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alexreb

Proper use of Brand Name Justification

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Have a situation that was created after purchasing GPS engineering equipment for approximately 30 offices serviced by my office. The engineering equipment was purchased about 4-5 years ago. Competition was limited to small businesses. The small business receiving the award provided Brand X. For the next few years we purchased upgrades, parts, etc., for the equipment using Brand X parts, upgrades, as MR showed no other parts, upgrades, etc. were compatible.

Last year some of the equipment began to fail and had to be replaced (total systems). We purchased about 8 new systems. A J&A was prepared using 6.302-1 and competition was limited to only Brand X systems. The basis for the justification was that Brand X was essential to our mission because the equipment had to be utilized and shared among all 30 of our offices and employees had been trained to use Brand X equipment. Purchasing other engineering equipment would mean having to train personnel on new equipment and having equipment that wasn't interchangeable with all other existing equipment.

This year even more entire systems need replacing. Next year there will probably be more. I now see this situation as a never ending cycle, where we continue purchasing Brand X equipment using our justification over and over, making it impossible for Brand X competitors to compete.

Was the basis of our justification improper?

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Was the basis of our justification improper?

No. However, at some point ? probably now, you need to stop copying by rote the information contained in the preceding Brand Name Justifications. Think carefully about your responses to the 11 entries required by 6.303-2 (a), particularly to paragraphs (5), (9) and (11). At some point, your Agency can no longer justify a Brand Name (aka sole source) acquisition of GPS equipment by saying its operations would be disrupted if it did not continue to use the incumbent contractor?s equipment. At some point, you must take steps to promote competition.

With apologies to the Westlaw mavens among the WIFCONers, let me cite a case involving a sole source J&A: B-298627, eFedBudget Corporation, November 15, 2006. In this case the GAO sustained a protest where the record showed that the agency did not satisfy its obligation to engage in reasonable advance planning and to promote competition. While the eBudget case involves software services, not GPS equipment, I believe it presents principles that apply to your circumstance.

In this case, the Department of State (DOS) had been contracting for 9 years with the same firm for implementation, maintenance, enhancement, and support for DOS?s worldwide budget and planning software systems.

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The J&A states that ?[w]ithout seeking a follow-on contract with its current software vendor, the [agency] would experience an immediate and substantial time delay or actually be unable to fulfill its requirements to adequately meet agency budgeting and financial responsibilities,? and lists several attributes of the incumbent that ?make it a unique source for these services.? AR, Tab 3, J&A, at 1, 2.

The J&A also describes the burden on the agency of adopting any other approach. Without continued support from the incumbent, according to the J&A, the agency ?would need to redesign its budget and planning systems to work with another software product, redesign its interfaces and duplicate the requirements analysis, design, and development stages of implementation to accommodate a new software package to perform the business functions? of the current, proprietary software.

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GAO considers the DOS arguments, but sides with the protestor. In so doing the GAO observes:

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?Under CICA, 41 U.S.C. sect. 253(a)(1)(A), contracting officers have a duty to promote and provide for competition and to provide the most advantageous contract for the government. In their role of promoting and providing for competition, contracting officials must act affirmatively to obtain and safeguard competition; they cannot take a passive approach and remain in a noncompetitive position where they could reasonably take steps to enhance competition. VSE Corp., Johnson Controls World Servs., Inc., B-290452.3 et al., May 23, 2005, 2005 CPD para. 103 at 8; HEROS, Inc., B-292043, June 9, 2003, 2003 CPD para. 111 at 7; National Aerospace Group, Inc., B-282843, Aug. 30, 1999, 99-2 CPD para. 43 at 8. See also S. Rep. No. 98-50, at 18 (1984), reprinted in 1984 U.S.C.C.A.N. 2174, 2191 (stating that CICA requires agencies to ?make an affirmative effort to obtain effective competition?).

CICA further provides that under no circumstance may noncompetitive procedures be used due to a lack of advance planning by contracting officials. 41 U.S.C. sect. 253(f)(5)(A); Signals & Sys., Inc., B-288107, Sept. 21, 2001, 2001 CPD para. 168 at 9. Although the requirement for advance planning is not a requirement that such planning be successful or error-free, see Abbott Prods., Inc., B-231131, Aug. 8, 1988, 88-2 CPD para. 119, at 8, the advance planning must be reasonable. Signals & Sys., Inc., supra, at 13. Here, we conclude that the agency has failed to comply with the CICA mandate for reasonable advance planning.

With regard to the feasibility of alternatives to a sole-source award, the agency principally focuses on the difficulties associated with either acquiring a new software system, or having another firm perform the required services without license rights to the RGII software. The agency also asserts that its advance planning efforts have been reasonable in that it has taken steps to avoid expansion of its reliance on RGII. In this regard, the agency notes, for example, that it has been considering using a program developed by another agency office, the Bureau of European Affairs, to meet its needs here, instead of contracting with RGII for the development of additional proprietary software. Agency?s Response to GAO Questions, supra, at 4.

While, as discussed above, it is reasonable to conclude that, given the restrictive nature of the agency?s current licensing agreement with RGII, only RGII can now meet its needs, the agency?s arguments simply do not address the issue of whether the agency?s acquisition planning--in the face of those restrictions--was reasonable, given the requirement that the agency make an affirmative effort to obtain competition. The agency has produced no record of any steps that it has taken to end its reliance on the services of the incumbent to maintain the existing software systems; in fact, this latest proposed sole-source award has a potential term of 5 years.

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Based upon the foregoing, it seems to me that your agency needs to start planning a competition for GPS equipment. If you are challenged, you will have trouble defending another sole source.

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I agree. Interesting read. We do need to take steps to promote future competition and end this cycle. In the eFedBudget case I note that GAO recommended that DOS perform a cost-benefit analysis to determine if it is worthwhile to seek competition. I'm not sure if that's what we need to do but it may be a good starting point for our future planning efforts. From what I know about the market for this type equipment, I believe our only impact would be training and costs associated with personnel learning a new system. Actual purchase costs are probably about the same.

Really appreciate your response.

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I've seen agencies in similar situations do competitions. The solicitation describes the status quo and includes a schedule to replace equipment currently in use in a staggered or staged mode. The incumbent has an advantage because all their equipment isn't replaced at once and the agency can use the newer equipment for the remainding life. Sources other than the incumbent have the propose all new as well which puts them at some disadavatge as des the training cost.

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I've seen agencies in similar situations do competitions. The solicitation describes the status quo and includes a schedule to replace equipment currently in use in a staggered or staged mode. The incumbent has an advantage because all their equipment isn't replaced at once and the agency can use the newer equipment for the remainding life. Sources other than the incumbent have the propose all new as well which puts them at some disadavatge as des the training cost.

Regarding "competitive advantage", I have met some 1102s who believe they have a legal obligation to eliminate an incumbent's competitive advantage.

Here is the GAO position:

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We have long recognized that a certain firm may enjoy a competitive advantage by its own incumbency. Aerospace Engineering Services, Corp., B-184850, Mar. 9, 1976, 76-1 CPD Para. 164; see, also, Holmes and Narver Services, Inc., B-208652, June 6, 1983, 83-1 CPD Para. 605. Furthermore, the government has no duty to equalize the position of competitors unless the competitive advantage results from a preference or unfair action by the government. John Morris Equipment and Supply, Co., B-218592, Aug. 5, 1985, 85-2 CPD Para. 128; Holmes and Narver Services, Inc., B-208652, supra.

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See B-228895, Dec 29, 1987, 87-2 CPD 636

http://www.gao.gov/products/437999

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Have a situation that was created after purchasing GPS engineering equipment for approximately 30 offices serviced by my office.

Is the "GPS engineering equipment" a commercial item? If so, remember: "Procurements conducted under simplified acquisition procedures are exempt from the statutory requirement to obtain full and open competition; instead, contracting officers are required to promote competition to the maximum extent practicable. 10 U.S.C. ? 2304(g)(3) (1994); FAR ?? 13.104, 13.501(a)." American Eurocopter Corp., B-283700, Dec. 16, 1999, 99-2 CPD ? 110. While the cases discussed above are persuasive, I suspect the GAO would be a little more deferential if the item is, in fact, commercial.

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Definitely commercial item. In reading the American Eurocopter case, I can say our justification is not as strong as WAPA's, but very similar in many ways (training, sharing equipment/personnel, etc.). I see strengths with both arguments, but you make some very good points. Thanks a bunch.

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It would have been better if the original acquisition had clearly been based on the premise that the winner would be the sole provider of the products for the next ten years, let's say, as part of an agency standardization program -- if that was indeed the agency's intention. At this point, a class J&A for the next ___ years would be a solution to allow time for a new competition. Individual J&As, year-after-year, seem to make a mockery of the system.

The contractor only competitively won one acquisition, and that for a limited scope. Talk about the camel's nose under the tent.

Often, contracting officers are organizationally weak -- but the advice from others to rigorously address the future competition is right on. The organization's competition advocate should be of some use -- this case is exactly why they exist.

ji

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