Critical Process Filtration, Inc.

Decision

Matter of: Critical Process Filtration, Inc.

File: B-400746, B-400747, B-400750, B-400751, B-400752, B-400785

Date: January 22, 2009

DIGEST

1. Protester's contentions that three agency procurements for brand-name filters improperly limit competition are denied where the record shows that the agency is procuring the brand-name items using simplified acquisition procedures and has adequately justified the use of its brand-name approach under the procedures applicable to simplified acquisitions.

2. Protester's contention that a fourth agency procurement for brand-name filters improperly limits competition is sustained where the procurement history information set forth in the solicitation shows that the value of the requirement is likely to exceed the applicable simplified acquisition threshold of $100,000; accordingly, the streamlined procedures applicable to simplified acquisitions cannot be used for this requirement.

Critical Process Filtration, Inc. (CPF) of Nashua, New Hampshire, a small business, protests the terms of six solicitations by the Defense Logistics Agency (DLA) for various types of brand-name fluid filters which are used in particular weapons systems. CPF argues that the solicitations lack essential information that would allow CPF to determine whether it can manufacture the filters itself, and therefore, whether to submit responses, and more broadly, that DLA has unjustifiably limited competition to specific brand-name items.

We deny three of the protests, dismiss two of them,[1] and sustain one.

BACKGROUND

Each of the challenged solicitations was electronically posted on the DLA Internet Bid Board System at https://www.dibbs.bsm.dla.mil as a request for quotations (RFQ), and each RFQ sought a different type of fluid filter. The postings provided only the national stock numbers (NSN), the names of the manufacturers, and their part numbers.

DLA describes all four of the RFQs as simplified acquisitions because it assigns a value of under $100,000 to them. See Federal Acquisition Regulation (FAR) sect. 2.101 (definition of –simplified acquisition threshold"). For three of the RFQs, there appears to be no question that the procurement is properly valued at less than the simplified acquisition threshold.[2] First, in B-400750, DLA estimated that it would place orders under an indefinite-delivery purchase order (IDPO)[3] for an estimated quantity of 274 filters over the 2-year term of the IDPO which, based on the lowest and highest historical prices listed in the RFQ, suggests a total price between $8,190 and $21,098. RFQ SPM7M1-08-U-J179 at 1, 7. Second, in B'400752, DLA will purchase 8 filters which, based on the only historical price listed in the RFQ, suggests a total price of $3,496. RFQ SPM7MC'09'T-0151 at 1, 3. Third, in B-400785, DLA will purchase 60 filters which, based on the two historical prices listed in the RFQ, suggests a total price between $789 and $900. RFQ SPM7M3'08'T'K838 at 1, 4.[4]

However, in the fourth case, B-400751, the RFQ contains an estimate that shows that DLA will purchase 1,356 filters over the 2-year term of the IDPO. Based on the lowest and highest historical prices also listed in the RFQ, our Office calculates a potential IDPO value between $205,881 and $343,977. RFQ SPM7L4-09-U-A006 at 1, 7.[5]

Each of the RFQs advised that DLA lacked data about the part, and that any firm wishing to propose an alternative to the brand-name item would be required to submit a data package for both the specified brand-name part, and the offered alternative.

DLA explains that it is conducting brand-name procurements,[6] all of these filters are –critical application items,"[7] and that it has identified the only known approved sources for these filters. DLA also states that each of the manufacturers of the brand-name filters –holds the related data proprietary." AR at 2. DLA explains that it relies on an –Acquisition Method/Acquisition Method Source Code,"[8] which is maintained in its Federal Logistics Information System database. The codes are used to record whether a part should be procured competitively, or only from sources specified in the database. E.g., AR, Tab 21, Declaration of DLA Equipment Specialist Supervisor, at 2.

DLA also explains that the cost of approving an additional source ranges from $1,700 to $4,700 depending on the number of engineering support activities involved. Therefore DLA believes it would not be cost-effective for the government to incur the cost of performing the engineering analysis that would be required to approve an additional source for three of the four filters.[9] In other words, in DLA's view, it would be unlikely to recoup those costs through competition.

DISCUSSION

Although CPF filed separate protests challenging the terms of each of these RFQs, the protests all raise the same issue, in essentially identical arguments. CPF argues that FAR sect. 11.104(b), which governs use of brand-name-or-equal purchase descriptions, bars DLA from conducting a procurement for brand-name items without setting forth salient characteristics that would permit broader competition.[10] E.g., Protest B'400750 at 3. More broadly, CPF argues that DLA has no basis to limit these procurements to the brand-name items.

DLA responds that it has properly used a brand-name specification in each of these RFQs because it lacks the data needed to specify its needs in any greater detail, or to evaluate alternative products, and because these procurements are under the simplified acquisition threshold. AR at 6. In addition, DLA argues that its use of brand-name purchase descriptions is permitted by the FAR where the brand-name items are essential to the government's needs, market research supports the lack of an alternative item, and, in the case of simplified acquisitions as here, the basis is documented in the contracting file. AR at 6-8 (citing FAR sections 11.105, 13.106-1(b)). DLA did not prepare a written justification for these procurements under FAR sect. 6.302-1 because the use of such justifications is not required when an agency is using simplified acquisition procedures. AR at 7; see also FAR sect. 6.001(a).

In reviewing DLA's obligations in this situation, we look first to Part 13 of the FAR, which establishes the procedures for simplified acquisitions. These simplified procedures are designed to promote efficiency and economy in contracting, and to avoid unnecessary burdens for agencies and contractors, where, in cases like these, the value of the acquisition is less than $100,000. See FAR sect. 2.101. In simplified acquisitions, agencies are only required to obtain competition to the –maximum extent practicable." 10 U.S.C. sect. 2304(g)(3); FAR sect. 13.104; Information Ventures, Inc., B'293541, Apr. 9, 2004, 2004 CPD para. 81 at 3. In a simplified acquisition, an agency can limit a solicitation to a brand-name item where the –contracting officer determines that the circumstances of the contract action deem only one source reasonably available (e.g., urgency, exclusive licensing agreements, brand name or industrial mobilization)." FAR sect. 13.106-1(b)(1). In such cases, we review protests of sole-source determinations--and, as here, the decision to limit the procurement to a brand-name--for reasonableness. Europe Displays, Inc., B'297099, Dec. 5, 2005, 2005 CPD para. 214 at 3-4.

For three of the RFQs, DLA has demonstrated a reasonable basis for using a brand-name specification for these filters. CPF asserts that DLA has no basis for limiting the solicitations to brand-name items, disputes the DLA's reliance on its database to furnish a justification for a brand-name procurement, and contends that the database is merely descriptive of previous procurement experience; its arguments provide no basis to sustain the protests. A contracting officer may rely on prior procurement history in the conduct of market research. International Filter Mfg., Inc., B-299407, Apr. 10, 2007, 2007 CPD para. 71 at 4. DLA has advised our Office, and the record supports its claim, that DLA does not have sufficient data to consider alternatives to the brand-name items. Under these circumstances, and particularly the fact that these procurements are properly valued at less than $100,000, the FAR permits a streamlined approach to procuring these items. See FAR sect. 10.001(a)(2)(iii). Therefore, in our view, the protest record for the challenges to RFQs SPM7M1'08'U'J179, SPM7MC-09-T-0151, and SPM7M3'08'T-K838 supports the agency's brand-name only approach.

However, as noted above, RFQ SPM7L4-09-U-A006 provides an estimated quantity of 1,356 filters over the 2-year term of the IDPO. At the lowest historical price listed in the RFQ, the value of this requirement is more than double the simplified acquisition threshold. Since, in our view, neither CPF nor DLA had adequately addressed the implications of this aspect of the record, we asked both parties to address whether DLA's explanation for its actions was consistent with the requirements of the FAR for requirements of this magnitude--that is, greater than $100,000. Fax from GAO to Parties, Jan. 9, 2009, at 1.

In response, DLA argues that the IDPO does not obligate the government to purchase the estimated quantity, and in fact limits purchases to $100,000. DLA argues that this approach is approved by the Defense Supply Center Columbus Acquisition Guide (DAG). Letter from DLA to GAO, Jan. 13, 2009, at 2 (citing DAG sect. 13.9002).[11] In its submission, CPF continued its arguments that the record here shows that the agency has failed to conduct proper acquisition planning. Letter from CPF to GAO, Jan. 14, 2009, at 1'2.

Although DLA argues that its actions are consistent with the statutes and regulations applicable to simplified acquisitions, the use of these procedures must be based on a reasonable expectation that the value of the requirement is at or below the simplified acquisition threshold. Where an agency uses simplified acquisition procedures to meet requirements that should reasonably be valued above the simplified acquisition threshold, our Office will sustain the protest. E.g., Global Commc'ns Solutions, Inc., B-299044, B-299044.2, Jan. 29, 2007, 2007 CPD para. 30 at 3 (protest sustained where agency used simplified acquisition procedures for commercial item acquisition that record demonstrated could only reasonably be valued above the applicable threshold).

We see no basis for DLA's approach of using simplified acquisition procedures where its estimated requirement for these filters cannot reasonably be expected to fall within the applicable threshold ($100,000) for a simplified acquisition of this nature. Although DLA responds that the use of simplified acquisition procedures is appropriate here because it limits the purchase under each of these IDPOs to $100,000, regardless of the value of the estimated quantity, we think DLA is, in essence, splitting these orders to allow the use of simplified acquisition procedures, which is expressly barred by FAR sect.13.003(c)(2). Cf. Mas'Hamilton Group, Inc., B'249049, Oct. 20, 1992, 92-2 CPD para. 259 at 5-6. Under this provision, agencies are advised:

Do not break down requirements aggregating more than the simplified acquisition threshold . . . into several purchases that are less than the applicable threshold merely to--

(i) Permit use of simplified acquisition procedures.

FAR sect. 13.003(c)(2); see also 10 U.S.C. sect. 2304(g)(2) (–A proposed purchase or contract for an amount above the simplified acquisition threshold may not be divided into several purchases or contracts for lesser amounts in order to use the simplified procedures . . .").

In our view, DLA is using the streamlined features of simplified acquisitions where the solicitation on its face demonstrates that the use of those procedures is improper. Indeed, DLA's experience under the resulting IDPO demonstrates this point: less than 1 month after issuance of the IDPO (which the RFQ described as having a maximum term of 2 years), DLA had already reached the $100,000 ceiling. In addition, the procurement history for this part, and the estimated quantity identified in the solicitation, strongly suggest that DLA will make additional purchases to meet its continuing needs. We therefore sustain this protest.

CONCLUSION

The protests challenging RFQs SPM7AX'08'X'0508 and SPM7MC'09'T'0468 (B-400746 and B'400747, respectively) are dismissed. The protests challenging RFQs SPM7M1'08-U-J179, SPM7MC'09'T-0151, and SPM7M3-08-T-K838 (B-400750, B'400752, and B-400785, respectively) are denied. The protest of RFQ SPM7L4'09'U'A006 (B-400751) is sustained.

RECOMMENDATION

In a letter dated January 13, 2009, DLA informed our Office that although DLA counsel had advised agency buyers that a timely pre-award protest had been filed on October 15, 2008, –[r]egretfully, despite this directive, . . . an award was made . . . and two orders were issued. . . ." DLA directed the vendor to stop work under the orders on January 13. In its letter, DLA also explained that the orders that had been placed essentially –maxed out" the IDPO, in DLA's parlance.

Since the IDPO was improperly issued, we recommend that the IDPO and the orders be terminated for the convenience of the government, if feasible. Furthermore, we recommend that DLA review its needs for this part and, if its requirements exceed the threshold for a simplified acquisition--as the record strongly suggests--DLA should procure this requirement using full and open competition, or properly justify any decision not to do so. We are also concerned that DLA has delayed providing a part to CPF to permit the firm to attempt to reverse engineer the filter being purchased here, and therefore DLA should consider doing so promptly. Finally, we recommend that the protester be reimbursed the costs of filing and pursuing protest B-400751, including reasonable attorneys' fees. 4 C.F.R. sect. 21.8(d)(1) (2008). CPF should submit its certified claim for costs, detailing the time expended and cost incurred, directly to the contracting agency within 60 days after receipt of this decision. 4 C.F.R. sect. 21.8(f)(1).

Gary L. Kepplinger
General Counsel