BNUMBER: B-261769
DATE: September 5, 1995
TITLE: Compugen, Ltd.
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Matter of: Compugen, Ltd.
File: B-261769
Date: September 5, 1995
David R. Johnson, Esq., and James C. Dougherty, Esq., Gibson, Dunn &
Crutcher, for the protester.
Jeffrey H. Schneider, Esq., Epstein, Becker & Green, for MasPar
Computer Corporation, an interested party.
Fred Kopatich, Esq., Department of Commerce, for the agency.
Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
In light of the decision in U.S. West Comms. Servs., Inc. v. United
States, 940 F.2d 622 (Fed. Cir. 1991), the General Accounting Office
(GAO) will no longer exercise jurisdiction over subcontract
procurements "for" the government, in the absence of a request by the
federal agency involved; nor will GAO consider a sole-source
subcontract award to be "by a federal agency" so as to justify taking
jurisdiction over a protest of the award, where the prime contractor,
in evaluating the protester's proposal and determining to make a
sole-source award to another firm, exercised substantial
responsibility for the procurement such that the prime contractor
could not be said to be a mere conduit for the agency.
DECISION
Compugen, Ltd. protests the award of a sole-source subcontract to
MasPar Computer Corporation by PRC, Inc. for a biotechnology sequence
search computer system to be provided to the U.S. Patent and Trademark
Office (PTO), Department of Commerce, under PRC's prime contract with
PTO.
We dismiss the protest.
Since the early 1980s, PTO has sought to establish an automated patent
system (APS), which would computerize all patent records and allow
text retrieval. To accomplish this, PTO has established a master
plan, under which an outside contractor--the systems engineering
integrator--would have the primary role of designing, testing,
acquiring, and maintaining the APS. In 1984, PTO awarded a
cost-plus-award-fee, task order contract to PRC to be the APS systems
engineering integrator.
The prime contract provided that the contractor would acquire
automated data processing (ADP) resources in accordance with the
policies and procedures of the Federal Information Resources
Management Regulation, 41 C.F.R. Part 201-39.[1] Under the prime
contract, PTO would review and approve PRC's solicitation documents
for APS system resources prior to release by PRC and, in this regard,
PRC was required to prepare a source selection handbook and
acquisition plan for each planned subcontract acquisition. PTO
reserved the right to have no more than two government observers
attend meetings of PRC's evaluation or source selection evaluation
boards; the contract provided that PTO's observers may ask questions
but were not permitted to present their own evaluations or opinions.
PTO also reserved the right to approve subcontract selections.
In 1994, PRC awarded a sole-source subcontract to MasPar for that
firm's chemical sequencing similarity software system with associated
hardware (the 1994 procurement). Prior to the award of this
sole-source subcontract, PTO prepared a sole-source justification for
the issuance of a task order directing PRC to synopsize PTO's
requirements for the computer system, inform potential sources of an
intended sole-source subcontract award to MasPar, and acquire the
MasPar system. PTO's sole-source justification documented PTO's
conclusion that "only MasPar Computer Corporation hardware and
software provides the needed compatibility and most cost effective
procurement alternative" and "that the MasPar . . . system, was the
only available software and hardware currently available that can
satisfy PTO's advanced sequence searching requirements." On March 17,
1994, PRC synopsized the sole-source subcontract award in the Commerce
Business Daily (CBD).
In May 1994, Compugen contacted PTO regarding the agency's possible
requirements for a biotechnology research computer system. Compugen
was informed that a MasPar computer system was being acquired by PRC
for PTO under PRC's prime contract and pursuant to the March 1994 CBD
announcement; Compugen was invited, however, to submit information on
its system and was informed that "PTO's intent is simply to maintain
an awareness of products that may be of use now or in the future."
From May 1994 through March 1995, Compugen and PTO communicated
regarding the capabilities of Compugen's system.
On April 5, PRC synopsized in the CBD its intent to award another
sole-source subcontract to MasPar for a biotechnology sequence search
computer system (the 1995 procurement). The CBD announcement
referenced Note 22, which invited interested persons to identify their
interest and capability to respond to this requirement. In this
regard, the CBD notice provided that:
"PRC requires that the vendor of any sequence similarity
searching software acquired must demonstrate that the products
have successfully operated as part of a sequence data base
searching service for public access. Further, PRC requires that
any searching system acquired be fully compatible with existing
SPARC hardware, and SunOS 4.x/Solaris 2.x operating system
software at the USPTO. This is required to ensure that the
existing hardware and software may continue to function as
components of the network used to access the sequence searching
software."
Compugen subsequently contacted PRC and submitted a proposal in
response to the CBD announcement. After PRC conducted discussions
with Compugen concerning the capabilities of its offered computer
system, PRC, by letter of May 31, informed Compugen that the firm's
offered sequence search hardware and software did not meet PRC's and
PTO's present needs. Specifically, PRC stated that it and the
government had already invested substantial resources in the MasPar
system, and that introduction of Compugen's system would cause delays
and require additional training. In addition, PRC concluded that
Compugen's system did not provide some of the features of the MasPar
system that PTO required. Compugen then filed this protest.
Commerce requests dismissal of Compugen's protest of the subcontract
award because the procurement is not by a federal agency but by PRC
under its prime contract with PTO. Compugen responds that PRC's
subcontract award was "by or for" the government and therefore we have
jurisdiction to review this subcontract procurement.
Under the Competition in Contracting Act of 1984 (CICA), our Office
has jurisdiction to resolve bid protests concerning solicitations and
contract awards that are issued "by a [f]ederal agency." 31 U.S.C.
3551(l) (1988). In the context of subcontractor procurements, we
interpreted CICA as authorizing our Office to review protests where,
as a result of the government's involvement in the award process or
the contractual relationship between the prime contractor and the
government, the subcontract in effect is awarded on behalf of the
government, that is, where the subcontract is awarded "by or for the
government." See 4 C.F.R. 21.3(m)(10) (1995); see also Ocean
Enters., Ltd., 65 Comp. Gen. 585 (1986), 86-1 CPD 479, aff'd, 65
Comp. Gen. 683 (1986), 86-2 CPD 10. Pursuant to this
interpretation, we traditionally reviewed subcontractor selections
that were "for" the government, where the subcontract awards concerned
(1) subcontracts awarded by prime contractors operating and managing
certain Department of Energy, or other agency, facilities; (2)
purchases of equipment for government-owned, contractor-operated
plants; and (3) procurements by certain construction management prime
contractors. Ocean Enters., Ltd., supra.
Our review role of the award of subcontracts was called into question
by U.S. West Comms. Servs., Inc. v. United States, 940 F.2d 622 (Fed.
Cir. 1991), which held that under CICA the General Services
Administration Board of Contract Appeals (GSBCA) did not have
jurisdiction over protests of subcontract awards; the court of appeals
held, construing statutory language basically identical to that
applicable to our Office, that the GSBCA does not have jurisdiction
over subcontract procurements that were conducted "for" a federal
agency, in the absence of a showing that the prime contractor was a
procurement agent, as defined by the Supreme Court in United States v.
New Mexico, 455 U.S. 720 (1982), and the court of appeals in United
States v. Johnson Controls, Inc., 713 F.2d 1541 (Fed. Cir. 1983).[2]
In response to this decision, we declined to review subcontract
procurements conducted by Department of Energy management and
operating prime contractors in the absence of a request by the agency
that we do so.[3] Geo-Centers, Inc., B-261716, June 29, 1995, 95-2
CPD . Also in response to the U.S West decision and in the
absence of any authorizing language in the recently enacted Federal
Acquisition Streamlining Act of 1994, Pub. Law No. 103-355, Oct. 13,
1994, we issued final revisions to our Bid Protest Regulations
confirming that we review of protests of subcontract awards only upon
the written request of the federal agency that awarded the prime
contract. See 60 Fed. Reg. 40,742-743 (1995) (to be codified at 4
C.F.R. 21.5(h), 21.13(a)).[4] The protester here has not persuaded
us that our view of the applicable law is erroneous. Accordingly, in
the absence of a request by the federal agency concerned, we decline
to take jurisdiction of this subcontract procurement "for" the
government.
Compugen also asserts that we should take jurisdiction in any event
because the agency's involvement is so pervasive that PRC is in effect
merely a conduit for PTO and therefore this procurement is "by" the
government.[5] We have reviewed subcontract procurements where the
government's involvement in the award process is so pervasive that the
subcontract is in effect awarded "by" the government. We have
considered a subcontract procurement to be "by" the government where
the agency handles substantially all the substantive aspects of the
procurement, leaving to the prime contractor only the procedural or
ministerial aspects of the procurement, i.e., issuing the subcontract
solicitation and receiving proposals. See St. Mary's Hosp. and
Medical Center of San Francisco, California, 70 Comp. Gen. 579 (1991),
91-1 CPD 597; University of Michigan; Indus. Training Sys. Corp., 66
Comp. Gen. 538 (1987), 87-1 CPD 643. On the other hand, we have
found subcontractor procurements were not "by" the government, even
where the agency effectively directed the subcontractor selections,
where the prime contractor handled other meaningful aspects of the
procurement. See ToxCo, Inc., 68 Comp. Gen. 635 (1989), 89-2 CPD
170; Kerr-McGee Chemical Corp., B-252979, May 3, 1993, 93-1 CPD 358,
aff'd, B-252979.2, Aug. 25, 1993, 93-2 CPD 120.
Here, the record establishes that PRC retained substantial
responsibility for the conduct of the 1995 subcontract procurement,
such that it did not act as a mere conduit for the government.
Although Compugen argues that PRC does not have the expertise to
evaluate the sophisticated system that is to be acquired;[6] that PRC
did not comply with the documentation requirements of its prime
contract for conducting APS resource procurements; and that the agency
directed PRC to award a sole-source contract to MasPar in 1994,[7] we
find none of these factors establishes that PRC acted as only a
conduit for the agency. The evidence in the record, including the
affidavits provided for PRC and agency personnel, establishes that it
was PRC, and not the agency, which received and evaluated Compugen's
proposal in response to the April 1995 CBD announcement and which
determined that award should be made to MasPar. Specifically, PRC
conducted all the discussions with Compugen regarding the
acceptability of its proposal in response to the 1995 CBD
announcement,[8] and the only contemporaneous evaluation documentation
in the record is PRC's letter to Compugen detailing PRC's reasons for
rejecting Compugen's proposal. In addition, the affidavits of PRC's
and the agency's personnel evidence that PRC acted in more than a
ministerial way in making this subcontract award and that, consistent
with the PRC contract, the agency was not actively involved in the
evaluation and source selection. In sum, the record indicates that
PRC's involvement in the procurement is more than that of a mere
conduit for the government, and we therefore find that this
procurement is not, in effect, by the government. See ToxCo, Inc.,
supra.
The protest is dismissed.
/s/ Ronald Berger
for Robert P. Murphy
General Counsel
1."ADP resources" are defined by the contract as ADP equipment,
commercially available software, maintenance services, and related
supplies.
2. Compugen argues that PRC under this contract satisfies the tests
set out in New Mexico and Johnson Controls, so as to be considered a
procurement agent for the purposes of this procurement. Those
decisions held that, to be considered a procurement agent, the prime
contractor must be (1) acting as a purchasing agent for the
government; (2) the agency relationship between the government and the
prime contractor must be established by clear contractual consent; and
(3) the contract must state that the government would be directly
liable to vendors for the purchase price. See 455 U.S. at 742; 713
F.2d at 1551-52. Here, there is no evidence that the prime contract
established an agency relationship between PRC and the agency or
provided that the government was directly liable to
vendors/subcontractors for the purchase price.
3. The Department of Energy revised its regulations, effective June 2,
1995, to eliminate language providing for our bid protest review of
its management and operating contractor procurements. See 60 Fed.
Reg. 28,737 (1995).
4. These revisions will become effective October 1, 1995.
5. Compugen also argues, citing our decision in Premiere Vending,
B-256560, July 5, 1994, 94-2 CPD 8, that we will take jurisdiction
over a subcontract procurement where a protester merely alleges that
the government is using a prime contractor as a conduit to evade the
competition requirements of CICA. Compugen misreads this decision.
In Premiere Vending, we considered whether a non-appropriated fund
instrumentality--an employees club of the Federal Bureau of
Prisons--in conducting a procurement was acting as a conduit for the
agency in order to circumvent the requirements of CICA; we found that
the employees club was not acting as a conduit for the agency and did
not review the merits of the protest.
6. We do not find that PRC lacks the expertise to evaluate the
biotechnology sequence search system that is being acquired by PRC.
7. The relationship and conduct of the agency and PRC in 1994 with
respect to the acquisition of the MasPar equipment does not ipso facto
establish, as Compugen asserts, that PRC is acting as a conduit for
the agency in 1995, even assuming the agency directed PRC to acquire
MasPar equipment in 1994. Compugen did not timely protest the 1994
acquisition of the MasPar equipment.
8. The affidavit of Compugen's director of marketing confirms that
after the April 5, 1995 CBD announcement, PTO's only communications
with Compugen regarding that firm's offered system were to inform
Compugen that PRC was conducting the procurement, that PRC was acting
in its own capacity as a private company, and that Compugen should
have received notice from PRC that PRC was making award to MasPar.