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.