B-182289, APR 25, 1975

B-182289: Apr 25, 1975

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CDPS-003-N-3-9-74 WAS ISSUED BY GSA ON FEBRUARY 9. THE CONTRACT TO BE AWARDED PURSUANT TO THIS SOLICITATION WAS AN INDEFINITE QUANTITY. IT IS THE POSITION OF STC THAT ITS OFFER REGARDING THE RENTAL OF ITS MODEL 8000 SHOULD HAVE BEEN ACCEPTED FOR INCLUSION IN THE SCHEDULE. THAT STC'S OFFER WAS NOT ACCEPTED DUE TO A STATUTORY IMPEDIMENT AGAINST ACCEPTANCE OF ANY SUCH ONE YEAR RENTAL REQUIREMENT WHERE FISCAL YEAR FUNDS ARE INVOLVED AND THE TERMS OF THE OFFER WOULD BIND THE GOVERNMENT BEYOND THE FISCAL YEAR INVOLVED. THE RENTAL OFFER OF THE MODEL 8000 WAS REJECTED. IT IS STC'S POSITION THAT ITS OFFER DID COMPLY WITH THE RFP'S TERMINATION CLAUSE. ITS OFFER FOR A FIXED-TERM ONE YEAR LEASE SHOULD NOT HAVE BEEN REJECTED ON THE BASIS THAT IT MIGHT OVERLAP FISCAL YEARS.

B-182289, APR 25, 1975

GSA PROPERLY REJECTED OFFER TO LEASE ADP EQUIPMENT WHERE FISCAL YEAR FUNDS WOULD BE INVOLVED AND PROPOSED TERMS OF LEASE WOULD OBLIGATE GOVERNMENT TO CONTINUE RENTAL PERIOD BEYOND FISCAL YEAR UNLESS AGENCY TERMINATED LEASE RATHER THAN PROVIDING FOR TERMINATION AT END OF FISCAL YEAR WITH RENEWAL OPTION.

STORAGE TECHNOLOGY CORPORATION:

STORAGE TECHNOLOGY CORPORATION (STC) HAS PROTESTED THE REFUSAL OF THE AUTOMATED DATA AND TELECOMMUNICATIONS SERVICE, GENERAL SERVICES ADMINISTRATION (GSA), TO INCLUDE IN ITS AWARD OF AN AUTOMATED DATA PROCESSING (ADP) SCHEDULE CONTRACT TO STC THE RENTAL OF CERTAIN GENERAL PURPOSE ADP EQUIPMENT.

REQUEST FOR PROPOSALS (RFP) NO. CDPS-003-N-3-9-74 WAS ISSUED BY GSA ON FEBRUARY 9, 1974, FOR THE RENTAL, PURCHASE, MAINTENANCE, AND REPAIR OF GENERAL ADP EQUIPMENT AND FOR THE FURNISHING OF SOFTWARE. THE CONTRACT TO BE AWARDED PURSUANT TO THIS SOLICITATION WAS AN INDEFINITE QUANTITY, REQUIREMENTS-TYPE CONTRACT FOR THE NORMAL SUPPLY REQUIREMENTS OF THE GOVERNMENT FOR THE PERIOD JULY 1, 1974 THROUGH JUNE 30, 1975. AFTER NEGOTIATIONS WITH STC REGARDING THE ITEMS TO BE PROCURED, GSA AWARDED TO STC ADP SCHEDULE CONTRACT NO. GS-00C-00412 ON SEPTEMBER 18, 1974, INCLUDING THE PURCHASE AND MAINTENANCE OF STC'S SYSTEM MODEL 8000 DISK DRIVE SYSTEMS, BUT EXCLUDING RENTAL OF THAT SYSTEM.

IT IS THE POSITION OF STC THAT ITS OFFER REGARDING THE RENTAL OF ITS MODEL 8000 SHOULD HAVE BEEN ACCEPTED FOR INCLUSION IN THE SCHEDULE. APPEARS GSA ORALLY ADVISED STC THAT THE STC REQUIREMENT FOR A ONE-YEAR LEASE ON ITS MODEL 8000, IF ACCEPTED, WOULD PRESENT AN ORDERING AGENCY WITH AN UNDUE RISK, IN THAT AN AGENCY MIGHT LEASE THE MODEL 8000 AND THEN DISCOVER IT COULD NOT PROPERLY UTILIZE THE ITEM OVER THE ONE-YEAR PERIOD. HOWEVER, THE GSA REPORT TO THIS OFFICE INDICATES, IN EFFECT, THAT STC'S OFFER WAS NOT ACCEPTED DUE TO A STATUTORY IMPEDIMENT AGAINST ACCEPTANCE OF ANY SUCH ONE YEAR RENTAL REQUIREMENT WHERE FISCAL YEAR FUNDS ARE INVOLVED AND THE TERMS OF THE OFFER WOULD BIND THE GOVERNMENT BEYOND THE FISCAL YEAR INVOLVED. THUS, ACCORDING TO GSA, ANY DELIVERY ORDER ISSUED TO STC AFTER JULY 1, 1974, WOULD BY THE TERMS OF THE LEASE OBLIGATE THE GOVERNMENT BEYOND THE CURRENT FISCAL YEAR, AND WOULD BE A CONTRACTUAL OBLIGATION OF FUTURE YEAR'S APPROPRIATIONS IN VIOLATION OF 31 U.S.C. SEC. 665(A) (1970) AND 41 U.S.C. SEC. 11 (1970). ON THIS BASIS, THE RENTAL OFFER OF THE MODEL 8000 WAS REJECTED.

IT IS STC'S POSITION THAT ITS OFFER DID COMPLY WITH THE RFP'S TERMINATION CLAUSE, IN THAT IT ACCEPTED THE GOVERNMENT'S TERMS AS STIPULATED IN THE RFP, TO INCLUDE THE GOVERNMENT'S RIGHT TO TERMINATE THE LEASE UPON 30 DAYS WRITTEN NOTICE AND, THEREFORE, ITS OFFER FOR A FIXED-TERM ONE YEAR LEASE SHOULD NOT HAVE BEEN REJECTED ON THE BASIS THAT IT MIGHT OVERLAP FISCAL YEARS. STC POINTS OUT, HOWEVER, THAT THERE WOULD BE CERTAIN TERMINATION CHARGES ASSOCIATED WITH SUCH A DISCONTINUANCE. IN THIS RESPECT, STC CHARACTERIZES ITS ONE YEAR RENTAL PROPOSAL AS OFFERING A VARIABLE (BALANCE OF TERM) CANCELLATION CHARGE, IN THAT ACCEPTANCE OF ITS OFFER WOULD OBLIGATE THE GOVERNMENT TO PAYMENT OF A ONE YEAR RENTAL FEE ON THE MODEL 8000 AND THAT CANCELLATION OF THE LEASE PRIOR TO THE END OF THAT YEAR WOULD CONVERT THE REMAINING RENTAL PAYMENTS INTO A ONE-TIME TERMINATION CHARGE. THUS, ITS TERMINATION CHARGE WOULD VARY WITH THE MONTHS REMAINING ON THE ONE-YEAR RENTAL PERIOD. STC CONTENDS THAT GSA HAS BEEN ACCEPTING FIXED CANCELLATION CHARGES FROM OTHER VENDORS, AND ARGUES THAT ITS VARIABLE CANCELLATION CHARGE (ON THE MODEL 8000), ALTHOUGH NOT LABELED AS SUCH, IS BY PRACTICE ACCEPTABLE TO GSA. MOREOVER, STC ARGUES THAT IN OTHER CIRCUMSTANCES GSA HAS IN FACT ACCEPTED FIRM-TERM LEASES FOR MORE THAN ONE YEAR, WHICH REPRESENTS A COMMITMENT BEYOND THE FISCAL YEAR IN WHICH THE DELIVERY ORDER IS PLACED AGAINST THE SCHEDULE. STC SUBMITS THAT AN AGENCY CAN TAKE ADVANTAGE OF SUCH LONG FIXED-TERM PLANS IF IT OBLIGATES BOTH THE MONEY FOR THE LEASE AND ANY TERMINATION CHARGES WHICH MIGHT BE INCURRED DURING THAT FISCAL YEAR. MOREOVER, SINCE STC CONTENDS THAT IT REASONABLY BELIEVED ITS ONE-YEAR LEASE OFFER WOULD HAVE BEEN ACCEPTABLE, IT ARGUES THAT GSA ACTED IMPROPERLY BY NOT STATING IN THE RFP THAT SUCH OFFERS COULD NOT BE ACCEPTED AND BY EVALUATING ITS OFFER ON THE BASIS OF CRITERIA NOT REVEALED IN THE RFP. IN THIS REGARD, IT BELIEVES THAT ANY GSA INTERNAL GUIDELINES FOR CONDUCT OF SCHEDULE NEGOTIATIONS SHOULD BE MADE PUBLIC.

PROCUREMENT OF ADP EQUIPMENT, SOFTWARE, AND RELATED SERVICES IS REQUIRED TO BE EFFECTED IN CONFORMANCE WITH 41 U.S.C. SEC. 11 (1970) AND 31 U.S.C. SECS. 665(A), 712A (1970), RESPECTIVELY, WHICH PROVIDE IN PERTINENT PART AS FOLLOWS:

"NO CONTRACT OR PURCHASE ON BEHALF OF THE UNITED STATES SHALL BE MADE, UNLESS THE SAME IS AUTHORIZED BY LAW OR IS UNDER AN APPROPRIATION ADEQUATE TO ITS FULFILLMENT ***.

"NO OFFICER OR EMPLOYEE OF THE UNITED STATES SHALL MAKE OR AUTHORIZE AN EXPENDITURE FROM OR CREATE OR AUTHORIZE AN OBLIGATION UNDER ANY APPROPRIATION OR FUND IN EXCESS OF THE AMOUNT AVAILABLE THEREIN; NOR SHALL ANY SUCH OFFICER OR EMPLOYEE INVOLVE THE GOVERNMENT IN ANY CONTRACT OR OTHER OBLIGATION, FOR THE PAYMENT OF MONEY FOR ANY PURPOSE, IN ADVANCE OF APPROPRIATIONS MADE FOR SUCH PURPOSE, UNLESS SUCH CONTRACT OR OBLIGATION IS AUTHORIZED BY LAW.

"EXCEPT AS OTHERWISE PROVIDED BY LAW, ALL BALANCES OF APPROPRIATIONS CONTAINED IN THE ANNUAL APPROPRIATION BILLS AND MADE SPECIFICALLY FOR THE SERVICE OF ANY FISCAL YEAR SHALL ONLY BE APPLIED TO THE PAYMENT OF EXPENSES PROPERLY INCURRED DURING THAT YEAR, OR TO THE FULFILLMENT OF CONTRACTS PROPERLY MADE WITHIN THAT YEAR."

PURSUANT TO THESE STATUTES, CONTRACTS EXECUTED AND SUPPORTED UNDER AUTHORITY OF FISCAL YEAR APPROPRIATIONS, AS HERE, CAN ONLY BE MADE WITHIN THE PERIOD OF THEIR OBLIGATION AVAILABILITY AND MUST CONCERN A BONA FIDE NEED ARISING WITHIN SUCH FISCAL YEAR AVAILABILITY, AND CONTRACTS ENTERED INTO UNDER FISCAL YEAR APPROPRIATIONS PURPORTING TO BIND OR OBLIGATE THE GOVERNMENT BEYOND THE FISCAL YEAR INVOLVED MUST BE CONSTRUED AS BINDING THE GOVERNMENT ONLY TO THE END OF THE FISCAL YEAR UNLESS OTHERWISE AUTHORIZED BY LAW. 48 COMP. GEN. 497, 499 (1969); 42 COMP. GEN. 272, 275 (1962).

WE HAVE CONSIDERED THE PROBLEMS OF FISCAL YEAR OVERLAP UNDER THE TERMS OF VARIOUS ADP CONTRACTS IN THE PAST. SEE B-164908, JULY 7, 1972; B-164908, JULY 6, 1970; 48 COMP. GEN. 494; 48 COMP. GEN. 497 (1969), SUPRA. EVEN THOUGH WE AGREE THAT STC'S OFFER DID IN FACT INCORPORATE A 30-DAY CANCELLATION CLAUSE, WE BELIEVE STC'S OFFER FOR RENTAL OF THE MODEL 8000 VIOLATES THE ABOVE-CITED STATUTES BECAUSE IT PROPOSED TO OVERLAP FISCAL YEARS UNDER FISCAL YEAR APPROPRIATIONS. SINCE AN ORDERING AGENCY WOULD OBLIGATE ITSELF TO A ONE-YEAR LEASE FOR THIS MODEL, ANY SUCH LEASE ENTERED INTO AFTER THE BEGINNING OF THE FISCAL YEAR WOULD OVERLAP WITHOUT AUTHORIZATION INTO THE NEXT FISCAL YEAR UNLESS THE GOVERNMENT EXERCISED ITS RIGHT OF TERMINATION BY GIVING STC WRITTEN NOTICE 30 DAYS PRIOR TO THE END OF THE FISCAL YEAR. IN THIS CONNECTION, WE STATED IN 48 COMP. GEN. 497, SUPRA, THAT THE ONLY CONTRACTUAL ARRANGEMENT WHICH WOULD SATISFY THE REQUIREMENTS OF THE ABOVE-CITED STATUTES, IN THE ABSENCE OF STATUTORY AUTHORITY OTHERWISE, WOULD BE A CONTRACT FOR THE FIRST FISCAL YEAR'S NEEDS WITH AN OPTION FOR RENEWAL FOR EACH SUCCEEDING YEAR UPON THE GIVING OF NOTICE TO THE CONTRACTOR. AS NOTED BY THE PROTESTER, LEASES FOR ADP EQUIPMENT WHICH HAVE OVERLAPPED FISCAL YEARS HAVE BEEN AWARDED. HOWEVER, IN ORDER FOR SUCH A LEASE TO BE VALID, IT MUST, BY ITS TERMS, TERMINATE AT THE END OF THE FISCAL YEAR, UNLESS THE GOVERNMENT EXPRESSLY EXTENDS IT BY PURCHASE ORDER. 48 COMP. GEN. 497, 502, SUPRA; B-164908, JULY 7, 1972, SUPRA. SINCE STC'S PROPOSAL TERMS WOULD REQUIRE AN AFFIRMATIVE ACT BY THE GOVERNMENT TO TERMINATE THE LEASE PRIOR TO THE END OF THE FISCAL YEAR, RATHER THAN PROVIDING FOR TERMINATION AT THE END OF THE FISCAL YEAR BY THE TERMS OF THE LEASE, STC'S OFFER WAS PROPERLY REJECTED.

FINALLY, STC ARGUES THAT IF FIXED-TERM LEASES OF ONE YEAR WERE NOT TO BE CONSIDERED FOR AWARD, THE RFP SHOULD HAVE SO STATED. IN THIS REGARD WE NOTE THAT WHILE PARAGRAPH 1 OF THE TERMS AND CONDITIONS APPLICABLE TO RENTAL OF SUCH EQUIPMENT ADVISED THAT THE CONTRACTOR "SHALL HONOR ORDERS FOR PERIODS OF ONE YEAR OR LESS," THE RFP EXPRESSLY POINTED OUT THAT THIS SCHEDULE WAS FOR THE PERIOD JULY 1, 1974 THROUGH JUNE 30, 1975. THEREFORE, WE BELIEVE THAT STC SHOULD HAVE BEEN AWARE THAT IT COULD NOT SUBMIT AN OFFER WHICH REQUIRED THAT ITS EQUIPMENT BE LEASED BEYOND JUNE 30, 1975.

ACCORDINGLY, THE PROTEST IS DENIED.