TITLE:  T-L-C Systems, B-285687.2, September 29, 2000
BNUMBER:  B-285687.2
DATE:  September 29, 2000
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T-L-C Systems, B-285687.2, September 29, 2000

Decision

Matter of: T-L-C Systems

File: B-285687.2

Date: September 29, 2000

Sidney Earley for the protester.

Frank J. Tokarz for Monaco Enterprises, Inc., an intervenor.

Raymond M. Saunders, Esq., Department of the Army, for the agency.

Charles W. Morrow, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in prepartion of the decision.

DIGEST

After receiving quotes in response to a request for quotes for a fire alarm
system, agency improperly placed an order under a Federal Supply Schedule
contract including items integral to the system but not listed in the
contract; agency's proposed corrective action of simply deleting the items
from the order and otherwise procuring them, presumably on a noncompetitive
basis from the awardee, does not render the protest academic, because the
remaining FSS order does not meet the agency's need for a complete system,
and the agency received and evaluated a significantly lower-priced,
acceptable quote from a non-FSS vendor (the protester) to supply such a
system.

DECISION

T-L-C Systems protests the issuance of an order to Monaco Enterprises, Inc.
under Monaco's General Services Administration (GSA) Federal Supply Schedule
(FSS) contract No. GS-07F-7832C pursuant to request for quotations (RFQ)
No. DAHA1300T6057, issued by the Department of the Army, Iowa Army National
Guard, for the delivery and installation of a radio frequency fire alarm
communication system. T-L-C contends that the order was improperly placed
with Monaco and that T-L-C should have received the award since it submitted
the low-priced, technically acceptable quote under the RFQ.

We sustain the protest.

The RFQ solicited quotes for a radio frequency fire alarm communication
system, Monaco model D-700 or approved equal, for 25 buildings at the 185th
Fighter Wing, Sioux City, Iowa and 4 buildings at the 133rd Air National
Guard, Fort Dodge, Iowa. The RFQ's statement of work (SOW) provided that the
"[s]ystem shall include a central radio alarm receiving/processing unit
consisting of computer, monitor, printer, radio frequency modulator and
uninterruptable power supply; remote transmitters, antennas, lightning
arrestors, enclosures and coax cables." The SOW also required the system at
Fort Dodge to include telephone dialers that "[u]pon activation . . . would
send an alarm message to the alarm shop and the central radio alarm
receiving/processing unit in Sioux City." See Agency Report, Tab 20, SOW.

The RFQ was issued to several FSS vendors, including Monaco, listed in the
FSS covering radio frequency fire alarm systems, [1] as well as to two
vendors, including T-L-C, which do not have FSS contracts. [2] Only Monaco,
T-L-C, and the other non-FSS vendor submitted quotes in response to the RFQ.
The vendors submitted technical responses to the RFQ describing their
proposed systems, including part numbers, with T-L-C submitting the
lowest-priced quote at $121,464.97, Monaco the next lowest quote at
$145,000.56, and the other non-FSS vendor with a quote of $164,440. Agency
Report, Tab 6.

After a technical review of the proposals, the Army found all three quotes
met the agency's requirements, but that award to Monaco was in the
government's best interest because only Monaco's complete system could be
purchased under its FSS contract. In this regard, the memorandum of record
of the evaluation stated:

  1. The technical review found all quotes to meet the governments
     requirements. Upon investigation only one company is under GSA
     contract. The IOWA AIR NATIONAL GUARD Contracting Officer believes that
     Monaco offers the best value at the lowest price under GSA.
  2. Approximately eight GSA vendors were called to see if they had
     equipment like what we needed. One vendor was found that could provide
     a complete System. Two other offers were received but were not under
     GSA Schedule.
  3. The advantages of Monaco are that they will provide complete turnkey
     system. We do not have to supply any products, which is a time saver
     for us. . . . [3]
  4. I believe that it is in the best interest of the Government to award a
     Delivery Order to Monaco System.

Agency Report, Tab 10, Memo For Record (May 23, 2000). Therefore, the Army
placed an order with Monaco under its FSS contract. See Agency Report, Tab
9. This protest followed. [4]

T-L-C protests the Army's decision to make award to Monaco under the RFQ
because T-L-C submitted the low-priced acceptable quote and not all of
Monaco's system is available from Monaco's FSS contract as represented by
the Army; specifically T-L-C notes that several critical parts making up the
system are not contained in Monaco's FSS contract, yet were included in the
FSS order. See Protester's Comments, Tab 15, at 1.

In response, the Army admits that certain items included in Monaco's FSS
contract order, specifically 4 dialers, 4 single line surge protectors, 2
D-700 support kits, and 25 lightning arrestors, the prices for which total
$18,801.92, were (and are) not part of Monaco's FSS contract. The Army
advises that it will delete these parts from the order and re-procure these
particular part numbers in accordance with the Federal Acquisition
Regulation. See Supplemental Agency Report, Memorandum (Sept. 11, 2000) at
1. Since these are Monaco's part numbers, this will presumably involve a
sole source acquisition. T-L-C contends that this corrective action does not
satisfy its protest that Monaco should not have received the award because
its total system is not included in its FSS contract and that T-L-C should
receive the order because it submitted the low-priced, technically
acceptable quote. [5]

As required by the Competition in Contracting Act of 1984, in conducting
procurements for property or services, agencies, with certain specified
exceptions, must obtain full and open competition through the use of
competitive procedures. 10 U.S.C. sect. 2304(a)(1) (1994). Section 259(b)(3)
(1994) of title 41 of the United States Code provides that the procedures
established for the GSA's FSS program satisfy the requirement in 10 U.S.C. sect.
2304(a)(1) for use of competitive procedures:

if-(A) participation in the program has been open to all responsible
sources; and (B) orders and contracts under such procedures result in the
lowest overall cost alternative to meet the needs of the Government.

We have recently concluded that, where an agency decides to purchase from
the FSS, it may limit its consideration of which solution meets the needs of
the government at the lowest overall cost to goods and services included on
the FSS; it need not consider quotes for items not included on FSS
contracts. See Sales Resources Consultants, Inc., B-284943, B-284943.2, June
9, 2000, 2000 CPD para. 102 at 4. However, an agency may not select an FSS
vendor for an order of items on the vendor's schedule and then include in
the order items not included in that vendor's FSS contract, if, as here, the
non-FSS items are priced above the micro-purchase threshold. See SMS Sys.
Maintenance Servs., Inc., B-284550.2, Aug. 4, 2000, 2000 CPD para. __ at 2;
Pyxis Corp., B-282469, B-282469.2, July 15, 1999, 99-2 CPD para. 18 at 4; see
also ATA Defense Indus., Inc. v. United States, 38 Fed. Cl. 489, 503 (1997).

Here, the record shows that the selection of Monaco was based primarily on
the erroneous belief that Monaco's entire system could be acquired from its
FSS contract. The order, however, included items that are not included in
Monaco's FSS contract. The order was therefore improper.

Moreover, the deletion of the non-FSS items from the order does not render
the protest academic. It is undisputed that the agency needs an integrated
and installed fire alarm system; contrary to the agency's understanding at
the time it selected Monaco, neither Monaco nor any other FSS vendor can
meet that need under an FSS contract. That distinguishes this case from the
procurement at issue in Sales Resources Consultants, Inc., supra, where the
agency could meet its needs with items available from the FSS. The agency
here received and evaluated quotations from non-FSS vendors; the agency thus
expanded this acquisition beyond FSS vendors. Accordingly, the agency was
required to consider items available from non-FSS vendors. The agency's
failure to do so clearly prejudiced T-L-C, because it offered the lowest
price for a technically acceptable solution among the quotations that the
agency received.

We recognize that in appropriate circumstances an agency may properly decide
to purchase some goods or services from the FSS and other related goods or
services outside the FSS. Here, however, the agency wanted to purchase an
integrated solution from one vendor. The agency's post-protest decision to
delete the non-FSS items from Monaco's order and then acquire those items
separately appears to be an effort to circumvent the rules limiting the use
of the FSS and, indeed, to create a sole-source justification for the
subsequent purchase of the non-FSS items from Monaco.

The protest is sustained.

We recommend that the order placed with Monaco be cancelled. It is not clear
from the record whether, other than ordering from the FSS, any other
alternative to conducting a full and open competition is available to the
agency here. In this regard, we recommend that the agency consider whether
it is appropriate to acquire the system using simplified procedures pursuant
to the test program for commercial items pursuant to FAR subpart 13.5 or
whether an order could be placed for the system under an
indefinite-delivery, indefinite-quantity contract (perhaps the contract TLC
references in its protest, if that is an indefinite-delivery,
indefinite-quantity contract). If possible under one of these alternatives
and otherwise appropriate, we recommend that award be made to T-L-C. If the
agency concludes that no such alternative is appropriate, we recommend,
since the value of this acquisition exceeds $100,000, that the agency
acquire the system using full and open competition. We also recommend that
T-L-C be reimbursed for the cost of filing and pursuing its protest,
including reasonable attorneys' fees. 4 C.F.R. sect. 21.8(d)(1) (2000). The
protester should submit its certified claim for such costs, detailing the
time expended and the costs incurred, directly to the contracting agency
within 60 days of receiving this decision.

Anthony H. Gamboa

Acting General Counsel

Notes

1. The FSS covering this item is FSC Group 63, Part I. Agency Report, Tab
19.

2. While the agency claims that it apprised T-L-C and the other non-FSS
vendor that it intended to place the order for the fire alarm system under
the FSS, the RFQ did not indicate that this was the case and T-L-C denies
being so advised. Both T-L-C and the other non-FSS vendor claim that they
have federal contracts (presumably indefinite-delivery, indefinite-quantity
contracts) under which the procuring activity could place orders for this
system.

3. T-L-C notes that its quote also did not contemplate the government
supplying any products.

4. Performance has been withheld pending our decision.

5. T-L-C also asserts that the installation of the fire alarm system
involves construction and is not encompassed under the FSS contract. Our
review of the contract shows that the installation work here is expressly
authorized by the contract under SIN (special item number) 246-50, ancillary
services, which permits services necessary to install the system. See Agency
Report, Tab 19, FSS, at 10.