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.