TITLE:  MTB Group, Inc., B-295463, February 23, 2005
BNUMBER:  B-295463
DATE:  February 23, 2005
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   Decision

   Matter of:   MTB Group, Inc.

   File:            B-295463

   Date:              February 23, 2005

   J. Randolph MacPherson, Esq., Halloran & Sage, for the protester.

   Angela Puri, Esq., Department of Housing and Urban Development, for the
agency.

   Mary G. Curcio, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest that conducting procurement using reverse auction format is
impermissible because vendors' prices will be disclosed during the auction
is denied; agency is conducting reverse auction under simplified
acquisition procedures, which encourage use of innovative procedures and
do not expressly prohibit disclosure of vendors' prices in implementing
such procedures, and disclosure is not prohibited under the procurement
integrity provisions of the Office of Federal Procurement Policy Act.

   DECISION

   MTB Group, Inc. protests that an online reverse auction (that is, an
auction under which the lowest priced vendor will be issued a purchase
order) being conducted by the Department of Housing and Urban Development
(HUD), Real Estate Assessment Center (REAC), for housing inspection
services, is improper because it requires the disclosure of vendors'
prices during the auction.

   We deny the protest.

   HUD requires the rental housing units for which it is responsible to
undergo annual physical inspections to ensure that they are fit for
habitation.  HUD is contracting for those services using an online reverse
auction; indeed, HUD has issued a notice to potential participants
indicating its intent to conduct reverse auctions for 330A properties
within Georgia and Pennsylvania.1  HUD is conducting the reverse auctions
under the simplified acquisition procedures of Federal Acquisition
Regulation (FAR) part 13.  Using this process, HUD will notify potential
participants of an upcoming auction, specifying the time that the auction
will start and close.  Those who choose to participate will submit
quotations to the online auction website.  During the auction, the website
will display the property to be inspected, the current lowest quotation,
and the time remaining in the auction.  The website will not display the
names of vendors, any other identifying information, or the time at which
quotations were submitted.  At the close of the auction, competing vendors
will be able to view all submitted quotations, as well as the winning
quotation, and a purchase order will be sent to the winning vendor.  HUD
will provide to unsuccessful vendors the name of the winning vendor and
its quotation, but not the identity of the unsuccessful vendors. 
Contracting Officer's Statement at 2. 

   MTB asserts that the reverse auction process established by HUD violates
the Office of Federal Procurement Policy Act, 41 U.S.C. S 423(a) (2000)
(and the implementing provisions of the FAR, SS 3.104-3, 3.104-4), by
disclosing or requiring vendors to disclose their quoted prices.  

   Our Office has not previously considered the question of whether agencies
properly may conduct procurements using reverse auction procedures under
which participants' prices will be revealed during the auction.  We find
that the protester has not established--and that there is no other basis
for concluding--that HUD's use of reverse auctions in conducting the
procurements here is improper.

   First, as a general matter, while the FAR does not expressly recognize
reverse auctions as a permissible procurement vehicle for goods and
services, neither does it expressly prohibit the government from using
auctions, and FAR S 1.102(d) provides that a procurement procedure is
permissible where not specifically prohibited.  At the same time, HUD's
use of reverse auctions is fully consistent with FAR part 13 and promotes
the underlying purpose of that regulation.  In this regard, FAR part 13,
which is generally aimed at streamlining the procurement process, advises
agencies to use simplified acquisition procedures where, as here, the
value of the acquisition is below the simplified acquisition threshold,
FAR SA 13.002; to make simplified purchases in the most suitable,
efficient, and economical manner based on the circumstances of the
acquisition, FAR S 13.003(g); and to use innovative procedures to the
maximum extent practicable.  FAR S 13.003(h).  In addition, agencies are
encouraged to use electronic purchasing techniques, FAR S 13.003(d), and
to maximize the use of electronic commerce when practicable and cost
effective.  FAR S 3.003(f).  We thus find no basis to object generally to
the agency's utilizing reverse auction procurement procedures.

   Regarding MTB's specific objection--that the reverse auction here is
impermissible because it will result in disclosure of its price--we find
no basis for objecting to the agency's approach.  MTB is correct that the
Act prohibits government officials and those acting on behalf of the
government from knowingly disclosing contractor quotation or proposal
information before award.  41 U.S.C. SA 423(a).  However, that prohibition
is not absolute.  Rather, the Act specifically provides that it does not
"restrict the disclosure of information to, or its receipt by, any person
or class of persons authorized in accordance with applicable agency
regulations or procedures, to receive the information," 41 U.S.C.
SA 423(h)(1), and does not "restrict a contractor from disclosing its own
quote or proposal information or the recipient from receiving that
information."  41 U.S.C. SA 423(h)(2).[1]  We think the price disclosure
under HUD's reverse auction procedures falls within the exception
language, although we are aware of no judicial or other authoritative
interpretation of these provisions.  First, under the procedure the agency
has established, vendors actually will disclose their own prices--albeit,
as a condition of competing--by entering the prices on the auction
website; as noted, a vendor's disclosing its own price is not prohibited
under the Act.[2]  Moreover, even if the price disclosure were considered
to be by government officials due to its nature as a precondition to a
vendor's competing, the disclosure is pursuant, and integral, to the
reverse auction procurement procedures established by the agency; we thus
would view the disclosure as being to persons authorized by agency
procedures to receive the information, consistent with the exception
language.  See generally DGS Contract Serv., Inc. v. United States, 43 Ct.
Cl. 227, 236 (1999); Ocean Servs., LLC., Ba**292511.2, Nov. 6, 2003,
2003A CPD P 206 at 5 (neither the Act nor the FAR establishes an absolute
prohibition against disclosure of price information, and both make clear
that prices can be disclosed under certain circumstances).

   MTB asserts that the reference in the exception language to "any person or
class of persons authorized in accordance with applicable agency
regulations or procedures" does not envision disclosures to competing
vendors--such as under the reverse auction procedures here--but, rather,
refers only to agencies' disclosure of pricing and other procurement
information to contractor personnel assisting the agency in proposal
evaluation and other related activities.  This argument is without merit. 
While MTB refers to support for its interpretation in the legislative
history of other legislation, it cites nothing in the Act itself or the
Act's legislative history--and we find nothing--to support its assertion. 
In fact, MTB ultimately acknowledges that neither the legislative history
of the Act, nor the regulatory history of FAR S 3.104(a), explains the
purpose or scope of the exception.  Protester's Comments at 21.  MTB's
interpretation is all the more untenable in light of the Act's underlying
purpose--to prevent government officials from disclosing sensitive
procurement information in exchange for gratuities or future employment
opportunities.  See 134A Cong. Rec. 32156 (Oct. 20, 1988) (Comments of
Senator Glenn summarizing the purpose of the Act); H.R. Rep. No.A 100-911,
atA 18A (1988).  This purpose would in no way be served by applying the
Act to preclude HUD from conducting procurements using its reverse auction
procedures.  Given all of these considerations, we find no basis for
objecting to HUD's use of reverse auction procedures here.[3]

   MTB maintains that HUD's dividing its overall requirement for inspection
services--which previously was met under large regional procurements--into
procurements for only one or a few inspections violates FAR S
13.003(c)(2).  This provision requires procuring agencies to use
simplified acquisition procedures to the maximum extent practicable for
acquisitions that will not exceed the simplified acquisition threshold
(generally $100,000) or the microa**purchase threshold (generally
$2,500).  In the language to which MTB is referring, the provision also
admonishes agencies not to divide requirements aggregating work valued
above the threshold amounts into several purchases below the threshold
amounts solely to permit use of the simplified procedures or to avoid
requirements applicable to purchases exceeding the thresholds.  MTB
asserts that HUD is violating this prohibition by dividing its single
requirement for inspection services into several smaller requirements, all
below the threshold amounts.

   This argument is without merit.  The record shows that HUD's motivation is
not to avoid competition requirements, but to expand the field of
competition to include all interested inspectors--including those who
desire to compete for single inspections--instead of effectively limiting
the competition to the few companies, such as MTB, that are able to
compete to perform large numbers of inspections in a specific region.  The
agency will achieve this aim by, as discussed above, publicizing each
separate requirement and giving all interested vendors an opportunity to
submit quotations on any or all of those requirements through the reverse
auction procedures.  Agency Report at 3, 8.  The agency reports that prior
auctions for smaller requirements have resulted both in adequate
competition and in lower prices for inspections.  Id. at 3-4.  In any
case, the record does not show that the protester has suffered any
prejudice as a result of the agency's new multiple procurement approach;
MTB does not allege, and there is no reason to assume, that it will be
precluded from competing for any of the requirements.  MTB's mere
preference that HUD continue to procure its inspection services as it has
in the past is not a valid basis of protest.  See Frasca Int'l, Inc.,
B-293299, Feb. 6, 2004, 2004 CPD P 38 at 3.

   The protest is denied. 

   Anthony H. Gamboa
General Counsel

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

   1  HUD previously awarded six regional indefinite-delivery contracts for
the inspection services using negotiated procurement procedures; MTB was
the incumbent contractor for three of those contracts, which have now
expired.

   [1] FAR SA 3.104a**4 similarly restricts the disclosure of price
information except, in accordance with applicable agency regulations or
procedures, to persons authorized by the agency head or the contracting
officer to receive such information, and also recognizes that a contractor
may disclose its own information.

   [2] The agency argues that disclosing a price without the vendor's name is
not a disclosure at all within the meaning of the Act.  We agree that it
is questionable whether revealing a price alone constitutes a disclosure
under the Act and regulations.  However, in light of our conclusion that,
in any case, the disclosure under HUD's procedures here does not violate
the Act, we do not reach this question.

   [3] MTB maintains that it considers its price information confidential and
that revealing its price will effectively reveal its labor, overhead and
profit rates.  However, we fail to see--and the protester does not
explain--how this differs from any other procurement.  In particular,
whenever a firm submits a sealed bid, its price--and all information that
can be derived from its price--is revealed at the public opening.  MTB
also complains that, although the quotations here will be anonymous, due
to the nature of the market for inspectors, vendors will be able to deduce
which quotations were submitted by which vendors and will be able to use
that information in developing their prices in future auctions.  Again,
however, this same result obtains under any competitive procurement; in
negotiated procurements, the successful offeror's price is revealed and
can be used by competing vendors in future procurements, and, as noted
above, in sealed bid procurements, all bidders' prices are revealed at the
public opening.  The disclosure of prices--and any competitive advantage
that inures to competitors as a result--is simply an inherent feature of
the transparency in any public competition for a federal contract award.