TITLE:  American College of Physicians Services, Inc.; COLA, B-294881; B-294881.2, January 3, 2005
BNUMBER:  B-294881; B-294881.2
DATE:  January 3, 2005

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   Decision

   Matter of:   American College of Physicians Services, Inc.; COLA

   File:            B-294881; B-294881.2

   Date: January 3, 2005

   Mark A. Friend, American College of Physicians Services, Inc.; Richard D.
Lieberman, Esq., and Karen R. O'Brien, Esq., McCarthy, Sweeney & Harkaway,
for COLA, the protesters.

   David H. Turner, Esq., Department of the Navy, for the agency.

   Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1.  Contention that a solicitation unduly restricts competition by
bundling the procurement of accreditation services and laboratory
proficiency testing in a single contract is denied where the agency
reasonably explains that procuring both services under the same contract
is necessary to meet the agency's needs for maintaining its medical
laboratories.

   2.  Contention that the agency violated the restriction, found at Federal
Acquisition Regulation (FAR) SA 12.302(c), against including terms and
conditions in a commercial item procurement that are inconsistent with
customary commercial practices by bundling the purchase of two commercial
items into a single procurement is denied because the regulatory
restriction, on its face, applies to terms and conditions used to procure
commercial items, and cannot properly be read as a supplemental
restriction against bundling, nor can it reasonably be read as a
supplement to the definition of a commercial item found at FAR SA 2.101.

   DECISION

   American College of Physicians Services, Inc. (ACPS) and COLA protest the
terms of request for proposals (RFP) No. N00140-04-R-0102, issued by the
Department of the Navy to procure professional accreditation services and
proficiency testing for medical laboratories operated by the U.S. Navy
Bureau of Medicine and Surgery. Both protesters argue that the
solicitation unduly restricts competition by bundling the purchase of
accreditation services and laboratory proficiency testing in a single
procurement.  In addition, ACPS argues that it is also unduly restrictive
to use one solicitation for all of the Navy's proficiency testing
requirements.  Both protesters also allege that purchasing accreditation
and proficiency testing services jointly is not a commercial practice.

   We deny the protests.

   BACKGROUND

   U.S. public heath regulations generally require certification of
laboratories that perform testing on human specimens and report patient
specific results for the diagnosis, prevention or treatment of disease, or
impairment.  42 C.F.R. SSA 493.1, 493.3 (2004); see generally 42 C.F.R.
Part 493.  Federal laboratories, including those operated by the military
services, are subject to these certification requirements, although the
requirements may be modified by agency heads to address agency-unique
circumstances.  42 C.F.R. SA 493.3(c). 

   To implement the regulatory scheme for certification and accreditation of
laboratories, the Department of Health and Human Services approves
non-profit institutions, rather than for-profit contractors, to provide
these services directly to the laboratories.  42 C.F.R. SSA 493.551(a),
493.553.  The pleadings submitted by both the Navy and the protesters
indicate that the community of institutions that perform these services is
limited in size, and well-known to laboratories, and to each other. 
Within this heavily-regulated arena populated by non-profit institutions,
the Navy is conducting a simplified acquisition for accreditation and
proficiency testing services using the commercial item test program
authorized by Federal Acquisition Regulation (FAR) Subpart 13.5, which
permits the use of simplified procedures for the acquisition of commercial
supplies and services in amounts up to $5 million. 

   With respect to the proficiency testing portion of this procurement, the
Navy and the protesters agree that there is currently only one entity, the
College of American Pathologists (CAP), that provides the full range of
possible proficiency testing that could be required here.  Thus, there is
no dispute that any successful offer to perform these services would have
to be submitted by CAP, or include CAP as a subcontractor.[3]  CAP is also
the Navy's incumbent contractor for these services, although it currently
performs the services under separate contracts. 

   In anticipation of this procurement, Navy contracting officials met with
representatives of COLA and representatives of the Joint Commission on
Accreditation of Healthcare Organizations (JCAHO) in early 2004, to
discuss the possibility of obtaining competition for the Navy's
requirements for accreditation and proficiency testing.  AR at 6. 
Although the Navy recognized that neither COLA nor JCAHO could provide all
of the agency's requirements, it concluded that by partnering, these
organizations might be able to submit viable proposals that would meet all
of the agency's needs.  Id. at 7. 

   On July 16, the Navy posted a presolicitation notice on the FedBizOpps
website advising of its requirements, and of its intent to solicit these
services as a commercial item using competition.  On August 10, the Navy
issued the instant solicitation seeking laboratory accreditation and
proficiency testing services at various Navy laboratories in the
continental United States and abroad.  The Navy appended an attachment to
the solicitation identifying by name 164 laboratories that might require
the services covered by the RFP. 

   On August 20, COLA filed an agency-level protest with the Navy raising
essentially the same issues raised here; on August 27, ACPS also protested
to the agency.  By letters dated September 23, the Navy denied both
protests.  Prior to the October 1 closing date, ACPS and COLA protested to
our Office.

   COLA'S PROTEST

   ACPS and COLA raise several of the same issues, although there are
differences in their pleadings.  Since the issues raised by COLA share a
legal foundation with additional issues raised by ACPS, we will address
COLA's contention's first.

   COLA argues that the Navy's bundled purchase of accreditation services and
proficiency testing services in the same solicitation unduly restricts
competition in violation of the Competition in Contracting Act of 1984
(CICA).[4]  According to COLA, the Navy's answer to the agency-level
protest failed to make the case for why these two services must be
purchased jointly. 

   CICA generally requires that solicitations 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.
SA 2305(a)(1) (2000).  Since bundled, consolidated, or total-package
procurements combine separate, multiple requirements into one contract,
they have the potential for restricting competition by excluding firms
than can furnish only a portion of the requirement.  Aalco Forwarding,
Inc., et al., B-277241.12, B-277241.13, Dec. 29, 1997, 97-2 CPD PA 175 at
6.  In interpreting CICA, we have looked to see whether an agency has a
reasonable basis for its contention that bundling is necessary, and we
have sustained protests where no reasonable basis was shown.  National
Customer Eng'g, B-251135, Mar. 11, 1993, 93-1 CPD PA 225 at 5.

   In answer to COLA's challenge, the Navy argues that procuring these
services separately would create an administrative burden for agency
contracting personnel.  AR at 16.  The Navy also contends that using
separate contracts would create logistical problems in its management of
laboratories since using separate contracts requires the agency to act as
a "go between" to coordinate the actions of the accreditation
organizations and the proficiency testing organizations.  Id. at 16-17. 
Finally, the Navy points out that by having a single contractor
responsible for both functions, it is more likely to obtain the immediate
review and monitoring of testing results needed to continue a laboratory's
accredited status.  Id. at 17.  COLA offers no specific response to these
arguments other than to contend that the Navy has yet to offer a rational
basis for procuring these services jointly.  COLA Comments at 3.  

   While the record here supports the protesters' contention that the joint
purchase of these services with one contract will restrict competition,
rather than enhance it, the question at issue is whether this approach is
required to meet the agency's needs.  EDP Enters., Inc., B-284533.6, May
19, 2003, 2003 CPD PA 93 at 5, 8.  With respect to the Navy's first
response--that it needs to procure these services jointly as a matter of
administrative convenience--administrative convenience for agency
contracting personnel is not a legal basis to justify bundling
requirements, if the bundling of requirements restricts competition, as it
appears here.  Vantex Serv. Corp., B-290415, Aug. 8, 2002, 2002 CPD
PA 131 at 4; National Customer Eng'g, supra at 6.

   On the other two fronts, however, we think the Navy has offered a
reasonable basis for procuring these services jointly, and neither COLA
nor ACPS has offered any reason why the Navy's position is unreasonable. 
For example, unlike in EDP Enterprises (where GAO sustained the protest
after finding that the agency had offered no reasonable basis for bundling
food services with other logistical services required at Fort Riley, see
2003 CPD PA 93 at 6), there is no dispute here that there is a logical
connection between the two services sought by this solicitation.  The
results of the proficiency testing services purchased under this
solicitation are used to determine a laboratory's eligibility for
accreditation.  In addition, the Navy has concluded that using a single
contractor to coordinate the two processes avoids logistical problems. 
For example, the Navy claims that using one contractor to coordinate these
two processes may help avoid reporting delays the Navy has experienced in
the past between the contractor who monitors the results of proficiency
testing and the contractor who reflects those results in accreditation
decisions.  Navy Response to COLA's Comments at 4.  In the absence of a
showing from COLA or ACPS that these rationales are unreasonable, we deny
the challenge to the solicitation.

   COLA next contends that the Navy has improperly included terms and
conditions in a commercial item procurement that are inconsistent with
customary commercial practices, in violation of FARA SA 12.302(c).[5]  In
this regard, COLA argues that FAR SA 12.302(c) blocks the joint purchase
of accreditation and proficiency testing services because purchasing the
two services with a single contract is not customary commercial practice. 
In addition, COLA argues that the Navy failed to obtain a waiver, or to
conduct appropriate market research to support its decision to deviate
from customary commercial practice by procuring these services jointly.

   The Federal Acquisition Streamlining Act of 1994, 10 U.S.C. SA 2377
(1994), established a preference, and specific requirements, for acquiring
commercial items that meet the needs of an agency.  In general terms, the
Act, and the regulations that implement it, are intended to steer
government agencies clear of the more traditional, and intrusive,
government contracting practices that have evolved when agencies are
buying products that have no counterpart in the commercial marketplace. 
ATA Defense Indus., Inc., B-282511.8, May 18, 2000, 2000 CPD PA 81 at 3;
Aalco Forwarding, Inc., et al., B-277241.8, B-277241.9, Oct. 21, 1997,
97-2 CPD PA 110 at 9-10.  FAR Part 12 implements this policy by allowing
agencies to use solicitation terms--and to make other adjustments in the
areas of acquisition planning, evaluation, and award--that more closely
resemble the commercial marketplace when procuring commercial items.  See
also Crescent Helicopters, B-284706 et al., May 30, 2000, 2000 CPD PA 90
at 2-4; Smelkinson Sysco Food Servs., B-281631, Mar. 15, 1999, 99-1 CPD
PA 57 at 4.

   In accordance with the above-stated policy, FAR SA 12.302(c) bars the
tailoring of solicitations for commercial items in a manner inconsistent
with customary commercial practice "unless a waiver is approved in
accordance with agency procedures."  Specifically, the provision states:

   (c) Tailoring inconsistent with customary commercial practice.  The
contracting officer shall not tailor any clause or otherwise include any
additional terms or conditions in a solicitation or contract for
commercial items in a manner that is inconsistent with customary
commercial practice for the item being acquired unless a waiver is
approved in accordance with agency procedures.  The request for waiver
must describe the customary commercial practice found in the marketplace,
support the need to include a term or condition that is inconsistent with
that practice and include a determination that use of the customary
commercial practice is inconsistent with the needs of the Government.  A
waiver may be requested for an individual or class of contracts for that
specific item. 

   As a preliminary matter, we note that the scope of FAR subpart 12.3,
within FAR PartA 12, is to establish the provisions and clauses to be used
when acquiring commercial items.  FAR SA 12.300.  The first substantive
provision within subpart 12.3 is titled, "Solicitation provisions and
contract clauses for the acquisition of commercial items."  Moreover, each
of the three substantive subsections of subpart 12.3--i.e., SSA 12.301,
12.302, and 12.303--address the provisions and clauses to be included in
solicitations (and the resulting contracts) for commercial items. 

   Viewing COLA's protest contention within the scope of FAR subpart 12.3, we
note first that COLA does not identify any term or condition of the
solicitation that is inconsistent with customary commercial practice. 
Instead, COLA's contention is that the joint purchase of these two
services under one contract is not commercial--i.e., it is the bundled
nature of the workload itself that COLA contends is the altered term or
condition.  Interestingly, both COLA and ACPS concede the commerciality of
each service if purchased separately.[6] 

   In our view, COLA's challenge to the joint purchase of accreditation and
proficiency testing services is appropriately heard as an assertion that
the bundled workload is an undue restriction on competition, which has
been answered above.  Simply put, we do not read FAR SA 12.302(c) to
provide a basis separate from CICA for challenging bundled procurements. 
We also do not read FAR SA 12.302(c) as an overlay on the definition of a
commercial item or service found at FAR SA 2.101.  In our view, FAR
SA 12.302--and the entire scheme of FAR subpart 12.3--addresses how
commercial items are procured, not whether the items or services
themselves are commercial in nature.

   To the extent that COLA argues that the Navy has failed to follow the
procedures of FAR SA 12.302(c) by not obtaining a waiver for allegedly
tailoring provisions and clauses in a manner inconsistent with customary
commercial practice, or failed to describe the customary commercial
practice found in the marketplace to support such a waiver, we do not
think COLA has established that the requirements of this provision are
applicable here.

   In this regard, we disagree with COLA's contention that the situation here
is similar to the situation we faced in Smelkinson Sysco Food Servs.,
B-281631, Mar. 15, 1999, 99-1 CPD PA 57.  In Smelkinson, the protester
challenged the inclusion of a clause requiring disclosure of internal
profit data (specifically, data on profits associated with
interorganizational transfers) in a solicitation issued under Part 12.  We
sustained the protest after concluding that the clause appeared
inconsistent with customary commercial practice, that the agency had not
conducted market research to support its decision to include the clause,
and that the agency had not obtained the requisite waiver needed to
include the additional requirements.  Id. at 5-6.  A clause requiring
disclosure of internal profit data is a textbook example of a clause
inconsistent with commercial practice, and, for that reason, we viewed the
inclusion of such a clause without the requisite market research or
waiver, as a violation of FAR SA 12.302(c).  In the present protest, by
contrast, COLA is not protesting the inclusion of any such clause--or,
indeed, of any clause, term, or condition in the solicitation at all.

   In summary, we deny COLA's argument that the agency acted improperly by
not following the procedures set forth in FAR SA 12.302 when it decided to
procure both accreditation and proficiency testing services in one
solicitation because we are not convinced that these procedures are
applicable here.  Thus, there was no requirement for market research to
support inclusion of an altered contract clause, and there was no
requirement for a waiver from customary commercial practices.  

   ACPS' PROTEST

   ACPS, for the most part, raises the same issues as COLA, which are
addressed above.  In a few instances, however, ACPS raises matters unique
to its status as a provider of proficiency testing services--in contrast
to COLA's status as a provider of accreditation services.  These issues
are addressed below.

   In its initial protest, ACPS argued that the Navy is unduly restricting
competition by using a single contract to procure all of its proficiency
testing needs.  In this regard, ACPS points out that CAP is the only
provider of proficiency testing in certain more esoteric areas of
healthcare. 

   The Navy's report answered ACPS's initial allegation regarding the
bundling of all proficiency testing needs, as well as the allegation ACPS
shared with COLA regarding the bundling of accreditation services and
proficiency testing services.  In its comments, however, ACPS offers no
challenge to the Navy's stated rationale for not breaking out the more
esoteric areas of proficiency testing.  Instead, all of ACPS's comments
regarding bundling are directed to the bundling of accreditation services
and proficiency testing services.  Accordingly, we conclude that ACPS
abandoned its challenge to the bundling of all the Navy's proficiency
testing needs into one contract.  See Wilson 5 Serv. Co., B-285343.2,
B-285343.3, Oct. 10, 2000, 2000 CPD PA 157 at 3 n.3.

   ACPS also argued in its initial protest that the Navy improperly states
the proficiency testing portions of its requirements using an approach
developed by CAP, which, in ACPS's view, makes it difficult for other
offerors of proficiency testing services to know which specific tests are
required.  Although the Navy agreed that the solicitation stated the
proficiency testing requirements in "testing modules that coordinate with
CAP catalogs," AR at 25, the Navy ultimately supplemented its explanation
of why this information was stated in this format in a final reply.  In
this document, the Navy stated that CAP pioneered proficiency testing to
address the government's testing requirements, and that the components of
CAP's testing modules are well-known throughout the industry, and are
publicly posted on CAP's website for use by other entities.  Since the
Navy has offered an explanation for stating its requirements in this
manner, and has shown that an explanation of the modules is publicly
available, and since ACPS has offered no substantive response to the
Navy's explanation, we have no basis to conclude that the solicitation is
overly restrictive because of how the work is defined.

   Finally, we note that ACPS raises several issues for the first time in its
comments on the agency report.  These issues include:  (1) ACPS's
assertion that the solicitation includes proficiency testing that should
more properly be characterized as "continuing medical education of
clinical pathologists rather than proficiency testing" as defined in 42
C.F.R. Part 493, ACPS Comments at 3; and (2) ACPS's challenge to the
solicitation's request for "evidence of past performance on equivalent
contracts of similar size, scope and value as this instant procurement,"
id. at 4-5.  These issues raise challenges to the solicitation that were
apparent on the face of the document, and had to be raised prior to the
time set for receipt of initial proposals.  4 C.F.R. SA 21.2(a)(1)
(2004).  At this juncture--proposals were due October 1, 2004, and the
comments here were filed November 17--these newly-raised issues are
untimely, and are dismissed.

   The protests are denied.

   Anthony H. Gamboa

   General Counsel  

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

   [1] The protester advises that COLA is not an acronym.

   [2] ACPS provides proficiency testing services for medical laboratories;
COLA provides accreditation services. 

   [3] See Agency Report (AR) at 7, 14 n.12; ACPS Initial Protest at 2; COLA
Initial Protest at 3.

   [4] Neither ACPS nor COLA argue that this solicitation violates the
bundling restrictions found in the Small Business Act, as amended, see 15
U.S.C. SA 631(j)(3) (2000); as a result, this decision does not consider
whether these restrictions apply to this procurement. 

   [5] In actuality, COLA alleged a violation of FAR SA 13.303(c), which
addresses blanket purchase agreements and has no application here.  We
presume COLA intended to argue a violation of FAR SA 12.302(c), which bars
the tailoring of provisions in a manner inconsistent with customary
commercial practice. 

   [6] While our decision addresses the matters raised by the protesters, it
should not be read to answer the question of whether accreditation
services (or proficiency testing services) provided by non-profit entities
(or by state boards, such as the Wisconsin State Laboratory of Hygiene
Proficiency Testing Program, for example--identified by the protester as
one of the proficiency testing providers eligible to participate in this
procurement) are commercial services as defined at FAR SA 2.101. 
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