BNUMBER:  B-279238 
DATE:  May 21, 1998
TITLE: Boehringer Mannheim Corporation, B-279238, May 21, 1998
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Matter of:Boehringer Mannheim Corporation

File:     B-279238

Date:May 21, 1998

Robert M. Jenkins III, Esq., Harkins Cunningham, for the protester.
Timothy Sullivan, Esq., and Katherine S. Nucci, Esq., Adduci, 
Mastriani & Schaumberg, for Abbott Laboratories, an intervenor.
Phillipa L. Anderson, Esq., and Melbourne A. Noel, Jr., Esq., 
Department of Veterans Affairs, for the agency.
Wm. David Hasfurther, Esq., and Michael R. Golden, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Blanket purchase agreement (BPA) with vendor for blood glucose 
monitoring products, which was executed pursuant to Federal 
Acquisition Regulation (FAR)  Subpart 8.4, is not legally 
objectionable notwithstanding the inclusion in the BPA of a 
conditional discount for other products sold by that vendor under 
another BPA.

DECISION

Boehringer Mannheim Corporation (BMC) protests the terms of a blanket 
purchase agreement (BPA) entered into by the Abbott Diagnostics 
Division and Veterans Integrated Service Network No. 7 (VISN 7), 
Department of Veterans Affairs (VA), for blood glucose monitoring 
products.  BMC contends the VA improperly bundled the anticipated 
purchase of these products with a potential 16-percent discount on any 
purchases made by VISN 7 under a separate Abbott immunoassay products 
BPA, thereby contravening the government's duty to promote full and 
open competition. 

We deny the protest.   

The VISN 7 blood glucose monitoring products BPA is part of a VA 
program to promote the standardization of pharmaceuticals and 
medical/surgical supply items in the hospital and clinic system 
operated by the Veterans Health Administration.  As part of the 
program, the VA created the National Center for Laboratory Accuracy 
and Standardization.  The Center conducted a study of monitoring 
systems and found that glucose monitoring products used for diabetes 
patients represented the single greatest over-the-counter supply cost 
for the VA in the year studied.  The Center recommended that each VISN 
develop a multi-disciplinary committee consisting of primary care 
providers, diabetes specialists, nursing educators, and laboratory and 
pharmacy service personnel to select glucose monitoring devices on a 
national level that would help with the standardization efforts for 
the accurate measurement of glucose and would promote the reduction of 
testing costs.  The recommendation encouraged the selection of devices 
from one manufacturer. 

VA management asked each VISN to implement the Center's recommendation 
by negotiating "[i]ncentive agreements (Blanket Purchase Agreements) . 
. . under the current Federal Supply Contracts."  The VA advised that 
"[a]ll contractors will be requested to submit proposals for 
consideration in return for VISN commitment."  The multi-disciplinary 
committee was to review the proposals and make a selection.  
In response to a request from VISN 7, Abbott, BMC, and Johnson & 
Johnson--three federal supply schedule (FSS) vendors of blood glucose 
monitoring systems--demonstrated their products to the VISN 7 
multi-disciplinary committee.  The committee charge was to choose and 
standardize around a specific monitoring system.  The attendees 
evaluated the products for accuracy, reliability, and precision; 
usability; data handling and computer interface; and strong positives 
and negatives.  After discussions of the demonstrations, two-thirds of 
the attendees indicated a preference for Abbott's products based on 
the factors identified above.

A VA acquisition officer was then asked to negotiate a BPA with Abbott 
on the basis of VISN 7's decision to standardize using Abbott's 
glucose monitoring products.  Both BMC and Abbott already had national 
BPAs negotiated by the General Services Administration which offered 
discounts on the glucose monitoring products depending on the 
percentage market share that the VISN purchases from that 
manufacturer.  In addition to the terms and conditions of its national 
BPA, during negotiations with the VA, Abbott offered new incentives 
that were described as "quick-start" and "additional immunoassay BPA" 
incentives based on a BPA for immunoassay products also negotiated 
with VISN 7.

The final executed BPA describes these as incentives intended to 
encourage VISN 7's rapid conversion to the Abbott product at a level 
of 100-percent standardization by the VISN 7 facilities.  If VISN 7 
were to complete its standardization to the Abbott product by May 15, 
1998, all facilities in the VISN would receive a 25-percent rebate on 
the VISN's expenditures for this product between January 1 and 
December 31, 1998.  Also, in return for 100-percent standardization, 
Abbott promised to apply a 16-percent discount to the pricing in 
another VISN 7 BPA, one that covers immunoassay products.  The 
16-percent discount on immunoassay products would be effective 
February 1, 1998; however, if standardization to Abbott's glucose 
monitoring products was not complete by April 15, pricing for Abbott's 
immunoassay products would revert to the current FSS levels until 
complete standardization occurred.  Then, the 16-percent discount for 
the immunoassay products would be provided so long as VISN 7 remained 
100-percent standardized to the Abbott glucose monitoring system.  The 
VISN 7 management issued memoranda to implement the standardization 
process to obtain the promised discounts.  BMC's protest followed.

BMC primarily objects to what it characterizes as the "bundling" of 
pricing of two distinct sets of products--Abbott's glucose monitoring 
products and its immunoassay products--in one BPA.  The agency denies 
that it bundled separate requirements in one procurement vehicle.  The 
VA maintains that the BPA for Abbott's glucose monitoring products 
merely cross-references the BPA for Abbott's immunoassay products to 
allow a 16-percent discount on these immunoassay products when 
purchased under Abbott's separate BPA for those products if, and only 
so long as, VISN 7 purchases 100 percent of its requirements for 
glucose monitoring products under Abbott's BPA for these products.  
According to the VA, the BPA with Abbott for blood glucose monitoring 
products is a valid BPA with "an incentive agreement grafted onto it," 
which does not contravene any statute or regulation.

We find nothing unlawful in VISN 7's BPA with Abbott.  A BPA is not a 
contract, but rather a simplified method of filling anticipated 
repetitive needs for supplies or services by establishing "charge 
accounts" with qualified sources of supplies.  Federal Acquisition 
Regulation (FAR)  sec.  13.201(a) (June 1997).  A BPA may be established 
with FSS contractors, if not inconsistent with the terms of the 
applicable schedule contract.  FAR  sec.  13.202(c)(3). FAR  sec.  8.404(b)(4) 
(FAC 97-01) specifically permits the establishment of BPAs when 
following the ordering procedures in FAR Subpart 8.4.  The provision 
further notes that all schedule contracts contain provisions 
authorizing BPAs and that ordering offices may use BPAs to establish 
accounts with contractors to fill recurring requirements.  FAR  sec.  
8.404(b)(5) notes that agencies may wish to request a price reduction 
vis-ï¿½-vis the vendor's FSS pricing when a BPA is being established.

Here, the VA has executed the Abbott BPA in accordance with the FAR.  
To determine which product best met its needs, consistent with FSS 
procedures as described in FAR Subpart 8.4, the VA invited three 
vendors with schedules for the blood glucose monitoring products to 
demonstrate their products.  After this product demonstration, the 
multi-disciplinary committee discussed the merits of these competing 
products and concluded that Abbott's system best met the agency's 
clinical needs and should be the standard product for VISN 7.[1]  In 
accordance with Abbott's FSS, which contained a provision permitting 
BPAs, the VA negotiated the BPA with Abbott.  The VA achieved a lower 
initial price than the price under Abbott's national BPA,[2] and 
discounts under which it anticipates first-year cost savings of 
approximately $1 million (with only $160,000 in savings resulting from 
the 16-percent discount of Abbott's immunoassay products).  We cannot 
conclude, nor does BMC establish, that Abbott's product does not 
represent the best value or the lowest overall cost alternative or 
that the VA did not follow the applicable FAR provisions in issuing 
this BPA.

BMC nonetheless argues that the Abbott offer of a 16-percent reduction 
on immunoassay BPA pricing quantity to encourage the VA medical 
facilities to convert to the Abbott monitoring system violates the 
statutory requirement for full and open competition, 41 U.S.C.  sec.  
253(a)(1)(A) (1994), by relying on impermissible bundling of products.  
The short answer is that purchases under the FSS program meet the full 
and open competition requirement since the term "competitive 
procedures" is defined to include the multiple awards schedule program 
of the General Services Administration.  41 U.S.C.  sec.  259(b)(3).[3]  
See FAR  sec.  6.102(d)(3); Southwest Decor, Inc.--Recon., B-246964.3, 
B-246965.3, June 4, 1992, 92-1 CPD  para.  491 at 2.

Moreover, the "bundling" cases cited by the protester refer to 
situations in which an agency has combined two separate requirements 
in one solicitation, thus restricting competition.  See, e.g., Better 
Serv., B-265751.2, Jan. 18, 1996, 96-1 CPD  para.  90.  Those cases are 
irrelevant here, where there is no allegation that the agency combined 
two procurements into one solicitation; indeed, the agency's purchases 
will indisputably be conducted under two separate BPAs.  To the extent 
that the protester is raising antitrust concerns about Abbott's 
conduct, such concerns are outside the scope of our bid protest 
jurisdiction.  4th Dimension Software, Inc.; Computer Assocs. Int'l, 
Inc., B-251936, B-251936.2, May 13, 1993, 93-1 CPD  para.  420 at 6.

We see no legal impropriety in the BPA at issue here.  By its terms a 
BPA is a method of filling repetitive needs.  The Abbott BPA, as with 
other BPAs, provides an incentive agreement to the agency to buy a 
vendor's products and to receive discounts on the items covered by the 
BPA.  While the VA would also receive a 16-percent discount when 
ordering Abbott's immunoassay products under another BPA if the agency 
purchases all of its glucose monitoring products from Abbott (since 
that is the import of "standardization" here), the failure to 
standardize to Abbott's glucose monitoring products would simply mean 
that the agency would not receive the additional discounts for 
immunoassay products.  We are aware of no statute or regulation that 
precludes the agency from negotiating such a BPA.

The protest is denied.

Comptroller General 
of the United States  

1. Although price was one of the factors considered by the committee, 
there is no indication in the record that the committee made its 
decision to select Abbott based on the 16-percent reduction on 
Abbott's immunoassay BPA pricing.  The contemporaneous minutes of the 
deliberations support the agency's position that the selection was 
primarily based on non-price factors.  The BPA at issue was, in fact, 
negotiated after the selection.

2. The Abbott BPA also provided a lower initial price than the other 
vendors.

3. The protester also argues that the VA has violated the mandate of 
FAR  sec.  15.402(b) (FAR 97-02) that contracting officers price each 
contract separately and not use proposed price reductions under one 
contract as an evaluation factor in another.  We see no basis to apply 
the provision in FAR  sec.  15.402(b), which applies to negotiated 
procurements, in the context of FSS BPAs, where agencies are merely 
seeking further price reductions vis-ï¿½-vis FSS pricing.