[Federal Register Volume 68, Number 114 (Friday, June 13, 2003)]
[Notices]
[Pages 35411-35413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-14934]
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GENERAL ACCOUNTING OFFICE
Administrative Practice and Procedure; Bid Protest Regulations,
Government Contracts
AGENCY: General Accounting Office.
ACTION: Notice.
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SUMMARY: The Office of Management and Budget (OMB) recently announced
major revisions to Circular A-76, which governs how Federal agencies
determine whether to transfer performance of commercial activities from
the public to the private sector, or vice versa. Performance of
Commercial Activities, 68 FR 32134 (May 29, 2003). As relevant here,
the revisions would make competitions involving in-house government
competitors more similar to private/private competitions conducted
under the Federal Acquisition Regulation (FAR) than has been the case
with the competitive sourcing process. This notice solicits comments
regarding two key legal questions, namely, whether the revisions made
to the Circular affect the standing of an in-house entity to file a bid
protest at the General Accounting Office (GAO), and who would have the
representational capacity to file such a protest. This notice also
solicits comments on other procedural issues raised by the Circular's
revisions.
DATES: Comments should be submitted on or before July 16, 2003.
ADDRESSES: Comments concerning these matters may be submitted by e-mail
at [email protected], or by facsimile at 202-512-9749. Due to
delivery delays, submission by regular mail is discouraged. Comments
may be sent by Federal Express or United Parcel Service to: Michael R.
Golden, Assistant General Counsel, General Accounting Office, 441 G
Street, NW., Washington, DC 20548.
FOR FURTHER INFORMATION CONTACT: Daniel I. Gordon (Managing Associate
General Counsel), Michael R. Golden (Assistant General Counsel) or
Linda S. Lebowitz (Senior Attorney); all three can be reached on 202-
512-9732.
SUPPLEMENTARY INFORMATION: GAO's statutory authority to hear bid
protests is found in the Competition in Contracting Act of 1984 (CICA),
31 U.S.C. 3551-56 (2000). CICA establishes the standard for standing to
file a protest by stating that a protest may be filed by an
``interested party,'' which is defined in the statute as ``an actual or
prospective bidder or offeror whose direct economic interest would be
affected by the award of the contract or by failure to award the
contract.'' 31 U.S.C. 3551(2); see also Bid Protest Regulations, 4 CFR
21.0(a) (2003).
Under this definition, GAO hears bid protests filed by private-
sector firms that have participated in A-76 cost comparisons, since a
private firm that participated in an A-76 cost comparison is an actual
offeror whose direct economic interest would be affected by the award
of the contract or by failure to award the contract. Over the past
three years, private firms have filed more than 50 protests at GAO
challenging the conduct of A-76 competitions.
In contrast, GAO consistently has found that Federal employees and
their unions cannot protest any aspect of the A-76 competition, because
they do not meet CICA's definition of an ``interested party,'' so that,
as a matter of law, GAO lacks authority to consider their protests. In
American Fed'n of Gov't Employees, AFL-CIO et al., B-282904.2, June 7,
2000, 2000 CPD ] 87 at 3-4, GAO identified a number of reasons for
[[Page 35412]]
this conclusion. It pointed out that neither individual Federal
employees, nor the in-house plan (the ``Most Efficient Organization,''
or MEO), nor the employees' union representatives are offerors. In
addition, GAO found that the MEO plan submitted in an A-76 competition
is not an offer as defined under the FAR, because the MEO does not
constitute a response to a solicitation (the solicitation currently
applies only to private-sector competitors), nor would the MEO, if
adopted, lead to formation of a contract, which is a mutually binding
legal relationship to perform the services. Indeed, as GAO pointed out,
no contract is awarded where the MEO prevails in the cost comparison.
See also American Fed'n of Gov't Employees, B-223323, June 18, 1986,
86-1 CPD ] 572; American Fed'n of Gov't Employees--Recon., B-219590.3,
May 6, 1986, 86-1 CPD ] 436 (affirming an earlier dismissal).
The April 2002 report of the Commercial Activities Panel
recommended that, in the context of improvements to the Federal
government's process for making sourcing decisions, a way be found to
level the playing field by allowing in-house entities to protest at
GAO, as private-sector competitors are allowed to do. The report noted
that, if a decision were made to permit the public-sector competitor to
protest A-76 procurements, the question of who would have
representational capacity to file such a protest would need to be
carefully considered.
By making a number of changes from the predecessor Circular, the
revised Circular may justify GAO reaching a different conclusion
regarding the compliance of the in-house entity with CICA's definition
of an ``interested party.'' Unlike under the predecessor Circular, the
revised A-76 framework contemplates that the in-house government entity
will submit an ``agency tender'' in response to the solicitation that
will be evaluated along with private-sector proposals for purposes of
ultimately deciding which competitor, public or private, should be
selected to perform the work. The agency tender will be developed by an
Agency Tender Official (ATO), defined as an agency official with
decision-making authority who ``represents the agency tender during
source selection.'' Revised Circular at D-2. If the agency tender
prevails in the competition, the revised Circular provides that an
``MEO letter of obligation'' will be issued to an official responsible
for performance of the MEO. Revised Circular at B-18. Under the revised
Circular, this letter of obligation is required to incorporate
appropriate portions of the solicitation and tender. Id. Under the
revised Circular, the public sector source's failure to perform in
accordance with its obligations can result in a termination action.
Revised Circular at B-20.
The ATO is among those defined under the revised Circular as a
``directly interested party'' for purposes of filing an agency-level
protest of the performance decision. Revised Circular at D-4. The
revised Circular also defines a ``directly interested party'' to
include a ``single individual appointed by a majority of directly
affected employees as their agent.'' Id. In contrast to the ATO's
defined role in the competition, the revised Circular does not define a
role for this individual, other than in contesting agency actions taken
in connection with an A-76 competition.
It is the cumulative legal impact of these changes that GAO is
considering in assessing whether an in-house entity should have
standing to file a bid protest at GAO when a competition is conducted
under the revised Circular. Under the revised Circular, the agency
tender appears to be treated more as an offer than under the
predecessor Circular, and, if the source selection results in a
decision to accept an agency tender, there will be a letter of
obligation, which appears intended to bind the in-house entity, in at
least a quasi-contractual way, to the terms of the solicitation and
tender. In this regard, it may be viewed as relevant that GAO recently
found that a public entity could be an interested party under CICA,
even though, if successful in a competition, it would not be obtaining
a contract. Federal Prison Indus., Inc., B-290546, July 15, 2002, 2002
CPD ] 112. Further, as discussed in Department of the Navy--Recon., B-
286194.7, May 29, 2002, 2002 CPD ] 76 at 4, GAO reiterated that the in-
house entity is essentially a competitor and that in preparing the in-
house plan for performance, the MEO team members ``functioned * * * as
competitors.''
GAO recognizes that there are various ways to resolve the legal
question of interested-party status for in-house entities under the
revised Circular. One way would be through case law. That is, GAO could
simply wait until a protest is filed by an ATO or another individual or
entity representing in-house interests; in response to a request for
dismissal on standing grounds (or at its own initiative), GAO could ask
the parties to address the matter in submissions and GAO could then
issue a decision resolving the protester's interested-party status.
Alternatively, GAO could amend its bid protest regulations to address
the impact of the revised Circular, or it could issue a notice in the
Federal Register announcing its legal conclusion. Another alternative
would be for Congress to amend CICA's definition of an interested party
for purposes of the filing of protests. Obviously, Congress could act
even if GAO does not, and, indeed, legislative action would override
action by GAO through its regulations or its case law. Finally, if it
is found that GAO does not have authority under CICA to consider such
protests, GAO could potentially consider protests by the ATO or another
individual or entity representing in-house interests as ``non-statutory
protests,'' if agencies agree in writing to have GAO decide the
protests.
The purpose of this notice is to solicit comments from the public
as to which action, if any, GAO should take. GAO would welcome comments
from contracting agencies, other Federal agencies, individual Federal
employees, Federal employee unions, contractors and other private-
sector firms, attorneys (from all sectors), and others wishing to
express a view. The most helpful views will be clear and concise, and
will reflect familiarity with GAO's bid protest regulations, practice,
and case law, as well as with the Circular A-76 framework. The key
questions GAO is seeking views on are: (1) What method of deciding the
matter GAO should use: case law (that is, wait for a protest presenting
the question to be decided by GAO), amendment to the bid protest
regulations, a notice in the Federal Register announcing GAO's legal
conclusion, or no action by GAO; and (2) if GAO should act, what its
decision should be--specifically, whether the in-house competitor
should, or should not, be considered an interested party, and, if so,
who should be viewed as having representational capacity to file a
protest at GAO on behalf of the in-house competitor.
It would also be helpful to know the commenters' views on whether
counsel for the ATO or the appointed individual would need to apply for
admission (and what conditions might affect the likelihood of that
counsel being admitted) to a protective order that GAO would issue (as
it normally does) to limit access to nonpublic information regarding
the procurement. See 4 CFR 21.4.
Finally, commenters may wish to address the impact, if any, on
their view of the holding from the Court of Appeals for the Federal
Circuit (consistent with GAO's view, as explained above) that Federal
employees and their union do not qualify as interested parties to
protest a decision pursuant to Circular
[[Page 35413]]
A-76. American Fed'n of Gov't Employees, AFL-CIO et al. v. United
States, 258 F.3d 1294 (Fed. Cir. 2001).
Another revision to the Circular appears to affect the procedures
GAO follows in handling protests of A-76 competitions. Under the
predecessor Circular, parties affected by the cost comparison decision
were able to challenge the results of the decision under an A-76
administrative appeal process. In light of the availability of this A-
76 appeals process, GAO had a longstanding rule, based on comity and
efficiency, that it would generally not hear a protest against the
propriety of the cost comparison until the A-76 administrative appeals
procedure provided by the agency had been exhausted. See Intelcom
Support Servs., Inc., B-234488, Feb. 17, 1989, 89-1 CPD ] 174; Direct
Delivery Sys., B-198361, May 16, 1980, 80-1 CPD ] 343. This is so, even
though GAO has recognized that there is no statutory or regulatory
requirement that an offeror exhaust available agency-level remedies
before protesting to GAO. See BAE Sys., B-287189, B-287189.2, May 14,
2001, 2001 CPD ] 86 at 17.
The revised Circular abolishes the administrative appeals process,
and instead provides that a ``directly interested party'' may contest
various aspects of a standard competition by filing an agency-level
protest. Under GAO's Bid Protest Regulations, protesters are not
required to file an agency-level protest before filing a protest at
GAO. In light of the revised Circular's abolition of the special A-76
administrative appeal process, GAO solicits comments on whether it
would be appropriate to continue to apply the exhaustion doctrine to A-
76 protests or whether protesters should now be permitted to file their
A-76 challenges directly with GAO.
Finally, the revised Circular states that ``no party may contest
any aspect of a streamlined competition.'' Revised Circular at B-20.
Under the revised Circular, a streamlined competition may entail
issuance of a solicitation for proposals from the private sector, but
that is not required. Revised Circular at B-4. GAO solicits comments on
whether it would have a legal basis to consider a protest, from either
the private or the public sector, regarding a streamlined competition.
Anthony H. Gamboa,
General Counsel.
[FR Doc. 03-14934 Filed 6-12-03; 8:45 am]
BILLING CODE 1610-02-P