TITLE:  American Federation of Government Employees, AFL-CIO; American, B-282904.2, June 7, 2000
BNUMBER:  B-282904.2
DATE:  June 7, 2000
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American Federation of Government Employees, AFL-CIO; American, B-282904.2,
June 7, 2000

Decision

Matter of: American Federation of Government Employees, AFL-CIO; American
Federation of Government Employees, AFL-CIO, Local 987; Laverne J. Rucker;
Gary Fowler; Donald E. Thompson; Larry Baines

File: B-282904.2

Date: June 7, 2000

Claude P. Goddard, Jr., Esq., Daniel J. Donohue, Esq., and Brian P. Waagner,
Esq., Wickwire Gavin, for the protesters.

Matthew O. Geary, Esq., Defense Logistics Agency, for the agency.

John L. Formica, Esq., and James A. Spangenberg, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Federal employees and the unions representing them, who assert that they
will be adversely affected by an agency's decision made pursuant to Office
of Management and Budget Circular No. A-76 to contract for work rather than
perform it in-house, are not actual or prospective bidders or offerors, and
thus are not interested parties eligible to maintain a protest at the
General Accounting Office.

DECISION

The American Federation of Government Employees, AFL-CIO; American
Federation of Government Employees, AFL-CIO, Local 987; Laverne J. Rucker;
Gary Fowler; Donald E. Thompson; and Larry Baines protest the award of a
contract to EG&G Logistics, under request for proposals (RFP) No.
SPO700-99-R-7003, issued by the Defense Logistics Agency, for material
distribution services at the Defense Distribution Depot, Warner Robins,
Georgia. The award results from a decision made in accordance with Office of
Management and Budget (OMB) Circular No. A-76 to contract for the services
rather than perform them in-house.

We dismiss the protest because the protesters are not "interested parties"
who may protest under the statute governing our process.

OMB Circular No. A-76 establishes the executive branch's policy regarding
performance of commercial activities that are incidental to the performance
of governmental functions. It outlines procedures for determining whether
commercial activities should be performed under contract by private
enterprise or in-house using government facilities and personnel. OMB
Circular No. A-76 and the Revised Supplemental Handbook (Mar. 1996)
(Supplemental Handbook) set out the steps of the cost comparison process.

First, a performance work statement (PWS) is drafted. The PWS is to reflect
the government's needs, and establish performance standards and measures
that provide for a common basis of evaluation and ensure comparable levels
of performance for the government's in-house plan and the private-sector
offers. Federal Acquisition Regulation (FAR) sect. 7.304(a); Supplemental
Handbook at 10. The PWS serves as the basis for the solicitation that is
issued to private-sector offerors, as well as the basis for the agency's
proposed in-house management plan. FAR sect. 7.304(c); Supplemental Handbook at
12. Once the PWS has been drafted, the competition among private-sector
offerors can be held and a private-sector proposal selected for the
public/private cost comparison.

The agency's in-house management plan is to reflect the scope of the PWS,
and describe the government's Most Efficient Organization (MEO). The
management plan is also to include, among other things, the in-house cost
estimate, which describes all costs associated with performance by the MEO
of the requisite activities. FAR sect. 7.304(b); Supplemental Handbook at 11.

After certain steps have been taken to ensure that the selected
private-sector offer and the management plan are comparable in terms of
performance standards and that the costs associated with the management plan
are justified, the contracting officer opens the government's in-house cost
estimate for comparison with the private-sector offeror's proposed price.
Id. at 13. Should the cost comparison result in the determination that the
activities should be performed in-house using government facilities and
personnel, the solicitation that was issued to the private-sector offerors
is canceled, FAR sect.sect. 7.302(b), 14.404-1(c)(9), 52.207-1, 52.207-2, and the
agency implements the MEO. Should the cost-comparison result in the
determination that the activities should be performed by the private-sector
offeror, a contract is awarded under the solicitation in response to which
the private-sector offeror's proposal was submitted.

The completion of the cost comparison invokes the OMB Circular No. A-76
administrative appeals process. Supplemental Handbook at 13; see FAR
sect. 7.307. An appeal can be filed by an "eligible appellant," which is defined
as, among other things, "[f]ederal employees (or their representatives) and
contractors that have submitted formal bids or offers who would be affected
by a tentative decision to convert to or from in-house, contract or
[interservice support agreement] performance as a result of a cost
comparison." Supplemental Handbook at 13. An appeal may challenge the
agency's compliance with OMB Circular No. A-76 or specific aspects of the
calculations in the cost comparison. Id. The Supplemental Handbook states
that if the agency appeal authority finds that the initial cost-comparison
decision was unsupported or erroneous, the appeal authority is to correct
the error and cost comparison, and the agency is to proceed according to the
amended decision. Id. The Handbook states that the appeals procedure "does
not authorize an appeal outside the agency or judicial review, nor does it
authorize sequential appeals." Id.

Here, as mentioned previously, the cost comparison resulted in the award of
a contract to EG&G Logistics. The protesters in this case first challenged
that award decision through the Circular No. A-76 administrative appeals
process. The agency appeal authority ultimately rejected the bulk of the
appeal, and the protesters subsequently filed this protest with our Office.
The individual protesters, who assert that they would have filled positions
set forth in the MEO had the cost comparison resulted in the determination
that the activities should be performed in-house, argue that numerous
mistakes were made in the cost comparison process. The protesters contend
that had the cost comparison been properly performed, the agency would have
canceled the solicitation and performed the activities in-house.

Where an agency has conducted an OMB Circular No. A-76 cost comparison, thus
using the procurement system to determine whether to contract out or perform
work in-house, we are authorized to consider a protest filed by a
private-sector offeror alleging that the agency has not complied with the
applicable procedures or has conducted an evaluation that is inconsistent
with the solicitation criteria or is otherwise unreasonable. See NWT, Inc.;
PharmChem Labs., Inc., B-280988,

B-280988.2, Dec. 17, 1998, 98-2 CPD para. 158 at 5-6; Alltech, Inc., B-237980,
Mar. 27, 1990, 90-1 CPD para. 335 at 3-4. However, we are without authority to
consider a protest if filed, as here, by federal employees (or by unions
representing these employees), even if they assert that they will be
adversely affected by the agency's decision to contract for the work rather
than perform it in-house.

Under the Competition in Contracting Act of 1984 (CICA) (implemented in our
Bid Protest Regulations, 4 C.F.R. sect. 21.0(a) (2000)), a protest may be
brought only by an "interested party," defined as "an actual or prospective
bidder or offeror whose direct economic interest would be affected by the
award of the contract or by failure to award the contract." 31 U.S.C. sect.
3551(2) (Supp. III 1997). As explained below, federal employees who assert
that they will be affected by the agency's decision to contract for the work
rather than perform it in-house and unions representing these employees are
not interested parties eligible to maintain a protest under the applicable
statute because they are not actual or prospective bidders or offerors under
a solicitation. National Fed'n of Fed. Employees, B-225335.2, Feb. 5, 1987,
87-1 CPD para.124 at 1; Jake O. Black, B-199564, Aug. 6, 1980, 80-2 CPD para. 95 at
2.

FAR sect. 2.101 defines "offer" as "a response to a solicitation that, if
accepted, would bind the offeror to perform the resultant contract." The
term "contract" is in turn defined as "a mutually binding legal relationship
obligating the seller to furnish the supplies or services (including
construction) and the buyer to pay for them." FAR sect. 2.101. Accordingly, in
order for anyone speaking for the MEO to be considered an offeror, the
government's submission on behalf of the MEO would have to constitute an
"offer," that is, be in response to a solicitation and constitute something
that, if accepted by the agency, would result in a contract binding the MEO
to perform the services required.

As noted above, however, the MEO in-house management plan is not submitted
in response to a solicitation; solicitation responses are limited to
private-sector offerors. Moreover, if a cost comparison performed in
accordance with OMB Circular No. A-76 results in the determination that the
activities should be performed in-house using government facilities and
personnel, the solicitation issued to the private-sector offerors is
canceled, and the work is performed in-house using government facilities and
personnel. FAR sect.sect. 7.302(b), 14.404-1(c)(9), 52.207-1, 52.207-2. That is, no
contract is awarded (under the solicitation or otherwise) for the in-house
performance of the required activities. Because no contract is awarded,
nothing submitted by the government regarding the performance of the
activities in-house, such as the government's in-house management plan, can
properly be considered an offer. As such, no individual or entity associated
with the proposed performance of the required services in-house can be
considered an actual or prospective "offeror," and accordingly, the
protesters here cannot be considered "interested parties" under CICA and our
Bid Protest Regulations. [1]

The protesters, although not claiming to be actual or prospective bidders or
offerors, point out that prior to the passage of CICA, the decisions of the
GAO set forth a more expansive test for determining "interested party"
status, under which we on occasion considered protests filed by parties who
were not actual or potential bidders or offerors. Specifically, the
protesters point to our decision in Marine Eng'rs Beneficial Assoc.;
Seafarers Int'l Union, B-195550, Dec. 5, 1980, 80-2 CPD para. 418 at 1, aff'd on
recon., 81-1 CPD para. 215, where we stated:

In determining whether a protester satisfies the interested party criterion,
we examine the degree to which the asserted interest is both established and
direct. In making this evaluation, we consider the nature of the issues
raised and the direct or indirect benefit or relief sought by the protester
. . . . Thus, we have recognized the rights of non-bidders to have their
protests considered on the merits where there is a possibility that
recognizable established interests will be inadequately protected if our bid
protest forum is restricted to bidders in individual procurements.

The protesters add that prior to the enactment of CICA, our Office
considered, for example, protests filed by such nonbidders or nonofferors as
a labor union challenging an agency's determination that a contractor for
whom union members worked was nonresponsible, District 2, Marine Eng'rs
Beneficial Assoc.--Associated Maritime Officers, AFL-CIO, B-181265, Nov. 27,
1974, 74-2 CPD para. 298, and a parent organization concerning the propriety of
an award of a contract for the operation of a day care center which the
children of members of the organization attended. Department of Labor Day
Care Parents' Assoc., B-183190, June 10, 1975, 75-1 CPD para. 353. The
protesters urge that we revert to the more expansive pre-CICA test for
determining "interested party" status, and find that, although the
protesters here are not actual or potential bidders or offerors, they be
considered interested parties, given the nature of their interests.

We note that, even prior to the enactment of CICA, our Office dismissed
protests of agency decisions to contract out for services filed by unions
representing federal employees and by federal employees themselves, on the
basis that the protesters were not, in effect, "interested parties." See,
e.g., Taxpayers Generally and Fed. Employees of Fort Eustis, Virginia,
B-210188, Jan. 17, 1983, 83-1 CPD para. 52 (federal employees and taxpayers
generally); Federal Employees Metal Trades Council, B-203818.2, Oct. 8,
1981, 81-2 CPD para. 288 (union); Mr. William T. Springfield, B-197752.2,
Apr. 28, 1980, 80-1 CPD para. 301 (individual employee); Local 1662, Am. Fed'n
of Gov't Employees, B-197210, Mar. 3, 1980, 80-1 CPD para. 169 (union); Locals
1857 and 987, Am. Fed'n of Gov't Employees, B-195733, B-196117, Feb. 4,
1980, 80-1 CPD para. 89 (union). Moreover, whatever flexibility our Office had
in this area prior to the enactment of CICA, we are currently without
authority to expand the definition in CICA and revert back to our pre-CICA
test for determining interested party status. [2]

In any event, we would not hear a protest filed by employees or their union,
because of the lack of identity between their interests and the interest of
the entity competing under the procurement. We have consistently found that
individual employees of disappointed bidders or offerors are not interested
parties to protest on behalf of their employer. Dale Chlouber, B-190638,
Dec. 30, 1977, 77-2 CPD para. 484 at 1-2. We have similarly declined to
consider, since the passage of CICA, protests filed by unions or trade
associations on behalf of their members employed by private sector bidders
or offerors because the unions/trade associations are not interested
parties. [3] Northwest Reforestation Contractors Assoc., Inc., B-240329,
July 20, 1990, 90-2 CPD para. 61 at 1-2; American Maritime Officers Serv.;
District 2, Marine Eng'rs Beneficial Assoc.-Associated Maritime Officers,
AFL-CIO, B-224480, July 22, 1986, 86-2 CPD para. 96 at 1-2.

The protesters argue, in the alternative, that our Office should consider
their protest because of the language in the Federal Activities Inventory
Reform (FAIR) Act of 1998, 31 U.S.C. sect. 501 note (Supp. IV 1998).

The FAIR Act requires agencies to submit to OMB "a list of activities
performed by Federal Government sources for the executive agency that, in
the judgment of the head of the executive agency, are not inherently
governmental functions." FAIR Act sect. 2, 31 U.S.C. sect. 501 note. The Director of
OMB is required to review the list, and after consulting with the executive
branch agency that submitted the list, provide the list to Congress, make
the list available to the public, and publish a notice informing the public
of the list's availability. Id.

The Act states that "[w]ithin a reasonable time after the date on which a
notice of the public availability of a list is published . . . the head of
the executive agency concerned shall review the activities on the list," and
requires that "[e]ach time that the head of the executive agency considers
contracting with a private sector source for the performance of such an
activity, the head of the executive agency shall use a competitive process
to select the source," except as otherwise provided by law, executive order,
regulation, or an executive branch circular or other guidance. Id.

The Act provides that "[a]n interested party may submit to an executive
agency a challenge of an omission of a particular activity from, or an
inclusion of a particular activity on, [the published] list." [4] Id. sect. 3.
The Act specifically defines interested party as, among other things, an
"officer or employee of an organization within an executive agency that is
an actual or prospective offeror to perform the activity" and the "head of
any labor organization" that represents such employees. Id.

The protesters contend that because the FAIR Act "equates agency employees
and their union representatives to ‘actual or prospective offerors,'"
our Office should "find that displaced employees and their unions have
standing to protest contracting out decisions." Protest at 3-4.

We disagree. The legislative history of the FAIR Act indicates that it was
enacted because of Congress' concern that the policy set forth in OMB
Circular No. A-76, regarding the identification of commercial activities
that are incidental to the performance of government functions and
determination as to whether such activities should continue to be performed
in-house by government personnel or should be performed by the commercial
sector, was being ignored. S. Rep. No. 105-269, at 4-6.

The Act uses the term "interested party" only to define those parties
eligible to challenge, to an executive agency, the inclusion or omission of
particular activities on the lists of activities identified by the agency as
not inherently governmental. It makes no mention of recognizing those
parties as "interested parties" for any other purpose. Nothing in the Act's
express language or in its legislative history suggests that the Act's use
or definition of the term "interested party" was intended to extend beyond
the context in which it appears, so as to alter the definition of that term
as set forth in CICA. See American Fed'n of Gov't Employees--Recon.,
B-219590.3, May 6, 1986, 86-1 CPD para. 436 at 2 (the OMB Circular No. A-76's
definition of federal employees and their representative organizations as
"directly affected parties" eligible to appeal to an agency a cost
comparison decision made by the agency under the authority of OMB Circular
No. A-76, does not authorize a similar appeal to our Office or the pursuit
of a bid protest as an interested party); see also American Fed'n of Gov't
Employees, AFL-CIO v. United States, No. 00-130C, slip op. at 23-32 (Fed.
Cl. May 10, 2000) (FAIR Act does not confer interested party status on
federal employees or their unions for purposes of challenging at the United
States Court of Federal Claims an agency's determination pursuant to OMB
Circular No. A-76 to contract for services).

The protest is dismissed.

Comptroller General

of the United States

Notes

1. In contrast, Department of Defense maintenance depots are eligible to
file bid protests at our Office because of their unique status as
governmental activities authorized to compete as separate entities for the
assignment of workload. 10 U.S.C. sect. 2470 (1994); B-279362, Mar. 26, 1998
(Letter from the General Counsel, General Accounting Office, to the
Chairman, Subcommittee on Military Readiness of the House Committee on
National Security).

2. It is true that, in certain circumstances, we consider non-statutory
protests if the agency involved has agreed in writing to have the protests
decided by GAO-which is not the case here. 4 C.F.R. sect. 21.13(a).

3. We note that the United States Court of Federal Claims (COFC) has
recently held that unions and federal employees are not interested parties
eligible to protest a decision under Circular No. A-76 to contract out.
American Fed'n of Gov't Employees, AFL-CIO v. United States, No. 00-130C,
slip op. at 10-32 (Fed. Cl. May 10, 2000). Specifically, the court found
that the unions and federal employees were not "interested parties" within
the meaning of the Tucker Act, as amended by the Administrative Dispute
Resolution Act, 28 U.S.C. sect. 1491(b)(1) (Supp. IV 1998), which gives the COFC
jurisdiction over bid protests.

4. The Senate Committee on Governmental Affairs specified that "[t]he
Committee intends for any challenges to the inventory list to be resolved
solely at the agency level by the agency." S. Rep. No. 105-269, at 9 (1998).