TITLE:  Department of the Army--Request for Modification of Recommendation, B-290682.2, January 9, 2003
BNUMBER:  B-290682.2
DATE:  January 9, 2003
**********************************************************************
Department of the Army--Request for Modification of Recommendation, B-290682.2,
January 9, 2003

   Decision
    
    
Matter of:   Department of the Army--Request for Modification of
Recommendation
    
File:            B-290682.2
    
Date:              January 9, 2003
    
Frank Moody for the protester.
Capt. Charles K. Bucknor, Ralph J. Frick, Esq., and Raymond M. Saunders,
Esq., Department of the Army, and Audrey H. Liebross, Esq., and John W.
Klein, Esq., Small Business Administration, for the agencies.
Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
Agency request for modification of recommendation in LBM, Inc., B-290682,
Sept. 18, 2002, 2002 CPD P:157, to recognize that the agency may limit the
competition to small business holders of
indefinite-delivery/indefinite-quantity contracts in conducting a small
business set-aside required by Federal Acquisition Regulation
S: 19.502-2(b) is denied because the Competition in Contracting Act of
1984 provides for full and open competition among eligible small business
concerns for acquisitions required to be set aside for small businesses.
DECISION
    
The Department of the Army requests that we modify the recommendation we
made in our decision in LBM, Inc., B-290682, Sept. 18, 2002, 2002, CPD
P:157, in which we sustained LBM's protest of the Army's decision to
acquire transportation motor pool services at Fort Polk, Louisiana, under
the Logistical Joint Administrative Management Support Services (LOGJAMSS)
contracts.  We found that the Army's failure to consider whether this
requirement should be set aside for exclusive small business participation
violated Federal Acquisition Regulation (FAR) S: 19.502-2(b) (the
so-called *rule of two*), which requires an agency to set aside
acquisitions for small businesses where there is a reasonable expectation
of receiving fair market price offers from at least two responsible small
business concerns.  We recommended that the Army consider whether, in
accordance with FAR S: 19.502‑2(b), the transportation motor pool
services at Fort Polk should be set aside exclusively for small business
participation. 
    
The Army requests that we modify our recommendation *to allow the Army to
implement the 'rule of two' among the small business concerns that
currently hold LOGJAMSS contracts.*  Army Request for Modification of
Recommendation at 1.  That is, the Army proposes to acquire these motor
pool services exclusively from small businesses but would limit the
competition for these services to the small businesses that hold LOGJAMSS
contracts.
    
We deny the Army's request for modification of our recommendation because
limiting the small business competition as proposed by the Army would
violate the competition requirements of the Competition in Contracting Act
of 1984 (CICA).
    
Background
    
1n 1996, the Army instituted a *regionalization* contracting approach to
*achieve savings resulting from improved processes and economies of
scale.*  In implementing the Army's contract regionalization plan, the
agency developed LOGJAMSS with a broad scope of work encompassing a wide
range of logistical functions and supporting tasks.  LOGJAMSS are
multiple-award, indefinite‑delivery/indefinite-quantity (ID/IQ) task
order contracts.  In 1998 and 1999, the agency awarded nine contracts
under LOGJAMSS, five to large businesses, two to small businesses, and two
to small disadvantaged businesses.  No specific projects at particular
locations were identified in the LOGJAMSS solicitation or contracts. 
    
Transportation motor pool services at Fort Polk had been performed
exclusively by small businesses, including LBM, under small business
set-asides over the last 10 years.  In May 2002, the Army decided to
instead acquire the Fort Polk's motor pool services using the LOGJAMSS
contracts.  It solicited proposals from the LOGJAMSS contractors for the
award of a fixed‑price task order for a base year with 4 option
years to perform motor pools services at Fort Polk.[1]  The Army did not
coordinate with, or notify, the Small Business Administration (SBA) of its
intent to withdraw the Fort Polk motor pool services from exclusive small
business competition and to transfer these services to LOGJAMSS contracts.
    
After learning that the Army would not be setting aside the Fort Polk
motor pool services for small business competition but would instead
acquire the services under the LOGJAMSS contracts, LBM protested to our
Office.
    
The Army requested that we dismiss LBM's protest as a challenge to the
proposed award of a task order under an ID/IQ contract, for which a
protest is not permitted under 10 U.S.C. S: 2304c(d) (2000).[2]  The Army
also argued that, to the extent we viewed LBM's protest as a challenge to
the terms of the solicitation for the award of the LOGJAMSS contracts, the
protest was untimely.  That is, the Army contended that LBM should have
been on notice from the LOGJAMSS solicitation that the Fort Polk motor
pool services *could* be ordered under the LOGJAMSS contracts and
therefore its protest after the award of the LOGJAMSS contracts was
untimely. 
    
We found that the limitation on our bid protest jurisdiction in 10 U.S.C.
S: 2304c(d) did not apply, because, contrary to the Army's arguments, LBM
was not challenging the proposed issuance of a task order for these
services, but was raising the question of whether work that had been
previously set aside exclusively for small businesses could be transferred
to LOGJAMSS, without regard to the FAR S: 19.502-2(b) requirements
pertaining to small business set-asides.  This was a challenge to the
terms of the underlying LOGJAMSS solicitation and was within our bid
protest jurisdiction.  LBM, Inc., supra, at 4.
    
We also found LBM's protest to be timely filed.  We found that the
LOGJAMSS scope of work was so broad and vague that LBM could not
reasonably be aware, and required to protest, at the time the LOGJAMSS
contracts were being competed (and apparently years before the Army
considered using those contracts for the Fort Polk motor pool services),
that the Army would use LOGJAMSS as the vehicle to acquire the motor pool
services at Fort Polk without first taking the steps legally required
regarding a possible further acquisition of that work under a small
business set‑aside. [3]  Id. at 6.
    
As to the merits of LBM's protest, we agreed that the Army had violated
FAR S: 19.502-2(b) (the rule of two).  Id. at 7.  This section generally
requires that a contracting officer set aside for small business all
acquisitions exceeding $100,000 if there was a reasonable expectation of
receiving fair market priced offers from at least two responsible small
business concerns.  We found that the Army had not considered whether
these services should be set aside exclusively for small business
participation before transferring this work to LOGJAMSS, despite the fact
that the agency was aware of at least two responsible small business
concerns capable of competing for the Fort Polk motor pool services. 
Also, the Army did not contend that there was not a reasonable expectation
of receiving fair market priced offers from at least two small
businesses.  We sustained LBM's protest on this basis, and recommended
that the Army consider whether, in accordance with FAR
S: 19.502‑2(b), the transportation motor pool services at Fort Polk
should be set aside exclusively for small business participation.
    

                              Modification Request

    
The Army does not challenge the merits of our decision in LBM, Inc., but
requests that we modify our recommendation to recognize that the agency
may limit the competition under an exclusive small business set-aside to
the current small business LOGJAMSS contract holders.  Specifically, the
Army states that, although pursuant to FAR S: 19.502-2(b) the Fort Polk
motor pool services should be set aside for small business participation,
that section does not specify *how* the set-aside should be implemented. 
Army Request for Modification at 2.  The Army contends that FAR S:
19.502-2(b) does not prohibit the agency from implementing a small
business set-aside for these services by restricting the competition to
the group of small businesses that have successfully competed for LOGJAMSS
contracts.  Army Brief at 12.  The Army argues that modifying our
recommendation, as requested by the Army, *is supported by the purpose and
intent of Congress in enacting [the Federal Acquisition Streamlining Act
of 1994 (FASA)].*  Id. at 9.  In this regard, the Army contends that under
LOGJAMSS the agency has ensured that small businesses have received a fair
proportion of the contract orders, whereas denying the Army's request
would negatively affect the Army's planned use of LOGJAMSS and contract
regionalization goals.  Id. at 5, 15-16.
    
LBM and the SBA oppose the Army's request for modification of our
recommendation, arguing that to allow the Army's requested modification
would *eviscerate the decision.*[4]  SBA Brief at 4.  Moreover, the SBA
argues that restricting a small business set-aside competition for these
services to only the small businesses that hold LOGJAMSS contracts would
violate CICA and the Small Business Act.
    

Discussion

    
The core of the Army's arguments is that there is no legal guidance as to
the extent of competition that must be conducted in a small business
set-aside.  Specifically, the Army argues that the *rule of two* does not
specify how a small business set-aside should be implemented.  As
explained below, we disagree with the Army that applicable law and
regulations are silent as to competition requirements in a small business
set-aside.
    
CICA generally requires contracting agencies to obtain full and open
competition through the use of competitive procedures, absent an exception
specified in CICA or other express statutory authority.  10 U.S.C. S:
2304(a)(1)(A) (2000).  *Full and open competition* is obtained when *all
responsible sources are permitted to submit sealed bids or competitive
proposals on the procurement.*  10 U.S.C. S: 2302(3)(D); 41 U.S.C.
S: 403(6).  With respect to small business set-asides, CICA defines
*competitive procedures* (that is, procedures under which a contract is
entered into pursuant to full and open competition) as including:
    
procurements conducted in furtherance of section 15 of the Small Business
Act (15 U.S.C. S: 644) as long as all responsible business concerns that
are entitled to submit offers for such procurements are permitted to
compete.
10 U.S.C. S: 2302(2)(D); see 10 U.S.C. S: 2304(b)(2) (use of competitive
procedures after exclusion of other than small business concerns in
furtherance of sections 9 and 15 of the Small Business Act).  The FAR
implements these CICA requirements by providing for full and open
competition after the exclusion of one or more sources, such as, for
example, business concerns that do not satisfy the size standards in a
small business set-aside.  See FAR S:S: 6.200, 6.203.  In short, where a
small business set-aside is called for, the law generally provides for
full and open competition among eligible small business concerns.
    
The Army nevertheless argues that because competitive procedures were used
to select the LOGJAMSS contract holders, the requirement for full and open
competition is not applicable to a decision to procure the Fort Polk motor
pool transportation services under a small business set-aside.  Army Reply
Brief at 13-14.  We disagree. 
    
As noted in our prior decision, it was the Army's decision in May 2002 to
transfer this work to LOGJAMSS, the scope of which was broad and vague and
did not specifically contemplate this work, that violated FAR S:
19.502-2(b).  That regulation requires the agency to consider setting
aside this work for exclusive small business competition.  The Army
apparently now concedes that under FAR S: 19.502-2(b) these services
should be set aside for exclusive small business competition.  As
discussed above, any such competition must be a full and open competition
among the eligible small businesses; there is no legal authority in such
circumstances to limit this competition to certain designated small
businesses.  The Fort Polk motor pool work was not called out in the
LOGJAMSS solicitation, and the fact that there was full and open
competition for the LOGJAMSS contracts is therefore irrelevant to the
application of the rule of two to the Fort Polk requirement.
    
The Army also argues that it has authority under the Federal Acquisition
Streamlining Act of 1994 (FASA), 10 U.S.C. S:S: 2304a-2304e, to limit the
small business set‑aside for these motor pool services to the
LOGJAMSS small business contract holders.[5]  This argument has no merit. 
FASA codified existing authority to award task and delivery order
contracts.  With respect to these motor pool services, nothing in FASA
provides an exception to the requirements of the Small Business Act and
its implementing regulations, which provide for exclusive small business
set‑asides, or to CICA's competition requirements with respect to
conducting a set‑aside competition.  To the contrary, FASA's
legislative history illuminates the need to comply with the CICA
competition requirements in conducting acquisitions for multiple award
contracts:
    
In addition, the conference agreement would provide general authorization
for the use of task and delivery order contracts to acquire goods and
services other than advisory and assistance services. 
The conferees note that this provision is intended as a codification of
existing authority to use such contractual vehicles.  All otherwise
applicable provisions of law would remain applicable to such acquisitions,
except to the extent specifically provided in this section.  For example,
the requirements of [CICA], although they would be inapplicable to the
issuance of individual orders under task and delivery order contracts,
would continue to apply to the solicitation and award of the contracts
themselves.
Joint Explanatory Statement of the Committee of Conference, H.R. Conf.
Rep. No. 103-712, at 181 (1994).
    
The Army nevertheless argues that it should be allowed to implement the
*rule of two* by limiting a set-aside for these services to its LOGJAMSS
small business contract holders because to do otherwise would endanger its
use of the LOGJAMSS contracts and contract regionalization approach.  The
Army also argues that limiting the set-aside in the fashion proposed by
the agency should be acceptable because LOGJAMSS already provides a
meaningful opportunity for competition to small businesses, either as
prime small business contract holders or as subcontractors to other
contract holders.  In addition, the Army contends that the LOGJAMSS
program has a good record of small business utilization in the performance
of orders.
    
As discussed above, what the Army has requested is not consistent with the
statutory and regulatory scheme applicable to small business set-asides. 
The Army is essentially asking us to waive statutory requirements for what
the Army views as strong policy reasons.  That we cannot do; that is a
decision for the Congress to make.  The requirement for full and open
competition established by the Congress in CICA cannot be dissolved based
only upon an agency's--or our Office's--policy arguments as to why it
would be better to limit competition for these services.  Furthermore, the
fact that the agency may have a very good record of small business
participation in performance of LOGJAMSS orders does not in itself provide
relief from the requirement to allow full and open competition from
eligible small businesses under a small business set-aside.  In this
regard, the FAR specifically identifies as an insufficient cause for not
setting aside an acquisition the fact that *[s]mall business concerns are
already receiving a fair proportion of the agency's contracts for supplies
and services.*  FAR S: 19.502-5(f); see Library Sys. & Servs./Internet
Sys., Inc., B-244432, Oct. 16, 1991, 91-2 CPD P: 337 at 4-5.
    
The request for modification of the recommendation is denied.
    
Anthony H. Gamboa
General Counsel
    

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

   [1] The contracting officer estimated that the Fort Polk motor pool
services requirement would be approximately $10 million for the total
5-year performance period.
[2] 10 U.S.C. S: 2304c(d) provides:
A protest is not authorized in connection with the issuance or proposed
issuance of a task or delivery order except for a protest on the ground
that the order increases the scope, period, or maximum value of the
contract under which the order is issued.
[3]  We also noted that *[i]t may be that if the LOGJAMSS solicitation had
identified motor pool transportation services at Fort Polk, LBM would have
had reasonable notice of its protest allegation.*  LBM, Inc., supra, at 6
n.5.
[4] While we address the Army's request on the merits, we agree with the
SBA that adoption of the Army's analysis would essentially reverse our
earlier decision.  In particular, if it were true that a small business
set-aside could properly be limited to small businesses holding LOGJAMSS
contracts, LBM, which does not hold one of those contracts, would not be
eligible for award and therefore would not be an interested party, so that
its protest should have been dismissed on that basis.
[5] The Army does not assert that a limited competition can be justified
under any of the exceptions to full and open competition identified in
CICA.  See 10 U.S.C. S: 2304(c).