BNUMBER:  B-277340 
DATE:  October 1, 1997
TITLE: Comdisco, Inc., B-277340, October 1, 1997
**********************************************************************

DOCUMENT FOR PUBLIC RELEASE
A protected decision was issued on the date below and was subject to a 
GAO Protective Order.  This version has been redacted or approved by 
the parties involved for public release.
Matter of:Comdisco, Inc.

File:     B-277340

Date:October 1, 1997

Ron R. Hutchinson, Esq., and Scott W. Woehr, Esq., Doyle & Bachman, 
for the protester.
Rand L. Allen, Esq., and David A. Vogel, Esq., Wiley, Rein & Fielding, 
for Troy Systems, Inc., an intervenor.
Terence W. Carlson, Esq., Department of Transportation, for the 
agency.
Glenn G. Wolcott, Esq., and Paul Lieberman, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Task orders under which an agency acquires the unrestricted 
discretionary right to require the contractor to provide specifically 
defined hardware and software constitute the "acquisition" of that 
hardware and software.

2.  Contract under which the agency acquires the right to exclusive 
use and control of specifically defined equipment for a period of time 
in return for monetary consideration effectively constitutes the 
"lease" of that equipment.

3.  In task orders where terms of underlying contract limits 
acquisition of hardware/software to 25 percent of the task orders' 
value, protest is sustained where agency is purchasing the right to 
acquire substantial quantities of hardware/software and provides no 
credible evidence that the limitation is satisfied, instead arguing 
that the nature of the acquisition makes it impossible for the 
protester to affirmatively demonstrate that contract limitation has 
been exceeded. 

DECISION

Comdisco, Inc. protests the Department of Transportation's (DOT) award 
of three task orders to Troy Systems, Inc. and its subcontractor, 
SunGard Recovery Services, Inc., under contract No. DTOS59-96-D-0411.  
Comdisco asserts that the task orders for disaster recovery computer 
equipment and related services are outside the scope of the Troy 
Systems contract because they exceed the underlying contract's express 
limitation on the acquisition of computer hardware and software.

We sustain the protest.

BACKGROUND

The contract which provides for the challenged task orders was awarded 
under request for proposals (RFP) No. DTOS59-96-R-00005, generally 
referred to as the Information Technology Omnibus Procurement (ITOP).  
The ITOP solicitation contemplated the award of multiple indefinite 
delivery/indefinite quantity (ID/IQ) contracts under which task orders 
would be issued "to obtain the gamut of support resources related to 
Information Resource Management."  DOT states that the value of the 
ID/IQ contracts "could potentially reach $1 billion over the seven 
year life of the contract."  

The ITOP RFP divided the tasks to be performed into three functional 
areas:  information systems engineering (ISE); systems/facilities 
management and maintenance (SFM); and information system security 
support services (ISS).  Under each of the functional areas, the RFP 
listed various tasks.  Listed under the ISS area were, among other 
things, "Disaster Recover, Continuity of Operations, and Contingency 
Planning."  

Section C.1.5 of the ITOP RFP contained the following limitation: 

     Integral to the services necessary in performing the preceding 
     functional areas, acquisition of hardware/software on a leased, 
     depreciated, or purchased basis may also be required of the 
     Contractor.  Under any of the three functional areas, a task 
     order may be used to acquire hardware/software up to 25% of the 
     value of the task order.

Section H.22 of the ITOP RFP made clear that this language imposes a 
mandatory ceiling, stating:  "As stated in Section C, paragraph 1.5, 
the value of [hardware, software and related supplies] shall not 
exceed 25% of the value of the TO [task order]."[1]   

Troy Systems was awarded an ITOP contract for the ISS functional area 
in May 1996.  Thereafter, DOT awarded task order Nos. T970003 ("task 
order No. 3"), T970005 ("task order No. 5"), and T970006 ("task order 
No. 6") to Troy Systems and its subcontractor SunGard Recovery 
Services, Inc.[2]  Each of the task orders was awarded at the request 
of a particular customer agency,[3] and each provides that in the 
event of a disaster,[4] Troy/Sungard will provide replacement computer 
equipment and related services to the customer agency.  More 
specifically, the SunGard proposal states that, when an agency 
determines, in its sole discretion, that a disaster has occurred,[5] 
Troy/Sungard will make the specified replacement equipment available 
for the agency's exclusive use,[6] at either a contractor or 
government facility, for a period of up to 6 weeks.  Each task order 
also requires Troy/SunGard to provide equipment for the customer 
agency to use during specified periods in which the agency will test 
its disaster plan.[7]  In consideration, Troy/SunGard charges a 
lump-sum fee which is paid by the customer agency in monthly 
installments.  During the first 30 days following declaration of a 
disaster, there is no additional daily charge.  Thereafter, a daily 
fee may be assessed in addition to the monthly rate.    

DISCUSSION

Following DOT's issuance of the task orders, Comdisco filed this 
protest, arguing that the task orders violate the express limitation 
in the ITOP solicitation regarding acquisition of hardware/software 
and, therefore, that Comdisco, which does not hold an ITOP contract, 
was improperly precluded from competing for the requirements.  
Comdisco's protest specifically asserts that the challenged ITOP task 
orders contemplate the customer agencies' acquisition of 
hardware/software, and that the value of such acquisition exceeds 25 
percent of the value of the task orders, thereby constituting 
out-of-scope modifications to the ITOP contract.  See, e.g., Neal R. 
Gross & Co., Inc., 69 Comp. Gen. 292 (1990), 90-1 CPD  para.  212 
(out-of-scope contract modifications are subject to competition 
requirements absent valid sole-source justifications).  Comdisco, a 
large provider of disaster recovery services, currently provides the 
type of equipment and services being obtained under the challenged 
task orders under General Services Administration contract No. 
GSOOK93AJC0593, another government-wide contract.  Comdisco maintains 
that it did not participate in the ITOP procurement because it viewed 
the scope of that contract as limited to advisory services.  

DOT first replies that, because Troy/SunGard's obligations under the 
task orders are contingent upon the customer agency's declaration of a 
disaster, the agency is only acquiring a service in the nature of an 
insurance policy and, therefore, that the task orders cannot 
constitute an "acquisition of hardware/software."  To support this 
argument, DOT refers to paragraph C-11 in the work statements for task 
order Nos. 5 and 6 which states:  "No hardware or software will be 
provided."[8]

However, in direct conflict with the statement in paragraph C-11, 
paragraph C-5 of task order No. 5 states:[9]   

     The contractor shall provide a fully operational computer and 
     network system equipment configuration equal to or greater in 
     capacity than that described below.

     QuantityDescription

     95      Pentium 120Mhz Personal Computers, minimum 16Mb RAM, 
             minimum 1.2 Gb hard drive, 10 Mb Ethernet Card, 15" Super 
             VGA monitor
      5      HP 4SI Compatible network printers
      1      ADIC 1200D - Sony SDT 5000 Tape Backup Unit with Adaptec 
             1542CP SCSI controller card
      1      T-1 Connection to CNS Headquarters' Computer Room
      1      Frame Relay Connection for backup PVC Access

Similarly, paragraph 5 of task order No. 3 states: 

     [T]he Contractor shall provide, for the exclusive use of the CRM 
     [Criminal Division of the Department of Justice], one IBM AS/400 
     (Model 310A) and one SunSparc/1000 whose configurations shall 
     meet or exceed the specifications provided in Section 5 of this 
     document.[10]

In light of the task orders' specific and unequivocal requirements 
that "the contractor shall provide" the specified hardware/software, 
DOT's reliance on the provision in paragraph C-11 of task order Nos. 5 
and 6 that, "[n]o hardware or software will be provided," is 
misplaced.[11]  

Further, DOT's assertion that the task orders contemplate the 
acquisition of services does not negate the fact that 
hardware/software is also being obtained.   Indeed, the 
above-discussed limitation in the ITOP RFP specifically contemplates 
the issuance of task orders in which both services and 
hardware/software are acquired, stating that acquisition of the latter 
may be "integral to the services necessary in performing [the 
contract]."  Finally, DOT's assertion that such hardware/software is 
acquired only when the customer agency declares a disaster does not 
alter the nature of the acquisition where, as here, the determination 
as to the existence of an event triggering the contractor's obligation 
to provide the hardware/software is within the sole discretion of the 
customer agency.[12]  In short, we find without merit DOT's assertion 
that the task orders do not constitute the "acquisition of 
hardware/software."  

DOT next argues that its acquisition of hardware/software is not "on a 
leased, depreciated, or purchased basis," and therefore falls outside 
of the ITOP limitation.  We disagree.  
   
A "lease" is defined as "a transfer of the right to possession and use 
of goods for a term in return for consideration."  Uniform Commercial 
Code  sec.  2A-103(j).  The term "possession" is defined as "[t]hat 
condition of facts under which one can exercise his power over a 
corporeal thing at his pleasure to the exclusion of all other 
persons."  Black's Law Dictionary 1163 (6th ed. 1990).  

Here, Troy/SunGard receives a lump-sum fee, paid in monthly 
installments, in return for its obligation to provide specified 
hardware/software, and related services, for the customer agency's 
exclusive use during testing and disaster periods.  Regarding disaster 
periods, Troy/SunGard's obligation is triggered by an action within 
the sole discretion of the customer agency.[13]  The fact that a 
disaster may not, in fact, be declared during the task order period 
does not alter the fact that, upon payment of the monthly fee, the 
agency has acquired the right to the exclusive use and possession, 
that is, the right to exercise its power over specific equipment, at 
its discretion, during the disaster period, not to exceed 6 weeks.[14]  
In short, each of the three task orders incorporates "the transfer of 
the right to possession and use of goods for a term in return for 
consideration"--that is, each calls for what is effectively a lease of 
the specified hardware/software.[15]   

Finally, DOT and Troy/SunGard assert that, even if the task orders 
constitute an acquisition of hardware/software subject to the 25 
percent limitation, the value of that hardware/software should be 
viewed as less than 25 percent of the task orders' value because, 
under past task orders, few disasters have actually been declared.[16]  
DOT and Troy/SunGard thus maintain that, in most instances, there is 
no value associated with the "acquisition of hardware/software."  

Accepting, arguendo, that disasters have historically been declared 
infrequently and, further, that when no disaster is declared the value 
of hardware/software actually provided to the customer agency 
represents less than 25 percent of a task order's total value,[17] we 
nonetheless reject the assertion that, on these facts, the protest 
should be denied.  This argument assumes, essentially, that the 25 
percent limitation is no barrier to award of a task order if it is 
more likely than not that no disaster will occur during the 
performance period and the value of hardware/software provided during 
performance will therefore have remained under 25 percent of the price 
of the task order overall.  This approach would judge compliance 
either by probabilities or retrospectively.  Yet the RFP does not 
restrict the limitation's applicability by probabilities, and, to be 
meaningful, the applicability of the 25 percent limitation must be 
determined prior to award of a task order, not upon its completion.  
Thus, if the occurrence of one or more disasters would mean that a 
task order contravened the 25 percent limitation, the task order is 
beyond the scope of the ITOP contract.  That the task order as 
ultimately performed would probably prove not to have exceeded the 
limitation does not cure the impropriety.

As to the task orders at issue here, DOT has not identified any 
portion of the
lump-sum fees that is properly allocable to the acquisition of 
hardware/software, and accordingly has not provided any documentation 
that the value of the task order reflected in the lump-sum fee 
complies with the 25 percent limitation, despite the agency's 
recognition in its post-hearing comments that "the hearing [conducted 
by GAO in connection with the protest] focused on . . . the 
prohibition that any acquisition of hardware under ITOP not exceed 25% 
of the value of the task order."[18]   Rather, DOT reiterates its 
argument that "the subscription fees are not the proper method to 
determine the value of a lease, because the subscription fees are not 
a lease."  As discussed above, we believe that the task orders 
effectively constitute a lease of the equipment being provided.

Instead of showing that the task orders comply with the 25 percent 
limitation, both DOT and Troy/Sungard assert that Comdisco cannot 
prove that the 25 percent limitation is exceeded because Troy/SunGard 
prices its disaster recovery services on a lump-sum basis, does not 
allocate any portion of that price to hardware/software, and is not 
capable of doing so.  Specifically, DOT asserts:  "GAO must deny 
Comdisco's protest, as Comdisco has not established that any of these 
three task orders violate the 25% hardware limitation."  

In this regard, Troy/SunGard's Program Manager submitted a declaration 
which discusses the composition of Troy/SunGard's price.  Paragraph 12 
of that declaration states:

     [deleted][19] 

Additionally, Troy/SunGard's Program Manager testified at the hearing 
as follows:  

     Q.  To what extent does your subscription fee that you would 
     propose on a particular -- for a particular customer relate, if 
     at all, to the costs of particular components of their 
     configuration?

     A.  [deleted]

Tr. at 156.

Contrary to DOT's and Troy/SunGard's assertions that the lump-sum fees 
are not related to the hardware/software provided, and that the 
parties are not capable of making such an apportionment, 
Troy/SunGard's proposals for task order Nos. 5 and 6 specifically 
state:

     [The customer agency] may exchange certain components of [the 
     equipment provided] for hardware representing newer technology, 
     by giving written notice to SunGard.  Upon the effective date of 
     this exchange, the Monthly Fees due under that Schedule may 
     increase by an amount reasonably determined by SunGard, based 
     upon the difference between (a) SunGard's then prevailing Monthly 
     Fees for the new hardware selected, and (b) an allocated portion 
     of the prior Monthly Fees covering the components that were 
     replaced.  [Emphasis added.]

This portion of Troy/SunGard's proposal requires the 
conclusion--contrary to the agency's and the awardee's 
assertions--that the amount of the lump-sum fees is directly tied to 
the hardware/software being provided and, further, that Troy/SunGard 
can and will apportion those fees to reflect the value of such 
hardware/software under certain circumstances--for example, when such 
an allocation will provide a basis for Troy/SunGard to increase its 
fees to reflect the greater value of "hardware representing newer 
technology."

In conducting the ITOP procurement, DOT drafted, and Troy/SunGard 
accepted without objection, the specific provision limiting the value 
of hardware/software to be acquired pursuant to that contract.  Now, 
these parties would have Comdisco's protest denied on the theory that, 
due to the lump-sum manner in which the ITOP task orders are priced, 
Comdisco cannot affirmatively demonstrate that the value of the 
hardware/software being provided reflects more than 25 percent of the 
task orders' value.  Stated in the alternative, the parties are 
arguing that Comdisco's protest must be denied because Comdisco cannot 
disprove that the value of the space and services supporting the 
hardware/software make up at least 75 percent of the task orders' 
value--that is, the space and supporting services are three times more 
valuable than the hardware/software itself. 

DOT's and Troy/SunGard's arguments appear to presume that, in the 
absence of Comdisco's affirmative allocation of the task orders' 
value, this Office must conclude that DOT's actions were acceptable.  
Under the circumstances presented here, adoption of this approach 
would place an inappropriate burden on the protester.  Rather, we view 
the more relevant principle to be that procuring agencies have a 
fundamental obligation to adequately document their source selection 
decisions so that a reviewing forum can determine whether those 
actions were proper.  See KMS Fusion, Inc., B-242529, May 8, 1991, 
91-1 CPD  para.  447 at 7; Department of the Army--Recon., B-240647.2, Feb. 
26, 1991, 91-1 CPD  para.  211 at 2.  Where an agency fails to create or 
retain such documentation, it bears the risk that our Office will not 
conclude that the agency had a reasonable basis for its procurement 
decisions.  Id.; American President Lines, B-236834.2, July 20, 1990, 
90-2 CPD  para.  53 at 6.   

Here, we have reviewed the record and are unable to reasonably 
conclude from the documentation presented that the portion of each 
task order's value related to items other than hardware/software 
reflect value that is three times greater than the value of the actual 
hardware/software being provided.  In reaching this conclusion, we 
disagree with the assertion that no portion of the lump-sum fee 
reflects the value of the specific replacement hardware/software.  
That assertion would mean that the fee would be the same, regardless 
of whether 10 or 1,000 replacement computers were to be provided, a 
proposition unreasonable on its face.  On the contrary, it is clear 
that the lump-sum fee, paid in monthly installments, essentially 
constitutes the price to the agency of acquiring the right to possess 
and control specific replacement equipment, along with related 
services, during periods of testing and when the customer, in its sole 
discretion, determines that a disaster has occurred.  While, in 
calculating the monthly fee, the awardee may well have discounted the 
value of the hardware/software to reflect the low probability that the 
replacement equipment will actually be needed, the value of that 
equipment would still appear to be a significant (if not the primary) 
component of the fee.

Based on our review of the record, it further appears that the right 
to obtain the hardware/software constitutes a significant portion of 
the task orders' requirements,  thus causing the task orders to fall 
outside the scope of the ITOP contract.  In this regard, neither DOT 
nor Troy/SunGard has provided documentation which reasonably addresses 
allocation of the lump-sum fee to the acquisition of 
hardware/software, and those parties have thus failed to provide 
adequate documentation that the task orders fall within the scope of 
the ITOP contract.  On this record, we conclude that DOT has failed to 
adequately document its source selection decision.  

The protest is sustained.[20]   

RECOMMENDATION

We recommend that DOT terminate the three task orders and advise the 
user agencies that the requirements reflected in those task orders 
appear to fall outside the scope of the ITOP contract and therefore 
may not be acquired thereunder.  We also recommend that Comdisco 
recover its cost of filing and pursuing its protest, including 
reasonable attorneys' fees.  Bid Protest Regulations, 4 C.F.R.  sec.  
21.8(d)(1) (1997).  The protester should submit its certified claim 
for such costs, detailing the time expended and costs incurred, 
directly to the agency within 60 days after receipt of this decision.  
Bid Protest Regulations, 4 C.F.R.  sec.  21.8(f)(1). 

Comptroller General 
of the United States

1. At a hearing conducted in connection with this protest, the ITOP 
Director of Acquisitions testified that this limitation was placed in 
the solicitation because the ITOP contracts were intended to be 
primarily contracts for services, not hardware or software, 
explaining:  "There's enough other GWACs [government-wide agency 
contracts] or government contracts out there to buy hardware."  
Hearing Transcript (Tr.) at 7-8.  Consistent with this understanding, 
labor categories, labor rates, and burden rates were the only cost 
factors evaluated by DOT in making ITOP awards.  Similarly, the cost 
proposals submitted by ITOP offerors, including Troy, contained 
descriptions of the labor categories, labor rates, and indirect burden 
rates, but did not refer to disaster recovery computer equipment or 
provide prices for such equipment.  

2. Each of these was issued on a "directed" basis, that is, without 
seeking proposals from other ITOP contract awardees.  In documenting 
the basis for the directed award, the customer agency for task order 
No. 3 stated:

            SunGard Recovery Services, Inc., the [Troy] subcontractor 
            actually providing the direct disaster recovery service to 
            the Government, is the organization most suited to fulfill 
            the Government's needs for a hot site location. . . .  If 
            SunGard had been a prime contractor on the ITOP contract, 
            the Government could have contracted directly with 
            SunGard; because SunGard, however, is a [Troy] 
            subcontractor on this contract, subcontracting becomes 
            necessary.

3. Task order Nos. 3, 5, and 6 provided disaster recovery equipment 
and related services to the Criminal Division of the Department of 
Justice, the Corporation for National Service, and the National 
Oceanic and Atmospheric Administration, respectively. 

4. Troy/SunGard defines a "disaster" as "any unplanned event or 
condition that renders the [customer agency] unable to use a Location 
for its intended computer processing and related purposes." 

5. In its proposal responding to task order No. 3, Troy/SunGard 
stated:  "You decide what constitutes a disaster."  Paragraph C-5.1 of 
the work statements for task order Nos. 5 and 6 states:

            In the event any unplanned condition (disaster) renders 
            the [customer agency] unable to use its data processing 
            equipment for an amount of time that, in its sole 
            discretion, is unacceptable, the contractor shall provide 
            the [customer agency] immediate access to the [computer 
            backup capability] for six (6) weeks and the coldsite for 
            up to twenty-six (26) weeks as described in the following 
            paragraphs, for 7 days a week, 24 hours a day, until the 
            [customer agency] is able to restore an acceptable level 
            of service at its own facility.

6. Paragraph 5.1 of the work statement for task order No. 3 states 
that "the Contractor shall provide, for the exclusive use of the 
[customer agency], one IBM AS/400 . . . and one SunSparc/1000."  
Troy/SunGard's proposal for task order Nos. 5 and 6 state that the 
replacement computer equipment will be available for the customer 
agency's "immediate and exclusive use."  Troy/SunGard's Program 
Manager further testified that the computer equipment provided under 
all three task orders at issue here could only be used by one customer 
at a time.  Tr. at 109.

7. The work statement for task order No. 3 states:  "At least 
annually, the Contractor shall allow the Government to test its 
disaster plan(s) at no additional charge.  To perform the test, the 
Contractor shall make the hot site available at a mutually agreed upon 
time and location for a period of up to two days (48 consecutive 
hours.)"  Similarly, the work statements for task order Nos. 5 and 6 
provide:  "The contractor shall provide [the customer agency] with 
thirty two hours of test time in eight hour increments each year." 

8. The provision in C-11 of task order Nos. 5 and 6 does not appear in 
task order No. 3.  

9. Paragraph C-5 of task order No. 6 contains identical language to 
that in task order No. 5, except that different hardware/software is 
specified.

10. As in task order Nos. 5 and 6, the referenced section 5 of task 
order No. 3 lists with great specificity the computer hardware and 
software components that Troy/SunGard must provide.

11. At the hearing, Troy/SunGard's Program Manager testified that he 
believed the statement in paragraph C-11 was "boilerplate," and that, 
contrary to paragraph C-11, Troy/SunGard would provide the 
hardware/software identified in the task orders in the event of a 
disaster.  Tr. at 124-125.

12. We note that, whether or not a disaster is declared, Troy/SunGard 
is obligated to provide similar equipment for the customer agency to 
use in testing its disaster recovery plan.  Accordingly, even if the 
customer agency does not exercise its discretion to declare a 
disaster, Troy/SunGard is still obligated to provide equipment for the 
customer's exclusive use during the required testing periods.

13. Paragraph 12.2 of the work statement for task order No. 3 
describes the obligation in the following manner:  "The Government 
shall pay a firm-fixed monthly rate for the availability of the backup 
equipment and related services provided by the Contractor."  (Emphasis 
added.)

14. Task order No. 3 does not limit the disaster period to any period 
other than the term of the task order itself.

15. Troy/SunGard's Program Manager submitted a declaration stating:  
"I have never heard anyone in the disaster recovery industry refer to 
any of our services as the . . . 'leasing' of hardware."  However, 
paragraph 5.1(c) of task order No. 3's work statement, which obligates 
Troy/SunGard to deliver additional equipment upon request, states:  
"The Contractor shall provide the equipment at the leased rates 
specified in the Contractor's proposal . . . ."  (Emphasis added.)    

16. Based on its past experience, Troy/SunGard asserts that "the 
probability of a disaster is not more than 4 or 5 percent."

17. As noted above, however, even when no disaster is declared, 
Troy/SunGard is still obligated to provide hardware/software to the 
customer agency in order for the agency to test its disaster plan.

18. DOT and Troy SunGard did submit with their post-hearing comments 
various calculations regarding allocation of the daily usage fees, 
contending that apportionment of only those fees is appropriate.  We 
note, however, that daily usage fees are provided for only under task 
order No. 6, and are charged only after the first 30 days of a 
disaster, and DOT acknowledges that "most disasters last [only] 10 to 
14 days."  

19. The next paragraph of that declaration states:  "The disaster 
recovery services and related products provided by SunGard also 
include . . .", followed by a list of various activities including 
"Risk Management," "Recovery Planning," "Testing and Implementation," 
and "Audit."  During the hearing, the Program Manager acknowledged 
that none of the activities listed in this paragraph are covered by 
the task order price, but, in fact, are billed separately.  Tr. at 
139-141.

20. Comdisco also asserts that the ITOP solicitation contemplated the 
acquisition of only disaster planning services, not actual 
implementation of disaster plans, arguing that any task order which 
provides for the acquisition of equipment to implement a disaster plan 
is per se beyond the scope of the ITOP contract.  We disagree.  The 
solicitation expressly contemplated issuance of task orders for 
"Disaster Recovery, Continuity of Operations, and Contingency 
Planning," and expressly recognized that acquisition of a limited 
amount of computer hardware/software could be "integral" to performing 
these tasks.