B-179285, FEB 14, 1974

B-179285: Feb 14, 1974

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

COAST GUARD PROCUREMENT OF EQUIPMENT FOR A VESSEL TRACKING SYSTEM FROM FEDERAL SUPPLY SCHEDULE SUPPLIER AFTER CONDUCTING COMPARATIVE COST ANALYSIS PURSUANT TO OMB CIRCULAR A-76 WHICH SHOWED GOVERNMENT OPERATION OF SYSTEM WOULD BE LESS EXPENSIVE THAN LEASING IT FROM TELECOMMUNICATIONS COMMON CARRIER IS NOT IMPROPER OR ILLEGAL DESPITE PROTESTER'S CLAIM THAT PROPER COMPARATIVE ANALYSIS WAS NOT MADE. DIRECTIVES OF CIRCULAR A-76 ARE MATTER OF EXECUTIVE POLICY ON WHICH GAO DOES NOT RULE. WHICH WERE MADE KNOWN TO SOUTHWESTERN BELL (SWB). WHICH WERE USED AS THE BASIS FOR THE COST ANALYSIS. AT&T ASSERTS THAT SYSTEM SPECIFICATIONS SHOULD HAVE BEEN PROVIDED. IT QUESTIONS HOW THE SYSTEM COST COULD VARY SO WIDELY IF BOTH THE COAST GUARD'S "IN-HOUSE" SYSTEM AND THE LEASED SYSTEM PROPOSED BY SWB WERE BASED ON THE SAME SPECIFICATIONS.

B-179285, FEB 14, 1974

COAST GUARD PROCUREMENT OF EQUIPMENT FOR A VESSEL TRACKING SYSTEM FROM FEDERAL SUPPLY SCHEDULE SUPPLIER AFTER CONDUCTING COMPARATIVE COST ANALYSIS PURSUANT TO OMB CIRCULAR A-76 WHICH SHOWED GOVERNMENT OPERATION OF SYSTEM WOULD BE LESS EXPENSIVE THAN LEASING IT FROM TELECOMMUNICATIONS COMMON CARRIER IS NOT IMPROPER OR ILLEGAL DESPITE PROTESTER'S CLAIM THAT PROPER COMPARATIVE ANALYSIS WAS NOT MADE. DIRECTIVES OF CIRCULAR A-76 ARE MATTER OF EXECUTIVE POLICY ON WHICH GAO DOES NOT RULE.

TO AMERICAN TELEPHONE AND TELEGRAPH CO.:

THE PORTS AND WATERWAYS SAFETY ACT OF 1972, PUB. LAW 92-340, AUTHORIZED THE COAST GUARD TO DEVELOP VESSEL TRAFFIC SYSTEMS FOR VARIOUS PORT AREAS. THE COAST GUARD DECIDED TO OBTAIN A SYSTEM FOR THE HOUSTON/GALVESTON PORT BY PURCHASING THE REQUIRED EQUIPMENT FROM A FEDERAL SUPPLY SCHEDULE SUPPLIER AFTER A COST ANALYSIS PERFORMED PURSUANT TO OFFICE OF MANAGEMENT AND BUDGET (OMB) CIRCULAR A-76 SHOWED THAT DIRECT PURCHASE AND OPERATION OF THE SYSTEM BY THE GOVERNMENT WOULD BE LESS EXPENSIVE THAN LEASING THE SYSTEM FROM COMMON CARRIERS OPERATING IN THE AREA. THE AMERICAN TELEPHONE AND TELEGRAPH COMPANY (AT&T) PROTESTED, CLAIMING THAT A PROPER COST COMPARISION BETWEEN A GOVERNMENT OPERATED SYSTEM AND A LEASED SYSTEM HAD NOT BEEN MADE.

THE COAST GUARD REPORTS THAT IT DID NOT DEVELOP SPECIFICATIONS FOR THE SYSTEM, BUT ONLY PERFORMANCE REQUIREMENTS, WHICH WERE MADE KNOWN TO SOUTHWESTERN BELL (SWB), AT&T'S OPERATING COMPANY, IN THE FORM OF CIRCUIT REQUIREMENTS. BOTH SWB AND GENERAL TELEPHONE (THE SYSTEM REQUIREMENTS INVOLVE BOTH SWB AND GENERAL TELEPHONE SERVICE AREAS) SUBMITTED QUOTATIONS BASED ON THOSE REQUIREMENTS, WHICH WERE USED AS THE BASIS FOR THE COST ANALYSIS. THIS ANALYSIS INDICATED THAT OVER A 20-YEAR LIFE CYCLE THE COST OF GOVERNMENT OWNERSHIP WOULD BE $784,368.50 WHILE THE COST OF LEASED SERVICES WOULD BE MORE THAN $10 MILLION. AT&T ASSERTS THAT SYSTEM SPECIFICATIONS SHOULD HAVE BEEN PROVIDED, AND IT QUESTIONS HOW THE SYSTEM COST COULD VARY SO WIDELY IF BOTH THE COAST GUARD'S "IN-HOUSE" SYSTEM AND THE LEASED SYSTEM PROPOSED BY SWB WERE BASED ON THE SAME SPECIFICATIONS. IN THIS RESPECT, AT&T STATES THAT INSTEAD OF BEING ALLOWED TO PROPOSE A SYSTEM MEETING THE SPECIFICATION REQUIREMENTS, SWB WAS ASKED ONLY TO QUOTE THE COST FOR SPECIFIC CHANNELS "WITH NO CLEAR IDEA AS TO WHETHER THE CHANNELS SPECIFIED BY THE COAST GUARD WERE THE MOST ECONOMICAL WAY TO MEET THE VESSEL TRACKING SYSTEM MISSION."

OMB CIRCULAR A-76 STATED THAT "THE DETERMINATION AS TO WHETHER TO PURCHASE OR TO LEASE EQUIPMENT *** INVOLVES A DETERMINATION OF THE DIFFERENCE IN COSTS UNDER THE ALTERNATIVES, AND THE PRINCIPLES SET FORTH IN THIS CIRCULAR SHOULD BE APPLIED TO THE EXTENT RELEVANT IN MAKING SUCH CONSIDERATIONS." WE AGREE WITH AT&T THAT A PROPER COST COMPARISON UNDER CIRCULAR A-76 WOULD NOT HAVE BEEN MADE IF SUBSTANTIALLY DIFFERENT SYSTEMS HAD BEEN EVALUATED. WE ALSO AGREE THAT DETAILED SYSTEM SPECIFICATIONS WOULD HAVE PROVIDED A COMMON BASIS FOR MAKING THE A-76 COST COMPARISON. HOWEVER, WE ARE AWARE OF NO LEGAL REQUIREMENT THAT SUCH SPECIFICATIONS BE DEVELOPED. FURTHERMORE, THE RECORD DOES NOT ESTABLISH THAT THE COAST GUARD MADE AVAILABLE TO AT&T A SET OF REQUIREMENTS WHICH DIFFERED FROM THOSE IT SATISFIED BY PURCHASING EQUIPMENT FROM THE FEDERAL SUPPLY SCHEDULE. IN ANY EVENT, WE HAVE ALWAYS REGARDED THE DIRECTIVES CONTAINED IN CIRCULAR A-76 AS MATTERS OF EXECUTIVE POLICY WHICH ARE NOT "WITHIN THE DECISION FUNCTIONS OF THE GENERAL ACCOUNTING OFFICE." B-170079, SEPTEMBER 15, 1970; B-179943, DECEMBER 27, 1973. ACCORDINGLY, WE MUST DENY THE PROTEST.

ALTHOUGH WE ARE AWARE OF NO BASIS FOR LEGALLY OBJECTING TO THE COAST GUARD'S PROCUREMENT OF THE VESSEL TRAFFIC SYSTEM IN THIS CASE, WE RECOGNIZE THAT THE ABSENCE OF SYSTEM SPECIFICATIONS AND THE NON COMPETITIVE NATURE OF THE PROCUREMENTS IN THIS TYPE OF SITUATION COULD LEAD TO MISUNDERSTANDINGS WHICH WOULD PRECLUDE THE MAKING OF AN ACCURATE COMPARATIVE COST ANALYSIS. IN THIS CONNECTION, OUR AUDIT STAFF HAS BEEN REVIEWING THE COAST GUARD'S ACQUISITION OF A SIMILAR SYSTEM FOR PUGET SOUND WITH A VIEW TOWARD DETERMINING WHETHER COMPETITIVE PROCUREMENTS, BASED ON DETAILED SPECIFICATIONS, OF SUCH SYSTEMS WOULD BE IN THE BEST INTERESTS OF THE GOVERNMENT. THAT REVIEW IS EXPECTED TO BE COMPLETED IN THE NEAR FUTURE.