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GAO Dismisses Protest B-406075 without Addressing Two Government Blunders. Fairness of Government Protest System Questioned
Comptroller General of the United States United States Government Accountability Office Washington, DC 20548 Decision 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. DIGEST 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. DECISION 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 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 concerns. 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 2 FedBid, Inc., is a commercial online procurement services provider that runs a website at FedBid.com, which among other things, hosts reverse auctions. 3 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. 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; 5 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. 6 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:// www.fbo.gov/notices/738acccf41121517d91118e0a706ebc2. 7 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 8 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. 9 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, 10 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 contracts. 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 GAO PROTEST CHALLENGING THE FSS EXEMPTION AND ASSERTING THE EXCLUSIVITY OF ‘SIMPLIFIED ACQUISITIONS’ Filed 10-26-2011 From: FitNet Hqts. Sent: Wednesday, October 26, 2011 10:46 AM To: FedBid Client Services; GAO Protests Cc: 'Lorna.email@example.com'; 'firstname.lastname@example.org' 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, http://bit.ly/rkHKvg. 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 (http://www.gao.gov/decisions/bidpro/400403.pdf) and the GAO B‐405271 Aldevra Protest Decision (http://www.gao.gov/decisions/bidpro/405271.pdf) 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 Raul.Espinosa@Fitnet.net . . . . FitNet Purchasing Alliance. . . email@example.com Email . . . OBJECTION TO ARMY MOTION TO DISMISS To: Pedro Briones email: firstname.lastname@example.org Company General Accounting Office Army Attorney: email@example.com 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 businesses. 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 1 The unsuccessful 2007 FitNet Challenge. – Protest B-309911 2 The Delex Case and the Aldevra case 3 The inconsistent FAR Rule of the Regulators. - http://1.usa.gov/skYcrV 4 The Free-Motion F-624 Cable Cross Over Machine. - http://bit.ly/vKTzlr 5 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 GAO.” 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. 6 Reverse Auction Rules Scheduled for an Overhaul by the r3 Initiative.- http://bit.ly/vsb6EG 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 Washington 11/16/2011 Small GSA Community (All 308797 Diversity Engagement Headquarter 13:30 Business Schedules qualified Sellers Service 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 analysis. 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 transferred. 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." 7 The SBA Legal Opinion on the GSA Exemptions. - http://bit.ly/rkHKvg 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." 8 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 . 9 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 incongruous. 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. Conclusion 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 President 10 FitNet’s FPA Division. - http://fitnet.net/Home.aspx . . FitNet Purchasing Alliance. . . firstname.lastname@example.org Email . . . . . OBJECTIONS TO ARMY AGENCY REPORT To: Pedro Briones email: email@example.com Company General Accounting Office Army Attorney: firstname.lastname@example.org 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. 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 . . FitNet Purchasing Alliance. . . email@example.com Email . . . . . OBJECTIONS TO GSA OPINION To: Pedro Briones email: firstname.lastname@example.org Company General Accounting Office Army Attorney: email@example.com 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. 1 Summary of the four OFPP directives issued to prevent unfair justifications.- http://bit.ly/Unfair_Justifications 2 SBA Office of Advocacy r3 Initiative position on the Exemptions and the rules of reverse auctions. - http://1.usa.gov/umx5Jc 3 OP-ED on the Exemptions. - http://bit.ly/vROY11 4 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.” 5 Petition to the Army to investigate their use of reverse auctions. - http://bit.ly/vwW6Zp 6 GAO Kindomware decision. - http://www.gao.gov/products/B-405727 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 7 GAO Aldevra decision. - http://www.gao.gov/products/B-405271,B-405524 8 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 9 See Attachment A and its corresponding notes (A1) 10 See Attachment B and its corresponding notes (B1) 11 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. Conclusion 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 President 12 The Procurement Advisory summarizing four (4) OFPP Directives. - http://bit.ly/Unfair_Justifications
"GAO Protest B-406075 Decision"