TITLE:	Vantex Service Corporation
BNUMBER:	   B-290415
DATE:		   August 8, 2002
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Vantex Service Corporation, B-290415, August 8, 2002

Decision


Matter of:   Vantex Service Corporation

File:            B-290415

Date:              August 8, 2002

Simon Elliott for the protester.
Ronald A. Kennedy for Kennedy Septic Tank Service, the intervenor.
Parag J. Rawal, 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 the preparation of the decision.

DIGEST

Protest against agency's bundling of portable latrine rental services with
waste removal services, each of which is classified under a different North
American Industrial Classification System code and is generally performed by
a different set of contractors, is sustained, where the agency has not shown
that bundling the services is necessary to meet its needs.

DECISION

Vantex Service Corporation protests the terms of invitation for bids (IFB)
No. DAKF40-02-B-0001, issued by the Department of the Army, Fort Bragg,
North Carolina, for rental and servicing portable latrines at Fort Bragg,
Fort Drum (New York), and Fort Campbell (Kentucky), and certain waste
removal services at Fort Campbell.  Vantex contends that the bundling of
portable latrine rental and servicing with the other waste removal services
at Fort Campbell unduly restricts competition.

We sustain the protest.

The IFB, issued as a total small business set-aside on March 29, 2002,
contemplated the award of one or more fixed-price contracts for a base
period with four 1-year options.  The bidding schedule segregated the work
for each facility under three separate schedules (I, II, III), and a fourth
schedule (IV) that combined the work for all three facilities.  The IFB
permitted bidders to bid on a single schedule, a combination of schedules,
or schedule IV (that is, all three locations), and provided for "most
advantageous to the government" award(s), based on either the lowest bids
from each schedule or the aggregate total of all schedules under
schedule IV.  Schedule III (for Fort Campbell) included waste removal
services in addition to portable latrine rental services; schedules I and II
included only portable latrine rental services.  The additional services
under schedule III included pumping and cleaning grease traps; pumping and
cleaning permanent concrete pit latrines; removing, cleaning and
reinstalling sewer sump pumps; pumping and cleaning septic tanks; and
pumping and cleaning sewer lift stations.  It is the inclusion of these
other services under schedule III that is the issue in this protest.

Vantex, which provides portable latrine services, filed a timely
agency-level protest alleging that combining the portable latrine services
with the waste removal services at Fort Campbell improperly bundled
requirements in violation of the Competition in Contracting Act of 1984
(CICA).  The Army denied Vantex's agency-level protest, and this protest on
the same grounds was filed shortly before bid opening.

In response to the IFB, the Army received seven bids.  Two bids were
received in response to schedule III:  one from the incumbent, Kennedy
Septic Tank Service, Inc. at $2,244,888 and the other from Tarheel
Specialties at $1,623,000.[1]  Only Kennedy submitted a bid for the Army's
total requirements for all three facilities under schedule IV.

CICA generally requires that solicitations include specifications which
permit full and open competition and contain restrictive provisions and
conditions only to the extent necessary to satisfy the needs of the agency.
See 10 U.S.C. ï¿½ 2305(a)(1)(B) (2000).  Because procurements conducted on a
bundled or total package basis can restrict competition, we will sustain a
challenge to the use of such an approach where it is not necessary to
satisfy the agency's needs.  Better Serv., B?265751.2, Jan. 18, 1996, 96-1
CPD ï¿½ 90 at 2.

Vantex argues that there is no valid reason to bundle the waste removal
services and portable latrine rental services under schedule III.  In this
regard, Vantex notes that the two types of services combined at Fort
Campbell fall under separate North American Industrial Classification System
(NAICS) codes, and alleges that generally the bidders on solicitations
covered by the NAICS code covering portable latrine services would not
compete for the waste disposal services covered by the other NAICS code, and
vice versa.[2]  Vantex states that it is aware of no other military
installation that bundles these services.  Vantex further asserts that there
has been very little competition (no more than two bids for the last several
procurements) for these services since they have been combined.  For
example, in the prior solicitation for these services, there were only two
bidders, itself and the incumbent, and Vantex found that it could not
effectively compete because its expertise and equipment were only suited for
the portable latrine requirement.  Vantex asserts that bundling the
requirements put Vantex and other potential bidders (both portable latrine
service providers and waste removal service providers), who could not
provide all of the services, at such a competitive disadvantage that only
the incumbent (which provides both types of services) would be competitive.

The Army's stated reason for combining portable latrine services with waste
removal services at Fort Campbell is as follows:

In the early 1980's, Fort Campbell obtained grease trap cleaning services
via purchase orders.  Cleaning services for Government owned portable
latrines was also contracted out.  This method of acquiring services was
costly, inefficient, and an administrative burden.  In the mid-1980's, Fort
Campbell, therefore, sought to have one contractor perform all the liquid
waste removal services as it was natural to combine like type contracts.
This method of acquiring services was cost efficient and reduced our
administrative burden.  We were able to avoid multiple solicitations and
multiple contracts with multiple contractors.  As a result Fort Campbell
could obtain needed similar services utilizing one contracting officer, one
contract specialist, and one contracting officer's representative.
Agency Report, Tab 15, Statement of Fort Campbell's Contracting Officer, at
2-3.  In addition, the agency states that the types of equipment and
employees that would be used for the two types of services are very similar
and that no particular expertise or certification is required for the waste
removal services.  Id.; Tab 16, Statement of Chief Engineering Division,
Public Works Business Center, Fort Campbell.

On the record before us, we find that the Army has not adequately
demonstrated that combining its requirements for portable latrine and waste
removal services was necessary to satisfy the agency's needs.[3]  The agency
has not adequately explained why it chose to bundle the two kinds of work at
Fort Campbell, yet did not bundle two kinds of work at either of the other
two locations, and in fact structured the solicitation so that services for
the three locations can be obtained by separate or combined awards, thus
facilitating competition while not excluding the possibility of a combined
contract.

The agency's justification, quoted above, essentially amounts to reliance on
administrative convenience as the basis for the bundling.  However, the fact
that the agency may find that combining the requirements is more convenient
administratively, in that it has found dealing with one contract and
contractor less burdensome, is not a legal basis to justify combining the
requirements, if the combining of requirements restricts competition.  CICA
and its implementing regulations require that the scales be tipped in favor
of ensuring full and open competition, whenever concerns of economy or
efficiency are being weighed against ensuring full and open competition.
See Better Serv., supra; National Customer Eng'g, B?251135, Mar. 11, 93-1
CPD ï¿½ 225 at 6.

Although the Army also claims that combining the services was more cost
efficient, other than its own statement, it has not produced any evidence
showing that these cost savings were significant, nor has it explained why
these savings went beyond no longer having to administer more than one
contract.  Restricting competition is presumed to raise, not lower, the cost
that the government will pay, and the desire to reduce administrative costs
is generally neither a permissible nor a logical basis to restrict
competition.  See National Customer Eng'g, supra, at 6-7 (where an agency
concludes that having separate contractors may lead to additional costs, the
proper course is not to restrict competition, but rather to structure the
procurement to take all costs into account).

Here, the record does not evidence that the agency has received the benefit
of competition or a lower price by combining the services.  The Army's
reported receipt of at least two bids under each procurement since the
services have been combined, and the recent experience in the last two
procurements reveal that the Army has only received minimal competition.
The Army mistakenly argues that receipt of at least two bids constitutes
adequate competition citing FAR ï¿½ 19.502-2.  That section, however,
establishes only the criteria upon which the agency may base a decision to
set aside a procurement exclusively for small businesses.  On the other
hand, FAR ï¿½ 14.408-1(b) states:

[I]f less than three bids have been received, the contracting officer shall
examine the situation to ascertain the reasons for the small number of
responses.  Award shall be made notwithstanding the limited number of bids.
However, the contracting officer shall initiate, if appropriate, corrective
action to increase competition in future solicitations for the same or
similar items, and include a notation of such action in the records of the
invitation for bids.
Even though no more than two bids were apparently received on prior
procurements for the combined services, there is no evidence that the
contracting officer undertook any investigation to determine whether
combining the requirements was inhibiting competition.

Moreover, the Army's own market survey confirmed that there were "numerous"
businesses capable of competing (and apparently willing to compete) for the
waste removal services, but chose not to compete primarily because of the
way in which the agency combined portable latrine services with these other
services that represented only approximately 25 percent of the contract.
See Agency Report, Tab 15, Statement of Fort Campbell's Contracting Officer
at 1; Agency Legal Memorandum at 4, 7-8.  As pointed out by the protester,
this survey did not include portable latrine companies in the area; Vantex's
own survey revealed at least 31 companies in the area who provide portable
latrine services, at least one of which had previously expressed interest in
bidding but did or could not because the services were combined with waste
disposal services at Fort Campbell.   See Protester's Comments at 2.  That
is, the record before us indicates that different sets of contractors
perform the two types of work and that bundling the two types of work
appears to discourage competition.  Given the lack of competition, and
evidence that other companies likely would have bid had the agency not
bundled the services, we believe that there is a reasonable basis for
concern that the bundling of services here may be causing the agency to pay
unnecessarily high prices.

The agency has produced evidence that a contractor could use some of the
same trucks, expertise, and equipment necessary to service the portable
latrines to perform the other services and that these other services require
no particular expertise or certification.[4]  The agency also argues that
Vantex and other bidders could easily subcontract for these services.  These
arguments are not relevant here because the issue is not whether there are
any potential offerors who can surmount barriers to competition, but rather
whether the barriers themselves--in this case, the bundling--are required to
meet the government's needs.  Pemco Aeroplex, Inc., B?280397, Sept. 25,
1998, 98-2 CPD ï¿½ 79 at 15; National Customer Eng'g, supra, at 5.  As
discussed above, the Army has not shown that combining portable latrine
rental and services with the other waste removal services is necessary to
meet the agency's needs.

The protest is sustained.

We recommend that the Army resolicit its requirements for Fort Campbell
without bundling portable latrine services with the other waste removal
services.  The agency could accomplish this by amending the solicitation to
provide for the possibility of separate awards for the two types of services
at Fort Campbell, as it did with regard to the possibility of separate
awards for the work at the three installations.  We also recommend that the
protester be reimbursed the cost of filing and pursuing its protests,
including attorney's fees.  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
General Counsel

                          -------------------------

[1] The government estimate for the total services at Fort Campbell was
$2,917,800.  Vantex alleges that Tarheel lacks relevant experience and
suggests that its low bid reflects a lack of understanding of the work,
which, Vantex speculates, may lead the contracting officer to conclude that
Tarheel is not a responsible bidder.  Protester's Comments at 3.  The agency
states that it has not yet decided who should receive the award(s).
[2] The NAICS code is used by the federal government to identify and
classify specific categories of business activity that represent the lines
of business a firm conducts.  See Professional Landscape Mgmt. Servs.,
Inc--Costs, B-287728.2, Nov. 2, 2001, 2001 CPD ï¿½ 180 at 2 n.3.  Here, since
the portable latrine services represented 75 percent of the Army's Fort
Campbell requirement, the Army solicited the requirement under the NAICS
code pertaining to portable latrine rental and servicing.  Response to
Agency-Level Protest at 1.
[3] After the protester's comments were filed, we requested during a
conference call with the parties whether the agency had any additional
reasons for combining the requirements.  The agency provided no further
reasons in response to this request.
[4] The protester responds that the agency and Kennedy's assertions that the
same equipment can be used do not account for various environmental
requirements, an argument that the agency has not addressed.