TITLE:  McKesson Automation Systems, Inc., B-290969.2; B-290969.3, January 14, 2003
BNUMBER:  B-290969.2; B-290969.3
DATE:  January 14, 2003
**********************************************************************
McKesson Automation Systems, Inc., B-290969.2; B-290969.3, January 14, 2003

   DOCUMENT FOR PUBLIC RELEASE                                                
The decision issued on the date below was subject to a GAO Protective      
Order.  This redacted version has been approved for public release.        

   Decision
    
Matter of:    McKesson Automation Systems, Inc.
    
File:             B-290969.2; B-290969.3
    
Date:              January 14, 2003
    
John A. Burkholder, Esq., and Richard B. Oliver, Esq., McKenna Long &
Aldridge, for the protester.
William A. Shook, Esq., Kelley P. Doran, Esq., and Michael F. Scanlon,
Esq., Preston Gates Ellis & Rouvelas Meeds, for Innovation Associates,
Inc., an intervenor.
Linda G. Sandoli, Esq., and Lynne E. Georges, Esq., Defense Logistics
Agency, Defense Supply Center Philadelphia, for the agency.
Tania Calhoun, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
Protests that procuring agency improperly proposed award to a firm on a
sole-source basis for the procurement and installation of a pharmacy
robotic refill system is denied where the record shows that the agency's
justification for concluding that only one responsible source could meet
its needs is reasonable.
DECISION
    
McKesson Automation Systems, Inc. protests the proposed award on a
sole-source basis to Innovation Associates, Inc. (IA) under request for
proposals (RFP)
No. SP0200-02-R-8022, issued by the Defense Logistics Agency, Defense
Supply Center Philadelphia (DSCP), for the procurement and installation of
IA's PharmASSIST robotic refill system at the United States Air Force
Academy in Colorado Springs, Colorado.  McKesson argues that the agency's
use of a sole-source procurement to meet this requirement is improper.
    
We deny the protests.
    
In response to various reports and recommendations concerning the use of
enhanced automation to improve patient safety, through the reduction of
medication errors, and to improve the efficiency of pharmacy personnel,
the Air Force Pharmacy and the Air Force Academy Pharmacy initiated market
research into automated medication dispensing systems as early as 1999. 
This market research eventually extended to a detailed independent report
that analyzed the automated pharmacy systems sold by various firms,
including IA and McKesson, as well as information gathered through trade
shows, site visits, and meetings with pharmacy systems vendors.  By March
2001, Air Force Academy representatives had developed a preference for the
IA system based upon this market research and forwarded a set of draft
salient characteristics to an Air Force consultant to the Surgeon General
for Pharmacy (Air Force consultant).  Transcript (Tr.) at 52, 58.[1]  The
Air Force consultant rejected the notion of a *preference*; conducted
discussions with technical users and pharmacy professionals to ascertain
the agency's minimum needs; engaged in additional market research which
included site visits and meetings with pharmacy systems vendors, including
IA and McKesson; and insisted that the salient characteristics be
objective and reviewed them to ensure that they were related to human
safety.  Id. at 53, 58.  The Air Force consultant ultimately agreed that
IA was the only vendor that could meet the agency's minimum needs. 
    
In February 2002, the Air Force forwarded drafts of its salient
characteristics for a robotic refill system and its justification and
approval for other than full and open competition (J&A)--prepared by the
Air Force Consultant--to the DSCP, which was to conduct the procurement on
behalf of the Air Force.  On June 25, the DSCP posted a presolicitation
notice for the procurement of a PharmASSIST robotic refill system,
manufactured by IA, on the government's Federal Business Opportunities
(FedBizOpps) web site.  The notice inadvertently failed to include
information on the sole-source nature of the procurement and was
subsequently modified to advise that award would be made on a sole-source
basis and that IA was the only known source that could supply the agency's
requirements. 
    
On July 17, McKesson requested copies of the J&A and the solicitation, and
was told that copies would be forwarded when they were finalized.[2]  On
October 3, the agency issued the solicitation for the procurement and
installation of the IA PharmASSIST robotic refill system.  The system will
be installed at the Air Force Academy and will process refill orders from
the outpatient pharmacies at four Colorado locations:  the Air Force
Academy Hospital, the Air Force Academy Community Center, Peterson Air
Force Base, and Evans Army Community Hospital.  J&A at 3.  The
solicitation, issued pursuant to commercial item acquisition
procedures,[3] listed 21 of what it referred to as *essential salient
characteristics.*  RFP at 5.  Award was to be made to the offeror that
provided a technically acceptable proposal--one that met all the salient
characteristics--at the lowest price.  Id. at 28.
    
Prior to the October 15 closing date for receipt of proposals, McKesson
filed this protest arguing that the DSCP is improperly using a sole-source
procurement, challenging various aspects of the J&A, and alleging that
certain of the RFP's salient characteristics are overly restrictive.[4] 
IA was the only firm that submitted a proposal; award has not yet been
made.  Along with its comments on the agency report, McKesson filed a
supplemental protest in which it argued that IA's proposal did not meet
certain of the RFP's requirements.[5] 
    
Although the overriding mandate of the Competition in Contracting Act of
1984 (CICA) is for full and open competition in government procurements,
obtained through the use of competitive procedures, 10 U.S.C. S:
2304(a)(1)(A) (2000), CICA permits noncompetitive acquisitions in certain
circumstances.  10 U.S.C. S: 2304(c).  One of those circumstances or
exceptions to the mandate that competitive procedures be used--that only
one responsible source and no other supplies or services will satisfy the
agency's requirements--was cited by the DSCP as the authority for its
proposed sole-source award to IA.  J&A at 1; FAR S: 6.302-1.
    
When an agency uses noncompetitive procedures under 10 U.S.C. S:
2304(c)(1), it is required to execute a written J&A with sufficient facts
and rationale to support the use of the cited authority, and publish a
notice to permit potential competitors to challenge the agency's intent to
procure without full and open competition.  See
10 U.S.C. S: 2304(f)(1)(A), (B); FAR S:S: 6.302-1(d)(1), 6.303, 6.304;
Marconi Dynamics, Inc., B-252318, June 21, 1993, 93-1 CPD P: 475 at 5. 
Our review of the agency's decision to conduct a sole-source procurement
focuses on the adequacy of the rationale and conclusions set forth in the
J&A.  When the J&A sets forth a reasonable justification for the agency's
actions, we will not object to the award.  Global Solutions Network, Inc.,
supra, at 6; Diversified Tech. and Servs. of Virginia, Inc.,
B-282497, July 19, 1999, 99-2 CPD P: 16 at 3.  Our review of the record
shows that several of the agency's reasons for concluding that only IA's
system can meet its needs constitute a reasonable justification for the
agency's decision to procure this system on a sole-source basis.     
    
The J&A lists four primary factors in the selection of a robotic refill
system: 
(1) compliance with Air Force communications security requirements;
(2) programmable dispensing units that eliminate the need to exchange/ship
counting unit component(s); (3) availability of the optical original
prescription image when checking the refilled prescription; and (4) no
cross contamination between medications.  J&A at 1.  The Air Force
consultant deemed these requirements to have an impact upon human safety,
Tr. at 63-65, 67, 76-77, and concluded that IA's system was the only one
that met all four of these requirements.  J&A at 1.  The J&A also states
that only IA's PharmASSIST robotic refill system has all of certain other
*essential features.*  According to the J&A, the robotic refill system to
be procured must have these essential features due to the importance of
minimizing medication errors and more efficiently using diminishing Air
Force pharmacy resources.  J&A
at 3.  These *primary factors* and *essential features* are expressed as
the various salient characteristics set forth in the RFP. 
    
One of the primary factors in the selection of the system was *compliance
with Air Force Communications Security requirements.*  J&A at 1.  As the
J&A makes clear, this factor, and the corresponding RFP requirement that
the system *provide evidence of certification meeting [Air Force] security
requirements,* RFP at 5, refers to the Air Force Communications Agency
Certificate of Networthiness (AFCA CON) process.  J&A at 2. 
    
An AFCA CON is required before the fielding of systems that alter, reside,
or require support from any part of the Air Force's enterprise network. 
Draft Air Force Certificate of Networthiness Guide (Draft Guide), Dec. 16,
2002, P:P: 1.3, 5.1.1; Draft Air Force Instruction No. 33-123,
*Networthiness and System Certifications,* Oct. 7, 2002, P:P: 1.1, 2
(implementing Air Force Policy Directive No. 33-1, *Command, Control,
Communications, and Computer (C4) Systems*); Air Force Instruction
No. 33-104, *Communications and Information:  Base-Level Planning and
Implementation,* May 10, 2001, P: 4.2 (implementing Air Force Policy
Directive 33-1, supra).  The networthiness assessment process determines
the impacts, risks, and vulnerabilities of fielding a system and considers
such things as network security, network impact, and compatibility with
the information technology infrastructure.  Draft Guide P: 9.1.2.  A
system or application is *networthy* if it has been assessed and
determined to be supportable from a communications and information
perspective, and if any impacts, risks, and vulnerabilities it may present
to the Air Force's enterprise network are deemed to be acceptable or
manageable. 
Id. at P: 9.1.1.  The networthiness process helps ensure that information
technology systems and applications are secure, supportable, sustainable,
and compatible with the Air Force enterprise network and information
technology infrastructure. 
    
McKesson does not dispute the agency's contention that the system required
here must interface with Air Force communications and information
infrastructures--the RFP requires the system to link and integrate with
the Composite Health Care System, a DOD-wide hospital information system. 
RFP at 5.  At the time the J&A was signed and the solicitation issued, IA
was the only manufacturer of automated dispensing and robotic refill
systems that had submitted a request for an AFCA CON.  J&A at 2. 
According to the agency, the AFCA CON process takes 12-18 months to
complete.  IA began the process in November 2001, the Air Force Surgeon
General's Information Management Branch completed the final inspection of
IA's system by September 2002, and the final AFCA CON was signed on
December 24.   
    
McKesson's assertion that the agency is using this requirement as a
competitive barrier against the firm, and that it has only *very recently
been pointed in the right direction to begin to attain definitive answers*
to questions about this process, Initial Protest at 5, is disingenuous. 
The Air Force consultant explains that, since these communication security
requirements became strictly enforced after the terrorist attacks of
September 11, 2001, the Air Force Pharmacy contacted most companies that
have pharmacy equipment requiring interface with Air Force systems.  On
October 10, 2001, she told McKesson's representatives that the Air Force
was *tightening up security requirements* and recommended that the firm
start the AFCA CON security process.  McKesson's representative stated
that the firm saw no need to pursue this process.  Air Force Consultant's
Oct. 10, 2001 Memorandum for the Record; Air Force Consultant's Initial
Declaration P: 15.  On June 24, 2002, she asked McKesson's representatives
if the firm had started the AFCA CON security process and was told that
this process *did not apply to them* because their firm was
*grandfathered.*  When the consultant tried to explain that *nothing was
grandfathered when it was newly purchased or upgraded,* she was told that
McKesson *would not invest the time--they could get local approval if they
needed it.*  Air Force Consultant's June 24, 2002 Memorandum for the
Record; Air Force Consultant's Initial Declaration P: 15.  McKesson has
not contradicted the Air Force Consultant's account of these events. 
    
The record shows that this Air Force-wide requirement is, in fact, an
expression of the agency's minimum needs.  To the extent that it creates a
*competitive barrier* to McKesson's participation in this procurement, the
record also shows that McKesson resisted the agency's early attempts to
assist the firm in overcoming this barrier.  By failing to begin the AFCA
CON process when it was advised to do so, McKesson accepted the risk that
the Air Force would release a solicitation containing a requirement it
would not be able to meet.  Pilkington Aerospace, Inc., B-259173,
Mar. 13, 1995, 95-1 CPD P: 180 at 10; recon. denied, B-259173.2, May 15,
1995,
95-1 CPD P: 242.  McKesson has given us no basis to disagree with the
agency's assertion that it cannot delay the project an additional 12-18
months simply because McKesson failed to initiate the AFCA CON process
when it was advised to do so.[6]   
    
We are unpersuaded by McKesson's argument that IA's proposal does not meet
this requirement because it did not have a final AFCA CON at the time its
proposal was submitted.  Neither the J&A nor the RFP required the
completion of the AFCA CON process at the time of proposal submission--the
J&A merely required compliance with Air Force communications security
requirements, and the RFP merely required evidence of certification
meeting these requirements.  See Container Prods. Corp.,
B-280603.2, Nov. 4, 1998, 98-2 CPD P: 106 at 3-4.  Although offerors were
instructed to include in their proposals evidence of certification meeting
the requirements, this evidentiary requirement must be read in conjunction
with the purpose behind the certification requirement--to ensure that a
system could be certified prior to the time it must be fielded.  As a
result, we think that the evidentiary requirement was only meant to
establish that the offeror would be able to meet the certification
requirement at the time of delivery.  Liebert Fed. Sys., Inc., B-274823,
Jan. 8, 1997,
97-1 CPD P: 45 at 5.  As IA's proposal made clear at the time of proposal
submission, and as the J&A acknowledged, IA's PharmASSIST Enterprise
System had passed its final inspection in this process and was merely
awaiting interim and final certification.  IA Proposal P:P: 4.11, 5.10;
J&A at 2.  In our view, this information was sufficient to meet the RFP's
requirement.[7]
A second primary factor in the selection of a robotic refill system was
that it have *programmable dispensing units that eliminate the need to
exchange/ship counting unit component(s).*[8]  J&A at 1.  The J&A states
that IA's system is fully programmable on-site to handle all tablet and
capsule types, but that all similar systems require at least some shipping
of the units for almost all product changes.  J&A at 2.  Medications must
be hand-counted during the time units are being exchanged, and Air Force
pharmacies typically have a significant number of generic product changes
per month.  Id.   
    
As the agency explains, McKesson's dispensing units must be manually
calibrated by the manufacturer for each product change.  The exchange of
McKesson's units has *always been a time-consuming process and requires
hand-counting medication for high-volume prescriptions until the new unit
is obtained.*  Air Force Consultant's Initial Declaration P: 10.  The Air
Force consultant states that experience contradicts McKesson's claim that
its method simply involves the ordering and installation of new units on a
next-day or maximum 48-hour delivery basis.  Id.  In any event, she adds,
even if a 48-hour delivery were consistently obtained, 2 days of manually
counting high-volume prescriptions is unacceptable when an alternative is
available.  Id.  In this regard, giving such discretion to pharmacy
personnel has a potential adverse impact on patient safety and
efficiency.  Id. P:P: 7, 10.  In contrast with the McKesson system, IA's
system does not require manual calibration either by the manufacturer or
the customer.  All of the calibration is software-driven--entering the
National Drug Code number programs the cells.  Id. at P: 8. 
    
McKesson argues that IA's system does not comply with the requirement to
eliminate the need to exchange/ship counting unit components because its
units must be returned to the manufacturer for cleaning, repair, or
replacement, which creates downtime requiring the hand-counting of
medications, the issue of concern to the agency.  As the agency points
out, however, the requirement at issue is not linked to the cleaning,
repair, or replacement of counting units, but to the programming of such
units when products are changed.  J&A at 2.  Air Force pharmacies have a
significant number of generically-equivalent product changes per month and
IA's units can be calibrated on-site for such changes.  Although a new
cell must be requested from IA when a drug entity changes, each of the
system's cabinets or banks comes with an additional programmable unit that
minimizes downtime.  In contrast, the McKesson dispensing units must be
calibrated off-site by the company when products are changed. 
    
In any event, the agency also states that the time saved by IA's ability
to electronically calibrate cells on-site is not offset by the maintenance
requirement to return cells to the manufacturer for routine cleaning.  The
Air Force consultant explains that the Air Force has four pharmacies using
the IA system.  In the past year, only six counting units were returned
from one site, and in the past 10 months only one counting unit was
returned from another site.[9]  In addition, when IA was told that a unit
was being returned for disassembly and cleaning, a new unit was shipped
immediately; in all cases, a clean unit was available at the site for use
when the decision was made to change and the units were changed in only a
few minutes.  McKesson has not provided any rebuttal to the agency's
explanation, which reasonably supports the agency's position that this is
a minimum requirement for patient safety and that IA has the only system
meeting this requirement.  Where, as here, a requirement relates to human
safety concerns, the agency has the discretion to set its minimum needs so
as to achieve not just reasonable results, but the highest possible
reliability and effectiveness.  Harry Feuerberg & Steven Steinbaum,
B-261333, Sept. 12, 1995, 95-2 CPD P: 109 at 3.
    
Since at least two of the primary factors set forth in the J&A reasonably
support the agency's conclusion that only IA could meet its minimum needs,
we need not decide whether the remainder of the J&A's rationale supports
this conclusion or whether the RFP's challenged salient characteristics
are overly restrictive. 
    
Our Office will not sustain a protest unless the protester demonstrates a
reasonable possibility of prejudice, that is, unless the protester
demonstrates that, but for the agency's actions, it would have had a
substantial chance of receiving the award.  McDonald-Bradley, B-270126,
Feb. 8, 1996, 96-1 CPD P: 54 at 3; Statistica, Inc. v. Christopher, 102
F.3d 1577, 1581 (Fed. Cir. 1996).  Here, even if we were to conclude that
the remainder of the J&A's rationale for this sole-source procurement were
unreasonable, the portion of the rationale we have already discussed is
sufficient to support the agency's decision that only IA could meet its
minimum requirements.  Likewise, even if we were to conclude that the
three salient characteristics challenged by McKesson were overly
restrictive of competition, since the firm cannot meet the two primary
factors discussed above,[10] we would have no basis to conclude that it
has any chance of receiving the award.  A protester is not an interested
party where it would not be in line for contract award if its protest were
sustained.  See Four Winds Servs., Inc., B-280714, Aug. 28, 1998, 98-2 CPD
P: 57 at 2. 
    
Our review of the record also shows that McKesson's allegations that IA's
proposal does not meet the agency's requirements are without basis.[11] 
McKesson argues that IA's system cannot meet the RFP's requirement that
*[e]ach defined specification must have operational capability or
operational experience/history in an existing pharmacy,* RFP at 5, because
it is not currently installed anywhere.  As the agency explains, however,
IA's pharmacy refill system is designed and produced using a variety of
components, the basic component of which is an automated pharmacy that
uses IA's PharmASSIST tablet and capsule dispensers that are used in a
number of Air Force pharmacies.  The robotics--an automated arm--is merely
an additional component of the system and consists of a highly dependable
and widely accepted unit that is sold in the United States.  Other
components used in IA's robotic system, such as conveyor belts, computer
terminals, filling stations, counting unit cabinets, and checking
stations, are used throughout the industry and are available in the
marketplace from IA and its subcontractors and are customized to the
customer's needs.  As a result, the agency states, each defined
specification of IA's system does have operational capability or
operational experience/history in an existing pharmacy.  McKesson has
given us no basis to disagree with this conclusion.
    
McKesson also argues that IA's system does not permit
out-of-cycle/sequence processing, an apparent reference to the RFP
requirement that the system *have internal buffers to hold counted
products until computer-controlled release allowing other items in queue
to be processed out of cycle.*  RFP at 5.  The agency explains that one
reason for this requirement is that it is important to be able to fill and
dispense prescriptions out of sequence.  The Air Force consultant states
that this requires more than one counting unit to contain medication at
the same time when *stat* prescriptions--those with high priority--are
processed.  Internal buffers provide safety when processing
out-of-sequence prescriptions because they do not allow an individual to
choose the wrong counting unit and dispense the wrong medication, thereby
eliminating human decision-making from the process and improving patient
safety.  Air Force Consultant's Initial Declaration P: 23.
    
IA's proposal states that its software supports a comprehensive set of
priorities that allow sophisticated handling of the internal filling
queue.  Orders of standard priority
are counted in a first-in-first-out (FIFO) manner, and orders of high
priority are counted before orders with standard priority.  Within the
group of orders with high priority, counting is performed in a FIFO
manner.  IA Proposal at 21.  IA's software also supports two special
priority designations, including the FillNext designation, which has the
highest priority in the system.  Orders with the FillNext designation are
counted in a last-in-first-out manner.  If the system cannot count a
FillNext order with this priority because the required dispenser is in
use, the software lets the user know what order must be filled so the
FillNext order can be counted.  Id.  While McKesson points to hearing
testimony that, in certain circumstances, the IA system may not allow
immediate out-of-cycle processing (such as if both chutes for a medication
are already filled), Tr. at 112-13, the RFP does not require immediate
out-of-cycle processing at all times.  We read the requirement as
governing the rule, not the exceptions associated with the refilling
process, and find no basis to conclude that IA's system cannot meet this
requirement.
    
The protests are denied.
    
Anthony H. Gamboa
General Counsel
    
    

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

   [1] Cites to the hearing transcript refer to the transcript of the hearing
that our Office conducted in connection with these protests.
[2] McKesson withdrew its July 19 protest of the sole-source award after
the agency advised it had not yet approved the J&A or the solicitation.
[3] Since the propriety of the agency's use of the sole-source selection
procedures at Federal Acquisition Regulation (FAR) subpart 6.3, not the
commercial item acquisition procedures at FAR part 12, is the dispositive
issue here, we need not address McKesson's allegation that the agency
improperly utilized the latter procedures.  See Johnson Controls World
Servs., Inc., B-285144, July 6, 2000,        2000 CPD P: 108 at 3.  We are
of the view, however, that McKesson has not persuasively rebutted the
agency's position that IA's system is a commercial item as defined by FAR
S: 2.1. 
[4] McKesson also alleged that the agency failed to conduct adequate
market research before proceeding with this sole-source procurement. 
However, our review of the record shows that the agency's market research,
which included review of an extensive independent report comparing various
firms' approaches to automated and robotic pharmacy systems, numerous
meetings with these firms to obtain additional information, site visits to
inspect various systems, and comparisons of the various features of each
firms' systems, was appropriate to the circumstances present here.  FAR S:
10.001(a)(2).  In any event, McKesson has not shown that the agency was
unaware of its qualifications, given the firm's frequent contacts with the
agency, the details of its products as set forth in the agency's market
research, and the Air Force consultant's experience with its products.  As
a result, even if we were to assume, for purposes of analysis, that the
agency had not conducted adequate market research, McKesson clearly was
not prejudiced.  Global Solutions Network, Inc., B-290107, June 11, 2002,
2002 CPD P: 98 at 7 n.5. 
[5] McKesson also alleged in its comments that several more of the RFP's
salient characteristics were overly restrictive.  However, protests based
upon alleged improprieties that are apparent in a solicitation must be
filed prior to the time set for receipt of initial proposals.  4 C.F.R. S:
21.2(a)(1) (2002).  Since McKesson did not raise these allegations prior
to the October 15 closing date for receipt of proposals, these allegations
are untimely and will not be considered. 
[6] McKesson's assertion that it has obtained the same sort of network
security approval from another federal agency and that the DSCP should
consider this approval to meet the requirement is entirely unpersuasive,
given the specific Air Force requirements outlined above and the dearth of
detail provided by McKesson concerning this approval. 
[7] McKesson argues that the AFCA CON applies to IA's PharmASSIST
Enterprise System, and not to the PharmASSIST robotic refill system the
firm has offered.  As the Air Force consultant has explained, however, the
IA robotic refill system can be viewed as merely the addition of the
robotic component--an automated arm--to the PharmASSIST Enterprise
System.  Air Force Consultant Initial Declaration P: 8.  IA's proposal
indicates its plan to use the PharmASSIST Enterprise System, and there is
no basis to conclude the AFCA CON does not apply to the system as offered.
[8] The related RFP salient characteristic required the system to be
*fully programmable and handle all tablet and capsule types.*  RFP at 5. 
McKesson's allegation that this characteristic is overly restrictive was
among its untimely allegations.  See supra at 3 n.4. 
[9] IA's proposal states that, for the average pharmacy, it would not be
unusual for dispensers counting even the dustiest drugs to go almost a
year between cleanings; most dispensers will never need to be cleaned. 
IA's Proposal at 21.
[10] It also appears that McKesson cannot meet, as written, the three
salient characteristics that it untimely challenged in its comments on the
initial agency report.
[11] McKesson's argument that IA's proposal does not indicate that its
system can meet any of the RFP's salient characteristics because one page
of its proposal merely indicates that it is compliant with each of these
characteristics ignores the remaining contents of IA's proposal, and
McKesson's argument that IA's proposal does not meet the agency's
throughput requirements ignores the fact that there are no such
requirements.