TITLE:   Pyxis Corporation, B-282469; B-282469.2, July 15, 1999
BNUMBER:  B-282469; B-282469.2
DATE:  July 15, 1999
**********************************************************************
Pyxis Corporation, B-282469; B-282469.2, July 15, 1999

Decision

Matter of: Pyxis Corporation

File: B-282469; B-282469.2

Date: July 15, 1999

Paul W. Cobb, Jr., Esq., and Leslie H. Lepow, Esq., Jenner & Block, for the
protester.

Jeff Arbuckle for OmniCell Technologies, Inc., an intervenor.

Maj. David Newsome, Jr., Department of the Army, for the agency.

Linda S. Lebowitz, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Where an untimely issue raised by the protester provides an opportunity
to clarify the caselaw concerning the ordering of non-Federal Supply
Schedule (FSS) items in connection with an FSS buy, a matter which the
General Accounting Office (GAO) views as of widespread interest to the
procurement system, GAO will consider this issue pursuant to the significant
issue exception to its timeliness rules.

2. An agency may no longer rely on the "incidentals" test to justify the
purchase of non-FSS items in connection with an FSS buy; where an agency
buys non-FSS items, it must follow applicable acquisition regulations.

3. Agency reasonably issued delivery orders to FSS vendor whose hospital
medication and supply dispensing system offered features that satisfied the
agency's needs, rather than to the protester, another FSS vendor, whose
comparably priced system did not satisfy these needs.

DECISION

Pyxis Corporation protests the issuance of delivery order Nos.
DADA10-99-F-0194, DADA10-99-F-0216, and DADA10-99-F-0217, to OmniCell
Technologies, Inc. by the United States Army Medical Command, Department of
the Army, for automated medication and supply dispensing equipment and
software, known as a "point of use" (POU) system for, respectively, Womack
Army Medical Center, Madigan Army Medical Center, and Walter Reed Army
Medical Center. The delivery orders were issued under OmniCell's Federal
Supply Schedule (FSS) contract No. V797P-3406K for medical equipment and
supplies. Pyxis contends the agency improperly issued the orders to
OmniCell.

We sustain the protest.

For each medical center, the agency required a POU system that would link
and provide automated access to medication and supply information at the
patient level, while interfacing with existing and future patient
information systems and billing networks. Contracting Officer's (CO)
Statement, May 10, 1999, at 1. The POU system would identify the specific
supply and pharmacy costs involved with treating individual patients by
case, diagnosis, and provider. As relevant here, by e-mail message dated
December 14, 1998, from the agency to Pyxis, the agency described its urgent
requirement for a POU system which "utilizes existing local area network
infrastructure and is consistent with DOD [Department of Defense] standards
for architecture (WIN NT) [Windows NT]." Protest, Apr. 8, 1999, Tab A; see
also Agency Report, May 10, 1999, Tab I, Memorandum--Policy for Military
Health Services System Operating Systems, Health Affairs Policy 96-058, Aug.
26, 1996 (Windows NT workstations and servers to be the standard). On
December 14, the agency requested FSS and product information from Pyxis and
OmniCell, the two firms which had FSS contracts for POU equipment. Pyxis and
OmniCell subsequently submitted relevant product information which was
reviewed by the agency between December 17, 1998 and January 8, 1999.

In reviewing the product information, the agency determined that OmniCell's
system satisfied the agency's needs, while the comparably priced Pyxis
system did not. CO Statement at 4. The most significant difference between
the two systems was that OmniCell's system was Windows NT compliant at the
time of the agency's review, while Pyxis, as stated in its product
submission, "was in the process of implementing Windows NT servers."
Supplemental Protest, May 20, 1999, at 12. (Pyxis also contemporaneously
advised the agency by e-mail message dated December 18, 1998, that its
architecture would be Windows NT compliant by the "MARCH/APRIL timeframe of
1999," Protest, Tab C, and by letter dated March 25, 1999, Pyxis announced
that its Windows NT-compliant servers were now commercially available.
Supplemental Agency Report, June 2, 1999, encl. 1.)

On March 15, the agency issued a delivery order for $293,990 to OmniCell for
a POU system at Womack, and on March 26, the agency issued two delivery
orders--one for $1,993,730 and one for $799,760 to OmniCell for POU systems
at Madigan and Walter Reed, respectively. During the pendency of this
protest, OmniCell delivered the three POU systems.

Ordering of Non-FSS Items Issue

Pyxis argues that the agency improperly ordered a number of non-FSS items
under each delivery order from OmniCell. The record shows that the product
and price list submitted by OmniCell in response to the agency's December 14
request for FSS and product information did not purport to be the firm's FSS
product and price list. Rather, labeled "Confidential Internal Price List,"
this list included, in addition to many items that were on OmniCell's FSS,
other, non-FSS items; moreover, even for the FSS items, some of the prices
on the list varied from OmniCell's FSS prices. Agency Report, Tab M,
OmniCell Product Submission, Confidential Internal Price List, at 38;
Comments, May 26, 1999, at 6. The agency states that it "asked for the FSS,
and that is what [it] thought it received [from OmniCell]." Supplemental
Agency Report at 9. It therefore appears that the agency made no effort to
ascertain whether OmniCell's submission was actually an FSS price list. The
agency concedes it ordered several non-FSS items from OmniCell; it also
appears that the agency paid higher prices for some of the FSS items than
the prices actually on OmniCell's FSS.

Citing ViON Corp., B-275063.3, B-275069.2, Feb. 4, 1997, 97-1 CPD para. 53
at 3-4, however, the agency maintains that all of the non-FSS items ordered
from OmniCell were incidental to the overall acquisition and the agency's
need to have a complete POU system, and that the price of these items
represented an insignificant percentage of the total value of each delivery
order. Supplemental Agency Report at 9-10. For example, under the Womack
delivery order, one non-FSS item valued at $15,000 was ordered (5 percent of
the total purchase price); under the Madigan delivery order, three non-FSS
items valued at $51,420, $7,715, and $38,565 were ordered (4 percent of the
total purchase price); and under the Walter Reed delivery order, two non-FSS
items valued at $64,275 and $7,175 were ordered (6 percent of the total
purchase price). Id. at 9.

Pyxis responds by stating that the agency's "incidentals" and
"insignificant" arguments are untenable in light of the holding in ATA
Defense Indus., Inc. v. United States, 38 Fed. Cl. 489 (1997). In ATA, the
court pointed out that pursuant to 10 U.S.C. sect. 2304(a)(1)(A), unless an
exception applies, an agency "shall obtain full and open competition through
the use of competitive procedures," and held that "[t]here is no exception
that even arguably covers ‘incidentals.'" ATA, 38 Fed. Cl. at 503. The
court continued by stating that "unless a product or service falls within an
exception contained in Section 2304 or can be classified as de minimis,
Section 2304 mandates that the product be purchased on a competitive basis
using a competitive procedure as defined in [10 U.S.C. sect.2302]. There is no
exception covering ‘incidentals.'" Id.

Our review of the chronology of the protest leads us to conclude that Pyxis
failed to assert the bid protest ground concerning the ordering of non-FSS
items in a timely fashion. Under our Bid Protest Regulations, a protest
based on other than alleged improprieties in a solicitation must be filed
not later than 10 calendar days after the protester knew, or should have
known, of the basis for protest, whichever is earlier. 4 C.F.R. sect. 21.2(a)(2)
(1999). Here, Pyxis received the agency's administrative report on May 10,
1999. In this report, the agency included copies of the three delivery
orders issued to OmniCell; each delivery order included the number and type
of item ordered, and unit and extended prices for each item. Agency Report,
Tabs D, G, and F. On May 20, Pyxis filed a supplemental protest in which it
made several arguments, none of which involved the ordering of non-FSS
items. On May 26, Pyxis filed comments on the agency report. (Our Office
granted an extension to Pyxis for the filing of comments.) In these
comments, for the first time, Pyxis raised the issue of the agency's
ordering of non-FSS items. Comments at 5-7. Pyxis discloses in its comments
that, not later than March 26, it had received a copy of OmniCell's FSS
offerings at the time of the procurement through the Freedom of Information
Act. Id. at 5-6. In its comments, Pyxis argued that "[i]t is clear from
OmniCell's FSS that numerous items ordered by [the agency] were not on the
FSS." Id. at 6. [1] We believe it is clear from this record that Pyxis knew
of its basis for protest not later than May 10 when it received as part of
the agency report copies of the three delivery orders and was able to
compare information in these orders to information on OmniCell's FSS. Pyxis
did not raise the non-FSS items issue within 10 days of receiving the agency
report in its timely filed supplemental protest, but instead, raised this
issue in its comments, 16 days after it knew of its basis for protest, thus
rendering the issue untimely.

Nevertheless, we will consider this issue pursuant to the significant issue
exception to our timeliness rules. 4 C.F.R. sect. 21.2(c). We do so in view of
the conflict in this area of the law between the Court of Federal Claims'
ATA decision and our prior decisions, the resolution of which is of
importance to the procurement community. Moreover, the issue itself--the
rules governing the ordering of non-FSS items in connection with an FSS
buy--is one that we consider of widespread interest to the procurement
system.

We are persuaded, in light of the analysis of the court in ATA, that there
is no statutory authority for the "incidentals" test enunciated in ViON. We
note that the General Services Administration (GSA), in its FSS Contractor
Guide, states that "[f]or administrative convenience, non-contract items may
be added to the Federal Supply Schedule BPA or the individual task order if
the items are clearly labeled as such, applicable acquisition regulations
have been followed, and price reasonableness has been determined for the
items." The FSS Contractor Guide, Section B: Multiple Award Schedule
Process, Incidental Items,
http://pub.fss.gsa.gov/vendorguide/section-b.html. Thus, as GSA also
recognizes, non-FSS items cannot be purchased from an FSS vendor unless
applicable acquisition regulations have been followed.

We conclude that it was improper for the agency here to include non-FSS
items in the delivery orders without ensuring that it had complied with the
regulations governing purchases of those non-FSS items. In this case, for
each delivery order, it is clear that the agency did not follow applicable
acquisition regulations, as the non-FSS items ordered exceeded the $2,500
micro-purchase threshold. See Federal Acquisition Regulation (FAR) sect. 2.101.
Accordingly, we sustain this ground of protest.

Other FSS Ordering Issue

Pyxis also argues that the purchases are flawed because, beyond advising
vendors that the POU system had to be Windows NT compliant in accordance
with Department of Defense policy, the agency failed to adequately state its
requirements for the system. For example, Pyxis complains that the agency
failed to disclose a requirement that both medications and supplies be
stored in a single cabinet; that the POU system operate on one database, on
one server; and that the system provide reports without requiring the user
to manually consolidate results from multiple databases. Supplemental
Protest at 5. Pyxis alleges these unstated requirements unduly restricted
the competition and necessarily precluded the agency's consideration of the
Pyxis POU system.

The protester does not dispute that, when an agency seeks to satisfy its
needs through the use of the FSS, an agency is not required to seek further
competition, synopsize the requirement, make a separate determination of
fair and reasonable pricing, or consider small business set-asides. FAR sect.
8.404(a); Design Contempo, Inc., B-270483, Mar. 12, 1996, 96-1 CPD para. 146 at
2. When placing an order of more than $2,500 under the FSS, however, a
procuring agency is required to reasonably ensure that a selection meets the
agency's needs by considering reasonably available information about
products offered under FSS contracts. See FAR sect.sect. 8.404(a), (b)(2).

Here, the agency reviewed the product information of Pyxis and OmniCell,
both of which had FSS contracts for medical equipment and supplies, Federal
Supply Classification Group 65, Part II, Section D. Agency Report, Tab E. In
selecting the supply or service that would meet an agency's needs, FAR
sect. 8.404(b)(2)(i) provides that an ordering office may consider "[s]pecial
features of the supply or service that are required in effective program
performance and that are not provided by a comparable supply or service."
Consistent with this provision, the agency concluded that the features of
the OmniCell POU system, as opposed to those of the Pyxis system, would
satisfy the agency's needs. [2]

In reviewing the product information submitted by both Pyxis and OmniCell,
the agency noted that OmniCell's POU system was already Windows NT compliant
in accordance with Department of Defense policy, as enunciated in 1996,
while Pyxis was in the process of making its POU system Windows NT
compliant, with Pyxis specifically advising the agency in its product
submission and by e-mail message dated December 18, 1998, that this process
would not be completed until March-April, 1999. [3] Although Pyxis believes
the agency should have waited until its POU system was Windows NT compliant
before issuing the delivery orders, we point out that there was no
requirement that the agency do so.

Further, in addition to the fact that the Pyxis POU system was not Windows
NT compliant at the time of the agency's review of the product information
and the issuance of the delivery orders, the agency identified additional
features on the OmniCell POU system which satisfied its needs. For example,
OmniCell's POU system stored medications and supplies in a single cabinet;
OmniCell's system operated on one database, on one server; [4] and
OmniCell's system provided reports without requiring the user to manually
consolidate results from multiple databases. Contrary to the protester's
assertion, these features associated with the OmniCell POU system were not
unstated requirements. Rather, in accordance with FAR sect. 8.404(b)(2)(i), the
agency reasonably viewed these items as special features that materially
differentiated OmniCell's POU system from the Pyxis system. Since a formal
synopsis and solicitation process is not contemplated for ordering from the
FSS, we have no basis to object to the agency's conclusion that the OmniCell
POU system would satisfy its needs. See, e.g., National Office Sys., Inc.,
B-274785, Jan. 6, 1997, 97-1 CPD para. 12 at 4-5.

Recommendation

In light of the fact that OmniCell has delivered the POU systems, we
recommend that Pyxis be reimbursed for its costs of preparing its product
submission. As discussed in the decision, the issue we are sustaining was
not timely raised by Pyxis, and we therefore are not recommending that the
firm be reimbursed its costs of filing and pursuing its protest, including
reasonable attorneys' fees. See 4 C.F.R. sect. 21.8(d)(1). As to the costs of
preparing its product submission, Pyxis should submit its certified claim,
detailing the time expended and costs incurred, directly to the contracting
agency within 60 days of receipt of the decision. 4 C.F.R. sect. 21.8(f)(1).

The protest is sustained.

Comptroller General of the United States

Notes

1. Pyxis went on to list items ordered, but not on OmniCell's FSS; it listed
FSS items ordered, but priced higher than those available on OmniCell's FSS;
and it calculated the percentage of the dollar value of each order which
represented the prices of the non-FSS items. Id.

2. No issue has been raised regarding the comparability of prices for the
POU systems offered by Pyxis and OmniCell. To the extent Pyxis complains
that the agency failed to seek price reductions from OmniCell, see FAR sect.
8.404(b)(3), the agency reports it sought, and received, price reductions
from OmniCell. CO Statement at 4, 5.

3. As noted above, by letter dated March 25, 1999, Pyxis advised the agency
that its Windows NT-compliant POU system was now commercially available.
However, the agency submitted information showing that Pyxis was still
testing its Windows NT-compliant system in early April 1999. Supplemental
Agency Report at 6.

4. Pyxis complains that OmniCell's POU system does not operate using a
single database, citing a page in OmniCell's "Policies and Procedures"
portion of its product information that references, in the plural,
"databases." Agency Report, Tab M, OmniCell Product Submission, Section 6:
Policies and Procedures, at 13. The agency never had any doubt regarding
whether OmniCell's system operated using a single database, and in the
technical overview to OmniCell's product information, OmniCell states that
its system "gathers data and archives it in a database. From this database,
[a number of reports, as listed] can be generated." Agency Report, Tab M,
OmniCell Product Submission, Section 1: Overview, at 11 (use of singular
"database"). OmniCell also submitted during the pendency of this protest
additional, publicly available product information, copyrighted from 1996
through 1998, which states in several places that OmniCell's POU system
operates with a centralized data management area and uses a Windows NT
operating system. See Letter from OmniCell to GAO (May 26, 1999)
(summarizing publicly available product information). Pyxis ignores this
information which supports the agency's position.