B-178442, JUN 20, 1974

B-178442, JUN 20, 1974

1. IN ACCORDANCE WITH FPR 1-3.101, GSA IS REQUIRED TO OBTAIN COMPETITION TO MAXIMUM EXTENT PRACTICABLE IN PROCURING PUBLIC UTILITIES SERVICES. NEITHER 41 U.S.C. 252(C)(10), AS IMPLEMENTED BY FPR 1 3.210(A)(5), NOR TITLE 7, SECTION 22.7 OF GAO MANUAL FOR GUIDANCE OF FEDERAL AGENCIES JUSTIFIES NONCOMPETITIVE PROCUREMENT OF PUBLIC UTILITIES SERVICES. 2. ALTHOUGH PROTEST WAS UNTIMELY UNDER 4 CFR 20.2 OF BID PROTEST PROCEDURES AND STANDARDS SINCE IT WAS NOT FILED UNTIL AFTER 6 MONTHS HAD ELAPSED FROM DATE PROTESTER HAD ACTUAL NOTICE OF GROUNDS OF PROTEST, QUESTION OF GSA'S OBLIGATION TO OBTAIN COMPETITION IN PROCURING PUBLIC UTILITY SERVICES IS SIGNIFICANT ISSUE WITHIN 4 CFR 20.2(B). GAO WILL, THEREFORE, CONSIDER PROTEST ALTHOUGH UNTIMELY FILED. 3. GAO ADDRESSED ISSUE OF GSA'S OBLIGATION TO OBTAIN MAXIMUM COMPETITION BECAUSE OF ITS SIGNIFICANCE AND CONCERN THAT FUTURE CORRECTIVE ACTION BE TAKEN. HOWEVER, GAO DECLINES TO CONSIDER REQUEST FOR CORRECTIVE ACTION IN PRESENT CASE SINCE PROTESTER HAS FILED SUIT IN STATE COURT CONTESTING LOCAL UTILITY COMMISSION RULING ON AUTHORITY OF INTERESTED PARTIES TO PROVIDE SERVICE REQUESTED BY GSA. AUTHORITY OF PARTIES TO PROVIDE SERVICES IS MATERIAL ISSUE TO COMPLETE DISPOSITION AND IS BEFORE COURT OF COMPETENT JURISDICTION WITHIN MEANING OF 4 CFR 20.11.

TO RCA ALASKA COMMUNICATIONS, INC.:

RCA ALASKA COMMUNICATIONS, INC. (RCA ALASCOM), PROTESTS THE GENERAL SERVICES ADMINISTRATION'S (GSA) NEGOTIATION AND AWARD OF A CONTRACT TO THE ANCHORAGE TELEPHONE UTILITY (ATU) FOR ENHANCING THE GOVERNMENT'S TELEPHONE SYSTEM IN ALASKA.

PRIOR TO THE MIDDLE OF 1972, INTRASTATE TELEPHONE SERVICE BETWEEN GOVERNMENT OFFICES IN FAIRBANKS, ANCHORAGE AND JUNEAU WAS ACCOMPLISHED OVER COMMERCIAL LINES. THE ANCHORAGE AND JUNEAU GSA OFFICES WERE EQUIPPED WITH A PRIVATE BRANCH EXCHANGE (PBX), A SYSTEM WHICH PROVIDES INTERCOMMUNICATIONS SERVICES AND CONNECTIONS TO THE LOCAL TELEPHONE SYSTEMS AND TO THE FEDERAL TELECOMMUNICATIONS SYSTEM (FTS). AN INITIAL STEP TOWARD IMPROVEMENT OF THE EXISTING SYSTEM WAS THE INSTALLATION OF A PBX IN FAIRBANKS AND THE ESTABLISHMENT OF TIELINES (A LINE OR CHANNEL DIRECTLY CONNECTING TWO PBX'S) BETWEEN ANCHORAGE AND FAIRBANKS AND BETWEEN ANCHORAGE AND JUNEAU. UNDER THIS ARRANGEMENT, THE ANCHORAGE OFFICE ACTS AS A MANUAL SWITCHING POINT WHENEVER TIELINE CALLS ARE PLACED TO OR FROM FAIRBANKS OR JUNEAU. SIMILARLY, FTS CALLS BETWEEN THE 48 CONTIGUOUS STATES AND ALASKA USE THE ANCHORAGE PBX AS THE ALASKA FOCAL POINT OF THE SYSTEM. INTRASTATE CALLS AND SOME INTERSTATE TRAFFIC ARE HANDLED MANUALLY BY THE RESPECTIVE PBX OPERATORS. THE MANUAL SERVICE IS LIMITED TO APPROXIMATELY 10 HOURS A DAY.

TO IMPROVE THE OPERATION AND EMERGENCY CAPABILITY OF THE SYSTEM, GSA DETERMINED THAT INSTALLATION OF A TANDEM SWITCH IN ANCHORAGE WOULD ELIMINATE THE NECESSITY OF USING THE ANCHORAGE PBX WHEN PLACING INTERSTATE CALLS TO AND FROM ALASKA AND INTRASTATE CALLS BETWEEN FAIRBANKS, ANCHORAGE AND JUNEAU. IN EFFECT, THE TANDEM SWITCH ARRANGEMENT WOULD SUPPLANT THE MANUAL PBX OPERATION BY PROVIDING AUTOMATIC SWITCHING. AS A BY-PRODUCT OF THE SWITCH, 24-HOUR-A-DAY SERVICE WOULD BE PROVIDED. IN SEPTEMBER OF 1971, GSA, IN ACCORDANCE WITH GENERAL PRACTICE, CONTACTED ATU WHICH WAS PROVIDING THE MANUAL SWITCHING OPERATION TO ARRANGE FOR INSTALLATION OF THE TANDEM SWITCH. IN RESPONSE TO ATU'S PROPOSAL, GSA ISSUED A LETTER ORDER ON NOVEMBER 22, 1971. SUBSEQUENTLY, A TELEPHONE SERVICE ORDER WAS ISSUED ON JUNE 30, 1972.

HOWEVER, RCA ALASCOM LEARNED OF THE NEGOTIATIONS AND FILED A COMPLAINT IN SEPTEMBER OF 1972 WITH THE ALASKA PUBLIC UTILITIES COMMISSION (APUC OR COMMISSION). THE COMPLAINT CONTESTED THE AUTHORITY OF ATU TO PROVIDE THE TANDEM SWITCH. RCA ALASCOM ALSO PROTESTED TO OUR OFFICE IN APRIL OF 1973. RCA ALASCOM'S BASIC POSITION WAS THAT IT ALONE WAS AUTHORIZED TO SUPPLY THE REQUIRED SUPPLIES AND SERVICES AND GSA FAILED TO AFFORD IT AN OPPORTUNITY TO OFFER THE SERVICES. ALTERNATIVELY, IT WAS URGED THAT EVEN IF BOTH WERE AUTHORIZED TO FURNISH THE REQUIRED SERVICES, GSA WAS OBLIGATED TO OBTAIN "COMPETITION TO THE MAXIMUM EXTENT PRACTICABLE," CITING SECTION 1-3.101 OF THE FEDERAL PROCUREMENT REGULATIONS (FPR).

IN VIEW OF THE ACTION BEFORE THE COMMISSION, GSA DID NOT ACCEPT THE SERVICES. WE WERE ADVISED IN THE INITIAL GSA REPORT THAT:

"*** GSA WILL CONSIDER ACCEPTING THE SERVICES IN DISPUTE FROM WHOMEVER IS DESIGNATED BY THE APUC AS THE CERTIFIED CARRIER. PENDING CERTIFICATION FROM THE APUC, GSA INTENDS TO TAKE NO ACTION REGARDING THE NECESSARY SERVICES OTHER THAN TO STATE THAT THEY ARE URGENTLY NEEDED BY THE FEDERAL GOVERNMENT AS AN INTEGRAL SEGMENT OF THE FTS NETWORK."

GIVEN GSA'S DECISION AND BECAUSE RESOLUTION OF THE QUESTION OF AUTHORIZATION COULD BE DISPOSITIVE OF THE PROTEST, WE SUSPENDED CONSIDERATION OF THE PROTEST PENDING A DECISION BY THE APUC. ON DECEMBER 14, 1973, THE COMMISSION ISSUED ORDER NO. 8 IN RESPONSE TO RCA ALASCOM'S COMPLAINT. IN SUMMARY, ORDER NO. 8: (1) DISMISSED RCA ALASCOM'S COMPLAINT AGAINST THE ATU; (2) DISMISSED A COUNTERCOMPLAINT OF ATU; AND (3) ORDERED RCA ALASCOM TO CONNECT CERTAIN CIRCUITS NECESSARY TO ACTIVATE THE FOUR- WIRE TANDEM SWITCH.

WE REQUESTED THAT GSA ADVISE US OF ITS INTERPRETATION OF THE APUC'S ORDER AND ITS PROPOSED COURSE OF ACTION IN VIEW OF THE DECISION. WE AGREE WITH GSA'S INITIAL OBSERVATION THAT THE ORDER SETTLES RCA ALASCOM'S INITIAL CONTENTION THAT IT ALONE IS AUTHORIZED TO PROVIDE THE SERVICES. THE COMMISSION CONCLUDED THAT "IT WOULD BE IN THE PUBLIC INTEREST TO AUTHORIZE ATU TO PROVIDE THE FOUR-WIRE SWITCH FOR THE GENERAL SERVICES ADMINISTRATION." IN LIGHT OF THE COMMISSION'S HOLDING, GSA'S POSITION AND PROPOSED COURSE OF ACTION IS STATED IN ITS FEBRUARY 12, 1974, REPORT:

"*** WE CAN ONLY CONCLUDE, FROM THE COMMISSION'S WORDS, THAT IN THEIR JUDGMENT, IT WOULD NOT HAVE BEEN IN THE PUBLIC INTEREST TO AUTHORIZE RCA ALASCOM TO PROVIDE THE PARTICULAR SWITCH REFERRED TO.

"AS TO GSA'S CURRENT POSITION WITH RESPECT TO THE PROCUREMENT OF THE FOUR -WIRE TANDEM SWITCH, WE WOULD LIKE TO POINT OUT THAT GSA HAS NOT ACCEPTED SERVICE ON THE TANDEM SWITCH IN QUESTION BECAUSE OF THE COMPLAINT FILED BY RCA ALASCOM WITH THE APUC. WE DID NOT THINK IT ADVISABLE TO ACCEPT SERVICE AND INCUR ADDITIONAL LIABILITY WHILE THE POSSIBILITY EXISTED THAT THE ATU MIGHT BE DETERMINED UNAUTHORIZED TO PROVIDE THE SERVICE. SIMILARLY, WE DETERMINED THAT IT WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT TO EXPEND ADDITIONAL TIME AND MONEY IN NEGOTIATIONS WITH OTHER POTENTIALLY UNAUTHORIZED CARRIERS PRIOR TO A RULING BY THE APUC UNDER U-72 -70. WITH REGARD TO THE LATTER, ORDER NO. 8 IS SILENT AS TO WHO, IN ADDITION TO THE ATU, MAY BE AUTHORIZED TO PROVIDE THE SWITCH. IN OUR VIEW, IT WOULD BE UNREASONABLE AT THIS TIME TO REQUIRE THE GOVERNMENT TO ENTER THE UNKNOWN WORLD OF CARRIER CERTIFICATION IN ALASKA AND RISK FURTHER DELAY AND LIABILITY EXPOSURE FOR SERVICES WHICH ARE URGENTLY NEEDED AND READILY AVAILABLE FROM AN ALREADY AUTHORIZED LOCAL UTILITY, NAMELY, THE ATU.

"IT WAS RECOGNIZED BY THE APUC THAT THERE WOULD BE NO RESULTANT ECONOMIES IN RELOCATING THE ALREADY INSTALLED FOUR-WIRE TANDEM SWITCH. MORE SPECIFICALLY, THE APUC STATED THAT IT IS THEIR UNDERSTANDING THAT THE ATU HAS ALREADY EXPENDED APPROXIMATELY $148,000 TO PROVIDE THE SWITCH TO GSA. THE GOVERNMENT IS IN AGREEMENT WITH THE APUC'S ECONOMIC ASSESSMENT, IN THAT IT WOULD NOT BE ECONOMICALLY FEASIBLE OR OTHERWISE IN THE BEST INTEREST OF THE GOVERNMENT TO RELOCATE THE SWITCH UNDER CURRENT CIRCUMSTANCES. FURTHER, ANY ATTEMPT TO RELOCATE THE SWITCH COULD BE CONSTRUED AS A POSSIBLE VIOLATION OF THE APUC'S ORDER REQUIRING RCA TO CONNECT THE LOCAL CIRCUITS REQUESTED BY THE DEFENSE COMMUNICATIONS AGENCY.

"ANY ADDITIONAL DELAY IN ACTIVATING THE FOUR-WIRE TANDEM SWITCH WILL RESULT IN FURTHER DEGRADATION OF GOVERNMENT FURNISHED TELECOMMUNICATIONS SERVICES BOTH TO AND FROM ALASKA. THE URGENT NEED FOR AUTOMATIC SWITCHING AND THE ASSOCIATED COST BENEFITS TO BE DERIVED THEREFROM HAVE BEEN EMPHASIZED IN OUR PRIOR REPORTS TO YOUR OFFICE.

"IN CONCLUSION, WE WOULD LIKE TO EMPHASIZE THAT GSA HAS, FROM THE OUTSET, REGARDED ITS BUSINESS DEALINGS WITH THE ATU AS CONSTITUTING A PROPER PROCUREMENT FOR SERVICES WITHIN THE APPLICABLE REGULATIONS.

"ACCORDINGLY, GSA HAS DECIDED TO ACCEPT SERVICES ON THE FOUR-WIRE TANDEM SWITCH SUPPLIED BY THE ATU."

IN LIGHT OF THE COMMISSION'S ORDER, RCA ALASCOM'S PRINCIPAL CONTENTION IS STILL THE ASSERTED FAILURE OF GSA TO COMPLY WITH THE REQUIREMENT OF FPR 1- 3.101(C) AND (D) THAT NEGOTIATED PROCUREMENTS BE ON A COMPETITIVE BASIS TO THE MAXIMUM EXTENT PRACTICABLE. RCA ALASCOM ASKS THAT WE RECOMMEND GSA ENTER INTO NEGOTIATIONS WITH ALL INTERESTED AND AUTHORIZED PARTIES. RCA ALASCOM IS SUCCESSFUL, IT OFFERS TO COMPENSATE GSA FOR ANY AMOUNTS, WITH CERTAIN EXCEPTION, DUE ATU. IN ADDITION, RCA ALASCOM HAS FILED SUIT IN THE SUPERIOR COURT FOR THE STATE OF ALASKA CONTESTING THE COMMISSION'S RULING.

INITIALLY, GSA QUESTIONS THE TIMELINESS OF RCA ALASCOM'S PROTEST BECAUSE IT HAD ACTUAL NOTICE OF GSA'S ACTIONS IN SEPTEMBER OF 1972, BUT DID NOT PROTEST TO OUR OFFICE UNTIL APPROXIMATELY 6 MONTHS LATER IN APRIL OF 1973. SEE 4 CFR 20.2(A), WHICH REQUIRES PROTESTS TO BE FILED WITHIN 5 WORKING DAYS AFTER THE BASIS OF PROTEST IS KNOWN OR SHOULD HAVE BEEN KNOWN.

IN OUR OPINION, THE EXTENT OF GSA'S OBLIGATION TO OBTAIN COMPETITION IN PROCURING PUBLIC UTILITY SERVICES RAISES AN ISSUE "SIGNIFICANT TO PROCUREMENT PRACTICES OR PROCEDURES" WITHIN THE MEANING OF 4 CFR 20.2(B). THEREFORE, WE WILL CONSIDER THE PROTEST EVEN THOUGH IT WAS NOT TIMELY FILED.

GSA MAINTAINS THAT IT WAS ACTING IN GOOD FAITH AND IN ACCORDANCE WITH ITS NORMAL PRACTICES IN ENTERING INTO NONCOMPETITIVE NEGOTIATIONS WITH ATU. GSA REFERS TO A NUMBER OF OTHER INSTANCES WHERE IT HAS PROCURED SIMILAR TANDEM SWITCHING ARRANGEMENTS FROM THE LOCAL FRANCHISED TELEPHONE UTILITY. IN GSA'S VIEW THE LOCAL UTILITY IS USUALLY BEST EQUIPPED TO PROVIDE THE SERVICES. GSA ALSO EMPHASIZES THAT IN THIS CASE -

"*** THERE ARE NO ADDITIONAL TOLL OR INTERSTATE TRUNKING SERVICES INVOLVED IN THE INSTALLATION OF THE TANDEM SWITCH. IN SIMPLISTIC TERMS, A MANUAL SWITCHING OPERATION (PRESENTLY PERFORMED BY ATU) IS BEING REPLACED BY AN AUTOMATIC SWITCH, UTILIZING EXISTING TOLL AND INTERSTATE TRUNKING FACILITIES CURRENTLY IN PLACE."

SUPPORT FOR GSA'S NORMAL PRACTICE IS FOUND IN SECTION 302(C)(10) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT, 41 U.S.C. 252(C)(10), WHICH PROVIDES THAT CONTRACTS MAY BE NEGOTIATED WITHOUT FORMAL ADVERTISING TO OBTAIN "PROPERTY OR SERVICES FOR WHICH IT IS IMPRACTICABLE TO SECURE COMPETITION." ONE OF THE SITUATIONS JUSTIFYING NEGOTIATION UNDER THIS SECTION IS -

"WHEN THE CONTEMPLATED PROCUREMENT IS FOR ELECTRIC POWER OR ENERGY, GAS (NATURAL OR MANUFACTURED), WATER, OR OTHER UTILITY SERVICES OR WHEN THE CONTEMPLATED PROCUREMENT IS FOR CONSTRUCTION OF A PART OF A UTILITY SYSTEM AND IT WOULD NOT BE PRACTICABLE TO ALLOW A CONTRACTOR OTHER THAN THE UTILITY COMPANY ITSELF TO WORK UPON THE SYSTEM." FPR 1 3.210(A)(5).

GSA POINTS OUT THAT FPR 1-3.210(A)(5), IN EFFECT, RECOGNIZES THAT THE PROCUREMENT OF PUBLIC UTILITIES INVOLVES A "LIMITED BUYERS MARKET" AND IN THIS CONTEXT IT MAY BE IMPRACTICABLE TO OBTAIN COMPETITION. IT IS URGED THAT THE MANDATE FOR MAXIMUM COMPETITION MUST BE VIEWED AGAINST THIS BACKGROUND.

GSA HAS ALSO FOUND SUPPORT FOR ITS GENERAL PRACTICE IN TITLE 7, SECTION 22.7 OF THE "GENERAL ACCOUNTING OFFICE POLICY AND PROCEDURES MANUAL FOR GUIDANCE OF FEDERAL AGENCIES." THE PORTION OF OUR MANUAL RELIED ON BY GSA READS AS FOLLOWS:

"GOVERNMENT AGENCIES NEED NOT ENTER INTO CONTRACTS WITH PUBLIC UTILITIES - REGARDLESS OF THE AMOUNT OF, OR THE NUMBER OF, PAYMENTS TO BE MADE - WHEN THE COMPANIES' RATES HAVE BEEN FIXED OR ADJUSTED BY FEDERAL, STATE, OR OTHER REGULATORY BODIES, UNLESS CONTRACTS ARE DEEMED TO BE IN THE BEST INTEREST OF THE GOVERNMENT. FURNISHING OF RATE SCHEDULES WILL NOT BE REQUIRED FOR PUBLIC UTILITY SERVICES WHEN THE COMPANIES FURNISH, OR THE INVOICES OR BILLS SHOW, THE TOTAL AMOUNT OF THE SERVICES FURNISHED, THE UNIT RATES CHARGED FOR THE SERVICES, AND THE TOTAL AMOUNT CHARGED.

"THIS SIMPLIFICATION DOES NOT PRECLUDE THE USE OF GOVERNMENT CONTRACTS WHERE THE COMPANIES REQUIRE AGREEMENTS OR CONTRACTS FOR THE FURNISHING OF SERVICES."

THIS SECTION WAS NOT INTENDED TO PRECLUDE COMPETITION IN THE AWARD OF GOVERNMENT CONTRACTS WITH PUBLIC UTILITIES. IT MERELY APPRISES FEDERAL AGENCIES OF SIMPLIFIED ACCOUNTING OR FISCAL PROCEDURES WHICH CAN BE USED WHEN OBTAINING SERVICES FROM PUBLIC UTILITIES WHOSE RATES HAVE BEEN FIXED OR ADJUSTED BY FEDERAL, STATE, OR OTHER REGULATORY BODIES. MOREOVER, THE PROVISIONS OF THE SECTION DO NOT BECOME OPERABLE UNTIL A CONTRACTING AGENCY OF THE GOVERNMENT HAS MADE A DECISION TO ENTER INTO A SERVICE- OR CONTRACT-TYPE ARRANGEMENT WITH THE PUBLIC UTILITIES.

THE STATUTORY AND REGULATORY AUTHORITY CITED IN SUPPORT OF GSA'S NORMAL PRACTICE MAY SUPPORT THE USE OF NEGOTIATION PROCEDURES. HOWEVER, THIS AUTHORITY DOES NOT JUSTIFY NONCOMPETITIVE PROCUREMENTS WHERE COMPETITION IS, IN FACT, AVAILABLE. IN OUR OPINION, THE DUTY TO OBTAIN MAXIMUM COMPETITION IS PARAMOUNT. WE RECOGNIZE THAT WHERE PUBLIC UTILITIES ARE INVOLVED THE NUMBER OF POTENTIAL SOURCES MAY BE SEVERELY LIMITED OR, FOR THAT MATTER, ONLY ONE SOURCE MAY BE AVAILABLE. NEVERTHELESS, GSA IS OBLIGATED TO OBTAIN COMPETITION TO THE EXTENT THAT IT IS AVAILABLE. INCIDENT TO THIS OBLIGATION, GSA MUST, IN OUR OPINION, ASSESS THE AVAILABILITY OF COMPETITION AND ACT ACCORDINGLY BEFORE ENTERING INTO PUBLIC UTILITIES CONTRACTS.

INSOFAR AS THE PRESENT CASE IS CONCERNED, THE QUESTION REMAINS WHETHER IT IS APPROPRIATE FOR OUR OFFICE TO RECOMMEND ANY CORRECTIVE ACTION. GSA'S POSITION IS THAT THE COMMISSION'S ORDER NO. 8 IS DISPOSITIVE OF THE QUESTION OF CERTIFICATION AS BETWEEN RCA ALASCOM AND ATU. RCA ALASCOM VIGOROUSLY DISPUTES THIS CONCLUSION AND URGES THAT IT IS ALSO AUTHORIZED TO PROVIDE THE SERVICES. MOREOVER, IT SPECIFICALLY OBJECTS TO ATTEMPTS TO RAISE THE CERTIFICATION ISSUE BEFORE OUR OFFICE.

WE AGREE THAT OUR OFFICE HAS NO JURISDICTION TO RULE ON THE CERTIFICATION QUESTION. HOWEVER, IT IS OBVIOUS THAT GSA IN THE EXERCISE OF ITS PROCUREMENT RESPONSIBILITY MAY DETERMINE THE SIGNIFICANCE OF THE COMMISSION'S RULING. IN ANY EVENT, WE BELIEVE THAT RCA ALASCOM'S DECISION TO BRING THE ISSUE OF CERTIFICATION BEFORE THE SUPERIOR COURT OF THE STATE OF ALASKA REQUIRES US TO DECLINE TO ISSUE A DECISION ON RCA ALASCOM'S REQUEST FOR CORRECTIVE ACTION IN THIS CASE. WE HAVE ADDRESSED THE PROCUREMENT ISSUE RAISED BY RCA ALASCOM BECAUSE OF ITS SIGNIFICANCE AND OUR CONCERN THAT FUTURE PROCUREMENTS FOR PUBLIC UTILITY SERVICES BE ON A COMPETITIVE BASIS TO THE MAXIMUM EXTENT PRACTICABLE. HOWEVER, THE FACT REMAINS THAT A MATERIAL ISSUE IS PRESENTLY BEFORE A COURT OF COMPETENT JURISDICTION.

THEREFORE, IN ACCORDANCE WITH 4 CFR 20.11, WE ARE CLOSING OUR FILE ON THIS CASE. SEE B-168096, JULY 6, 1971.