Corp., B-401628, Oct. 2, 2009, 2009
CPD ¶ 200 at 5 n.2. In contrast, Aldevra involved a requirement to conduct
set-asides where specific conditions are met under a unique statute specific to the
Department of Veterans Affairs (VA)--the Veterans Benefits, Health Care, and
Information Technology Act of 2006. That Act has no application outside VA.

Finally, and for the record, neither FitNet, nor the SBA, address section 1331 of
the Small Business Jobs Act of 2010 and its implementing FAR amendments.
See Pub. L. No. 111-240, 124 Stat. 2504, 2541, title I, subtitle C, part III, § 1331
(Sept. 27, 2010), codified at 15 U.S.C. § 644(r). Section 1331 directed the Office of
Federal Procurement Policy, in consultation with GSA, to establish guidance under
which federal agencies may, at their discretion, set aside orders placed against
multiple award contracts for small business concerns. See id. (emphasis added).
Pursuant to the statutory mandate, the FAR Council issued an interim rule
amending, among other things, FAR §§ 8.405.5, Federal Supply Schedules--Small
Business; 16.505, Indefinite-Delivery Contracts--Orders, and 19.502-4,

  The SBA in providing its views on this protest also does not address whether a
procuring agency could not otherwise comply with the set-aside requirements of the
Small Business Act by setting aside FSS orders for small business holding FSS

Page 5                                                                       B-406075
Multiple-award contracts and small business set-asides. While we reach no
conclusion in this case for this protester--and without the benefit of briefs on
the issue--section 1331 of the Act, as implemented by amendments to FAR
§§ 8.405 5(1), 19.502-4(c), appears to address, and possibly settle, this issue.

The protest is dismissed.

Lynn H. Gibson
General Counsel

Page 6                                                                       B-406075

                                                               Filed 10-26-2011

From: FitNet Hqts.
Sent: Wednesday, October 26, 2011 10:46 AM
To: FedBid Client Services; GAO Protests
Cc: ''; ''
Subject: FedBid BUY # 307070 - GAO Protest (Army MICC Fort Carson)

ATN: FedBid Client Services 

         Please inform the FedBid Fort Carson contracting officer on the Buy in question of the FitNet Purchasing Alliance (FitNet) 
timely GAO Protest against the Army’s decision to use a government reverse auction to a) allegedly circumvent the mandated set‐
aside requirements of the Small Business Act and b) limit the bidding to GSA Federal Supply Schedule Holders without regards to the 
mandated  requirements  of  the  statutes  as  they  relate  to  small  businesses.  In  short,  FitNet  contends  that  the  Army  should  have 
issued this BUY as a set‐aside for small businesses. 

          For the record, FitNet is an interested party as it is eligible to participate in the FedBid ‘GSA Schedule Bids Only.’  FedBid 
does allow for ‘teaming partners,’ and FitNet has, in the past, participated in such Buys.  This time, however, FitNet, supported by 
the  Fairness  in  Procurement  Alliance  coalition,  wishes  for  GAO  to  rule  on  its  protest  –  regardless  of  the  Army’s  position  and/or 
disposition ‐ given the huge implications of the expected GAO ruling.  

         I  respectfully  offer,  in  support  of  this  GAO  protest,  an  SBA  Legal  Opinion,  sought  originally  by  GAO,  on  an  identical  case 
dating  back  to  February  7th,  2007  and  available  on  this  link,   In  it,  SBA  stated  “according  to  statute  and 
regulations,  small  business  set  asides  are  mandatory  for  acquisitions  valued  from  $3,000  to  $100,000  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.”  

         The SBA Legal Opinion further stated that “The FAR regulations support this position. 48 C.F.R. § 19.502‐2(a). In addition, 
the FAR explains that such a small business set aside takes a priority over the GSA Schedule program. There is nothing in statute or 
GAO  rulings  indicating  that  a  GSA  Schedule  contract  should  or  can  take  priority  over  this  statutorily  mandated  small  business 
reservation requirement.”  

         FitNet wishes to reference both the GAO B‐400403 Delek Protest Decision 
(  and the GAO B‐405271 Aldevra Protest Decision 
( both of which confirm that the GSA Federal Supply Schedule is subject to the 
statutory set‐aside provisions of various legislations including the Small Business Act.  

         Should FitNet prevails on its protest, FitNet is requesting for GAO to cancel the Buy and re‐issued it as a set‐aside for small 
businesses.  GAO  is  urged  to  recommend  for  the  Army  to  restrict  all  of  its  future  procurements  between  $3,000  and  $150,000  – 
including  those  which  rely  on  reverse  auctions  –  to  small  businesses.    Additionally,  FitNet  is  requesting  for  all  of  its  expenses, 
including legal and professional costs, in connection with the filing of the protests to be reimbursed. 

        Please  do  request  for  the  Fort  Carson  Contracting  Office  to  acknowledge  this  communication.  The  Small  Business 
Coordinator for Fort Carson Mission and Installation Contracting Command is receiving a copy of this communication and so is the 
SBA PCR.   Respectfully submitted, 

Raul Espinosa, President 
Fairness in Procurement Alliance 
.                                                                                 FitNet Purchasing Alliance.
.                                                                        Email
                   OBJECTION  TO   ARMY  MOTION  TO  DISMISS 

                To:         Pedro Briones                        email:

                Company     General Accounting Office           Army Attorney:

                From:       Raul Espinosa                        Date:           11/20/2011

                Re:         Protest B-406075
.              .             .             .            .             .          .             .             .        .
    FitNet Purchasing Alliance (FitNet) respectfully request GAO to deny the Army Motion to Dismiss 
    the GAO protest in question and proceed to rule on the merits of this protest – hopefully with SBA 
    and  GSA  legal  opinions  to  aid  the  GAO  ruling.    Since  FitNet  raised  its  unsuccessfully  challenge 
    against  the  GSA  Schedule  ‘exemption,’1  there  have  been  two  separate  GAO  Protest  Decisions2 
    which have confirmed the unambiguous intend of Congress as it relates to the set‐aside statutes of 
    the  Small  Business  Act  and  related  legislation  plus  one  attempt  by  the  Regulators3  to  fix  the 
    allegedly  unfair  diversion  of  $44  Billion  of  potential  FSS  annual  contracts  away  from  small 
    FitNet is herewith challenging the Army’s decision not to set‐aside a solicitation for nine brand‐
    name or Equal Dual Cable Cross‐over Machines (Free Motion Cable Cross Machine Model F‐624 or 
    Equivalent.)4    The  estimated  value  of  the  Buy  is  estimated  at  under  $60,000.  The  procurement 
    vehicle the Army had selected – to allegedly circumvent the FAR and the set‐aside statutes ‐ was 
    the Fedbid reverse auction procurement vehicle, which has been the subject of a Petition to the 
    Secretary of the Army to bring transparency an oversight to their contracting practices. 5 

        The unsuccessful 2007 FitNet Challenge. – Protest B-309911
        The Delex Case and the Aldevra case
        The inconsistent FAR Rule of the Regulators. -
        The Free-Motion F-624 Cable Cross Over Machine. -
        Refer to Attached Exhibit A
I wish to point out, for the record, that: 
       a) Participation on Fedbid Buys is restricted to a community of registered sellers,  
       b) Free Motion, the manufactured referenced on the Buy in question, is a ‘Large Business,’ by 
           SBA standards and is the alleged preferred supplier of the end‐user. 
       c) The Fedbid reverse auction rules were cited, in 2008, by the SBA Office of Advocacy on 
           their r3 Initiative6 which list the nation’s  “Ten Worst Small Business Offenders.”    
       d) Neither  the  FAR  nor  GSAM  references  the  rules  and  processes  of  governing  reverse 
           auctions, many of which, ‐ as per the r3 Initiative and the attached Petition to the Army – 
           allegedly violate the FAR and SBA regulations. Regulators have not addressed the subject. 
                                            The Army Argument 
The Army’s argument, to prevent FitNet’s from exercising its rights to due process through GAO, is 
based solely on the assumption that “FitNet is not an Interested Party to file the subject protest with 
The Competition in Contracting Act of 1984 (CICA) sets forth the GAO authority to entertain bid 
protests. According to CICA, an “interested party” is as “an actual or prospective bidder or offeror 
whose direct economic interest would be affected by the award of a contract or by the failure to 
award a contract.” 31 U.S.C. § 3551(2)(a) see also  4 C.F.R § 21.0(a)(1)  FitNet, along with the SBA 
Contracting Law Department and attorneys for advocacy organizations consulted on the matter 
believe that a combination of factors, including the fact that the procurement vehicle being used is 
a reverse auction whose rules have been reported to be in conflict with the FAR and the fact that 
similar GAO rulings support the contention that FitNet is an “interested party” to raise the issues set 
forth in the protest. 

     Reverse Auction Rules Scheduled for an Overhaul by the r3 Initiative.-
As a member of the FedBid Community, FitNet is eligible to participate on all of the FitNet Buys, 
including those which are restricted to GSA Schedules. The qualifications, for non‐GSA Schedule 
suppliers are restricted to teaming with GSA Schedule suppliers something FitNet has done in the 
past. Below is an excerpt from a Fedbid notice, which describes the eligibility of three separate 
Buys, two of which were restricted to GSA Schedule Buys. Both of the GSA Schedule Buys were set‐
aside for small businesses, an option the Army should have  never ignored.  
    Buy                                                End         Set-     Contract        Seller
            Buy Description            Buyer
    No.                                             Date/Time     Aside      Type         Community
                                                                                 FedBid Seller
       Diversity Outreach          Washington
                                                   11/16/2011 Small    GSA       Community (All
308794 Organizational              Headquarter
                                                   12:30      Business Schedules qualified Sellers
       Engagement                  Service
                                                                                 can bid)
                                                                                 FedBid Seller
                                                   11/16/2011 Small    GSA       Community (All
308797 Diversity Engagement        Headquarter
                                                   13:30      Business Schedules qualified Sellers
                                                                                 can bid)
                                                                                       FedBid Seller
       DIVERSITY OUTREACH Washington
                                                   11/16/2011 Small    Open            Community (All
308772 ORGANIZATIONAL     Headquarter
                                                   16:00      Business Market          qualified Sellers
       ENGAGEMENT         Service
                                                                                       can bid)
The  Fedbid rules, articulated on their instructions, do allow non‐GSA Schedule suppliers to team up 
with Schedule Holders, many of whom are not Fedbid Members.  

The 2007 GAO B‐309911 decision about FitNet was the result of several things. One of them was 
GAO unfamiliarity with the rules of reverse auction which in spite of violating the FAR, they do 
allow, nevertheless, for non‐GSA Schedule suppliers who belong to the Fedbid community to team 
with GSA Schedule suppliers and bid on GSA Schedule Buys.  The other fact was FitNet’s inability, on 
a pro se challenge, to articulate its ability to bid on GSA Schedule Buys.   
FitNet has claimed that it is an interested party because it could have submitted an offer on the Buy 
in question and if it could have done so, it could have also challenged a decision not to set‐aside the 
Buy as required. 
SBA,  through  a  Legal  Opinion7  has  stated  that  “according  to  statute  and  regulations, 
small business set asides are mandatory for acquisitions valued from $3,000 to $100,000 
(upgraded  to  $150,000  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, the Army did not 
have any discretion on the matter. 
 The Army has  falsely implied in its ‘Factual Summary’ that “Prior to Posting the Solicitation on  
Fedbid, the Contracting Officer, through market research and with concurrence from Small Business 
Administration, determined that the solicitation should not be set‐aside for Small Business.”  
SBA  never  concurred  with  the  Contracting  Officer  wishes,  to  allegedly  satisfy  the  end‐user’s 
preferred supplier – a large business, ‐‐ but objected to the CO’s desire not to set‐aside the Buy for 
small businesses. According to a communication from Tanika Pierce, “As the PCR for Fort Carson, 
I  recommended  that  this  procurement  be  set‐aside  for  small  business  and  I  did  not 
coordinate  on  form DD2579.” (see Exhibit B)    
In  LBM. Inc.,  B‐290682, Sept. 18, 2002, 2002 CPD ¶ 157, a small business protester  
argued that the procuring agency was required to set aside certain motor pool services 
for  small  businesses.  The  GAO  stated  that  the  protester,  LBM,  Inc.  (LBM)  was  not 
challenging  the  proposed  award  of  a  task  order  under  an  existing  indefinite 
delivery/indefinite  quantity  contract  (IDIQ).  Rather,  LBM  was  challenging  the  agency's 
acquisition planning in transferring the motor pool services to the IDIQ contract without 
first considering the Small Business Act and implementing regulations. Further, in LBM, 
Inc., the GAO explained that under the broad definition of "acquisition" as set forth in 
the  Federal  Acquisition  Regulations  (FAR),  the  procuring  agency's  acquisition  was 
subject  to  the  Small  Business  Act  and  particularly  FAR  §  19.502‐2(b)  concerning  small 
business set asides. In addition, the GAO noted: 
         Had the agency complied with the requirements of FAR § 19.502‐2(b), it might 
         have concluded that the LOGJAMSS contracts were not the appropriate vehicle 
         for this acquisition. Whatever the outcome of the FAR § 19.502‐2(b) analysis, 
         though, the agency's intent to use a task order under LOGJAMSS as the contract 
         vehicle did not eliminate the legal requirement that the agency undertake that 
LBM, Inc., supra at 7‐8. 
Although the issue was not specifically addressed in LBM, Inc., the GAO entertained the 
protest and LBM was therefore deemed an "interested party," despite the fact LBM was 
not an awardee under the lDIQ contract under which the motor pool services had been 
FitNet's protest is similar to LBM's.  In this protest, FitNet has challenged the agency's 
acquisition planning in utilizing the GSA Schedule Program without first considering the 
Small  Business  Act  and  implementing  regulations.  FitNet  has  argued  that  the  Army 
should have first looked to small businesses, either through the GSA Schedule or outside 
of it and issued a solicitation for a small business set aside. FitNet's argument, similar to 
the ruling in LBM, Inc., is that if the Army had complied with the Small Business Act it 
might have concluded that the GSA Schedule Program was not the appropriate vehicle 
for  this  procurement.  See  LBM,  Inc.,  supra.  Thus,  Fitnet,  as  a  small  business,  is  a 
"prospective offeror" if this protest ground is sustained. FitNet, like LBM, is therefore an 
"interested party." 

    The SBA Legal Opinion on the GSA Exemptions. -
We  note  that  the  Army  subsequently  filed  a  Request  for  Modification  of 
Recommendation of the GAO's decision in LBM, Inc. See Dept. of the Army ‐ Request for 
Modification  of  Recommendation,  B‐29068.2,  2003  CPD  ¶  23.  Specifically,  the  Army 
requested that the GAO permit it to implement FAR § 19 .502‐2(b) (the "rule of two") by 
limiting competition to those small business that were holders of certain IDIQ contracts 
(i.e. , the LOGJAMSS contracts). The GAO ruled that the "request” is not consistent with 
the statutory and regulatory scheme applicable to small business set asides." Id. at 6.8  
In addition, the GAO stated, in a footnote, that  "if it were true that a small business set‐
aside  could  properly  be  limited  to  small  businesses  holding  LOGJAMSS  contracts,  LBM, 
which  does  not  hold  one  of  those  contracts,  would  not  be  eligible  for  award  and 
therefore  would  not  be  an  interested  party,  so  that  its  protest  should  have  been 
dismissed on that basis." Id., fn. 4. 
The  statement  in  that  footnote,  however,  does  not  consider  that  the  issue  in  both 
protests ‐ LBM, lnc, and FitNet ‐ is whether, during the agency's acquisition planning, it 
must first consider the Small Business Act and implementing regulations. If the answer is 
"yes," as FitNet and the SBA have argued before, then the next step is a determination 
on what contract vehicle to use.9 
Consequently,  FitNet  is  an  "interested  party"  to  raise  this  issue  because  FitNet  is  a 
"prospective offeror." 

 The SBA believes that the ruling and issues presented in Dept. of the Army, supra are distinguishable from the
procurement and issues raised in this protest. See SBA's September 4, 2007 Response to Agency Report in B·309911,
Protest of FltNet Purchasing Alliance
   It is important that the procuring agency review the Small Business Act requirements first, and then decide the
competition method to use second (e.g., Fedbid, GSA Schedule, GWAC, small business set aside outside the GSA
Schedule Program, etc.). The Small Business Act states that for "[e]ach contract for the purchase of goods and services
that has an anticipated value greater than $2,500 but not greater than $150,000 shall be reserved exclusively for small
business concerns unless the contracting officer is unable to obtain offers from two or more small business concerns
that are competitive with market prices and are competitive with regard to the quality and delivery of the goods or
services being purchased." 15 U.S.C. § 6440(i) (emphasis added). If the agency decided to use the GSA Schedule
first, and there were not two or more small business concerns that met the "rule of two" requirements on the
schedule, but there were not two or more small businesses off the schedule, then this provision of the Small
Business Act would be circumvented,
This FitNet protest is also similar to MCI Telecommunication Corp., 70 Compo Gen. 20 
(Oct. 10, 1990). In that protest, the GAO ruled that MCI Telecommunications Corp. (MCI) 
was an "interested party" to protest the contemplated issuance of delivery orders under 
Sprints' FTS2000 contract. The GAO stated that "[i]f, as alleged by MCI, providing long‐
distance  telephone  service  for  federal  inmates  is  outside  the  scope  of  the  FTS2000 
contracts,  then  MCI  never  had  the  opportunity  to  compete  for  award  of  a  contract  to 
provide this service." MCI Telecommunication Corp., 70 Comp, Gen. 20, 23. The same is 
true  here.  If,  as  alleged  by  FitNet,  the  Army  failed  to  consider  the  Small  Business  Act 
when  acquiring  these  supplies,  then  FitNet  never  had  the  opportunity  to  compete  for 
award of a contract to provide these supplies (because we do not know what vehicle the 
Army  would  have  or  could  have  used).  FitNet  now  seeks  that  opportunity  through 
means of a protest to the GAO. 
If the GAO decides that the procuring agency must select the type of competition first 
(GSA Schedule etc.) and then must apply the provisions of  the Small Business Act, the 
SBA believes that prior GAO rulings support the contention that FitNet is an "interested 
party."  In  Information  Ventures,  Inc.,  B‐291952,  2003  CPD  ¶  101,  May  14,  2003,  the 
protester,  Information  Ventures,  Inc.  (IVI),  protested  the  Federal  Emergency 
Management  Agency's  (FEMA's)  determination  to  purchase  web  site  usability  and 
design reviewer services from the FSS rather than under a small business set aside, IVI 
was not a FSS vendor at the time of the protest. Information Ventures, Inc., B‐291952, 
2003  CPD  ¶  101  at  1.  Nevertheless,  GAO  entertained  the  protest,  never  specifically 
addressed  the  issue  of  "interested  party,"  and  ruled  that  (for  procurements  valued 
above  $100,000)  FEMA  was  not  required  to  set  aside  the  requirement  for  small 
businesses in lieu of purchasing from FSS vendors. FitNet, like lVI, is not a FSS vendor, 
and is arguing, like lVI, that the procuring agency should have set aside the requirement 
for  small  businesses.  The  GAO  treated  IVI  as  an  "interested  party"  when  ruling  that 
FEMA could use the FSS, and should treat FitNet as an "interested party" if it rules that 
the  Army  should  have  set  aside  the  requirement  for  small  businesses,  but  could  have 
used  anyone  of  a  number  of  competitive  procedures  in  doing  so,  including  the  GSA 
Schedule Program. Otherwise, GAO's application of "interested party" status would be 
The Army’s alleges that FitNet’s reference to The Fairness in Procurement Alliance (FPA) 
does not make FPA an “interested party.”  For the record, FitNet founded and manages 
FPA as it can be noted on the FitNet’s website10. 
FitNet trust that the above explanations, formulated in a very short time frame of three‐days, will 
be sufficient to convince GAO that FitNet is, indeed, an “interested party” in terms of  bidding on 
GSA Schedule Buys on the FedBid Community. The Petition to the Secretary of the Army, which has 
become a Congressional as well, articulates many of the issues and problems with reverse auctions 
which GAO should address in conjunction with the GAO protest.  FitNet appreciates the 
opportunity to present its case to GAO and trust that GAO will decide to hear the GAO protest and 
rule on its merit.  Please do request the Army to incorporate, on its report, the alleged Research 
Report and the documents claiming that SBA coordinated small business participation.  All 
materials including the ATP prices the Army referenced on the Buy should also be included.  
Thank you for the opportunity to make a difference, 

Raul Espinosa 

     FitNet’s FPA Division. -
            .                                                                                      FitNet Purchasing Alliance.
            .                                                                             Email

           To:         Pedro Briones                   email:

           Company     General Accounting Office      Army Attorney:

           From:       Raul Espinosa                   Date:           12/09/2011

           12/09Re:    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. 

    The February 2007 SBA Opinion solicited by GAO.-
In its instructions, GAO told the Army to focus its Agency Report and its Case on the following

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

       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
        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

    Text of GAO Protest B-406075 -
    The GAO Delex decision. -
    The GAO Aldevra Case. -
    Text of Espinosa Rebuttal to the Army’s Motion to Dismiss. – Refer to the Attachments
    DoD Guidance on Teaming Arrangements. -
    SBA Guidance on Teaming Arrangements. -
    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

      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
      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
     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.

     The SBA Office of Advocacy r3 Initiative referencing Reverse Auctions. – Refer to attachments
     Petition to the Army to bring transparency. – Refer to the Attachments
     The GAO Delex decision. -
     The GAO Aldevra decision. -
          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

   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.”

     Document Submitted with the Protestor Objection. – Refer to Attachments
     The SBA 2007 Legal Opinion. - .-
     The FAR interim Rule which allows set-aside on the FSS. -
      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

         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.

     Merriam-Webster definition of ‘ability.’ -
     The GAO Delex Case.-
     The GAO Aldevra Case. -
     The SBA Legal Opinion of February 2007. -
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

   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

         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.)

     FAR Part 10 . -
     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.


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 

     Procurement Advisory summarizing the subject of Unfair Justifications. -
            .                                                                                           FitNet Purchasing Alliance.
            .                                                                                  Email
            .               OBJECTIONS TO  GSA OPINION  

           To:          Pedro Briones                      email: 

           Company      General Accounting Office         Army Attorney:

           From:        Raul Espinosa                      Date:            01/14/2011

           Re:          Protest B-406075

           .            .            .            .             .            .            .            .
I wish to go on record acknowledging GAO , first of all, for finally agreeing to accept  voluntary opinions from 
valuable  parties  which  support  the  FitNet  position  on  this  highly  significant  protest  which  highlights  the 
endemic  abusive  procurement  practices  of  Federal  Agencies,  specifically  GSA  and  the  Army  in  using  unfair 
justifications  on    simplified  acquisitions  on  the  GSA  Schedules  (FSS),  including  reverse  auctions    a)  to  offer 
preferential treatment to large businesses;1  b) to circumvent the statutes and the regulations that protect the 
rights  of  small  businesses  as  the  SBA  Office  of  Advocacy  has  confirmed2  and  c)  to  continue  relying  on  the 
Exemptions to  divert simplified acquisitions away from small businesses.3 
My documentation on this protest, along with the voluntary opinions submitted will help convince GAO of the 
need  to  strongly  support  its  latest  protest  decisions  involving  simplified  acquisitions  on  the  FSS4    –    which 
government policy officials had the audacity to neither acknowledge nor obey  –  involving the FSS and  the 
rules of reverse auctions.5  Small businesses believe that the GAO decision on the FitNet case   will help bring 
transparency to the government‘s abuse of the ‘reverse auction rules’  and eventually help level the playing 
field in government contracting.    
                                                               ‐    MORE ‐ 
Federal  Agencies,  especially  the  Army  have  been  using  the  GSA  Contract  Teaming  Agreement  (CTA)  to 
circumvent the statutes and the regulations that protect small businesses to please requestors or end users on 
solicitations or Buys and that practice must come to an end once and for all. 

    Summary of the four OFPP directives issued to prevent unfair justifications.-
    SBA Office of Advocacy r3 Initiative position on the Exemptions and the rules of reverse auctions. -
    OP-ED on the Exemptions. -
    Delex, Aldevra and Kimdomware GAO Decisions
Through its ruling, I expect GAO to recommend the Army cancel and re‐issue the solicitation under protest as a ‘set‐
aside’  for  small  business  and  order  the  Army  to  perform  adequate  and  compliant  Market  Research  before 
coordinating  this  and  ALL  of  its  future  simplified  acquisitions  (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.  I also expect for GAO to affirm that the Fedbid simple teaming arrangements on their ‘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)  are  compliant  and  valid.    Additionally,  I  also  expect  for  GAO  to  rule  that  the  GSA  CTA 
language is inconsistent with applicable laws and regulations and that their requirements are not applicable in this 
protest.  And, finally, I expect for GAO to reference that the Fedbid Reverse Auction Rules, do require an overhaul to 
make sure a) they are all compliant with all the statutes, the FAR and the SBA regulations and b) they are fair to both 
parties and are not used by Federal Agencies, any longer, to gain unfair advantage over the Sellers.  Finally, I expect 
for GAO to recommend that the Army reimburse me for the costs of filing and pursuing the protest. 

FitNet is an Interested Party 
First of all, FitNet  has met the interested party definitions under the GAO rules, and its standing is very clear. 
The  most  recent  GAO  decision  involving  the  FSS  on  the  Kindomware  (B‐405727)  case6    states  that  “the 
protester  is  challenging  the  terms  of  the  solicitation,  and  the  remedy  sought  is  the  opportunity  to  compete 
under a revised solicitation, the protester is an interested party, even if it did not submit a quotation or offer.  
See Courtney Contracting Corp., B‐242945, 1991, 91‐1 CPD ¶ 593 at 4‐5. 
Furthermore, FitNet has been prejudiced by the Army’s decision not to set‐aside a ‘simplified acquisition’ on 
the FSS which relies on the ‘government reverse auction’ (i.e., Fedbid) as a procurement vehicle.  As noted on 
the  GAO  decision  on  the  Aldevra  (B‐405727)  case7    “the  (Agency)  decision  to  procure  items  from  the  FSS 
without  first  determining  whether  the  procurement  should  be  set‐aside  for  (small  businesses)  violates  the 
(small business) regulations.” 
                                                                 ‐    MORE ‐ 
In the Aldevra case , GAO ruled by saying “we conclude that the exception in the FAR that permits agencies to 
award  task  and  delivery  orders  under  the  FSS  without  regard  to  government‐wide  small  business 
programs…does not govern.” 

    Petition to the Army to investigate their use of reverse auctions. -
    GAO Kindomware decision. -
I  have  also  attached  –  even  though  it  is  not  required  to  prove  that  I  have  standing  ‐  documentation  which 
demonstrates that FitNet does have and has had arrangements, since the company was established in 1995, 
with fitness equipment manufacturers many of whom have ‐ directly or indirectly through third parties ‐ GSA 
Schedule Contracts on Schedule 7830.8   
The Fedbid Simple Teaming Arrangement is Compliant 
When Fedbid publishes a Buy which an Agency has purposely restricted for ‘GSA Schedule Bids Only,’  Fedbid 
has always allowed non‐GSA Schedule suppliers which are members of its Fedbid community  to team up with 
GSA Schedule suppliers,  many of which are not members of the Fedbid community  – without the complexity, 
overly restrictive and discriminatory policy of the GSA CTA –  to bid  on those Buys.   
The  Umbrella  Initiative  Think  Tank  research  on  small  businesses  contracting  with  the  Federal  Government 
submitted to the Senate Committee on Small Business and Entrepreneurship has demonstrated that the GSA 
Schedule  holders  represent  a  very  small  percentage  of  small  businesses  registered  to  do  business  with  the 
government,  yet  the  federal  procurement  data  system  (FPDS)  has  demonstrated  that  the  government  has 
been awarding more than three out of every four simplified acquisitions to large businesses when the Small 
Business Act exclusively reserves those purchases for small businesses. 

       Small Business Participation in Government Contracting at the Federal Level as of March 2011

                               Latest U.S.   Business Registered to contract with Small Businesses on the GSA Federal Supply
                                Census                the Federal Govt.                       Schedule Program

    Total Small Businesses       27.2M                 482,262 (1.7%)                            14,345 (< 2%)

                                                                                (of the total small businesses registered on CCR)

                                                          ‐   MORE -

The Unfair and Damaging Results of falsely Justifying Market Research

    GAO Aldevra decision. -,B-405524
    See Attachment D
The Market Research submitted by the Army9 on this case demonstrates the unprofessional and incompetent
manner in which a procurement specialist attempted to justify a decision not to set aside the procurement and
unfairly offer preferential treatment to a large business. The market research performed was not only not
compliant with the regulations including FAR 10 as FitNet has proven,10 but was done to avoid the small
business coordination that SBA PCRs provide. In short, there were in excess of 150 small businesses on the
CCR database capable of fulfilling the requirements of the Buy in question.

The Inconsistency of the GSA CTA with applicable laws and regulations 
The GSA arguments on their Opinion11 that their CTA prevents FitNet from teaming with a Schedule holder on 
a simplified acquisition, which, ‐ to begin with ‐ is supposed to be exclusive for small business ‐ is unlawful, 
unfair and discriminatory. Below is how the Fedbid describes their rules on those Buys: 
GSA  Schedule  Bids  Only  :  Sellers  bidding  on  this  opportunity  MUST  have  the  items requested  on  an  existing 
GSA  Schedule.  The  Schedule  must  either  be  in  the  Seller's  name  or  the  Seller  must  be  able  to  document  its 
ability to act as an agent of a partner's Schedule. Sellers may offer Open Market items only in accordance with 
the  approved  Terms  and  Conditions  of  their  respective  GSA  Schedule  AND  upon  approval  from  the  soliciting 
Contracting Officer 
FitNet has bid and won Fedbid Buys restricted for ‘GSA Schedule Bids Only’ in the past. The only issue that 
conceivable  might  affect  FitNet  in  those  Buys  is  the  fact  that  SOME  agencies  (not  ALL)  prefer  to  issue  the 
resulting  contract  to  the  Schedule  holder  even  though  the  ‘non‐schedule  holder’  was  the  one  doing  the 
bidding.      Frankly,  FitNet  has  never  been  concerned  about  such  eventuality  because  FitNet  knows  how  to 
protect  its  rights  and  make  sure  that  its  share  of  the  profits  from  that  Buy  are  received  from  its  ‘teaming 
partner.’  To demonstrate, I am offering the comment from one of the COs FitNet has dealt with on an award 
it had received.   The comment confirmed that, even on those cases, FitNet is able to receive such awards. 
                                                          ‐    MORE ‐ 
“It  is  our  policy  to  issue  a  GSA  delivery  order  to  the  company  that  holds  the  GSA  contract  unless  the  GSA 
Schedule  uses  “Authorized  GSA  Schedule  Partners”.    Authorized  GSA  Schedule  Partners  must be  listed  in the 

   See Attachment A and its corresponding notes (A1)
   See Attachment B and its corresponding notes (B1)
   See Attachment C
GSA  Schedule.   Unless  your  company  is  listed  as  an  Authorized  GSA  Schedule  Partners,  the  delivery  order  in 
question will only list your company as Care Of “C/O.” 
A great deal of GSA Schedule suppliers, frankly, do not belong to the Fedbid community and some which do, 
typically are  unaware of many of the opportunities that are available through the Fedbid Buys.    I don’t intend 
to reveal to the Army or GSA the proprietary knowledge acquired through the years on how FitNet goes about 
winning restricted buys unless GSA or the Army pays me six figures to tell them the knowledge I have acquired 
to fulfill Fedbid Buys.      
In summary, reverse auctions makes it possible for non GSA Schedule  companies ‐ on the Fedbid community ‐ 
to actually team up on those Buys ‐ without divulging critical information to their GSA Schedule partner with 
whom they do business with.    
If those businesses  were to divulge their knowledge, prematurely,  the GSA Schedule holder might be inclined 
(as it has happened in the past) to by‐pass the non‐schedule supplier which brought them the opportunity and 
pursue those opportunity themselves.   In short,  a) FitNet  complies with the rules of the reverse auctions and 
b) FitNet complies with the teaming requirements of the Buys.   
The GSA CTA, in the  opinion of many attorneys FitNet has consulted with, violates not only the FAR 9.60.3‐ 
Policy, but the SBA and the DoD views on ‘teaming arrangements.’ Those policies permit small businesses to 
pursue contracts for mutual benefit.  
The GSA Contractor Teaming Arrangement (CTA): 
    a) The  GSS  “policy”  on  team  members  having  schedules   is  nowhere  in  the  regulations,  and  it  would 
        require a notice plus a comment change to the GSA acquisition rules to give GSA’s position legal effect.   
    b) The CTA Is overly restrictive because it limits the teaming to GSA Schedule holders and focuses solely 
        on promoting them while disregarding other valid and compliant teaming agreement possibilities. 
    c) The  CTA  violates  FAR  9.603  –  Policy  which  outlines  what  are  the  requirements  for  a  teaming 
        arrangement and acknowledges the fact that “the government will recognize the integrity and validity 
        of contractors teaming agreements, provided, the arrangements are identified and fully disclosed on an 
    offer,  or  for  arrangements  entered  into  after  the  submission  of  an  offer  before  the  arrangements 
    become effective.”     
d) The CTA does not appear to recognize the Fedbid simple agreement on their ‘GSA Schedule Buys Only’ 
    even  though  many  non‐schedule  holders  on  Fedbid,  including  FitNet,  have  been  awarded  contracts 
    through such teaming agreements. The Fedbid teaming agreement on ‘GSA Schedules Only’ Buys has 
    been in place since Fedbid began operating government reverse auction, under a GSA contract. 
e) The  CTA  Is  akin  to  what  SBA  would  consider  a  ‘joint  venture’  (JV)  in  another  context  whereas   the 
    ‘team’ is used to refer to a prime/sub team instead of a JV.  Like a JV, the GSA CTA provides that both 
    parties  have  privity  with  the  government  and  that  both  parties  are  responsible  for  the  duties 
    addressed in the CTA document. This is not required for JVs  in the SBA small business programs.  An 
    8(a) firm may JV with a non‐8(a),  a SDVO may JV with a non‐SDVO, a WOSB may JV with a non‐WOSB, 
    etc., etc., etc.    
f) The CTA Violates the SBA’s teaming agreement main objective on their small business programs, which 
    is  solely   to  ensure  that  large  businesses  do  not  exercise  undue  control  or  influence,  especially  in 
    ‘simplified acquisitions. This policy helps small businesses maximize their teaming opportunities.  
g) The CTA would invalidate the Fedbid compliant and simple agreement which discloses ‐ on the actual 
    offer   ‐   the  ‘companies on   the  teaming  agreement’  (they  do  not  both  have  to  be  schedule holders) 
    and the GSA Schedule contract to be referenced.  FAR 9.603 specifically states “the government will not 
    normally require nor encourage the dissolution of contractor team arrangements.” 
h) The  CTA  is  non‐consistent  with  applicable  laws  and  regulations  when  it  is  applied  to  ‘simplified 
    acquisitions,’ (contracts between $3,000 and $150,000), which are exclusive to small businesses.  The 
    CTA language makes no reference to small businesses.  
                                                     ‐   MORE ‐ 
i) The CTA allows poorly trained contracting specialists ‐ as exemplified on the solicitation under protest ‐ 
     a) to avoid the guidance of the regulations, including FAR 10 and submit incompetent and misleading 
    market  research;  b)  to  offer  unlawful  preferential  treatment  to  large  businesses;  c)  to  avoid  the 
          guidance  of  four  (4)  OFPP  directives  issued  to  prevent  unfair  justifications12   and  c)  to  avoid  the 
          involvement of the SBA PCRs in providing small business coordination to Agencies which use the GSA 
          Schedules and/or the government reverse auction vehicles, to purposely circumvent FAR 19.   

FitNet trust that its documentation along with 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 that it is also eligible to 
request for GAO to rule and make recommendations in a fashion similar to our expectations: 

Recommend  that  the  Army  cancel  and  re‐issue  the  solicitation  under  protest  as  a  ‘set‐aside’  for  small  business  and 
order  the  Army  to  coordinate  and  order  the  Army  to  perform  adequate  and  compliant  Market  Research  before 
coordinating  this  and  ALL  of  its  future  simplified  acquisitions  (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.  I also expect for GAO to affirm that the Fedbid  simple teaming arrangements on their ‘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)  are  compliant  and  valid.    Additionally,  I  also  expect  for  GAO  to  rule  that  the  GSA  CTA 
language is inconsistent with applicable laws and regulations and that their requirements are not applicable in this 
protest.  And, finally, I expect for GAO to reference that the Fedbid Reverse Auction Rules, do require an overhaul to 
make sure a) they are all compliant with all the statutes, the FAR and the SBA regulations and b) they are fair to both 
parties and are not used by Federal Agencies, any longer, to gain unfair advantage over the Sellers.  Finally, I expect 
for GAO to recommend that the Army reimburse me for the costs of filing and pursuing the protest. 
FitNet  appreciates the opportunity to present its case to GAO and trust that GAO will rule and make recommendations that 
will clear, once and for all, the fact that ‘simplified acquisitions are exclusive for small businesses. ‘ 
Thank you for the opportunity to make a difference, 

Raul Espinosa 

     The Procurement Advisory summarizing four (4) OFPP Directives. -

To top