TITLE:  TRS Research, B-290644, September 13, 2002
BNUMBER:  B-290644
DATE:  September 13, 2002
**********************************************************************
TRS Research, B-290644, September 13, 2002

   Decision
    
    
Matter of:   TRS Research
    
File:            B-290644
    
Date:              September 13, 2002
    
Robert G. Fryling, Esq., and Edward J. Hoffman, Esq., Blank Rome Comisky &
McCauley, for the protester.
Capt. Gregory A. Moritz, Department of the Army, and John W. Klein, Esq.,
and Kenneth Dodds, Esq., Small Business Administration, for the agencies.
Susan K. McAuliffe, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
1.  Protest of consolidated procurement is sustained where solicitation
consolidated
procurement requirements previously provided under separate smaller
contracts, and was likely to be unsuitable for award to a small business,
and thus constituted a bundled procurement, and record shows that agency
failed to comply with requirements to demonstrate that bundling was
justified.
    
2.  Agency improperly failed to coordinate its anticipated consolidated
procurement with the Small Business Administration, as required by statute
and regulation, since small business contractors currently perform work
included in the consolidated procurement and magnitude of the consolidated
procurement renders small business participation unlikely.
DECISION
    
TRS Research, a small business, protests the terms of request for
proposals (RFP) No. DAMT01-02-R-0028, issued by the Department of the
Army, Military Traffic Management Command (MTMC), for the award of a
fixed-price indefinite-quantity contract for container program management
services to meet Department of Defense (DOD) needs for leased intermodal
container equipment worldwide.[1] 
TRS contends that the procurement is improperly bundled and that the
agency has not shown that the consolidation of procurement requirements is
justified.
    
We sustain the protest.
    
The RFP, issued on March 29, 2002, sought a single source to provide
leased intermodal container equipment worldwide to the Army and other
agencies, and
to manage the agency's intermodal container leasing program, including the
development and maintenance of a web-based information management system
for ordering equipment and obtaining performance management information
via the Internet.  The solicitation calls for program management services
and the provision of a wide range of intermodal container equipment,
including refrigerated containers.  The RFP's performance work statement
was developed by an Integrated Process Team (IPT) consisting of government
and industry representatives who set out to incorporate standard business
practices into the agency's intermodal container leasing program.
    
The solicitation was issued on an unrestricted basis after the agency
decided, with the concurrence of the agency's small business specialist,
not to set the procurement aside for small business concerns because
*[t]here is no expectation that 2 or more small businesses exist that can
provide the robust system consistent with the requirements of the proposed
acquisition in order to provide the best mix of cost, performance and
schedule.*  Small Business Coordination Record, Mar. 19, 2002.  The
contracting officer, however, did not refer the proposed acquisition to
the Small Business Administration (SBA) Procurement Center Representative
(PCR) or to anyone else at the SBA for review prior to conducting the
procurement.
    
The RFP contemplated the award of a contract for a base year and 4 option
years
(at a value of approximately $82 million); the RFP provided an additional
5-year award term incentive (increasing the total potential value of the
contract to approximately $186 million).  RFP S: B.2.4.  The guaranteed
minimum value for the indefinite-quantity effort was set at $500,000 per
year, reflecting the agency's estimate that, at a minimum, the program
management function would be ordered each year.  RFP S: B.2.3.  Award was
to be made to the offeror that submitted the proposal deemed to present
the best value to the agency, management, technical, past performance,
socio-economic commitment and price factors considered. 
RFP S:S: M.2-M.4.1.5.
    
The agency's intermodal container leasing program previously had been
managed by MTMC, which acted as program manager and contract administrator
for requesting activities and vendors.  The majority of containers were
supplied by nine vendors--including the protester--that had been awarded
indefinite-delivery/indefinite-quantity (ID/IQ) contracts under a Master
Lease Agreement (MLA) in 1997.  Three of the nine ID/IQ vendors (including
the protester) are small businesses.  The ID/IQ contracts vary in scope;
although some vendors were awarded some of the same items, no two of the
nine vendors were awarded contracts requiring exactly the same equipment. 
The MLA, which is set to expire on September 30, had been valued at
approximately $45 million; the guaranteed minimum value of each vendor's
contract under the MLA was set at $10,000 for a 5‑year period.
    
MTMC reports that refrigerated containers and related parts and generator
sets were inadvertently omitted entirely from the list of items identified
in the MLA.  Consequently, the agency's refrigerated container
requirements have been met by separate acquisitions outside of the MLA; at
least three small businesses (again including the protester) have provided
refrigerated containers to the agency under separate acquisitions.  The
agency reports that 320 refrigerated containers and related generator sets
and spare part kits have been leased outside the MLA, by separate
procurements, over the last 4 fiscal years (in contrast to the
27,211 pieces of various container equipment that have been leased under
the MLA during that time).  Contracting Officer's Statement, June 25,
2002, at 5.
    
The agency contends that awarding a single contract to one contractor for
all of its intermodal container leasing program needs will cure
performance problems experienced under the previous fragmented and
inefficient approach, which required the administration of nine different
ID/IQ contracts (as well as the separate smaller contracts for items not
included in the MLA).  Id.
    
TRS contends that the RFP improperly consolidates requirements to the
detriment of TRS and other small business concerns, and that the agency
failed to meet statutory and regulatory requirements for justification of
its bundled procurement. 
In particular, TRS argues that the solicitation violates the restrictions
against unnecessary and unjustified bundling in the Small Business Act and
implementing regulations in that the agency has not justified its
consolidation of procurement requirements previously provided under
separate smaller contracts into a solicitation of offers for a single
contract that is likely to be unsuitable for
award to a small business concern.[2]  See 15 U.S.C.S: 632(o)(2); 13
C.F.R. S: 125.2(d)(i);
Federal Acquisition Regulation (FAR) S: 2.101.  The agency contends that
the procedural requirements for justification of bundling do not apply
because the procurement is not bundled.
    
The Small Business Act, as amended, provides that, *to the maximum extent
practicable,* each agency shall *avoid unnecessary and unjustified
bundling of contract requirements that precludes small business
participation in procurements as prime contractors.*  15 U.S.C.
S: 631(j)(3) (2000).  To implement this restriction, the Small Business
Act defines bundling as:
    
consolidating 2 or more procurement requirements for goods or services
previously provided or performed under separate smaller contracts
[performed by or suitable for award to one or more small business
concerns] into a solicitation of offers for a single contract that is
likely to be unsuitable for award to a small-business concern due to--(A)
the diversity, size, or specialized nature of the elements of the
performance specified; (B) the aggregate dollar value of the anticipated
award; (C) the geographical dispersion of the contract performance sites;
or (D) any combination of the factors described in subparagraphs (A), (B),
and (C).
15 U.S.C. S:S: 632(o)(2), (3); see also FAR S: 2.101.
    
Under the statute, an agency may determine that consolidation of
requirements is *necessary and justified if, as compared to the benefits
that would be derived from contracting to meet those requirements if not
consolidated, the Federal Government would derive from the consolidation
measurably substantial benefits . . . .*  15 U.S.C. S: 644(e)(2)(B).  The
statute provides that such benefits may include cost savings, quality
improvements, reductions in acquisition cycle times, better terms and
conditions, or other benefits.  Id.  The Act and implementing regulations
provide specific requirements for an agency's consideration and analysis
of the benefits of the bundled procurement in light of its impact on small
business concerns.[3]  15 U.S.C. S:S: 644(a), (e); 13 C.F.R.
S:S: 125.2(b)-(d) (2002). 
    
The agency contends that the current procurement does not meet the
definition of bundling.  The agency primarily argues that the RFP's
intermodal container equipment requirements are not a consolidation of *2
or more procurement requirements,* as required in the statutory
definition, but rather represent a single procurement requirement for
container leasing services to meet all of the agency's intermodal
container equipment requirements worldwide, which previously had been met
through the issuance of orders under the nine ID/IQ vendor contracts
awarded under the MLA. 

   The agency does not consider its separate acquisitions of refrigerated
containers (and associated equipment) to constitute a separate procurement
requirement, and it discounts the relevance of its occasional separate
acquisition of refrigerated containers outside the MLA, contending that
the refrigerated container equipment ordered was minimal compared to the
amount of equipment ordered under the ID/IQ contracts.  MTMC also contends
that the acquisition of refrigerated containers should not be considered
to be a separate procurement requirement, since the MLA should have
provided for refrigerated containers as a type of intermodal container
equipment but inadvertently did not.

   The SBA disagrees with the agency's view that the procurement is not
bundled and argues that the agency must comply with the Small Business Act
provisions on bundling.  The SBA concludes that the procedural
requirements for justification of bundling were improperly disregarded by
the contracting activity.
    
As stated above, the first element of the statutory definition of bundling
involves the consolidation of *2 or more procurement requirements*
previously satisfied by separate smaller contracts.  The Act, however,
does not define the term *procurement requirement.*  The agency contends
that the term should be broadly defined here.  Specifically, the agency
contends that, since the MLA sought to include all of the agency's
intermodal container equipment requirements, the MLA and the nine
resulting ID/IQ contracts should be viewed as constituting one single
broad procurement requirement for intermodal container equipment.  The
protester argues that the different coverage of each of those ID/IQ
contracts indicates that more than one procurement requirement is being
met by the contracts.  The protester points out that its ID/IQ contract is
for far fewer than the full list of items identified in the MLA, and
argues that, since its award is not reflective of the MLA's full list,
that list should not be considered the agency's procurement requirement
that resulted in the award of its contract.  In other words, the protester
contends that the varied terms of each of the contracts indicate that, as
awarded, the ID/IQ contracts meet multiple procurement requirements.  The
SBA agrees that each ID/IQ contract should be viewed as a separate
procurement requirement, as the terms of each ID/IQ contract here define
the agency's requirement to be met by that contract.
    
Our consideration of the entire record, including the submissions of the
parties and the SBA, leads us to conclude that the RFP consolidated
multiple requirements.
While we recognize that there are instances where an agency awards
identical ID/IQ contracts so that it might be reasonable to define what
was solicited and awarded as one procurement requirement (a question we
need not resolve here), that is not what occurred in this instance.  In
this case, although a single solicitation (the MLA) was issued, it listed
a variety of equipment needed by the agency.  The MLA thus was not a
statement of a single procurement requirement, as the agency suggests, but
instead functioned more as a list of a range of multiple procurement
requirements.  As the protester notes, the nine contracts awarded under
the MLA were of varied scope and
covered varying lists of equipment.  If the MLA referenced a single
requirement, as the agency contends, that would mean that the contracting
agency had awarded many (perhaps all) of the nine contracts even though
(since they did not cover the entire MLA) they did not satisfy the
agency's procurement requirement.  The fact that all of the containers and
all of the related equipment can be accurately described as intermodal
container equipment does not establish that they are simply elements in a
large unitary procurement requirement; otherwise, separate equipment
contracts for different types of furniture, or for identical services in
different regions of the country, would have to be viewed as contracts for
a single procurement requirement.  In our view, to define *procurement
requirement* so broadly could shield from meaningful review the very sort
of arbitrary consolidation of requirements that the Act's restrictions on
bundling are intended to prevent.[4]
    
Our conclusion that the consolidated RFP at issue here covers *2 or more
procurement requirements* is further supported by the agency's previous
use of separate contract vehicles for refrigerated containers.  The record
is clear that, whether due to agency inadvertence or otherwise, neither
the MLA nor any of the ID/IQ contracts contemplated or provided for the
acquisition of refrigerated containers.  The separate acquisition of
refrigerated containers strongly suggests that they represent a distinct
procurement requirement.  Although the agency suggests that its
refrigerated container acquisitions should be overlooked in determining
whether bundling is involved here because there were far fewer
refrigerated containers acquired than other types of equipment ordered
under the ID/IQ contracts, the agency has not provided any legal support
for this contention.  The statutory provisions defining bundling simply do
not differentiate between large or small procurement requirements
regarding the required consolidation of two or more *procurement
requirements*; in fact, the Act's definition specifically recognizes that
procurement requirements may have been met under relatively small
contracts.  See 15 U.S.C. S: 632(o)(2).  Accordingly, our review of the
record leads us to agree with the protester's and the SBA's view that the
RFP here consolidates two or more procurement requirements previously
provided under separate smaller contracts by small businesses. [5]
    
The final element of the Act's definition of bundling concerns the
likelihood that the consolidated requirement is unsuitable for award to a
small business concern due to its size, value, specialized nature, or
geographical dispersion.  In its supplemental report submitted in response
to the SBA's comments on the agency report, the agency contends that an
award under the RFP should be considered suitable for a small business,
since the agency in fact received one small business offer under the RFP.
    
Our review of the record shows that despite the agency's post-protest
contention that an award under the RFP is suitable for small businesses,
the record contains no evidence of any meaningful analysis or
consideration by the agency that supports this position.  Our review of
the record instead indicates that the agency itself had some concerns in
this regard--it expected that no small business may exist that could meet
the sizeable performance requirements of the RFP.  See Small Business
Coordination Record, Mar. 19, 2002.  Further, although the agency reports
receipt of one, presumably self-described, small business offer, no
information at all has been provided by the agency as to the technical
acceptability or price reasonableness of the proposal.  The receipt of
only one small business offer, in any event, would suggest a substantial
reduction in small business participation from that which was achieved
under the prior MLA procurement (where three of the nine vendors awarded
contracts in that procurement were small businesses).  Consequently, given
the lack of support for the agency's general conclusion as to the
likelihood that a consolidated contract is suitable for small businesses,
and in view of the specialized nature of the information technology
portion of the solicitation, the significant increase in contract value of
this intermodal container equipment procurement from the previous MLA
procurement and the worldwide scope of the contract contemplated under the
RFP, we believe the protester and the SBA have reasonably shown that award
of the contract contemplated by the RFP is likely to be unsuitable for
award to a small business.  Accordingly, we believe the current RFP fits
within the statutory definition of a bundled procurement.  15 U.S.C.
S: 632(o)(2).
    
It is clear from the record that because the agency did not consider the
requirement bundled, it failed to follow any of the procedural
requirements in the Small Business Act's implementing regulations to
justify the bundling of requirements under the
RFP.[6]  We therefore sustain the protest.[7]
    
Our review of the record confirms an additional statutory violation by the
agency regarding notification to the SBA of the anticipated consolidated
procurement prior to public issuance of the solicitation.  The Small
Business Act and its implementing regulations (as well as specific DOD
guidance for the consolidation of requirements) call for contracting
agencies to submit documentation, including the solicitation,
to the SBA for review of anticipated consolidated procurements where a
bundled procurement is unjustified or it includes work currently being
performed by a small business and the magnitude of the proposed
procurement renders small business prime contract participation unlikely. 
See 15 U.S.C. S: 644(a); 13 C.F.R. S: 125.2(b); FAR S:S:19.201,
19.202‑1(e); DOD Memorandum Regarding Consolidation of Contract
Requirements, Oct. 23, 1996, at 1.  The proposed procurement is to be
reviewed by the SBA PCR at least 30 days prior to the solicitation's
issuance.  Id.  Here, even if the contracting officer did not think the
procurement was bundled, we believe it was unreasonable for her not to
recognize that coordination with the SBA PCR was required, since small
businesses were performing work included in the RFP and the magnitude of
the proposed consolidated procurement could reasonably render small
business prime contractor participation unlikely.[8]  The agency's failure
to coordinate its current consolidation of requirements with the SBA PCR
was thus inconsistent with the requirements of the Act and implementing
regulations.[9]  See Letter to the Air Force in the Matter of Valenzuela
Eng'g, Inc., B-277979, Jan. 26, 1998, 98-1 CPD P: 51 at 1-3.
    
In accordance with the above, we recommend that the agency forward a copy
of the solicitation to the SBA PCR in order to give the PCR the
opportunity, as required by statute and regulation, to propose alternative
actions or to appeal the agency's consolidation of requirements.  Id.  We
also recommend that the agency conduct the required statutory and
regulatory reviews in order to properly document whether the current
bundling of requirements is justified.  See 15 U.S.C. S: 644(a); 13 C.F.R.
S: 125.2(d).  We recommend that the agency then revise the RFP, if
appropriate, and solicit new proposals.  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.
    
The protest is sustained.
    
Anthony H. Gamboa
General Counsel
    

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

   [1] The intermodal containers permit transshipping of cargo among sea,
highway, rail and air modes of transportation.
[2] TRS initially also contended that the consolidated procurement unduly
restricted competition in violation of the Competition in Contracting Act
of 1984, 10 U.S.C. S:2305(a)(1) (2000).  The protester's subsequent
submissions to our Office, however, pursued only the challenge of bundling
under the Small Business Act.  Accordingly, our discussion is limited to
the requirements of the Small Business Act and that Act's application to
the current procurement.
[3] For example, combined benefits (in terms of cost savings, quality
improvements, better terms, reductions in time, and other benefits),
quantified at an amount equivalent to 5 percent of the contract value, or
$7.5 million, whichever is greater, where the contract value exceeds $75
million, may justify a bundled requirement.  13 C.F.R. S:
125.2(d)(5)(i)(B).  Alternate procedures for the justification of bundled
requirements are also provided in the regulations.  See 13 C.F.R. S:
125.2(d)(5)(ii).
[4] Our Office has recognized the benefits provided by the award of
multiple ID/IQ contracts for related, but distinct, procurement
requirements, because such ID/IQ contracts mitigate against a consolidated
*winner-takes-all* situation that would preclude additional contractors
from performing some of the government's requirements.  See, e.g., Aalco
Forwarding, Inc., et al., B‑277241.12, B-277241.13,
Dec. 29, 1997, 97‑2 CPD P: 175 at 7 n.9.
[5] Similarly, since the current RFP apparently includes additional
requirements not specifically referenced in the matrix of the ID/IQ
contract terms provided for the record, such as the leasing of 40-foot
open top and flatrack containers, we note that, to the extent the agency
has acquired such services by separate smaller contracts in the past, they
also would constitute separate procurement requirements consolidated in
the current RFP.
[6] The agency does not argue, nor does our review of the record show,
that the IPT's market research or an early case study prepared by the
agency's consultant quantified the value of benefits to be achieved under
the actual consolidated requirements of the current RFP.  Also, as the SBA
notes, since the value of the contract here exceeds $75 million, the
agency is required to meet additional procedural requirements to justify
*substantial* bundling.  See 13 C.F.R. S:S: 125.2(d)(1)(iii); 125.2(d)(7).
[7] The agency points out that our Office will not sustain a protest where
the protester has not suffered competitive prejudice from the agency's
actions.  See McDonald-Bradley, B-270126, Feb. 8, 1996, 96-1 CPD P: 54 at
3.  Here, however, we believe the record demonstrates sufficient
prejudice.  TRS, a small business that has supplied certain intermodal
container equipment under its ID/IQ contract, and has also provided
refrigerated containers outside of the MLA, has shown that it reasonably
will be precluded from doing so here where the RFP's bundling of
requirements, including the work it had performed in the past, renders
unlikely that an award under the RFP would be suitable for a small
business.
[8] While MTMC argues that the contracting officer had an informal
agreement with the SBA PCR to refer to the PCR only those anticipated
procurements related to set-asides or matters about which the contracting
officer had concerns, such an agreement cannot excuse MTMC from complying
with the clear statutory requirements for review by the SBA here; there is
no statutory or regulatory provision for the informal agreement the
contracting officer offers to support her failure to follow the statutory
and regulatory requirements.
[9] The protester also argues that the RFP's $500,000 guaranteed minimum
annual value is an improper nominal amount; this argument is
unpersuasive.  Contrary to the protester's suggestion, there is no legal
requirement for a guaranteed minimum to be large enough to reimburse a
contractor for its start-up or performance costs.  The agency has
explained that the minimum amount provided in the RFP reflects the
agency's expected minimum annual order of, at least, the program
management function of the RFP.  Since the minimum quantity on any one
contract may not exceed the amount the government is fairly certain to
order, FAR S: 16.504(a)(2), we have no basis to question the RFP's stated
guaranteed minimum; the protester simply has not shown that the amount
would mislead contractors, subject the government to undue risk, or
otherwise fail to provide adequate consideration to bind the parties to
the contract.  See Aalco Forwarding, Inc., et al., B-277241.15, Mar. 11,
1998, 98-1 CPD P: 87 at 6-8.