B-235999.1, Sep 28, 1989, 89-2 CPD ***

B-235999.1: Sep 28, 1989

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Financial and trust services should have been competed under the Brooks Act. The act applies if the contract requires "the performance of a service or the furnishing of a product which is performed or produced making significant use" of automatic data processing equipment. 40 U.S.C. Requirement for offerors to provide detailed analyses of computer and its use was an important and significant element of the services to be provided. Whether individual services should have been broken out from acquisition of integrated financial. Accounting and trust services was matter for agency discretion. Total package approach might have justifiable on basis of assuring sufficient compatibility among computer dependent functions to support an integrated system.

B-235999.1, Sep 28, 1989, 89-2 CPD ***

PROCUREMENT - Special Procurement Methods/Categories - Released - Computer equipment/services - Federal procurement regulations/laws - Applicability PROCUREMENT - Special Procurement Methods/Categories - Computer equipment/services - Contract awards - Authority delegation DIGEST: 1. Contract for accounting, financial and trust services should have been competed under the Brooks Act, 40 U.S.C. Sec. 759 (Supp. IV 1986). The act applies if the contract requires "the performance of a service or the furnishing of a product which is performed or produced making significant use" of automatic data processing equipment. 40 U.S.C. Sec. 759(a)(2)(A). Requirement for offerors to provide detailed analyses of computer and its use was an important and significant element of the services to be provided. Moreover, request for proposals included other services, forming bulk of contract, that could only by performed by computer. PROCUREMENT - Specifications - Minimum needs standards - Total package procurement - Propriety 2. Whether individual services should have been broken out from acquisition of integrated financial, accounting and trust services was matter for agency discretion. Total package approach might have justifiable on basis of assuring sufficient compatibility among computer dependent functions to support an integrated system. Investment advisory services, however, appear not to be computer dependent and there is no obvious rationale for not breaking them out, thereby enhancing competition for these services.

The Honorable Mike Synar

Chairman, Subcommittee on Environment, Energy, and Natural Resources

Committee on Government Operations

House of Representatives:

In your letter of June 19, 1989, you asked several questions regarding a contract awarded by the Bureau of Indian Affairs (BIA) to the Security Pacific National Bank for cash concentration, accounting, financial trust and investment services. In a meeting with members of your Subcommittee's staff on June 30, it was agreed that we would respond in two separate replies. One would focus on the procurement and legal issues, while the second would focus on the testing and review questions in your letter. provided the latter response on August 22 in a letter from our Financial Management Systems Issues Group.

This letter focuses on the legal and procurement issues that you raised. Specifically, you asked whether in our opinion the federal regulations and guidance pertaining to procurements for automatic data processing equipment and services (ADPE) applied to the accounting services procured by the BIA under this contract. You also asked whether the accounting services should have been procured separately from the cash management services or the financial trust and investment advisory services.

Based on our analysis, we believe that this acquisition was subject to, and should have been conducted under, the provisions of section 111 of the Federal Property and Administrative Services Act, as amended, 40 U.S.C. Sec. 759 (Supp. IV 1986), popularly known as the Brooks Act. We also think that the breakout of at least some of the services acquired might have been possible and could have enhanced the competition for them.

BIA currently manages approximately $2.4 billion in trust funds belonging to Indian tribes, individual Indians, Alaska natives and Native Corporations, and irrigation and power projects. BIA initiated this acquisition as part of a study under Office of Management and Budget Circular No. A-76 to identify and implement the most cost effective means of managing these funds, either in-house or by contract.

BIA's request for proposals (RFP) provided for the implementation of a system to provide integrated cash collection and concentration, investment, and account management services, and data processing and reporting. The system is required to support electronic funds transfers and the Department of Treasury lockbox network, and provide BIA on-line access through BIA-provided communications and terminals for account inquiry and maintenance.

The RFP required that offerors undergo a demonstration to establish the operational capabilities of the software offered, using transactions provided by the government. The operational capability demonstration was to be conducted at the offeror's institutional processing center and required the offeror to provide a description of the hardware and operating system and system software, proprietary software, and the applications developed to support BIA's requirements, as well as computer performance and workload analyses sufficient to allow evaluation of the computer's processor, input-output, and main storage utilization. The acquisition resulted in the award of a contract to the Security Pacific National Bank.

To aid in responding to your letter, we obtained the views of the Department of the Interior, BIA's parent agency, regarding Brooks Act applicability to the BIA procurement. The Department reports that BIA did not consider whether the provisions of the Brooks Act would apply to this acquisition because the services were transactional or advisory in nature. The Department notes that BIA conducted this acquisition under the provisions of Office of Management and Budget Circular No. A 76, and states that BIA issued the contract pursuant to the Snyder Act of November 2, 1921, 25 U.S.C. Sec. 13.

The Department further advises that in response to your inquiries the BIA has raised the question of the applicability of the Brooks Act to this acquisition with the Secretary of the Interior. We understand that BIA has not yet received a response to its inquiry.

The Brooks Act places authority for the supervision and coordination of ADPE acquisition by Federal agencies with the Administrator of General Services. 40 U.S.C. Sec. 759(a)(1). In furtherance of the purposes of the act, the Administrator has issued regulations governing the acquisition of ADPE in the Federal Information Resources Management Regulation (FIRMR), 41 C.F.R. Part 201 (1988). The FIRMR requires that contracting for ADPE subject to the Brooks Act be accomplished in accordance with the Federal Acquisition Regulation (FAR) and the FIRMR. 41 C.F.R. Sec. 201-1.101-1 (1988). The FIRMR also requires, among other things, that agencies use the method of acquisition that represents the lowest overall systems life cost to the government. FIRMR Sec. 201- 32.101. The question of whether the act, and the FIRMR, apply to this acquisition depends on: (1) whether the act applies to the agency involved; (2) whether the subject matter of the acquisition falls within the act; and (3) whether either the agency or the subject matter might be exempt from the provisions of the act.

For purposes of the Brooks Act, the term "Federal agencies" includes executive agencies. 40 U.S.C. Sec. 472. The Department of the Interior is an executive agency, 5 U.S.C. Sec. 101, and the BIA is a unit within that Department. Thus, the Brooks Act applies to the Department and the BIA.

As amended by the Paperwork Reduction Reauthorization Act of 1986, Pub. Laws 99-500, 99-591, the Brooks Act defines ADPE to include equipment that is either used by a federal agency, or is under a contract with a federal agency which "(I) requires the use of such equipment, or (II) requires the performance of a service or the furnishing of a product which is performed or produced making significant use of such equipment." 40 U.S.C. Sec. 759 (a)(2)(A). The term ADPE includes:

"(i) computers;

"(ii) ancillary equipment;

"(iii) software, firmware, and similar procedures;

"(iv) services, including support services; and

"(v) related resources as defined by regulations issued by the Administrator for General Services." 40 U.S.C. Sec. 759 (a)(2)(B).

Conversely, the Act does not apply to ADPE acquired by a federal contractor which is merely incidental to the performance of the contract. 40 U.S.C. Sec. 759 (a)(3).

The General Services Board of Contract Appeals, in assessing whether an acquisition falls within the Brooks Act, has framed the question as being whether either of the the "use" criterion is satisfied, or whether the ADPE is merely incidental to the performance of the contract. Mandex, Inc., GSBCA No. 9786-P, Nov. 30, 1988, 1989 BPD Sec. 135. In addressing this issue, the Board has looked at various indicia, including whether the use is significant and required to perform the contract, United Telephone Company of the Northwest, GSBCA No. 10031-P, May 17, 1989, 1989 BPD Sec. 153, or whether ADPE is mentioned significantly in the RFP. Wildhack & Associates, GSBCA No. 9108-P, Aug. 7, 1987, 87-3 BCA Sec. 20,092. The Board has found cash concentration, lockbox and financial reporting services not unlike those contemplated by the BIA contract to fall within the confines of the Act. See Wildhack & Associates, supra; The Citizens and Southern National Bank, GSBCA No. 9721-P, Oct. 28, 1988, 1988 BPD Sec. 250.

Application of these criteria to the present matter is complicated somewhat by the lack of clear delineation in the RFP and contract among the various financial, accounting, reporting, trust, investment advisory, and other services to be performed by the contractor, which we attribute to BIA's desire for an integrated system. On balance, however, we believe that virtually all of these services, with the possible exception of the investment advisory services, fall within the ambit of the Brooks Act.

In our view, the single most telling aspect of the RFP lies in the operational capability demonstration requirement for detailed system performance information. This requirement reflects an interest by BIA in the efficiency of an offeror's system that we can attribute only to a clear understanding that the system and its use was an important and significant element of the services to be provided. Moreover, the RFP and contract include requirements for BIA access to accounts by computer terminal for inquiry and maintenance, electronic funds transfer, and other services constituting the bulk of the contract, that could only be satisfied by a computer system. As the Board noted in Wildhack & Associates, supra, "significance does not connote exclusivity, it merely requires importance or consequence." The system here is clearly an important element of the services to be provided.

The Department has identified no statute that would have exempted this acquisition from the provisions of the Brooks Act. The Snyder Act provision the Department cites as authority for the acquisition authorizes the expenditure of appropriated funds for the benefit, care and assistance of Indians. It is the Brooks Act, however, that governs the acquisition of ADPE by federal agencies. As we explained above, the Department and BIA are subject to the Act and the subject matter of the acquisition falls within its definition of ADPE. Consequently, in the absence of any exemption, we believe that this acquisition should have been conducted under the provisions of the Brooks Act and the FIRMR.

Because the Brooks Act gives supervision and coordination authority for ADPE purchases to the Administrator of General Services, an agency desiring to initiate an ADPE procurement of this magnitude must request and obtain a delegation of procurement authority from the General Services Administration. BIA did not do so. The effect of BIA's failure is to leave the agency holding a contract BIA lacked the proper authority to award. This does not in itself, however, necessarily nullify the procurement or contract, since the deficiency is curable. The Citizens and Southern National Bank, supra. BIA may still explore with the Administrator of General Services the actions needed to cure this problem. We think that BIA should halt any further work under the contract until these issues are resolved with the Administrator.

With regard to your second concern, we view the question of whether procurement by a total package approach is needed to meet an agency's minimum needs to be a matter generally within the discretion of the agency, subject to the requirement that the determination have a reasonable basis. See, e.g., Savin Corp., B-232560, Dec. 5, 1988, 88-2 CPD Para. 562; LaBarge Products, Inc., B-232201, Nov. 23, 1988, 88-2 CPD Para. 510. In the present case, it seems reasonable to conclude that it would be difficult for BIA to assure sufficient compatibility among those functions that are computer system-dependent to provide the desired degree of integration by any means other than a total package acquisition.

Nevertheless, the investment advisory services appear not to be computer system-dependent and we have identified no obvious rationale for not procuring these services separately. We understand that because the acquisition was limited to firms designated as federal depositories by the Department of the Treasury under the provisions of 12 U.S.C. Sec. 265, at least one securities firm that expressed an interest in the procurement was unable to compete. We believe the competition for these services could have been enhanced had they been broken out and competed separately.

By letter dated July 10, 1989, you also inquired about BIA's fundamental authority to contract for the performance of some functions that you suggest may be inherently governmental. We anticipate resolution of this question shortly, and will advise you of our conclusions in a separate letter.