BNUMBER:  B-280945; B-280945.2; B-280945.3 
DATE:  December 4, 1998
TITLE: Satellite Services, Inc., B-280945; B-280945.2; B-280945.3,
December 4, 1998
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Matter of:Satellite Services, Inc.

File:     B-280945; B-280945.2; B-280945.3

Date:December 4, 1998

Laurence Schor, Esq., and Susan L. Schor, Esq., McManus, Schor, Asmar 
& Darden, for the protester.
Kenneth W. Dodds, Esq., for the Small Business Administration.
Capt. Steven H. Levin, Department of the Army, for the agency.
C. Douglas McArthur, Esq., and Christine S. Melody, Esq., Office of 
the General Counsel, GAO, participated in the preparation of the 
decision.

DIGEST

1.  Award under solicitation for construction services would not 
result in a binding requirements contract, where the solicitation does 
not obligate the agency to order any work at all from any individual 
contractor, and where, despite government promise to allow awardees to 
enter into limited competition for future task orders, the contracting 
officer can deny contractors the right to compete if it is "in the 
best interest of the government"; a party may not reserve to itself a 
method of unlimited exculpation without rendering the promises 
illusory and the contract void.

2.  Award under solicitation for construction services would not 
result in a binding indefinite-quantity contract where it contains no 
obligatory minimum quantity, rendering the government's obligations 
illusory and, therefore, unenforceable.

DECISION

Satellite Services, Inc. (SSI) protests the terms of request for 
proposals (RFP) No. DAHA23-98-R-0002, for construction work at various 
National Guard installations.  Satellite asserts that the RFP is 
flawed because the agency is commiting itself neither to order a 
stated minimum quantity of services nor to order all of its 
requirements from a successful offeror, rendering illusory the 
consideration necessary for an enforceable contract.

We sustain the protest.

On August 5, 1998, the United States Property and Fiscal Officer for 
Missouri issued the RFP for a "multiple-award, multiple-year task 
order contract" for maintenance, repair, and construction work at 
Rosecrans Memorial Airport in St. Joseph, Missouri, Jefferson Barracks 
and Lambert Field in St. Louis, and Canon Range at Fort Leonard Wood 
for 1 year, with four 1-year options.  RFP, Standard Form (SF) 1442, 
block 10, and  sec.  B.1.a.  The solicitation allows potential offerors to 
specify at which of the four locations, and in which dollar ranges,[1] 
they would like to compete for task orders if they are selected for 
award of a task order contract.   The RFP provides for no guaranteed 
minimum per contractor; a contractor can receive a maximum of $20 
million over the 5-year term of the contract.  RFP  sec.  B.6.a.  A 
contractor may request release from the contract at any time after the 
base year.  RFP  sec.  B.4.

Section C of the RFP contains a statement of work and an explanation 
of how the contract would be administered.  Each contractor promises 
to maintain an office within 100 miles of the project locations and to 
attend, within 24 hours of notice, preproposal site visits.  RFP  sec.  
C.1.g.  The agency will issue an oral or electronic (facsimile or 
e-mail) "Notice of Proposed Task Order Project Request for Proposal," 
with a brief synopsis of the project including required performance 
period, details of the preproposal conference, and "best value 
requirements"--that is, whether award will be based on price or a 
price/technical tradeoff.  RFP  sec.  C.5.a.  Based on competitive 
proposals received "exclusively" from task order contractors, the 
agency will select one of those contractors, to which it will issue 
the task order.  RFP  sec.  C.1.c.  Pursuant to RFP  sec.  C.7.a the contractors 
will be given "a fair opportunity to compete for each . . . proposed 
project" at the locations and in the price ranges included in their 
contracts. 

While the RFP states that the agency will offer all construction 
acquisition projects from $2,000 to $3 million in value at the 
installations covered, for competition among the contractors, the RFP 
also allows the government to exclude projects "unique" in nature.  
RFP  sec.  C.1.b.  The RFP also provides that the contracting officer will 
not have to provide the contractors with the opportunity to compete 
where there is an urgent need; where he determines that only one 
contractor can provide the services because of their unique or highly 
specialized nature; where a project is a "logical follow-on to an 
order already issued under the contract"; or "when otherwise 
determined to be in the best interest of the Government."  RFP  sec.  C.3.   
Further, the government reserves the right to contract for work 
outside the task order contract if the contracting officer determines 
that the price obtained through competition among the contractors is 
not fair and reasonable.  RFP  sec.  C.7.b.

SSI essentially contends that the RFP is ambiguous and raises a number 
of questions relating to interpretation both of the RFP and any 
resultant contract.  The protester argues that, although it is unclear 
what kind of contractual vehicle the agency intends, that contract 
will lack the consideration required by the Federal Acquisition 
Regulation (FAR) and applicable legal principles to result in an 
enforceable contract.  

In response to the protest, the agency contends that an award under 
the solicitation will give rise to a valid requirements contract based 
on the agency's promise, under section C.1.b of the RFP, to allow all 
task order contractors to participate in a limited competition for all 
of its future requirements for construction services, between $2,000 
and $3 million at the four installations covered.  We disagree.  

A requirements contract provides for filling all actual purchase 
requirements of designated government activities for supplies or 
services during a specified contract period, with deliveries or 
performance to be scheduled by placing orders with the contractor.  
FAR  sec.  16.503(a).  The promise by the buyer to purchase the subject 
matter of the contract exclusively from the seller is an essential 
element of a requirements contract.  Modern Sys. Tech. Corp. v. United 
States, 979 F.2d 200, 205 (Fed. Cir. 1992).  A solicitation will not 
result in the award of an enforceable requirements contract where a 
solicitation provision disclaims the government's obligation to order 
its requirements from the contractor and therefore renders illusory 
the consideration necessary to enforce the contract.  See Sea-Land 
Serv., Inc., B-266238, Feb. 8, 1996, 96-1 CPD  para.  49 at 5.  

As pointed out by the protester, the agency's position essentially 
relies upon the concept that the individual contracts with the task 
order contractors as a group constitute the "contract" under which the 
agency agrees to satisfy its requirements.  With regard to any 
individual contractor, however, there is no obligation to procure all 
of the agency's needs from that contractor, or to procure all of its 
needs within a designated price range or at a designated location from 
that contractor, or even to order any work at all from the contractor.  
Further, the agency's obligations to the contractors as a whole are 
limited by the RFP provisions allowing the contracting officer to 
exclude "unique" projects--and, more important, allowing the 
contracting officer to deny the task order contractors the right to 
compete--the very right that the agency argues they have bargained 
for--"when otherwise determined to be in the best interest of the 
Government."  A party may not by such means reserve to itself a method 
of unlimited exculpation without rendering the promises illusory and 
the contract void.  Torncello v. United States, 681 F.2d 756, 760 (Ct. 
Cl. 1982).  As the court stated in Torncello, it is specious to argue 
that the agency's power to avoid its obligations is limited by 
requiring that it can only do so in the best interest of the 
government or in the exercise of its discretion.  Id. at 770 ("it 
seems hardly sufficient for the government to promise not to do 
anything that would be against its own interest.  This merely is 
promising only to do whatever suits it.").

In other words, an obligation that is avoidable in the government's 
discretion, or whenever it is in the government's interest, is no 
limit on the agency's actions.  Where the agency has such discretion, 
it is impossible to ascertain any definite amount of work to which a 
contractor is entitled, no guidance for a court or board to determine 
if and when a breach has occurred, and no means of enforcing the 
contract against the government.  See Modern Sys. Tech. Corp. v. 
United States, supra, at 206.

Further, the essence of a requirements contract is not only that the 
government agrees to satisfy all its requirements from one contractor, 
but that the contractor agrees to fill all those requirements.  Media 
Press, Inc., 215 Ct. Cl. 985, 986 (1977); Sea-Land Serv., Inc., supra. 
The contract contemplated here lacks this element as well.  As 
originally issued, the RFP  sec.  B.1.c required the contractors to submit 
proposals for task orders on all the locations and in all the dollar 
ranges specified in their offers.  By amendment No. 0003, however, the 
agency deleted that requirement.[2]  In sum, both parties to the 
contract here would retain the right to avoid performing; neither will 
have agreed to be bound in any meaningful way.   The absence of valid 
mutual promises renders the contract unenforceable.  Sea-Land Serv., 
Inc., supra.

In responding to other issues raised by the protester, the agency 
suggests that the contract may be regarded not as a requirements 
contract, but as an indefinite-quantity contract.[3]  Assuming this is 
an alternative argument by the agency, the contract nevertheless does 
not qualify as an indefinite-quantity contract.  Specifically, FAR  sec.  
16.504 expressly states that an indefinite-quantity contract shall 
require the government to order and the contractor to furnish at least 
a stated minimum quantity of supplies or services.  FAR  sec.  
16.504(a)(1).  To ensure that the contract is binding, the minimum 
quantity must be more than a nominal quantity.  FAR  sec.  16.504(a)(2).  
The FAR reflects the rule that, without an obligatory minimum 
quantity, the government-buyer under an indefinite-quantity contract 
would be allowed to order nothing, rendering its obligations illusory 
and, therefore, unenforceable.  Rice Lake Contracting, Inc. v. United 
States, 33 Fed.Cl. 144, 153 (1995); Aalco Forwarding, Inc., et al., 
B-277241.15, Mar. 11, 1998, 98-1 CPD  para.  87 at 6.  Since the RFP here 
contains no stated minimum, it does not meet the test for formation of 
a valid indefinite-quantity contract.

Given our finding that, however interpreted, award under the 
solicitation would not give rise to an enforceable contract, we 
sustain the protest.  We recommend that the agency cancel the RFP and 
reissue it in a legally sufficient form.[4]  We also recommend that 
SSI recover its costs of filing and pursuing the protest.  Bid Protest 
Regulations, 4 C.F.R. sec.  21.8(d)(1) (1998).  The protester should submit 
its certified claim for such costs, detailing the time expended and 
costs incurred, directly to the contracting agency within 60 days of 
receiving this decision. 4 C.F.R.  sec.  21.8(f)(1).

The protest is sustained.

Comptroller General
of the United States

1. The RFP sets out six dollar ranges, beginning at $2,000, as 
follows:  up to $100,000; up to $250,000; up to $500,000; up to $1 
million; up to $2 million; and up to $3 million.  RFP  sec.  B.1.b.

2. In this regard, amendment No. 0003, block 14.b stated:  
"Contractors that are awarded a Task Order 'Ticket' will not be 
required to submit a bid on EVERY project."  The agency and protester 
agree that the effect of the amendment was to delete the requirement 
for task order contractors to submit offers on all task orders in 
their designated locations and dollar ranges.

3. For example, the agency's response to the protester's argument that 
the agency is improperly "bundling" its requirements is that it 
followed FAR  sec.  16.504, which applies to indefinite-quantity contracts.

4. While the protester raises other challenges to the solicitation, 
this recommendation to cancel the solicitation renders them academic, 
and we need not consider these issues further.