BNUMBER: B-281281
DATE: January 21, 1999
TITLE: Fidelity and Casualty Company of New York, B-281281, January
21, 1999
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Matter of:Fidelity and Casualty Company of New York
File: B-281281
Date: January 21, 1999
Michael P. Coffey, Esq., for the protester.
Dennis J. Gallagher, Esq., Department of State, for the agency.
David A. Ashen, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
With regard to solicitation to select insurance carrier to furnish
contractors with Defense Base Act (DBA) workers' compensation
insurance coverage required for contractor employees performing public
work contracts and certain other contracts outside of the United
States, protest that agency improperly deleted Federal Acquisition
Regulation (FAR) affirmative action clauses from solicitation is
denied where FAR is inapplicable because appropriated funds would not
be obligated or expended under the DBA contract to be awarded under
the solicitation; FAR applies only to acquisitions by the government
of supplies or services with appropriated funds.
DECISION
Fidelity and Casualty Company of New York protests the terms of
request for proposals (RFP) No. S-OPRAQ-98-R-0040, issued by the
Department of State (DOS) for selection of an insurance carrier to
offer workers' compensation coverage to DOS contractors whose
employees are performing contracts outside of the United States.
Fidelity and Casualty protests DOS's determination to delete several
affirmative action clauses from the solicitation and to exclude
coverage of aviation support services from the scope of the contract.
We deny the protest.
Pursuant to the Defense Base Act (DBA), 42 U.S.C. sec. 1651(a) (1994),
workers' compensation insurance coverage is required for contractor
employees performing public work contracts and certain other contracts
outside of the United States. By regulation, DOS has extended the
required coverage to all service contracts (other than contracts for
personal services) which require contractor employees to perform work
outside of the United States. 48 C.F.R. sec. 628.305 (1998). DOS
regulations provide for inserting in such solicitations standard
clauses requiring the contractor to procure the required DBA insurance
coverage pursuant to the terms of DOS's contract with its selected DBA
insurance carrier unless the contractor has a DBA self-insurance
program approved by the Department of Labor. 48 C.F.R. sec. 652.228-71,
652.228-72 (1998).
The RFP as issued required offerors to furnish rates per $100 of
employee remuneration for each of four categories: construction
contracts financed by DOS, service contracts financed by DOS, aviation
support services contracts financed by DOS, and additional emergency
medical evacuation coverage. In addition, the RFP as issued
incorporated by reference the following standard affirmative action
clauses: (1) Federal Acquisition Regulation (FAR) sec. 52.222-25,
entitled Affirmative Action Compliance; (2) FAR sec. 52.222-35,
Affirmative Action for Special Disabled and Vietnam Era Veterans (Apr
1984) (Deviation); and (3) FAR sec. 52.222-36, Affirmative Action for
Workers with Disabilities. DOS deleted the above FAR affirmative
action clauses in RFP amendment No. 0003; based on a number of
inquiries from potential offerors, DOS determined that deleting the
clauses would increase competition. Agency Report, Nov. 2, 1998, at
3.
Fidelity and Casualty argues that deletion of the FAR affirmative
action clauses from the solicitation was improper because they were
required by the FAR. DOS responds that deletion of the clauses was
proper because no funds, appropriated or nonappropriated, will be
obligated or expended under the DBA insurance contract to be awarded
under the solicitation, and the FAR therefore does not apply here.
Id. at 21-22. The agency notes in this regard that the "FAR applies
to all acquisitions as defined in Part 2 of the FAR, except where
expressly excluded," FAR sec. 1.104, while "acquisition" is defined in
Part 2 of the FAR to mean "the acquiring by contract with appropriated
funds of supplies or services (including construction) by and for the
use of the Federal Government through purchase or lease . . . ." FAR sec.
2.101. Fidelity and Casualty acknowledges that there will be no
direct expenditure of appropriated funds by DOS under the DBA
insurance contract, but argues that:
there is a direct expenditure of appropriated funds to DOS
contractors that perform work overseas and employ eligible
employees. Such direct expenditure by the DOS is comprised, in
part, of the cost of DBA insurance purchased from the DBA
insurer, for the cost of DBA insurance is one of the cost
elements the DOS contractor encounters. . . . Upon payment of the
premium to the DBA insurance contract carrier, the contractor, in
turn, submits a voucher to the DOS and receives reimbursement for
the cost of the premium paid.
Protest, Oct. 11, 1998, at 3, 5.
As noted by DOS, the FAR, by its terms, applies only to government
acquisitions of supplies or services with appropriated funds. FAR sec.
1.104, 2.101. Since the record indicates that DOS will not obligate
or expend appropriated funds under the DBA insurance contract itself,
we agree with DOS that the provisions of the FAR do not apply to the
DBA contract. Simplix, B-274388, Dec. 6, 1996, 96-2 CPD para. 216 at 5;
Good Food Serv., Inc.--Recon., B-256526.3, July 11, 1994, 94-2 CPD para.
16 at 2; Good Food Serv., Inc, B-253161, Aug. 19, 1993, 93-2 CPD para. 107
at 4. While DOS may obligate or expend appropriated funds under other
contracts, the price or cost of which may be determined in part by the
DBA insurance rates established under the DBA contract, this does not
constitute the obligation or expenditure of appropriated funds under
the DBA insurance contract; the payment to the DBA insurance
contractor will be made by the DOS contractors and not by DOS. The
mere fact that a contract confers a benefit on the government, as does
the DBA selection by securing the best DBA insurance rate for DOS
contractors and thus reducing DOS's contracting costs, does not
furnish a basis for finding that there was an obligation or
expenditure of appropriated funds. See generally Century 21--AAIM
Realty, Inc., B-246760, Apr. 3, 1992, 92-1 CPD 345 at 4, recon.
denied, B-246760.2, Aug. 6, 1992,
92-2 CPD para. 78 at 2-3 ("no-cost" contract for home-finding and/or
relocation services for federal employees).[1] We conclude that the
FAR does not apply here and that the clauses in question therefore did
not have to be included in the RFP.
DOS also excluded coverage of aviation support services contracts from
the scope of the DBA contract in RFP amendment No. 0003. DOS reports
that potential offerors had expressed concern about inclusion of
coverage for such contracts in the absence of claims history data.
According to DOS, the inquiries it received in this regard led to
further consideration of the matter, which ultimately resulted in
deletion of coverage of aviation support services contracts when the
agency concluded that the agency's aviation support services
contractor was able to obtain more favorable rates from its own
insurer than under DOS's DBA contract. Agency Report, Nov. 2, 1998,
at 9; Supplemental Agency Report, Nov. 30, 1998, at 2.
Fidelity and Casualty alleges that "DOS may have tailored Amendment
Three (deleting the aviation support services requirement) in order to
eliminate the use of appropriated funds in the contract, and thereby
eliminating the [affirmative action program] requirement." Protest,
Oct. 11, 1998, at 7.
In drafting solicitations, agencies may include restrictive provisions
or conditions only to the extent necessary to satisfy the needs of the
agency or as authorized by law. 10 U.S.C. sec. 2305(a)(1)(B)(ii) (1994).
We will question a solicitation provision only where the protester
shows that it is not reasonably related to the agency's requirements
and has the effect of restricting competition, since our role in
reviewing bid protests is to ensure that the statutory requirement for
full and open competition is met, not to protect the competitive
interest a protester may have in solicitation terms that could make it
more difficult for certain firms to compete. Simplix, supra, at 5-6.
The protester's challenge to deletion of the requirement that the DBA
insurance carrier offer coverage of aviation support services
contracts is untenable. The protester's position would require the
solicitation to be modified to require more than the agency has
determined it actually needs; this would tend to make the RFP more
restrictive, which is inconsistent with the principle of full and open
competition, and does not provide a valid basis for protest.
Aerostructures, Inc., B-280284, Sept. 15, 1998, 98-2 CPD para. 71 at 2.
The protest is denied.
Comptroller General
of the United States
1. While Fidelity and Casualty cites the decision in G. L. Christian
and Assocs. v. United States, 312 F.2d 418 (Ct. Cl. 1963), as support
for its position, we find that the case does not support finding an
expenditure of appropriated funds under the DBA insurance contract.
In G. L. Christian and Assocs., the court read into a contract for a
military housing project a standard termination clause, applicable to
contracts for the procurement of supplies or services which obligate
appropriated funds, where: (1) it was anticipated that the
construction loans would be paid off with the quarters allowances of
military personnel; (2) the loans were insured by the government; (3)
on completion of the project or termination of the contract, the
government agreed to take over ownership of the mortgagor-corporations
and to assume liability to the mortgagee for outstanding liabilities;
(4) the contractor and subcontractors looked to the government for
payment of their claims and had received appropriated funds in partial
settlement; and (5) the congressional authorization for the contract
affirmatively recognized that appropriated funds would be involved.
Id. at 424-26. Here, in contrast, neither the terms of the solicited
DBA insurance contract nor the expectations of the parties included
the direct payment of appropriated funds to the DBA insurance
contractor.