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Competitive RFP with Directed Sub

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I am looking for law or regulation references to support or refute the position that you can conduct a competitive acquisition, and as part of the RFP establish a requirement that all offerors must propose and the successful offeror must use a directed source for a particular aspect of the acquistion (i.e. a directed sub); and in such a situation no J&A is needed.

Does anyone have a suggestion as to a statute or regulatory cite that I can read that addresses that scenario?

In advance thx for your help.

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I know of no statute or regulation that expressly addresses directed subcontracting one way or another.

FAR Part 6, which implements the Competition in Contracting Act, does not apply to subcontract awards, see FAR 6.001, so agencies need not prepare a J&A when directing award of a subcontract to a particular firm. I know of no rule or decision to the effect that directed subcontracting is a form of brand name specification. All the same, a wise CO will document the file to explain why it is necessary to direct a subcontract to a particular firm. See Feldman, 03-03 Briefing Papers 1, "Subcontractors in Federal Procurement: Roles, Rights & Responsibilities."

Indeed, consistent with other FAR clauses, the agency's solicitation may direct that all prospective prime contractors use a particular subcontractor, provided that such a condition reflects the agency's minimum needs and that all prime contractor offerors compete on a common basis.

See, too, Valentec Sys., Inc., Comp. Gen. Dec. B-270880, 96-1 CPD ? 231.

Prime contractors do not have to obtain full and open competition when awarding subcontracts. They need only seek competition to the "maximum practical extent." See FAR 52.244-5. See also Feldman, cited above. As a general rule, GAO will not entertain protests about subcontract awards. See 4 CFR ? 21.5(h).

If a prospective offeror wants to protest directed subcontracting it would have to do so on the grounds that the prime contract specification is unduly restrictive. In that case, the agency would have to show that its requirement is reasonable. When an agency directs subcontracting, it must ensure that all offerors are evaluated on a common basis. See Feldman, Government Contract Awards: Negotiation and Sealed Bidding, ? 3:60:

When an agency requires contractors to use directed source subcontractors, it must ensure that all offerors are competing on a common basis.

This is done by establishing a "surrogate price" for the subcontractor, so that offerors won't be prejudiced if the subcontractor proposes a different price to different offerors.

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It would appear that under a directed subcontract scenario that the subcontract would have to be limited to services to avoid a sole source justification, otherwise the subcontract for product would in essence be a brand name specification requiring a sole source justification 6.302-1©. Supplier vs subcontractor definition.

Does the surrogate price become the contract price? Why as a prime would I not bid a high contract price for the subcontractor if I will be evaluated at the lower surrogate price?

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I am looking for law or regulation references to support or refute the position that you can conduct a competitive acquisition, and as part of the RFP establish a requirement that all offerors must propose and the successful offeror must use a directed source for a particular aspect of the acquistion (i.e. a directed sub); and in such a situation no J&A is needed.

Does anyone have a suggestion as to a statute or regulatory cite that I can read that addresses that scenario?

In advance thx for your help.

From the point of view of competitors of the directed source, this may be a violation of CICA. See Savantage Financial Servs. v. United States, 81 Fed. Cl. 300 (2008). Even though the agency is pushing the actual purchase to the prime contractor, the subcontract with the directed source is still part of a federal acquisition (per the statutory and FAR definition of procurement) and CICA applies. Of course, GAO won't touch this situation. You have to go the Court of Federal Claims to make this argument.

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From the point of view of competitors of the directed source, this may be a violation of CICA. See Savantage Financial Servs. v. United States, 81 Fed. Cl. 300 (2008). Even though the agency is pushing the actual purchase to the prime contractor, the subcontract with the directed source is still part of a federal acquisition (per the statutory and FAR definition of procurement) and CICA applies. Of course, GAO won't touch this situation. You have to go the Court of Federal Claims to make this argument.

Jon,

Are you saying that an agency would have to execute a sole source J&A in order to direct the use of a specific subcontractor?

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Jon,

Are you saying that an agency would have to execute a sole source J&A in order to direct the use of a specific subcontractor?

Yes, the agency in Savantage might have won if they had had an appropriate sole source J&A. Of course, that would have been a bit difficult in that case because there were 5 software financial services software products already certified by FSIO (part of OMB). Now the procurement in Savantage was a very high profile procurement. I suspect that in many cases agencies get away with this all the time and no one is the wiser. For the creative procurement professional, there all sorts of ways to get around competition.

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Yes, the agency in Savantage might have won if they had had an appropriate sole source J&A. Of course, that would have been a bit difficult in that case because there were 5 software financial services software products already certified by FSIO (part of OMB). Now the procurement in Savantage was a very high profile procurement. I suspect that in many cases agencies get away with this all the time and no one is the wiser. For the creative procurement professional, there all sorts of ways to get around competition.

While I think that an agency should document the file to explain why it is directing offerors to hire a specific subcontractor, and that the explanation must be reasonable, I do not agree that the agency is required to prepare a J&A as prescribed by FAR 6.303. Nothing in statute or regulation requires a J&A in support of directed subcontracting. Moreover, directed subcontracting does not constitute a sole source acquisition as defined in FAR 2.101.

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While I think that an agency should document the file to explain why it is directing offerors to hire a specific subcontractor, and that the explanation must be reasonable, I do not agree that the agency is required to prepare a J&A as prescribed by FAR 6.303. Nothing in statute or regulation requires a J&A in support of directed subcontracting. Moreover, directed subcontracting does not constitute a sole source acquisition as defined in FAR 2.101.

Good point about FAR 2.101 and 6.303. Further, even if a would-be drafter of a J&A for a particular subcontract managed to get past those two cites, FAR 6.304 addresses dollar level for approval of a J&A in terms of the Government contract to be awarded, not some subset of that amount. This is one case where there's nothing subtle about what FAR means versus what it says. Upshot is that the only place where you'll find a J&A about why you need gizmo X from company Z is in a contract file leading to an award to that company.

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While I think that an agency should document the file to explain why it is directing offerors to hire a specific subcontractor, and that the explanation must be reasonable, I do not agree that the agency is required to prepare a J&A as prescribed by FAR 6.303. Nothing in statute or regulation requires a J&A in support of directed subcontracting. Moreover, directed subcontracting does not constitute a sole source acquisition as defined in FAR 2.101.

The reasoning in the Distributed Solutions and Savantage cases was that bid protest jurisdiction exists over "any alleged violation of statute or regulation in connection with a procurement or a proposed procurement." (28 USC 1491(B)(1)) The courts then went to the statutory definition of "procurement" (which is mirrored in the FAR 2.101 definitions of "acquisition" and "procurement"). That definition states: "The term ?procurement? includes all stages of the process of acquiring property or services, beginning with the process for determining a need for property or services and ending with contract completion and closeout." (41 USC 403) In both cases, the agency had "determined a need for property or services" and thus a procurement was initiated which engaged the bid protest jurisdiction of the Court of Federal Claims.

I agree that the FAR may not require a formal J&A, but if the record does not have the functional equivalent justification of a sole source acquisition of the directed subcontract's goods or services, the subcontractor's competitors have a basis for a bid protest even if they could not have been awarded or bid on the prime contract.

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jvanhorne.....In its 2011 Google decision COFC relied upon the Distributed Solutions and Savantage cases to rule that FAR Part 6 was violated for the lack of a J&A due to the DOI decision to require Microsoft as a directed subcontractor. It ruled that the mere decision itself was a procurement and required a J&A. Google had protested before COFC Interior's decision (procurement) to make the network service providers (the prime contractors) subcontract with Microsoft as the supplier of software. The court ruled Interior did not follow the FAR Part 6 J&A process required by CICA in its attempt to use a D&F to justify the restriction. The DOI contract had to be re-competed and under the new 2012 award Onix Networking (the prime) will subcontract to Google to provide the software that the prime will use to meet the service requirements of Interior.

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