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A-76 (Rev.), Attachment B:  F. Contests:  Directly Interested Party

Comptroller General - Key Excerpts

On January 11, 2005, the Navy published an announcement on the federal business opportunities (FedBizOpps) Internet website, publicizing the Navy’s intent to conduct a standard competition to compare the cost of continued in-house performance of the requirements at issue with obtaining those services by contract. Among other things, the January 11 notice stated, “this notice represents the formal public announcement and official start date of a public-private competition of the [NAVSOC].” Thereafter, the Navy issued an RFP and the ATO submitted the agency tender on behalf of the government’s most efficient organization (MEO), followed by discussions and the Navy’s evaluation of the competing submissions. On January 4, 2007, the Navy announced its decision to obtain the services from Rome Research, and provided a debriefing to the ATO on that date. Under the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, Pub. L. No. 108-375, sect. 326(a)(2), 118 Stat. 1811, 1848 (2004), codified at 31 U.S.C. sect. 3551 (Supp. IV 2004), the definition of an interested party eligible to file a protest was amended to include “the official responsible for submitting the Federal agency tender in a public-private competition conducted under Office of Management and Budget Circular A-76 regarding an activity or function of a Federal agency performed by more than 65 full-time equivalent employees of the Federal agency.” However, the amended statute also provided:

(d) APPLICABILITY.—The amendments made by this section shall apply to protests . . . that relate to studies initiated under Office of Management and Budget Circular A--76 on or after the end of the 90-day period beginning on the date of the enactment of this Act.
Pub. L. No. 108-375, sect. 326(d).

The “date of the enactment of this Act” was October 28, 2004, when the Act was signed by the President. On April 14, 2005, following public notice and an opportunity to comment, our Office amended our Bid Protest Regulations to conform to the Act, adding an ATO to the definition of an interested party. In so doing, we noted that the amendments were applicable to protests regarding A-76 competitions that are initiated more than 90 days after enactment of the Act--that is, on or after January 26, 2005. Specifically, we stated:

Protests filed at GAO . . . that relate to studies initiated under OMB Circular A-76 before January 26, 2005, will be considered under GAO’s regulations as they were prior to the issuance of this final rule. 70 Fed Reg. 19679 (daily ed. Apr. 14, 2005).

As indicated above, the public announcement date, or “start date” under Circular A‑76 for the competition at issue here was January 11, 2005. Accordingly, the public-private competition was initiated prior to the effective date of the statutory amendment authorizing protests by ATOs. The ATO argues that we should construe the date the competition was “initiated” to be nearly 6 months later, based on the Navy’s subsequent issuance of another public notice on June 30. The ATO asserts that the June 30 notice constituted a “recommencement” of the public-private competition. Our review of the record shows that the Navy’s June 30 notice was expressly designated as a “Modification to a Previous Notice” and, under the heading “Description,” the June 30 notice stated: “Update 6-30-05 > This is to inform interested parties that the solicitation number has been changed to N62467‑05‑R-0139.” The June 30 notice further stated that an industry forum would be conducted on July 15, and then included the words “Original notice,” followed by a verbatim repetition of the January 11 notice, including the statement, “this notice represents the formal public announcement and official start date of a public-private competition.” Based on the repetition of this language, the ATO argues that the Navy reinitiated the competition on June 30. We have considered both notices, along with the parties’ arguments, and conclude that the second notice did not cancel and restart the A-76 competition. Rather, as the specific language of the second notice indicates, it was a “modification” and an “update” of the prior notice initiating the standard competition.In several decisions, our Office has addressed the standing of federal employees to protest the result of an A-76 competition prior to the statutory amendment authorizing ATO protests, discussed above; we have concluded that, prior to the statutory amendment, federal employees did not meet the definition of an interested party, and thus were ineligible to protest a decision to contract out for the services. E.g., Alan D. King, B-295529.6, Feb. 21, 2006, 2006 CPD para. 44; Dan Duefrene, et al., B‑293590.2 et al., Apr. 19, 2004, 2004 CPD para. 82. (James C. Trump, B-299370, February 20, 2007) (pdf)

As set forth above, CICA and our Bid Protest Regulations confer interested party status on the individual responsible for submitting the agency tender, and neither confers such status on a union representative or other individual purporting to represent the employees of the agency who are engaged in the performance of the activity or function subject to the public-private competition. This amendment to our Bid Protest Regulations is consistent with both the express language of CICA as amended, and the intent of Congress as expressed in the conference report accompanying the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, which provided that “[a] person representing a majority of the employees would not have standing to file a protest, but would have the right to intervene in a protest filed by an interested party, including the [agency tender official].” H.R. Conf. Rep. No. 108-767, at 648, reprinted in 2004 U.S.C.C.A.N. 1961, 2003. As the protester recognizes, our Office’s authority to consider bid protests is provided by CICA. As such, whether a court or another federal agency such as the Federal Aviation Administration confers standing on a union representative, or considers such a representative an interested party for the purposes of pursuing a matter involving OMB Circular A-76, is irrelevant to our determination here, because those entities are not governed by CICA. In light of this, and the clear language of our Bid Protest Regulations which do not recognize union representatives as interested parties for the purposes of filing and pursuing protests, we cannot consider Mr. Drake to be an interested party eligible to file and pursue this protest. (Lawrence C. Drake, B-298143, April 7, 2006) (pdf)

The amendments made by this section shall apply to protests filed under subchapter V of chapter 35 of title 31, United States Code, that relate to studies initiated under Office of Management and Budget Circular A-76 on or after the end of the 90-day period beginning on the date of the enactment of this Act. Id. at section 326(d). As explained in the Federal Register notice implementing the change to our statute, and the resulting change in our Bid Protest Regulations, the date of enactment was October 28, 2004, and therefore, the end of the 90-day period was January 26, 2005. 70 Fed. Reg. 19,679 (Apr. 14, 2005). Given the statutory direction quoted above, we think that even if Mr. King is correct in his argument that the Army’s authority to conduct this cost comparison study expired on September 30, 2004--and for the record, we do not think he is[7]--we see no basis in the facts here to support Mr. King’s necessary assumption that the cost comparison study here can properly be viewed as one that was initiated on or after January 26, 2005. In this regard, we note that the cost comparison study here was begun in 2000, the RFP was issued in 2003, the results of the study were announced on September 29, 2004, and those results have been the subject of near-constant litigation since. At no point was the cost comparison study cancelled, either expressly or by operation of law, and at no point has the Army abandoned its study and started over. In fact, between the vitally important dates--under Mr. King’s theory of this case--of September 30, 2004, and January 26, 2005, the cost comparison study was the subject of a protest before our Office that was dismissed as academic when the Army took corrective action in response to the protest. That dispute was resolved, and was followed by an administrative challenge at the Army and subsequent protests here. Finally, we note that even when the Army again took corrective action during the summer of 2005, after a hearing before our Office, the agency took steps to remedy the problems highlighted during the hearing within the structure of the existing cost comparison study. The study was not abandoned and begun anew. Given that the facts here do not support, in any way, a conclusion that this cost comparison study was abandoned at some point and restarted after January 26, 2005--a necessary conclusion for Mr. King to have standing--we conclude that Mr. King is not an interested party to pursue this protest before our Office. (Alan D. King, B-295529.6, February 21, 2006) (pdf)

Nevertheless, the distinctions between the two versions of the Circular cannot properly make a difference in our position that, under the current statutory language in CICA--which is the language we must look to in determining whether a party has standing to protest to our Office--the in-house entity lacks standing to protest. First and foremost, the MEO is still not competing for a contract: if the MEO wins the competition, the work will be performed in-house and, notwithstanding the new Circular’s use of the term “letter of obligation” and the reference to termination, there will be no contract. The letter of obligation is not a mutually binding legal relationship between two signatory parties--there is no contractual legal relationship between the MEO and the agency. Importantly, the agency cannot seek legal redress against the MEO, for example, by seeking reimbursement of excess reprocurement costs if the MEO is “terminated” for failure to meet its commitments. Cf. FAR § 49.402-2(e) (contractors are liable to the government for excess reprocurement costs when a contract has been terminated for default). Because the letter of obligation is not a contract, the MEO’s “tender” cannot properly be viewed as an offer (since an offer is something that, if accepted, would create a contract, FAR § 2.101; Restatement (Second) of Contracts §§ 24, 35 (1981)). Hence, under the new Circular, as under the prior one, no in-house entity can qualify as an “actual or potential offeror” and thus as an interested party for purposes of filing a protest at GAO. In addition, since the MEO is not an actual entity, it cannot have a “direct economic interest [that] would be affected by the award of the contract or by failure to award the contract,” as CICA requires for a would-be protester to be an interested party. While individual employees certainly may have an interest in who wins the competition, the MEO, as a mere management plan, has no such interest. Even the employees’ interest is problematic for at least two reasons. First, which employees would ultimately be affected, and how they would be affected, is not clear until long after a protest would need to be filed, since the government’s “bump-and-retreat” rules, 5 C.F.R. §§ 351.701-351.705, make it hard to predict which employees would actually be affected by a decision to contract out. Second, individual employees’ interests have never been viewed as establishing interested-party status, since to do so would allow any private competitor’s employees to claim that status, a position that we have always rejected. In sum, we find that, under the current language of CICA, our Office cannot consider a protest filed on behalf of an MEO, and we therefore dismiss Mr. Duefrene’s protest.

We recognize the concerns of fairness that weigh in favor of correcting the current situation, where an unsuccessful private-sector offeror has the right to protest to our Office, while an unsuccessful public-sector competitor does not. As a result, consistent with the principles adopted unanimously by the Commercial Activities Panel in its April 2002 report, we are recommending that Congress consider amending CICA to allow protests to be brought on behalf of MEOs. Accordingly, by letter of today to the Chairman and Ranking Minority Member of the House Committee on Government Reform, the Senate Committee on Governmental Affairs, and the Senate and House Committees on Armed Services, we are transmitting a copy of this decision, with the suggestion that Congress may wish to consider amending CICA to provide for MEO standing. The letter also suggests that any amendment to CICA specify who would be authorized to protest on the MEO’s behalf: the ATO, affected employees (either individually or in a representative capacity), and/or employees’ union representatives.  (Dan Duefrene; Kelley Dull; Brenda Neuerburg; Gabrielle Martin, B-293590.2; B-293590.3; B-293883; B-293887; B-293908, April 19, 2004.) (pdf) 

[NOTE:  The letter referred to in this decision is on page 7 of the pdf file of the decision.]

Initially, while it is true that the revised Circular states that no party may contest any aspect of a streamlined competition, this language does not preclude a protest to our Office because CICA, not the revised Circular, provides the basis for our bid protest authority. Thus, an interested party, as defined by CICA and our Bid Protest Regulations, may protest a streamlined competition to our Office where the agency elects to use the procurement system and conducts a competition by issuing a solicitation to determine whether a private-sector entity can perform the work more cost effectively. See Revised Circular, attach. B, ¶ C.1. However, here, as permitted under the revised Circular’s streamlined procedures, the record shows that the decision to contract out the work was based solely on the agency’s internal analysis and was not made pursuant to a solicitation. As USDA correctly argues, under CICA, and our Bid Protest Regulations, our Office’s jurisdiction is limited to considering protests involving solicitations issued by federal agencies and awards made or proposed to be made under those solicitations. Holiday Inn; Baymont Inn & Suites, B-288099.3, B-288099.4, Sept. 20, 2001, 2001 CPD ¶ 166 at 5. In these circumstances, where USDA used streamlined procedures, but did not issue a solicitation for purposes of conducting a procurement to determine whether to contract out or to perform work in-house, we conclude that we lack jurisdiction to consider Ms. Bray’s protest. (Vallie Bray, B-293840; B-293840.2, March 30, 2004) (pdf)

In dismissing this protest, we are not addressing the issue of whether Mr. Van Auken has standing to file a bid protest with our Office. The Competition in Contracting Act of 1984 (CICA) establishes the standard for standing to file a protest here by stating that a protest may only be filed by an “interested party,” which is defined in the statute as “an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract.” 31 U.S.C. § 3551(2); see also Bid Protest Regulations, 4 C.F.R § 21.0(a). As we discussed in our Federal Register notice at 68 Fed. Reg. 35411 (June 13, 2003), the May 2003 revisions to the Circular raise a number of legal questions, most significantly, whether the revisions affect the standing of an in-house entity to file a bid protest at the GAO, and, if so, who should have the representational capacity to file such a protest. In light of the dismissal of the protest, we do not reach the question of federal employees’ standing to file protests with our Office under CICA, and this dismissal should not be read as an indication of how our Office will ultimately resolve that question.  (William A. Van Auken, B-293590, February 6, 2004)  (pdf)

Comptroller General - Listing of Decisions

For the Government For the Protester
James C. Trump, B-299370, February 20, 2007 (pdf)  
Lawrence C. Drake, B-298143, April 7, 2006 (pdf)  
Alan D. King, B-295529.6, February 21, 2006 (pdf)  
Dan Duefrene; Kelley Dull; Brenda Neuerburg; Gabrielle Martin, B-293590.2; B-293590.3; B-293883; B-293887; B-293908, April 19, 2004 (pdf)  
Vallie Bray, B-293840; B-293840.2, March 30, 2004) (pdf)  
William A. Van Auken, B-293590, February 6, 2004 (pdf)  




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