BNUMBER:  B-275063.2; B-275069.2
DATE:  February 4, 1997
TITLE:  ViON Corporation

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Matter of:ViON Corporation

File:     B-275063.2; B-275069.2

Date:February 4, 1997

David R. Hazelton, Esq., and David E. Ross, Esq., Latham & Watkins, 
for the protester.
Robert J. Moss, Esq., Dickstein, Shapiro, Morin & Oshinsky LLP, for 
Severn Companies, Inc., an intervenor.
Robert R. Goff, Esq., Defense Information Systems Agency, 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

1.  A Federal Supply Schedule contractor may properly offer only to an 
ordering agency a one-time price reduction from its schedule contract 
for a specific order.

2.  Agency properly ordered items incidental to and necessary for the 
operation of a computer system ordered under Federal Supply Schedule 
(FSS) contract, which provided for the provision of such incidental 
items not specifically listed in the FSS contract.

DECISION

ViON Corporation protests the Defense Information Systems Agency's 
(DISA) issuance of delivery orders Nos. DCA200-97-F-0761 and 
DCA200-97-F-0765 to the Severn Companies, Inc., under Severn's Federal 
Supply Schedule (FSS) contract No. GS-35F-092D.  ViON complains that 
the delivery orders are outside the scope of Severn's FSS contract.

We deny the protests.

On September 23 and 25, 1996, DISA issued two requests for quotations 
(RFQ) to contractors holding the appropriate FSS contracts and to ViON 
which has an indefinite delivery/indefinite quantity (IDIQ) or 
requirements contract with DISA for the installation and maintenance 
of mainframe computers.[1]  The RFQs sought quotes for the replacement 
of existing central processing units (CPU) at DISA's Jacksonville, 
Florida, and San Diego, California, Defense MegaCenter data processing 
sites.  Vendors were informed that, among other things, they must 
provide International Business Machines compatible mainframe CPUs and 
"all additional components necessary to provide a fully functional 
[CPU] meeting these requirements."  A 1-year warranty was required for 
the CPU to be installed in Jacksonville and a 3-month warranty was 
required for the CPU to be installed in San Diego.

In response, DISA received the following quotations from ViOn and 
Severn pursuant to their respective contracts:  

                    Jacksonville   San Diego

     Severn         $1,574,444     $1,397,000
     ViON           $4,581,000     $4,680,000
     ViON Alternate Quote          $2,700,000

The delivery orders were issued to Severn on October 3 and 10, based 
upon that firm's significantly lower quoted prices, and these protests 
followed.

ViON protests that the orders to Severn are materially different from, 
and exceed the scope of, Severn's FSS contract.  Specifically, ViON 
complains that Severn improperly offered "one time spot discounts" 
below its FSS contract prices, which were not made available to other 
schedule users; that more than half of the items ordered by DISA are 
not listed on Severn's FSS contract; and that the delivery orders' 
warranty and "trade-in" provisions are materially different from those 
provided for in Severn's FSS contract.

Under the FSS program, the General Services Administration enters into 
indefinite delivery contracts with commercial firms to provide 
supplies and services, at stated prices for given periods of time, as 
a means of providing federal agencies with a simplified process for 
obtaining commonly used supplies and services at prices associated 
with volume buying; ordering agencies issue delivery orders directly 
to schedule contractors for the required supplies and services.  
Federal Acquisition Regulation (FAR)  sec.  8.401 (FAC 90-41).[2]  
Non-mandatory schedule users, such as DISA, are directed to use their 
business judgment in determining whether ordering supplies or services 
from an FSS vendor represents the best value and meets the agency's 
needs at the lowest overall cost.  FAR  sec.  8.404(b)(2).  In selecting 
the best value item and the lowest overall cost, the ordering agency 
may consider such factors as the special features of one item not 
provided by comparable items which are required in effective program 
performance; trade-in considerations; probable life of the item 
compared with that of a comparable item; warranty conditions; and 
maintenance availability.  FAR  sec.  8.404(b)(2)(ii).

Here, DISA determined that Severn's substantially lower-priced quotes 
represented the best value to the agency.  While ViON complains that 
Severn's quoted prices are "one time spot discounts" below its FSS 
contract prices, this is specifically permitted by FAR  sec.  8.404(b)(3) 
and Severn's FSS contract, which provide that "MAS [multiple award 
schedule] contractors will not be required to pass on to all schedule 
users a price reduction extended only to an individual agency for a 
specific user."

ViON also complains that, in addition to the CPUs, DISA has ordered a 
number of other items that are not included in Severn's FSS 
contract.[3]  DISA and Severn respond that these additional items are 
incidental to, and necessary for, the configuration and operation of 
the CPUs; that the RFQs required vendors to provide "all additional 
components necessary to provide a fully functional [CPU] meeting these 
requirements"; and that Severn's FSS contract stated that "equipment 
will be provided with all standard cables, accessories, and 
documentation applicable to the equipment commonly supplied by the 
manufacturer."  

The items to which ViON here objects are various cables, clamps, 
racks, and controller cards, which, it is undisputed, are necessary 
for the operation of the CPUs.  As noted, Severn's FSS contract 
specifically provided that cables and accessories would be provided 
with equipment ordered under the contract; thus, these items can be 
ordered within the scope of Severn's FSS contract.  Moreover, an 
agency may procure FSS items and non-FSS items that are incidental to 
the FSS items under a single FSS procurement, so long as they meet the 
needs of the ordering agency and offer the lowest aggregate price, and 
if the cost of the non-FSS items is small compared to the total cost 
of the procurement.  Dictaphone Corp., B-254920, Jan. 6, 1994, 94-1 
CPD  para.  6; American Body Armor & Equip., Inc., B-238860, July 3, 1990, 
90-2 CPD  para.  4.  The record evidences that this was the case here.[4]  

ViON next argues that Severn's FSS contract did not provide for 
tailoring warranty provisions to meet the needs of individual 
procurements, yet the warranty provisions were tailored for 
Jacksonville (a 1-year warranty) and San Diego (a 3-month warranty).  
We disagree.  Severn's FSS contract provides, in pertinent part:

     "[f]or the purposes of this contract, commitments, warranties and 
     representations include, in addition to those agreed for the 
     entire schedule contract:  . . . [a]ny representations and/or 
     warranties made concerning the products made in any literature, 
     description, drawings and/or specifications furnished by Severn."  
     [Emphasis added.]

Thus, Severn's contract provided for the offer of warranties specific 
to each procurement, such as was sought by the RFQs here.  This is 
also consistent with FAR  sec.  8.404(b)(2)(ii), which allows ordering 
agencies to weigh such factors as warranty conditions in determining 
whether an order from the FSS represents the best value to the 
government.

Next, ViON argues that the trade-in credits provided under the 
delivery orders are inconsistent with Severn's FSS contract and are 
unreasonable.  Severn's FSS contract, however, recognizes that the 
ordering agency may receive credit for items traded in by the agency.  
While ViON asserts that the reasonableness of each trade-in credit had 
to be separately determined, FAR  sec.  8.404(b)(2)(ii) allows ordering 
agencies to account for trade-in considerations in determining the 
best value item at the lowest overall cost.  Here, DISA evaluated 
Severn's offered trade-in credits in connection with the firm's 
substantially lower prices for the CPUs, and determined that Severn's 
quotes, including its offered trade-in credits, reflected the best 
value at the lowest overall cost.  ViON has not shown this 
determination to be unreasonable.

The protests are denied.

Comptroller General
of the United States

1. Whether ViON's contract with DISA is an IDIQ contract or a 
requirements contract is the subject of litigation before the United 
States Court of Federal Claims.  This issue is not before our Office.

2. While ViON initially argued that FAR subpart 8.4 was not applicable 
to this procurement of automatic data processing (ADP) equipment, FAC 
90-41, effective for solicitations issued on or after August 8, 1996, 
extended the coverage of FAR subpart 8.4 to include ADP acquisitions. 

3. In its December 9 comments on the agency report on the protests, 
ViON argued that these no-charge items exceed the limitation in 
Severn's FSS contract precluding the supply of "not separately priced" 
items in excess of $2,500 per schedule order.  This allegation is 
dismissed as untimely since it was filed more than 10 calendar days 
after ViON knew or should have known this basis for protest.  Bid 
Protest Regulations,  sec.  21.2(a)(2), 61 Fed. Reg. 39039, 39043 (1996) 
(to be codified at 4 C.F.R.  sec.  21.2(a)(2)).  ViON knew or should have 
known from the documents in its possession, at the time it filed its 
protest on October 29, that Severn's delivery order contained a number 
of "not separately priced" items and that Severn's FSS contract 
provided the specific limitation on "not separately priced" items now 
referenced by the protester.  ViON's initial protest did not assert 
that this maximum order limitation had been violated, but only that 
the delivery orders to Severn contained "not separately priced" items.  
This general complaint was not sufficiently specific  to raise the 
maximum order limitation issue. 

4. The protester argues that the total cost of the items assertedly 
outside the scope of Severn's FSS contract amounts to "thousands and 
thousands of dollars."  Given that the cost of the CPUs exceeds $1 
million, these additional items would seem to be an insignificant 
portion of the total requirement.  Raymond Corp., B-246410, Mar. 2, 
1992, 92-1 CPD  para.  252.