BNUMBER: B-270109
DATE: February 6, 1996
TITLE: LDDS Worldcom
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Matter of:LDDS Worldcom
File: B-270109
Date: February 6, 1996
J. Randolph MacPherson, Esq., Sullivan & Worcester, for the protester.
Michael D. Rigg, Esq., Department of the Navy, for the agency.
David A. Ashen, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest against terms of solicitation for license to furnish personal,
unofficial telecommunications services to service members is dismissed
where solicitation was issued by a nonappropriated fund
instrumentality (NAFI) and there is no showing that in conducting the
procurement the NAFI was acting as a conduit for the agency in order
to circumvent applicable procurement statutes; GAO's bid protest
jurisdiction is limited to procurements by federal agencies, and NAFIs
do not meet the statutory definition of federal agencies.
DECISION
LDDS Worldcom protests the terms of request for proposals No.
NNA250-95-R-0025, issued by the Navy Exchange Service Command (NEXCOM)
for personal, unofficial telecommunications services. LDDS argues
that NEXCOM, a Morale, Welfare and Recreation (MWR) activity and a
nonappropriated fund instrumentality (NAFI), is seeking to use the
solicitation to procure improvements to, and the renovation or repair
of, government-owned property, thereby improperly augmenting the
Navy's appropriation; according to the protester, the solicited work
amounts to military construction services that should be procured by a
federal agency with appropriated funds, under the Federal Acquisition
Regulation (FAR) and the Defense Federal Acquisition Regulation
Supplement (DFARS).
We dismiss the protest.
The solicitation contemplated the award of a non-exclusive, revocable
license for a base period of 10 years with 5 option years to furnish
personal, unofficial telecommunications services to service members at
more than 320 Navy, Marine Corps, and Coast Guard installations. The
services to be furnished include bachelor quarters in-room phone
service, Navy Lodge in-room phone service, pay phone service, affinity
long distance service, over-the-counter and vended prepaid debit
cards, long distance phone centers, military calling card services,
and brig/confinement facility pay phone service.
The solicitation generally contemplated that the licensee at its own
expense would furnish and install any necessary equipment and
facilities, furnish the required services, and pay certain required
license fees; the licensee would recover its costs through service
charges paid by the service members and other users over the life of
the license. Specifically, the solicitation required the licensee to
pay an up-front license fee, propose percentage commissions, and
guarantee payment of the higher of the proposed commissions or
specified minimum monthly commissions. In addition, the solicitation
required the licensee to "provide, service, and maintain all
equipment, supplies, cabling, wiring, switches, hardware and
connectivity required to supply the personal telecommunications
services required by this licensing agreement." The solicitation
generally provided that:
"the equipment and services required herein will be provided at
no cost to [NEXCOM] or the other military activities covered by
this solicitation. Consequently, unless this solicitation
specifically states otherwise, all charges for the provision of
the equipment, including installation and maintenance, and
services required herein . . . shall be the responsibility of the
successful offeror."
The solicitation specifically provided that "[t]he Licensee shall be
responsible for all costs of design, wiring, cable, jacks, software,
equipment and installation necessary to provide the services required
under this license agreement." The solicitation further provided
that:
"[e]xcept as otherwise specifically stated in the body of this
agreement, title to all property and materials provided by or on
behalf of the Licensee, to include without limitation, switches,
wiring, cable, jacks, software, facilities or equipment, shall
remain in the licensee throughout the period of the agreement.
When the agreement ends, whether by termination, revocation, or
at the expiration of the initial term and any authorized
extension periods, title to all said property and materials shall
automatically vest in the government, unless the Contracting
Officer in the sole exercise of discretion shall direct
otherwise."
LDDS argues that installing the cabling, wiring and other equipment
that will be necessary in order to provide the required personal
telecommunications services--the cost of which LDDS estimates to be
more than $120 million--amounts to a renovation or upgrade of
government-owned troop housing facilities and thus comes within the
statutory definition of military construction, that is, "any
construction, development, conversion, or extension of any kind
carried out with respect to a military installation." 10 U.S.C. sec.
2801(a) (1994). According to the protester, such work therefore must
be authorized by law, included in an appropriation, and obtained
through an acquisition conducted under the FAR and the DFARS. See
63 Comp. Gen. 422 (1984) (military construction activities, as a
general rule, must be financed from funds specifically appropriated
therefor); but cf. 10 U.S.C. sec. 2805(c)(1) (minor military
construction).[1]
The statutory authority of this Office to decide bid protests of
procurement actions is set forth in the Competition in Contracting Act
(CICA), 31 U.S.C. sec. 3551 et seq. (1994). CICA defines a protest as a
written objection by an interested party to a solicitation by a
federal agency for the procurement of property or services, or a
written objection by an interested party to the award or proposed
award of a contract. 31 U.S.C. sec. 3551(1).
Since the passage of CICA, our bid protest jurisdiction has not been
based on the expenditure of appropriated funds or on the existence of
some direct benefit to the government. Americable Int'l, Inc.,
B-251614; B-251615, Apr. 20, 1993, 93-1 CPD para. 336. Instead, our
threshold jurisdictional concern is whether the procurement at issue
is being conducted by a federal agency. Id.
In limiting our jurisdiction to procurements by federal agencies, CICA
adopted the definition of that term set forth in the Federal Property
and Administrative Services Act of 1949, now codified at 40 U.S.C. sec.
472 (1994). 31 U.S.C. sec. 3551(3). As defined therein, an executive
branch federal agency includes any executive department or independent
establishment, including wholly-owned government corporations. NAFIs,
such as NEXCOM, do not meet the statutory definition of federal
agencies; although NAFIs are government instrumentalities and are
generally recognized as being associated with and generally supervised
by their respective government entities, NAFIs operate without
appropriated funds and are not themselves federal agencies. Military
Equip. Corp. of Am., B-253708, June 11, 1993, 93-1 CPD para. 455;
University Research Corp., B-228895, Dec. 29, 1987, 87-2 CPD para. 636.
As such, NAFIs are beyond our bid protest jurisdiction and,
consequently, we generally will not review procurements conducted by
these entities.
One issue we will consider is whether a NAFI, in conducting a
procurement, was acting as a conduit for the federal agency in order
to circumvent applicable procurement statutes. See generally
Compugen, Ltd., B-261769, Sept. 5, 1995, 95-2 CPD para. 103; Premiere
Vending, B-256560, July 5, 1994, 94-2 CPD para. 8; Americable Int'l, Inc.,
supra. This is not the case here; there is no evidence that NEXCOM is
acting as an agent of the Navy to circumvent the procurement statutes.
First, the essential purpose of this procurement is to procure
personal, unofficial telecommunications services for service members.
The record indicates that, as a general matter, the provision of
personal, unofficial telecommunications services is arranged by the
installation MWR office, billeting fund, or similar NAFI. Indeed,
appropriations of an agency are available to pay charges for a long
distance call only if necessary for official business. See 31 U.S.C. sec.
1348(b). Second, LDDS has made no showing of significant and
pervasive Navy participation in the selection of the successful
licensee which might suggest an agency situtation. See Americable
Int'l, Inc., supra. Finally, while the Navy (and other military
services) may benefit to some extent from the wiring and cabling of
some buildings by the licensee, we think any such benefit is only
relatively incidental to the fundamental purpose of this
procurement--that is, to provide personal, unofficial
telecommunications services at more than 320 installations for a
period of 10 to 15 years. In these circumstances, we do not believe
that the record establishes that NEXCOM has been a mere conduit for
the Navy. Without such a showing, and since there is no question that
the solicitation was issued by a NAFI, we have no jurisdiction over
the procurement. Id.
The protest is dismissed.
Comptroller General
of the United States
1. Although LDDS filed its protest prior to the closing date for
receipt of initial proposals, NEXCOM proceeded with the competition
and ultimately selected another firm for award of a license.