B-217237, AUG 27, 1985, 85-2 CPD 231

B-217237: Aug 27, 1985

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PROTEST ALLEGATION THAT PROCURING AGENCY IMPROPERLY COMPRESSED PROCEDURES OF OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-76 IN DETERMINING WHETHER CONTRACTED SERVICE SHOULD BE RETURNED TO IN-HOUSE PERFORMANCE WILL NOT BE CONSIDERED SINCE IT INVOLVES AGENCY'S COMPLIANCE WITH EXECUTIVE BRANCH POLICY OF CIRCULAR THAT GAO DOES NOT REVIEW. (COLUMBUS) FOR THESE SERVICES BECAUSE GSA DID NOT HAVE THE PERSONNEL RESOURCES TO PERFORM THE WORK. SINCE GSA BELIEVED THAT THE CONTRACT PRICE WAS MORE COSTLY THAN THE COST OF DOING THE WORK WITH ITS OWN EMPLOYEES. GSA ACKNOWLEDGES THAT THE PRESCRIBED POLICY FOR REACHING THIS DETERMINATION WHERE THERE IS AN EXISTING CONTRACT FOR THE REQUIRED SERVICE IS FOUND IN THE OFFICE OF MANAGEMENT AND BUDGET (OMB) CIRCULAR NO.

B-217237, AUG 27, 1985, 85-2 CPD 231

OFFICE OF MANAGEMENT AND BUDGET - CIRCULARS - NO. A-76 - POLICY MATTERS NOT FOR GAO REVIEW DIGEST: 1. PROTEST ALLEGATION THAT PROCURING AGENCY IMPROPERLY COMPRESSED PROCEDURES OF OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-76 IN DETERMINING WHETHER CONTRACTED SERVICE SHOULD BE RETURNED TO IN-HOUSE PERFORMANCE WILL NOT BE CONSIDERED SINCE IT INVOLVES AGENCY'S COMPLIANCE WITH EXECUTIVE BRANCH POLICY OF CIRCULAR THAT GAO DOES NOT REVIEW. CONTRACTS - IN-HOUSE PERFORMANCE V. CONTRACTING OUT - COST COMPARISON - AGENCY IN-HOUSE ESTIMATE - BASIS 2. OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-76 IMPLICITLY EXCLUDES ALL OTHER PROCURING AGENCY SEVERANCE PAY FORMULAS. CONTRACTS - IN-HOUSE PERFORMANCE V. CONTRACTING OUT - COST COMPARISON - AGENCY IN-HOUSE ESTIMATE - BASIS 3. BASED ON REVIEW OF RECORD, GAO CANNOT CONCLUDE THAT AGENCY FAILED TO PROVIDE A RATIONAL BASIS FOR ITS A-76 COST DETERMINATION INVOLVING MATERIAL COSTS, CONVERSION COST DIFFERENTIAL, AND ALLEGED ADDITIONAL CONTRACT SUPPORT COSTS.

AMERICAN OPERATIONS CORPORATION:

AMERICAN OPERATIONS CORPORATION (AMERICAN) PROTESTS THE DECISION OF THE GENERAL SERVICES ADMINISTRATION (GSA) TO PERFORM MECHANICAL MAINTENANCE SERVICE (CONSISTING OF PREVENTIVE MAINTENANCE, UPKEEP, REPAIR, AND OPERATION OF HEATING, AIR CONDITIONING AND ELEVATOR SERVICES) WITH INHOUSE EMPLOYEES AS A RESULT OF A COST COMPARISON CONDUCTED UNDER INVITATION FOR BIDS (IFB) GB-11C-40322.

WE DENY THE PROTEST IN PART AND DISMISS IT IN PART.

GSA PREVIOUSLY HAD CONTRACTED WITH COLUMBUS SERVICES, INC. (COLUMBUS) FOR THESE SERVICES BECAUSE GSA DID NOT HAVE THE PERSONNEL RESOURCES TO PERFORM THE WORK. SINCE GSA BELIEVED THAT THE CONTRACT PRICE WAS MORE COSTLY THAN THE COST OF DOING THE WORK WITH ITS OWN EMPLOYEES, GSA DECIDED-- PRIOR TO THE JANUARY 1985 CONTRACT EXPIRATION DATE-- TO DETERMINE THE MOST COST EFFECTIVE METHOD OF PROVIDING THE SERVICES.

GSA ACKNOWLEDGES THAT THE PRESCRIBED POLICY FOR REACHING THIS DETERMINATION WHERE THERE IS AN EXISTING CONTRACT FOR THE REQUIRED SERVICE IS FOUND IN THE OFFICE OF MANAGEMENT AND BUDGET (OMB) CIRCULAR NO. A-76 SUPPLEMENT, AUGUST 1983, PART 1, CHAPTER 1, EXHIBIT 3, WHICH PROVIDES:

"(1) DETERMINE IF THE CURRENT (COMMERCIAL) CONTRACT COST IS REASONABLE AND PERFORMANCE IS SATISFACTORY. IF SO, CONTINUE UNDER CONTRACT. IF NOT OR AT END OF CONTRACT PERIOD, INCLUDING OPTIONS, THEN

"(2) OPEN THE BID TO OTHER COMMERCIAL COMPETITION THROUGH THE NORMAL PROCUREMENT PROCESS.

"(3) DETERMINE IF THE CONTRACT COST OBTAINED THROUGH COMPETITIVE SOLICITATION FOR BIDS AND PROPOSALS ARE REASONABLE. IF SO, AWARD A CONTRACT. IF NOT,

"(4) DETERMINE IF IN-HOUSE PERFORMANCE BY GOVERNMENT EMPLOYEES WOULD BE FEASIBLE IF THE ACTIVITY WERE TO BE BROUGHT IN-HOUSE. IF NOT, AWARD A CONTRACT. IF IN-HOUSE PERFORMANCE IS FEASIBLE, THEN

"(5) SCHEDULE THE ACTIVITY FOR A COST COMPARISON REVIEW, AND

"(6) CONDUCT A COST COMPARISON OF IN-HOUSE AND CONTRACT COSTS IN ACCORDANCE WITH PARTS III, AND IV OF THIS SUPPLEMENT.

"(7) IF THE TOTAL IN-HOUSE COST ESTIMATE IS LESS THAN TOTAL CONTRACT COSTS BY 10 PERCENT OF PERSONNEL-RELATED COSTS (DIFFERENTIAL) AND 25 PERCENT OF THE ESTIMATED ACQUISITION COST OF ADDITIONAL EQUIPMENT AND FACILITIES NEEDED BY THE GOVERNMENT, THEN PERFORM THE ACTIVITY IN-HOUSE USING GOVERNMENT PERSONNEL AND EQUIPMENT AND FACILITIES. IF NOT, AWARD A CONTRACT.

GSA STATES IT MADE A REASONABLE MANAGEMENT DECISION TO COMPRESS THE STEPS FOR REVIEWING EXISTING CONTRACTS BY SKIPPING STEPS (2) THROUGH (5) AFTER DECIDING UNDER STEP (1) THAT THE THEN-EXISTING COMMERCIAL CONTRACT PRICE WAS UNREASONABLE. INCIDENT TO THIS MANAGEMENT DECISION, GSA DECIDED TO FOREGO A COMPETITION LIMITED SOLELY TO BIDS FROM THE PRIVATE SECTOR. CONSEQUENTLY, GSA ISSUED THE IFB WHICH INFORMED BIDDERS NOT ONLY THAT THE GSA DETERMINATION TO DO THE WORK WITH GSA EMPLOYEES OR BY CONTRACT WOULD BE BASED ON THE PROCEDURES CONTAINED IN OMB CIRCULAR A-76, BUT ALSO THAT THE GSA COST ESTIMATE WAS TO BE PREPARED AT THE SAME TIME AS BIDS AND OPENED TOGETHER WITH THE BIDS. THE IFB FURTHER PROVIDED THAT, IF THE GSA ESTIMATE WAS LOW, THE IFB WOULD BE CANCELED AND GSA EMPLOYEES WOULD PERFORM THE WORK.

SIX COMMERCIAL BIDS WERE RECEIVED; THE GSA ESTIMATE WAS LOWER. AMERICAN, THE LOW BIDDER, APPEALED TO GSA THE PROPRIETY OF THE GSA ESTIMATE. GSA SUSTAINED CERTAIN ASPECTS OF THE APPEAL AND DENIED OTHERS. AFTER THE APPEAL, THE GSA ESTIMATE REMAINED $51,128 LOWER THAN AMERICAN'S BID.

FIRST, AMERICAN ARGUES THAT GSA NEGLECTED TO CONDUCT A PROCUREMENT LIMITED TO COMMERCIAL COMPETITION AS IS CONTEMPLATED BY STEPS (2) AND (3) OF THE OMB CIRCULAR.

OUR REVIEW ROLE IN A-77 PROTESTS IS LIMITED TO AN EXAMINATION OF THE PROCURING AGENCY'S IMPLEMENTATION OF THE COST COMPARISON PROCEDURES THAT THE SOLICITATION ANNOUNCED WOULD BE USED. SIDNEY R. JENKINS, B-217045, NOV. 27, 1984, 84-2 CPD PARA. 581. WHEN AMERICAN BID, IT WAS ON NOTICE OF THE COMPRESSED PROCEDURE THAT WOULD BE USED, SINCE THE IFB EFFECTIVELY INFORMED BIDDERS OF GSA'S INTENT TO COMPRESS THE STEPS OF THE CIRCULAR BY ADVISING THAT GSA'S ESTIMATE WOULD BE OPENED AT THE SAME TIME THAT BIDS WOULD BE OPENED. AMERICAN'S CHALLENGE TO GSA'S DECISION TO COMPRESS THE ABOVE STEPS DOES NOT INVOLVE IMPLEMENTATION OF SOLICITATION PROCEDURES, BUT INSTEAD INVOLVES GSA'S COMPLIANCE WITH OTHER PROVISIONS OF THE CIRCULAR. COMPLIANCE WITH THE CIRCULAR, HOWEVER, INVOLVES A MATTER OF COMPLIANCE WITH EXECUTIVE BRANCH POLICY. WE DO NOT REVIEW SUCH MATTERS. CF. DWS, INC., B-211950.2. FEB. 10, 1984, 84-1 CPD PARA. 164, WHERE WE DECLINED TO REVIEW A PROTEST OF AN AGENCY'S "ALLEGED INTENT" TO CONVERT A CONTRACTED OPERATION TO A GOVERNMENT OPERATION WITHOUT COMPLYING WITH THE OMB CIRCULAR.

CONSEQUENTLY, WE DISMISS THIS GROUND OF PROTEST.

AMERICAN ALSO CONTENDS THAT GSA UNDERSTATED THE COST OF FLUORESCENT LAMPS AND LIGHTING BALLASTS IN THE GSA COST ESTIMATE; THAT GSA FAILED TO FOLLOW SPECIFIC A-76 ONE-TIME CONVERSION PROCEDURES IN CALCULATING PAY FOR GSA EMPLOYEES WHO WOULD LOSE THEIR JOBS IF THE CONTRACTOR ASSUMED THE OPERATION; THAT GSA HAS ADDED CONTRACT SUPPORT TO GSA'S CURRENT OPERATION, BUT DID NOT INCLUDE THE COST OF THIS SUPPORT IN ITS COST ESTIMATE; AND THAT GSA IMPROPERLY CALCULATED A CONVERSION DIFFERENTIAL USED TO FACTOR IN THE COST DUE TO THE ANTICIPATED CHANGE IN OPERATION FROM A CONTRACTOR-RUN TO A GSA-RUN OPERATION.

A PROTESTER CHALLENGING A COST COMPARISON MUST DEMONSTRATE NOT ONLY A FAILURE TO FOLLOW ESTABLISHED PROCEDURES, BUT ALSO THAT THIS FAILURE MATERIALLY AFFECTED THE OUTCOME OF THE COST COMPARISON. THE PROTESTER MAY MEET ITS BURDEN BY PRESENTING SUFFICIENT EVIDENCE TO RAISE A REASONABLE DOUBT AS TO WHETHER THE RESULT OF THE COST COMPARISON WOULD BE DIFFERENT IF THE CORRECT PROCEDURES WERE FOLLOWED IF THE AGENCY DOES NOT DISPEL THAT DOUBT. SERV-AIR, INC., AVCO, 60 COMP.GEN. 44 (1980), 80-2 CPD PARA. 317.

CONCERNING THE QUANTITY OF FLUORESCENT LAMPS AND LIGHTING BALLASTS TO BE USED, GSA BASED ITS ESTIMATE OF 6,000 FLUORESCENT LAMPS AND 650 LIGHTING BALLASTS ON THE NUMBER OF LAMPS AND BALLASTS USED OVER THE PAST 3 YEARS. AMERICAN HAS FURNISHED US WITH A LETTER FROM A REPRESENTATIVE OF THE PRIOR CONTRACTOR, HOWEVER, WHICH STATES THAT THE YEARLY CONSUMPTION FOR THESE ITEMS BASED ON DOCUMENTED CONSUMPTION FROM JULY 1983 THROUGH OCTOBER 1984 WAS 15,528 LAMPS AND 2,160 BALLASTS PER YEAR. GSA, IN RESPONSE, POINTS OUT THAT THE CONSUMPTION FOR 1984 DOES NOT REFLECT THE NORMAL AMOUNT OF LAMPS AND BALLASTS ANNUALLY BECAUSE THERE WAS A ONE-TIME MAJOR RELAMPING PROJECT DURING THAT YEAR. GSA, THEREFORE, BASED ITS ESTIMATE ON 1982 AND 1983 CONSUMPTION WHICH, ACCORDING TO GSA, MORE ACCURATELY REPRESENTS EXPECTED CONSUMPTION. SINCE THE PREPONDERANCE OF THE CONSUMPTION REPORTED BY THE CONTRACTOR TOOK PLACE DURING 1984 AND SOME OF THE 1983 CONSUMPTION MIGHT HAVE REFLECTED STOCKPILING FOR THE 1984 RELAMPING EFFORT, WE CANNOT CONCLUDE THAT GSA'S MATERIAL COST ESTIMATE HAS BEEN SHOWN TO BE IN ERROR.

ON THE MATTER OF COMPUTING SEVERANCE PAY, GSA REPORTS THAT IT DID NOT USE THE A-76 PERCENTAGE ESTIMATE-- 4 PERCENT-- OF EMPLOYEES EXPECTED TO BE SEPARATED. GSA NOTES THAT, WHILE A-76 STATES THAT THE 4 PERCENT FIGURE IS APPROPRIATE FOR USE IN MOST COST STUDIES, A-76 ALSO EXPRESSLY PROVIDES THAT IN "COST STUDIES FOR WHICH A HIGHER OR LOWER SEPARATION RATE THAN THE 4 PERCENT CAN BE ANTICIPATED, OTHER ESTIMATES OF SEVERANCE PAY MAY BE USED, PROVIDED THE ALTERNATE ASSUMPTIONS CAN BE FULLY DOCUMENTED." GSA SAYS THAT IT RELIED ON A HIGHER PERCENTAGE RATE FOR SEPARATION (AND, CONSEQUENTLY, A HIGHER SEVERANCE PAY FIGURE) BECAUSE GSA BELIEVED IT COULD FULLY DOCUMENT THE HIGHER SEPARATION RATE. AS EXPLAINED BY GSA:

"THE MOST EFFICIENT OPERATION DEVELOPED IN THE MANAGEMENT STUDY LEADING TO THE IN-HOUSE ESTIMATE REDUCED STAFFING IN THE ELEVATOR SHOP FROM TEN TO SIX POSITIONS SHOULD THE ACTIVITY REMAIN IN-HOUSE. THE SIX ... INDIVIDUALS ... REPRESENTED THESE MOST LIKELY TO REMAIN ON-BOARD UNDER IN- HOUSE OPERATION, AND, CONSEQUENTLY, THEY (ARE) THOSE INDIVIDUALS THAT WOULD BE AFFECTED BY A CONVERSION OF THIS ACTIVITY TO CONTRACT OPERATION. AS INDICATED, THE CIRCULAR ALLOWS FOR ESTIMATES OF SEVERANCE PAY OTHER THAN (THE STIPULATED PERCENTAGE) "PROVIDED THE ALTERNATE ASSUMPTIONS CAN BE FULLY DOCUMENTED.' GSA HAS DEVELOPED A STANDARD FORMULA WHICH TAKES INTO ACCOUNT GSA'S ACTUAL EXPERIENCE NATIONWIDE IN THE PERCENTAGE OF AFFECTED EMPLOYEES WHO HAVE BEEN OFFERED COMPARABLE EMPLOYMENT BY SUCCESSFUL CONTRACTORS, THE ACTUAL WEEKLY SALARY COST OF ALL AFFECTED EMPLOYEES, THE ACTUAL AVERAGE YEARS OF SERVICE OF ALL AFFECTED EMPLOYEES, AND THE ACTUAL AVERAGE AGE OF ALL AFFECTED EMPLOYEES.

ACCORDINGLY, USING GSA'S FORMULA, THE ONE-TIME SEPARATION COSTS FOR PERSONNEL LEAVING THE GOVERNMENT WERE CALCULATED TO BE $72,176."

IN REPLY, AMERICAN CONTENDS THAT GSA HAS FAILED TO FULLY DOCUMENT THE BASIS FOR NOT FOLLOWING THE SPECIFIC 4 PERCENT RULE ESTABLISHED BY A-76. SPECIFICALLY, AMERICAN CONTENDS THAT THE SIX GSA ELEVATOR MAINTENANCE EMPLOYEES WHOSE SEVERANCE PAY WAS COMPUTED IN THE ABOVE FORMULA WOULD PLACE EVERY ELEVATOR MAINTENANCE EMPLOYEE PLACE EVERY ELEVATOR MAINTENANCE EMPLOYEE AFFECTED BY A SIMILAR AFFECTED BY A SIMILAR ADVERSE ACTION WHICH RESULTED FROM A BID OPENING SUBSEQUENT TO THE CASE IN QUESTION."

GSA'S POSITION IS THAT THE OMB CIRCULAR PERMITS THE USE OF ITS OWN NATIONWIDE FORMULA REFLECTING GSA'S ACTUAL EXPERIENCE. HOWEVER, WE READ THE OMB CIRCULAR AS IMPLICITLY EXCLUDING ALL OTHER AGENCY SEVERANCE PAY FORMULAS. OUR VIEW, A-76 PERMITS THE OMB FORMULA TO BE DISREGARDED ONLY WHERE AN AGENCY CAN DOCUMENT THAT THE SEPARATION RATE IN THE PARTICULAR CASE ACTUALLY WILL BE OTHER THAN 4 PERCENT. THIS IS NOT DONE ON THE BASIS OF NATIONAL AVERAGES, BUT ON THE BASIS OF A SHOWING FROM THE FACTS AND CIRCUMSTANCES IN THE PARTICULAR CASE THAT THE RATE WILL BE DIFFERENT. THIS GSA HAS NOT DONE. GSA ADMITS THAT, IF THE COSTS WERE CALCULATED UNDER THE OMB FORMULA, THE RESULT WOULD BE A SHIFT OF COSTS OF $68,798 IN FAVOR OF THE CONTRACTOR. HOWEVER, THIS DOES NOT END THE INQUIRY INTO THE COST COMPARISON SINCE GSA ARGUES THAT, IF THE "CONVERSION DIFFERENTIAL," DISCUSSED NEXT, HAD BEEN PROPERLY COMPUTED, THERE WOULD STILL BE A COST ADVANTAGE TO GSA OF $47,934 AFTER TAKING INTO ACCOUNT THE ABOVE $68,798 AMOUNT.

THE CIRCULAR REQUIRES THAT 10 PERCENT CONVERSION DIFFERENTIALS BE ADDED WHEN AN AGENCY EVALUATES CONVERTING TO AN IN-HOUSE OPERATION AND CONVERTING TO CONTRACTING-OUT. WITH REGARD TO CONTRACTING OUT, THE CIRCULAR AT PAGE IV-41 OF THE COST COMPARISON HANDBOOK, PART OF THE SUPPLEMENT TO THE CIRCULAR, PROVIDES THAT A "COST MARGIN EQUAL TO TEN PERCENT OF THE IN-HOUSE PERSONNEL RELATED COSTS . . . MUST BE ADDED TO THE COST OF CONTRACTING ... TO GIVE CONSIDERATION TO THE LOSS OF PRODUCTION ... AND OTHER UNPREDICTABLE RISKS THAT RESULT ANY TIME A CONVERSION IS MADE." PAGE IV-45 ALSO PROVIDES THAT A 10 PERCENT DIFFERENTIAL INVOLVING THE "GOVERNMENT PERSONNEL-RELATED COST" MUST BE ADDED TO THE GOVERNMENT ESTIMATE BEFORE A DECISION IS TO BE MADE TO CONVERT A CONTRACTED OPERATION TO A GOVERNMENT EMPLOYEE OPERATION.

IN PREPARING ITS COST ESTIMATE, GSA SAYS THAT IT DID ADD 10 PERCENT OF ITS PERSONNEL COSTS TO THE ESTIMATE. AMERICAN ARGUES THAT THIS ADDITION WAS DEFECTIVE BY $13,798 BECAUSE GSA ALLEGEDLY FAILED TO APPLY THIS DIFFERENTIAL TO PERSONNEL-RELATED COSTS INVOLVING ESTIMATED OVERTIME, EMERGENCY CALLBACK, AND MINOR REPAIRS.

IN RESPONDING TO AMERICAN'S ARGUMENT, GSA SAYS THAT IT DISCOVERED AN ERROR. WHILE IT ADDED THE 10 PERCENT DIFFERENTIAL TO ITS ESTIMATE, GSA SAYS THAT IT ERRONEOUSLY FAILED TO ADD THE 10 PERCENT DIFFERENTIAL TO AMERICAN'S BID FOR THE COST OF ELEVATOR MAINTENANCE WHICH GSA EMPLOYEES HAD BEEN PERFORMING DURING THE LIFE OF THE COMMERCIAL CONTRACT.

AMERICAN ARGUES THAT THIS ADDITIONAL CHARGE-- $65,604-TO ITS BID IS IMPROPER BECAUSE GSA IS ATTEMPTING "TO MIX THE RULES" BY ADDING COSTS BOTH TO ITS ESTIMATE AND TO AMERICAN'S BID TO REFLECT THE ABOVE PROVISIONS OF THE OMB CIRCULAR. AMERICAN ARGUES THAT THIS APPROACH WAS NOT REVEALED IN THE SOLICITATION WHICH WAS PRIMARILY ISSUED TO DETERMINE IF THE STATUS-QUO OF COMMERCIAL CONTRACTING SHOULD BE UPSET-- NOT TO DETERMINE IF THE ELEVATOR MAINTENANCE FUNCTION SHOULD BE CONTRACTED OUT.

SINCE THE SOLICITATION INCLUDED ELEVATOR SERVICES AMONG THOSE TO BE PERFORMED AND BECAUSE THESE SERVICES WERE BEING PERFORMED BY GOVERNMENT EMPLOYEES, WE CONSIDER THAT IT WAS PROPER UNDER THE OMB CIRCULAR FOR GSA TO ADD THE COST DIFFERENTIAL IN QUESTION TO AMERICAN'S BID EVEN THOUGH THE ELEVATOR SERVICES WERE ONLY A PART OF A LARGER PACKAGE OF SERVICES WHICH HAD PREVIOUSLY BEEN CONTRACTED.

CONSEQUENTLY, SINCE GSA PROPERLY APPLIED THE CONVERSION DIFFERENTIAL TO AMERICAN'S BID, GSA'S ESTIMATE REMAINS LOW BY $34,136, EVEN IF WE ACCEPT AMERICAN'S ADDITIONAL ARGUMENT THAT AN ADDITIONAL $13,798 IN CONVERSION COSTS SHOULD HAVE BEEN ADDED TO GSA'S ESTIMATE. AMERICAN ALLEGES THAT A COMPETITOR-- ISS ENERGY SERVICES, INC., (ISS)-- UNDER THE CONTESTED SOLICITATION HAS IMPROPERLY BEEN PERFORMING WORK WITHIN THE SCOPE OF THE IFB SINCE THE OPERATION WAS TAKEN OVER BY GSA EMPLOYEES IN JANUARY 1985. AMERICAN STATES THAT GSA HAD LONG KNOWN THAT CONTRACTOR SUPPORT WORK WOULD BE REQUIRED AND THAT THE COST OF THIS CONTRACTED WORK EFFORT SHOULD BE ADDED TO THE GSA ESTIMATE SINCE THE ESTIMATE ALLOWED FOR NO ADDED CONTRACT SUPPORT.

IN REPLY, GSA STATES THAT ISS WAS COMPETITIVELY AWARDED AN INDEFINITE QUANTITY CONTRACT FOR BACK-UP PREVENTIVE MAINTENANCE FOR THE DISTRICT WHICH INCLUDES THE BUILDING FOR WHICH THE COST COMPARISON WAS MADE. UNDER THIS CONTRACT, GSA STATES, ISS WAS NOT REQUIRED TO PROVIDE REGULAR SERVICE TO A PARTICULAR BUILDING. RATHER, GSA ORDERS SERVICE FROM TIME-TO-TIME AS NECESSARY. GSA STATES THAT THE PURPOSE OF THE INDEFINITE QUANTITY CONTRACT, WHERE SERVICES FOR BUILDINGS ARE ALREADY BEING PROVIDED BY GOVERNMENT PERSONNEL, IS TO HAVE COMPETITIVELY ARRIVED AT PRE-SET PRICES FOR WORK THE GOVERNMENT IS NOT IN A POSITION TO PERFORM. GSA FURTHER STATES THAT WHEN ITS EMPLOYEES STARTED TO PERFORM THE SERVICES THIS YEAR FOR THE BUILDING FOR WHICH THE COST COMPARISON WAS MADE, THERE WAS A NEED TO MAKE REPAIRS TO CORRECT THE INEFFICIENT OPERATION OF THE BUILDING. ACCORDING TO GSA, THE INEFFICIENCY WAS CAUSED BY THE PRIOR COMMERCIAL CONTRACTOR'S LACK OF PERFORMANCE WHICH WAS INITIALLY BROUGHT TO THE CONTRACTOR'S ATTENTION BY GSA IN OCTOBER 1984. GSA INSISTS THAT THESE REPAIRS WERE NOT WITHIN THE SCOPE OF THE A-76 SOLICITATION AND THAT, HAD AMERICAN BEEN THE SUCCESSFUL CONTRACTOR, ITS CONTRACT WOULD ALSO HAVE BEEN MODIFIED TO PROVIDE FOR THIS ANTICIPATED ADDITIONAL WORK. GSA ALSO REPORTS:

"THE GOVERNMENT'S PERFORMANCE OF THE NECESSARY MINOR REPAIRS CONSTITUTED AN INCREASE IN THE SCOPE OF WORK FOR WHICH THE GOVERNMENT WAS RESPONSIBLE. THE BUILDINGS MANAGER CHOSE TO PERFORM MINOR REPAIRS AND REPAIRS TO CONTROL SYSTEMS THROUGHOUT THE BUILDING WITH GSA PERSONNEL BECAUSE THE REPAIRS NEEDED IMMEDIATE ATTENTION. GOVERNMENT EMPLOYEES ORIGINALLY SCHEDULED TO PERFORM THE PREVENTIVE MAINTENANCE WORK WERE ASSIGNED TO PERFORM THESE REPAIRS. THE PREVENTIVE MAINTENANCE WORK THAT HAD BEEN THE RESPONSIBILITY OF THOSE EMPLOYEES WAS THEN PERFORMED BY ISS. THIS WAS A RESOURCE ALLOCATION CHOICE OF THE BUILDINGS MANAGER.

"SINCE JANUARY 10, 1985, WHEN GSA PERSONNEL BEGAN MAINTENANCE WORK AT FORRESTAL (THE BUILDING FOR WHICH THE COST COMPARISON WAS MADE), THE BUILDINGS MANAGER HAS UTILIZED THE INDEFINITE QUANTITY CONTRACT EIGHT TIMES FOR A TOTAL OF $46,473.80. THIS MONEY HAS BEEN PAID FROM THE FORRESTAL ACCOUNT ESTABLISHED TO FUND THE WORK COVERED UNDER THE A-76 SOLICITATION. THE AMOUNT OF MONEY ALLOTTED TO THE BUILDING MANAGER'S ACCOUNT WAS BASED ON THE GOVERNMENT'S A-76 COST ESTIMATE. ANY FUNDS EXPENDED ON THE INDEFINITE QUANTITY CONTRACT ARE SUBTRACTED FROM, NOT ADDED TO, THIS ACCOUNT. THE USE OF THE INDEFINITE QUANTITY CONTRACTOR TO PERFORM PREVENTIVE MAINTENANCE DID NOT SUPPLEMENT THE GOVERNMENT'S COST ESTIMATE, AND THE GOVERNMENT WILL STILL PERFORM THE WORK FOR LESS MONEY THAN (AMERICAN)." IN REPLY TO GSA'S POSITION, AMERICAN DOES NOT SPECIFICALLY QUESTION THE FINANCIAL STATEMENTS MADE BY GSA OTHER THAN SUGGESTING THAT "ANY EXPERIENCED MANAGER KNOWS THAT SUCH STATEMENTS ARE SUPPORTABLE BY SIMPLE ADJUSTMENTS IN THE COST ACCOUNTING STRUCTURE." AMERICAN ALSO STATES THAT IT TALKED TO THE PRIOR CONTRACTOR AND THAT THE CONTRACTOR "STATES (IT) LEFT LITTLE IF ANY UNPERFORMED WORK WHICH GSA CLAIMS IN-HOUSE PERSONNEL (HAD TO) PERFORM."

ALTHOUGH THE CONTRACTOR MAY DISPUTE GSA'S POSITION CONCERNING THE COMPANY'S ALLEGED "LACK OF PERFORMANCE," WE CANNOT CONCLUDE-- MERELY FROM THIS DISPUTE-- THAT GSA DID NOT NEED TO PERFORM THE REPAIR WORK IN QUESTION. FURTHER, AMERICAN HAS OFFERED NO EVIDENCE-- OTHER THAN MERE SUGGESTION-- THAT GSA'S FINANCIAL STATEMENTS ARE INCORRECT. FINALLY, AMERICAN DOES NOT QUESTION THAT THE REPAIR WORK WAS BEYOND THE SCOPE OF THE A-76 IFB.

GIVEN THAT GSA PERFORMED THIS OUT-OF-SCOPE WORK WITH ITS OWN EMPLOYEES BECAUSE THE REPAIRS WERE URGENTLY NEEDED, GSA PROPERLY EMPLOYED THE EXISTING BACK-UP CONTRACTOR, ISS, TO DO THE "WITHIN-SCOPE" PREVENTIVE MAINTENANCE UNDER DIRECT WORK ORDERS SINCE THE EXISTING ISS CONTRACT WAS AVAILABLE AND ARGUABLY COVERED THIS WORK.

AS TO AMERICAN'S ARGUMENT THAT THE COST OF ISS'S WORK ORDERS SHOULD BE ADDED IN ITS ENTIRETY TO GSA'S COST ESTIMATE, THIS ARGUMENT FAILS TO TAKE INTO ACCOUNT THAT GSA HAD OBVIOUSLY INCLUDED IN ITS ORIGINAL COST ESTIMATE AN AMOUNT FOR DOING THIS PREVENTIVE MAINTENANCE WITH ITS OWN EMPLOYEES. CONSEQUENTLY, ONLY THE ADDITIONAL COST-- IF ANY-- THAT GSA INCURRED IN HAVING ISS, RATHER THAN GSA EMPLOYEES, DO THE WORK SHOULD BE ADDED TO THE GSA COST ESTIMATE. GIVEN GSA'S ABOVE POSITION THAT IT WILL STILL PERFORM THE WORK FOR LESS MONEY THAN AMERICAN, GSA IS OF THE APPARENT VIEW THAT THE ADDITIONAL COST INVOLVED WITH THE ISS WORK ORDERS-- IF ANY-- IS NOT SUFFICIENT TO OVERCOME THE COST DIFFERENCE, DESCRIBED ABOVE, IN FAVOR OF GSA. WE ARE NOT IN A POSITION TO QUESTION GSA'S VIEW.

THE PROTEST IS DISMISSED IN PART AND DENIED IN PART.