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Has anyone read The Tolliver Group, Inc. and People, Technology and Processes, LLC v. U.S., 151 Fed.Cl. 70 (Nov. 30, 2020) and ITility, LLC, GAO B-419167, Dec. 23, 2020, which appear to conflict with respect to application of the "Rule of Two"— FAR 19.502-2(b) — when using a MATOC? The government has appealed the COFC decision to the Federal Circuit, and the result may have a significant impact on acquisition operations. Both decisions involve interpretations of 15 USC 644(r) as well as FAR 19.502-2(b).

If you have read them (perhaps I should say, fought your way through them), what do you think of the two decisions and the apparently conflicting conclusions of the court and the GAO? What are the long term implications, if any?

I'm trying to start a discussion thread, not an educational thread. If I don't get any responses within the next week or so I'll ask Bob to close it.

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  • Vern Edwards changed the title to Applying the "Rule of Two" to MATOCs

They definitely do conflict.  I personally agree with GAO but who am I?  The logic I don’t follow in COFC decision is once a CO uses discretion in setting aside a procurement under FAR 8.4, the set-aside applies even after cancellation and using a different contract approach.  I really need to read both in more detail in the morning with coffee.  

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@formerfed The court said that the agency did not formally cancel the GSA FSS solicitations as required by 10 USC 2305(b)(2) and did not formally withdraw the FSS set-asides as required by FAR 19.502-9. The court said that if it has, in fact, done those things it order the Army to reinstate the solicitations. The court told that Army that it could not proceed under the MATOC unless it does those two things anew.

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Now I'm just a simple beancounter and I've never been a contracting officer. However, this bit from the Itility GAO protest caught my eye:

 

Quote

As a precursor to fulfilling its changed requirements, DHS undertook market research to inform its acquisition approach.  DHS effectively limited its review to six multiple-award IDIQ contracts. 

 

Is that really market research? Just seems like a quick survey of what other agencies are doing. I would never have guessed that such a quick pass would qualify as market research. Kind of a narrow view of the marketplace. Which is to say, I definitely see the protester's point there.

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@ji20874Do you see any incongruity between GAO's description of the protest and the basis for the decision they made?

GAO seems to think that ITility protested the fact that the agency did not set aside the task order under the Alliant2 contract. See the first sentence of the decision.

Why would ITility do that? They are not a party to the Alliant 2 contract. A set-aside under Alliant 2 would do them no good. It seems to me that ITility was protesting the agency's decision to use the Alliant 2 contract.

GAO based its decision on its interpretation of 15 USC 644(r). But if ITility was protesting the use of Alliant 2, not the failure of the agency to set aside the task order under Alliant 2, then what bearing did 15 U.S.C. 644(r) have on the protest?

 

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I am not an attorney, and I look on these matters as a practitioner.  Others may see things differently.

As I understand, the GAO's protest decision in Itility was expressly driven by the FAR implementation of 15 USC 644(r).  That is why Itility differs from the pre-15 USC 644(r) Delex decision.  I read somewhere that 15 USC 644(r) was a response to Delex.

I support the Itility decision because ordering is supposed to be quicker and easier.  I am okay with the FAR implementation of 15 USC 644(r) and the discretion it gives to contracting officers.  This discretion is given to contracting officers individually, not to agencies corporately.

In Itility, the incumbent's option was not exercised and the agency met the need with an order under an IDIQ contract.  I am okay with this.  When an indefinite delivery contract exists and meets an agency's needs, I am generally okay with using that contract without extensive market research, documentation, or justification.

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@ji20874Thanks for the response.

Just so you know, Delex, GAO B-400403, 2008 CPD § 181, addressed the question of whether the Rule of Two applied to fair opportunities under MATOCs. I think that's the question that 15 USC 644(r)(2) was written to answer, and I think the answer is no.

But Delex did not address the question of whether the Rule of Two had to be applied before making the decision whether to use a MATOC, and I don't think 15 USC 644(r) does, either.

I understand why people "support" the ITility decision. You're not the first person to tell me that. But the question that concerns me is whether GAO's decision correctly applies 15 USC 644(r) to the issue that was at hand.

A side note: This is a discussion forum, and as a member, I am not willing to defer discussion of legal issues to attorneys. I'm not an attorney, but the Court of Federal Claims has referred to my writings on more than one occasion, as recently as March 2020 in fact. Educated laypersons can develop and express legal opinions (as opposed to advice) in forums like this; they just can't practice law. And I think practioners should work to become educated laypersons.

I'd like to see more such discussion at Wifcon, especially with practitioners like you, instead of the querulous answering of indecipherable hit-and-run "questions."

But I respect your position and your post. If you don't want to discuss it, you don't want to discuss it. I get it.

As for fair opportunity ordering being "quicker and easier," it mostly is not. That ship sailed long ago. Agencies have turned the fair opportunity process into a FAR Part 15 process. They're even incorporating FAR 52.215-1 into their requests for task order proposals. I talked about that with a GSA official for an hour yesterday, and he was in near despair about it. The simplicity gene is rare among Federal acquisition practitioners. The FASA multiple-award policies have been a disaster in many ways.

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As a practitioner, I do not believe that a rule-of-two determination should be necessary before deciding to use an indefinite delivery contract.  When an indefinite delivery contract exists and meets an agency's needs, I am generally okay with ordering against that contract without extensive market research, documentation, or justification.  Just do it.

Long ago, when FASA was new, the thought was that ordering against MATOCs was a matter of post-award administration.  That thought never got real traction and we erringly treat ordering like brand-new pre-award acquisitions.  Yes, that ship sailed long ago.  If an official in GSA is despairing, I hope he or she will work harder to teach correct principles.  In my opinion, our agency attorneys have been part of the problem -- I am tongue-in-cheek reminded of the famous quote from Henry VI, Part 2, Act IV, Scene 2.

 

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2 minutes ago, ji20874 said:

Long ago, when FASA was new, the thought was that ordering against MATOCs was a matter of post-award administration.

For this reason, ordering against MATOCs is not subject to CICA.  But almost none of my colleagues are aware of this truth, and most attorneys refuse to believe it.  

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@ji20874 I think that when FASA created today's multiple-award contracting regime in 1994, the policy makers did not anticipate all of the issues that would arise under the new regime. For instance, the Rule of Two for acquisitions estimated to exceed the simplified acquisition threshold, FAR 19.502-2(b), which was first published in 1979, applies to "any acquisition," without apparent exception. A decision to place an order against an agency MAC or a GWAC is a step in an acquisition. That is why the Tolliver and ITility protests were filed. They raise the issue of applying the Rule of Two to an acquisition before a decision is made as to the method of acquisition. They do not raise the issue of whether to set an order aside under a MAC.

An issue can lie latent for many years before some contractor or attorney in some protest or claim spots it and raises it.

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2 hours ago, Vern Edwards said:

 

As for fair opportunity ordering being "quicker and easier," it mostly is not. That ship sailed long ago. Agencies have turned the fair opportunity process into a FAR Part 15 process. They're even incorporating FAR 52.215-1 into their requests for task order proposals. I talked about that with a GSA official for an hour yesterday, and he was in near despair about it. The simplicity gene is rare among Federal acquisition practitioners. The FASA multiple-award policies have been a disaster in many ways.

I was listening to the recent ABA Section of Public Contract Law's annual Federal Procurement Institute last week. One of the sessions was "Bid Protests at the U.S. Court of Federal Claims and the U.S. Government Accountability Office." One of the panel participants made a comment that will stick with me for awhile: "It seems that every time somebody tries to simplify an acquisition, it ends up making it more complex."

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@here_2_help Recommended reading: The Utopia of Rules: On Technology, Stupidity, and the Secret Joys of Bureaucracy (2016). Whenever we want to free markets from government bureaucracy, the government ends up writing new rules to ensure that markets are free, and creates new bureaucracies and procedures to enforce the new rules.

Multiple-award contracting was supposed to make contracting easier and quicker, but it has gotten more difficult and time-consuming with each passing year and each new "innovation."

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On 3/21/2021 at 9:14 AM, Vern Edwards said:

what do you think of the two decisions and the apparently conflicting conclusions of the court and the GAO? What are the long term implications, if any?

I find the court's opinion compelling when considering FAR subpart 8.00 and FAR subpart 10.001.  I will admit not doing a deep dive to review statutory history that compelled these subparts of the FAR so my view is that of a practitioner and my converse view is not to simply be a contrarian.  It is that of a past CO and the thought process of figuring out what procurement strategy to use.

As I read the comments it seems implied that when one picks up a requisition that they could automatically decide that MATOC will be used and the Rule of Two can be disregarded.   This is converse to a combined read of FAR 8.00 and 10.001 in my view.   After all one should not automatically morph to an existing MATOC if the need is available under Committee for Purchase From People Who Are Blind or Severely Disabled. I do realize that FAR 8.00 points to multi-agency procurements as the next level but to me it also points (that one should give consideration to) to FAR Part 19 along with multiagency procurements.   In the determination of possible sources following 8.00 then 10.001 comes into play.

As an aside I do find it interesting that the neither the court or GAO brought in the mention of commercial item.   I say this from a read of 10.001.   By example.   I pick-up the requisition is it okay to automatically determine the need is a commercial item, without documentation, and then automatically decide to go with say GSA-FSS?  For those that say Yes that is okay why would not the same be true for making a determination of Rule of Two before proceeding to the next step?  Or in other words must I not determine Rule of Two too?

Quickly and without further positioning on the court versus GAO rulings the long term implication to me is that CO's admit that they must consider the full process of mandatory/non-mandatory sources and set-aside before just jumping to (or being pushed by management)  "this" multi-agency procurement.  It seems the array is actually available which encompasses those that would satisfy the Rule of Two.

 

 

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16 minutes ago, C Culham said:

After all one should not automatically morph to an existing MATOC if the need is available under Committee for Purchase From People Who Are Blind or Severely Disabled.

I agree -- wherever this is true, maybe the parent MATOCs should not have been awarded in the first place.  But once gets past the mandatory sources, FAR 8.004 tells us to consider use of MATOCs before use of open market.  

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Just now, ji20874 said:

I agree -- wherever this is true, maybe the parent MATOCs should not have been awarded in the first place.  But once gets past the mandatory sources, FAR 8.004 tells us to consider use of MATOCs before use of open market.  

And 8.004 says to "see" part 19 as a precursor to use of the multiagency procurements.   Ergo consider the Rule of Two.  I agree it is not the imperative but just my read.

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All over the place:

GAO in B-419167 (Itility):

"We further expounded on our statutory interpretation of Section 644(r) in Aldevra, B-411752, Oct. 16, 2015, 2015 CPD ¶ 339. In Aldevra, the protester, supported by the SBA, argued that because a proposed Federal Supply Schedule (FSS) order had an anticipated value between the micropurchase and simplified acquisition thresholds, the agency was required to comply with small business set-aside requirements. We disagreed based on the discretionary language of 15 U.S.C. § 644(r). Specifically, we explained that:

Given the language of the Jobs Act, as well as regulatory provisions implementing the Jobs Act, it is readily apparent that the general small business set-aside rule . . . implemented under FAR § 19.502-2, does not apply when placing orders under the FSS program. In this regard, the Jobs Act clearly provides for granting agency officials discretion in deciding whether to set aside orders under multiple-award contracts (EA)."

SBA in B-419167 (Itility):

"SBA additionally argued that our Office should interpret 15 U.S.C. § 644(r) as merely providing contracting agencies with the discretion to place set aside orders against unrestricted multiple-award contracts as an exception to the statutory fair opportunity requirements. In this regard, SBA argued that we should not interpret the statutory grant of discretion as alleviating contracting agencies from complying with the Small Business Act’s mandatory set-aside requirements when issuing orders under a multiple-award contract (EA)."

COFC in Tolliver:

"In sum, what the government really seems to be arguing is that the agency, having awarded its preferred TMS MAIDIQ without any set-aside component, is now exempt from applying the Rule of Two to any proposed procurement (or acquisition) of services that might be obtained using the TMS MAIDIQ. Put yet differently, the government asserts that, having exercised its discretion not to set-aside any portion of the TMS MAIDIQ scope or any of the TMS MAIDIQ‘s contract awards for small business, the agency can utilize the TMS MAIDIQ for any acquisition – and avoid the Rule of Two – so long as the contemplated scope of work is within the TMS MAIDIQ’s scope. No statutory or regulatory language, however, supports such a sweeping inference (EA)."

Although they are worded differently, GAO and the COFC are on a different page in their decisions. 

On 3/21/2021 at 12:14 PM, Vern Edwards said:

If you have read them (perhaps I should say, fought your way through them), what do you think of the two decisions and the apparently conflicting conclusions of the court and the GAO? What are the long term implications, if any?

Vern thanks for the discussion starter. "Fought your way through" is the correct wording. 

1. I think GAO is deciding on what was written and COFC is legislating from the bench on what they think it means/should mean. 

2. If the COFC ruling is not overturned on appeal, then agencies won't know what the appropriate acquisition strategy is when planning. Could depend on where a protest/case is determined within the legislative branch (GAO/COFC/etc.).  

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32 minutes ago, C Culham said:

And 8.004 says to "see" part 19 as a precursor to use of the multiagency procurements.   Ergo consider the Rule of Two.

In a MATOC ordering context, I have considered "see . . . part 19" to mean looking at FAR 19.502-4(c) for order set-asides at contracting officer discretion rather than 19.502-2 for Rule of Two for open market before considering using MATOCs.  That's me.  Since FAR 8.004 directs consideration of MATOC ordering before open market, I look at Part 19 in this light.

Anyway, it will messy until the government's appeal of Tolliver is decided.

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1 hour ago, ji20874 said:

In a MATOC ordering context, I have considered "see . . . part 19" to mean looking at FAR 19.502-4(c) for order set-asides at contracting officer discretion rather than 19.502-2 for Rule of Two for open market before considering using MATOCs.

Is it just me, or does 19.502-4 (c) apply to the competition requirements to establish IDC contracts under 16.500 (a), as oppose to ordering against an established contract under 16.505 (b) (ii)?

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2 hours ago, ji20874 said:

maybe the parent MATOCs should not have been awarded in the first place

Going backwards and I apologize.   

MATOC's are not mandatory (Not in the FAR Part 8 sense but by use in general) does not the world change daily in the arena of the Committee for Purchase From People Who Are Blind or Severely Disabled?   If so then when it comes to an instant requisition is not the mandatory source to be considered prior to use of a MATOC even if due consideration was given at the time of the award of the MATOC?   

The reason I pose the questions is not an attempt complicate the thread it is my way of still supporting the courts view by comparison.   If I have to consider statutorily mandated sources with an instant need should I not consider the Rule of Two as well based on its statutory language?   It just seems that there is a want to have it both ways, under one statute I must, yet under another its left to the practitioners imagination?  GAO has not looked at the big picture but I believe the Court has by my read of both decisions.

I know I am wrong but yet it makes me think that the government is trying to protect what happens in reality as opposed to what should happen statutorily.   

I appreciate Vern bringing the thoughts to the table and yes, it will be interesting to see what is determined upon appeal.

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@ji20874 You said:

7 hours ago, ji20874 said:

Since FAR 8.004 directs consideration of MATOC ordering before open market, I look at Part 19 in this light.

Here is 8.004 in its entirety:

Quote

If an agency is unable to satisfy requirements for supplies and services from the mandatory sources listed in 8.002 and 8.003, agencies are encouraged to consider satisfying requirements from or through the non-mandatory sources listed in paragraph (a) of this section (not listed in any order of priority) before considering the non-mandatory source listed in paragraph (b) of this section. When satisfying requirements from non-mandatory sources, see 7.105(b) and part  19 regarding consideration of small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including 8(a) participants), and women-owned small business concerns.

(a)(1) Supplies. Federal Supply Schedules, Governmentwide acquisition contracts, multi-agency contracts, and any other procurement instruments intended for use by multiple agencies, including blanket purchase agreements (BPAs) under Federal Supply Schedule contracts (e.g., Federal Strategic Sourcing Initiative (FSSI) agreements accessible at http://www.gsa.gov/fssi (see also 5.601)).

(2) Services. Agencies are encouraged to consider Federal Prison Industries, Inc., as well as the sources listed in paragraph (a)(1) of this section (see subpart  8.6).

(b) Commercial sources (including educational and non-profit institutions) in the open market.

Are you saying that 8.004 directs agencies to consider ordering from a MATOC before considering an open market purchase? I don't see shall or must anywhere in 8.004. I don't even see should. I do see the word "encouraged."

I don't read 8.004 as directing agencies to do anything.

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  • 2 weeks later...
On 3/23/2021 at 1:44 PM, C Culham said:

MATOC's are not mandatory...

 

On 3/23/2021 at 5:47 PM, Vern Edwards said:

I don't read 8.004 as directing agencies to do anything.

Right.  But once we get past the mandatory sources, FAR 8.004 encourages us to consider already-existing schedules, GWACs, and so forth before considering open market sources.

 

 

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  • 2 months later...

Sorry for being so late to the party.  I like all the arguments and if they don't boot it for jurisdiction Tolliver just may prevail given the favorable long standing statutory, regulatory and shear raw power of the small business constituency. 

First I must go on a quick tangent about COFC jurisdiction.  One of my fave excerpts from GUAM INDUSTRIAL SERVICES, INC., * * Plaintiff, * * v. * * THE UNITED STATES, * * Defendant, * * v. * * CABRAS MARINE CORP., * * Defendant-Intervenor. No. 15-588 C Filed: August 3, 2015 top of page 10: 

"But, FASA provides that “[a] protest is not authorized in connection with the issuance or proposed issuance of a task or delivery order,” except in two circumstances not relevant to this case. 41 U.S.C. § 4106(f)(1). 

...We acknowledge that this statute is somewhat unusual in that it effectively eliminates all judicial review for protests made in connection with a procurement designated as a task order—perhaps even in the event of an agency’s egregious, or even criminal conduct. Yet Congress’s intent to ban protests on the issuance of task orders is clear from FASA’s unambiguous language..."

Will the Federal Circuit boot Tolliver on jurisdictional grounds?  I sure hope not.  No fun in that!  Plus, Tolliver is "Mingled with MAS" so I doubt it gets the boot (COFC certainly DOES have jurisdiction to hear MAS matters). 

While I generally favor a court of competent jurisdiction over GAO, I like this solid piece of logical argument from Itility.

"Finally, if we adopted ITility’s and SBA’s interpretation that a Rule of Two analysis is required before an agency selects the IDIQ contract vehicle, it is not apparent how an agency can ever get “inside” the IDIQ and exercise the discretion afforded by 15 U.S.C. § 644(r) in connection with the issuance of an order.  To this point, if the Rule of Two is satisfied, a contracting officer would be required to set aside the contract for small businesses.  Alternatively, if the Rule of Two is not satisfied, the contracting officer would not need the discretion established by § 644(r) and the FAR because there would not be two small businesses capable of performing the order. Thus, SBA’s and ITility’s arguments are not actually proposing a basis on which to distinguish Edmond Scientific, but, rather, would require us to overturn the decision and adopt the parties’ position that the grant of discretion in the Jobs Act only provided an exception to the applicable fair opportunity requirements (which we reject for the reasons set forth above).  Therefore, for the reasons above, we reject SBA’s and ITility’s efforts to distinguish Edmond Scientific."  

My Translation:  Adopting Tolliver would render 15 USC 644(r) SQUATLESS (would not mean squat, like EVER, would be completely WORTHLESS). 

Additionally, adopting Tolliver would mean the FAR council erred in it's preamble to Federal Acquisition Regulation; Set-Asides Under Multiple-Award Contracts when replying to a comment taking the position that 15 USC 644(r) is SQUATLESS.  

Comment:  Several respondents stated that because the court in [Kingdomware Techs., Inc. v. United States, 136 S. Ct. 1969 (2016)] held that a task order was a contract, “contract” as written in 15 U.S.C. 644(j) includes task orders issued from multiple-award contracts, making order set-asides on multiple-award contracts mandatory not discretionary when applying the “rule of two.” . . .

Response:  The “rule of two” described in Kingdomware refers to the [Veterans Affairs (VA)] statute, 38 U.S.C. 8127, not a requirement in the Small Business Act.  The Kingdomware decision is silent on the construction of the Small Business Act.  The VA statute and the Small Business Act are written differently, with the former statute applying only to acquisitions of the [VA].  The VA statute only speaks to contracts and is silent on the handling of orders.  Because of this silence, the Court concluded that the mandate applicable to contracts also applied to orders, since orders have the legal effect of contracts.  By contrast, the Small Business Act has separate and distinct provisions addressing contracts and orders and addresses each in a different manner.  Section 1331 of the Jobs Act (15 U.S.C. 644(r)) addresses order set-asides and makes the application of the “rule of two” discretionary for orders placed under multiple-award contracts.  15 U.S.C. 644(j) applies to contracts and mandates application of the “rule of two” for contracts valued at the simplified acquisition threshold or less.

15 U.S.C 644(r) is specific in that it only applies to multiple-award contracts.  Legislative history demonstrates that prior to 15 U.S.C. 644(r), there was a mixed record of small business participation on multiple-award contracts.  Congress was clear in section 1331 of the Jobs Act that under a multiple-award contract, agencies may, at their discretion . . . conduct a set-aside of orders under a multiple-award contract....

While I covet GAO's position in  Itility (I LOATHE being told what to do), if I were to wager, I would bet on Tolliver prevailing.  Why? The "Rule of Two" is like Sauron's Ring in Lord of the Rings. 

One Ring to rule them all,

One Ring to find them,

One Ring to bring them all and in the darkness bind them.

Not in the evil sense (Small business is the bright soul of America) but in its power.  The Rule of Two has been around a long time. 15 USC 644(r) is akin to a little P-ant of a NEWB in comparison.  However, I find myself stuck in a conundrum.  That NEWB has been extremely successful under MAS. In fact, based on that success, SBA has EXEMPTED MAS from various requirements. For example, see this preamble in a recent SBA final rule:

Because discretionary set-asides under the FSS programs have proven effective in making awards to small business under the program and SBA did not want to add unnecessary burdens to the program that might discourage the use of set-asides, the proposed rule provided that, except for orders or Blanket Purchase Agreements issued under any FSS contract, if an order under an unrestricted MAC is set-aside exclusively for small business (i.e., small business set-aside, 8(a) small business, service-disabled veteran-owned small business, HUBZone small business, or women-owned small business), a concern must recertify its size status and qualify as such at the time it submits its initial offer, which includes price, for the particular order.

My final comment.  Interesting how SBA covets the NEWB in the above pre-amble but squishes that same P-ant in Itilty and Tolliver.  

 

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