B-211549, JAN 24, 1984

B-211549, JAN 24, 1984

DIGEST: 1. THIRD LOW BIDDER PROTESTING THAT THE LOW BID SHOULD BE REJECTED IS AN "INTERESTED PARTY" UNDER GAO'S BID PROTEST PROCEDURES WHERE THE SECOND LOW BID HAS EXPIRED. 2. AGENCY DID NOT ABUSE ITS DISCRETION IN DETERMINING THAT IT MAY ACCEPT LOW BID FOR SPORTS OFFICIATING SERVICES FROM ORGANIZATION IT REGARDS AS SUBSTANTIALLY OWNED OR CONTROLLED BY GOVERNMENT EMPLOYEES WHERE PRICE OF OTHER BIDDER IS 38 PERCENT HIGHER AND IN ALL LIKELIHOOD SAME INDIVIDUALS WOULD PERFORM THIS ESSENTIALLY PART-TIME WORK REGARDLESS OF WHICH BIDDER WAS AWARDED THE CONTRACT. 3. A BID SUBMITTED BY A FOR-PROFIT COMMERCIAL CONCERN MAY BE UNREASONABLY HIGH, EVEN IF SHOWN TO ACCURATELY REFLECT THE COSTS UNIQUE TO THAT BIDDER PLUS A MODERATE PROFIT, IF THE MARKETPLACE WHICH INCLUDES NONPROFIT ASSOCIATIONS CAN SATISFY THE GOVERNMENT'S NEEDS FOR SUBSTANTIALLY LESS - HERE, 38 PERCENT. 4. PROTEST THAT PERFORMANCE OF SPORTS OFFICIATING SERVICES BY ACTIVE DUTY MILITARY AND BY CIVILIAN GOVERNMENT PERSONNEL WOULD VIOLATE DUAL COMPENSATION LAWS IN DENIED WHERE PROTESTER HAS NOT MET ITS BURDEN OF PROOF.

INTERNATIONAL ALLIANCE OF SPORTS OFFICIALS:

INTERNATIONAL ALLIANCE OF SPORTS OFFICIALS (IASO) PROTESTS THE AWARD OF A CONTRACT TO TWIN STATES ATHLETIC OFFICIALS ASSOCIATION UNDER INVITATION FOR BIDS (IFB) NO. DAKF23-83-B-0037 ISSUED BY THE DEPARTMENT OF THE ARMY FOR ATHLETIC OFFICIATING IN A VARIETY OF SPORTS AT FT. CAMPBELL, KENTUCKY. IASO PRIMARILY CONTENDS THAT TWIN STATES IS SUBSTANTIALLY CONTROLLED BY GOVERNMENT EMPLOYEES AND AWARD TO SUCH A FIRM IS CONTRARY TO PUBLIC POLICY.

THE PROTEST IS DENIED.

FT. CAMPBELL INITIALLY SOUGHT THESE SERVICES THROUGH IFB NO. DAKF23 82-B- 0211, A SMALL BUSINESS SET-ASIDE, IN RESPONSE TO WHICH THREE BIDS WERE RECEIVED AND OPENED ON SEPTEMBER 16, 1982. TWIN STATES WAS THE APPARENT LOW BIDDER BUT SINCE THAT ASSOCIATION IS A NONPROFIT ORGANIZATION IT DOES NOT QUALIFY AS A SMALL BUSINESS, AND CONSEQUENTLY ITS BID WAS REJECTED. IASO AND MANAGEMENT APPLICATIONS, INC. (MA) ALSO SUBMITTED BIDS BUT THEIR BIDS WERE SO MUCH HIGHER THAN TWIN STATES' BID AND THE GOVERNMENT ESTIMATE THAT THE ARMY DECIDED TO CANCEL THE SOLICITATION ON THE GROUNDS THAT THE ONLY BIDS AVAILABLE FOR ACCEPTANCE CONTAINED UNREASONABLE PRICES.

IFB -0037, AN UNRESTRICTED SOLICITATION, WAS THEN ISSUED FOR THE SAME REQUIREMENT. BIDS WERE RECEIVED FROM THE SAME THREE FIRMS WHICH RESPONDED TO THE INITIAL SOLICITATION AND FROM HUMAN RESOURCES CONSULTANTS, INC. HUMAN RESOURCES WAS THE LOW BIDDER, BUT IT SUBMITTED A MISTAKEN BID AND WAS PERMITTED TO WITHDRAW. THE NEXT LOW BID WAS SUBMITTED BY TWIN STATES IN THE AMOUNT OF $117,640.50. MA AND IASO SUBMITTED BIDS IN THE AMOUNT OF $156,354.50 AND $162,027.70, RESPECTIVELY.

ACCORDING TO THE ARMY, 39 PERCENT OF TWIN STATES' MEMBERS ARE ACTIVE DUTY MILITARY PERSONNEL AND CIVILIAN GOVERNMENT EMPLOYEES AND FOUR OF THE TEN MEMBERS OF THE ASSOCIATION'S GOVERNING BOARD ARE ACTIVE DUTY MILITARY PERSONNEL. ON THIS BASIS IT DETERMINED THAT TWIN STATES IS "SUBSTANTIALLY OWNED OR CONTROLLED" BY GOVERNMENT EMPLOYEES AND IT CONCLUDED THAT CONTRACTING WITH THE ASSOCIATION WAS CONTROLLED BY DEFENSE ACQUISITION REGULATION (DAR) SEC. 1-302.6. THAT REGULATION PROVIDES THAT NO AGENCY SHALL KNOWINGLY ENTER INTO A CONTRACT WITH EMPLOYEES OF THE GOVERNMENT OR A BUSINESS ORGANIZATION THAT IS SUBSTANTIALLY OWNED OR CONTROLLED BY GOVERNMENT EMPLOYEES EXCEPT FOR THE MOST COMPELLING REASONS, SUCH AS WHERE THE NEEDS OF THE GOVERNMENT CANNOT REASONABLY BE OTHERWISE SUPPLIED, AND THAT IN THE EVENT IT IS BELIEVED SUCH A REASON EXISTS, THE CONTRACTING OFFICER MUST OBTAIN APPROVAL OF THE HEAD OF PROCURING ACTIVITY PRIOR TO ENTERING INTO THE CONTRACT. PURSUANT TO DAR SEC. 1-302.6, THE CONTRACTING OFFICER REQUESTED APPROVAL FROM HEADQUARTERS, U.S. ARMY FORCES COMMAND TO CONTRACT WITH TWIN STATES, EXPLAINING THAT THE ONLY OTHER TWO BIDS RECEIVED WERE DETERMINED TO BE UNREASONABLY PRICED IN COMPARISON WITH BIDS RECEIVED FOR SIMILAR SERVICES AT OTHER MILITARY INSTALLATIONS, THE BID OF TWIN STATES, AND THE GOVERNMENT ESTIMATE, AND CONCLUDING THAT THE GOVERNMENT'S NEEDS COULD NOT REASONABLY BE OTHERWISE SUPPLIED. APPROVAL WAS RECEIVED AND AWARD WAS MADE TO TWIN STATES ON MARCH 31, 1983.

THE ARMY INITIALLY CONTENDS THAT IASO IS NOT AN INTERESTED PARTY ELIGIBLE TO PROTEST THE AWARD BECAUSE IT WAS THE THIRD LOW BIDDER AND SINCE IASO HAS NOT PROTESTED AWARD TO MA, THE SECOND LOW BIDDER, IT WOULD NOT BE ELIGIBLE FOR AWARD EVEN IF ITS PROTEST WERE SUSTAINED. IASO RESPONDS THAT MA HAS GONE OUT OF BUSINESS AND THEREFORE IF ITS PROTEST WERE TO BE SUSTAINED, IT WOULD BE NEXT IN LINE FOR AWARD.

UNDER OUR BID PROTEST PROCEDURES A PARTY MUST BE "INTERESTED" IN ORDER TO HAVE ITS BID PROTEST CONSIDERED BY OUR OFFICE. 4 C.F.R. SEC. 21.1(A) (1983). DETERMINING WHETHER A PARTY IS SUFFICIENTLY INTERESTED IN A PROTEST INVOLVES CONSIDERATION OF THE PARTY'S STATUS IN RELATION TO THE PROCUREMENT AND THE NATURE OF THE ISSUES RAISED. N.D. LEA & ASSOCIATES, INC., B-208445, FEBRUARY 1, 1983, 83-1 CPD 110. ASSUMING THAT TWIN STATES' LOW BID SHOULD HAVE BEEN REJECTED AND THAT MA IS STILL IN BUSINESS, AWARD COULD NOT BE MADE TO MA FOR THAT FIRM'S BID IS NO LONGER AVAILABLE FOR ACCEPTANCE. MA'S BID INDICATED THAT IT WAS AVAILABLE FOR ACCEPTANCE FOR 60 DAYS AFTER BID OPENING, JANUARY 20, 1983, AND THERE IS NO EVIDENCE IN THE RECORD THAT THIS ACCEPTANCE PERIOD EVER WAS EXTENDED. THUS, MA'S BID HAS EXPIRED AND WE THEREFORE CONCLUDE THAT IASO IS AN "INTERESTED PARTY."

WITH REGARD TO THE OWNERSHIP AND CONTROL OF TWIN STATES, THE RECORD ONLY INDICATES THAT THE AGENCY CLAIMS THAT 39 PERCENT OF TWIN STATES' MEMBERS AND 40 PERCENT OF ITS GOVERNING BOARD ARE GOVERNMENT EMPLOYEES, WHILE IASO CLAIMS THAT 85 PERCENT OF TWIN STATES' MEMBERS ARE GOVERNMENT EMPLOYEES. NEITHER PARTY PROVIDES ANY DOCUMENTATION TO SUPPORT ITS ASSERTION NOR DOES EITHER EXPLAIN HOW THESE INDIVIDUALS WOULD "SUBSTANTIALLY OWN OR CONTROL" THE ASSOCIATION. WE NOTE, HOWEVER, THAT THE ARMY HAS ASSUMED THAT THEY WOULD AND THAT TWIN STATES THEREFORE FALLS WITHIN THE PROHIBITION AGAINST THE GOVERNMENT CONTRACTING WITH ITS EMPLOYEES. ON THE OTHER HAND, THE ARMY ASSERTS THAT THE ADDITIONAL COST OF OVER $44,000 WHICH IT WOULD INCUR BY CONTRACTING FOR THESE SERVICES WITH THE PROTESTER RATHER THAN WITH TWIN STATES CONSTITUTES A "COMPELLING REASON" FOR MAKING AN EXCEPTION TO THE GENERAL RULE AGAINST CONTRACTING WITH GOVERNMENT EMPLOYEES. IASO RESPONDS THAT THE FACT THAT THE GOVERNMENT CAN REALIZE COST SAVINGS BY CONTRACTING WITH A CONCERN CONTROLLED BY GOVERNMENT EMPLOYEES DOES NOT CONSTITUTE A COMPELLING REASON TO MAKE AN AWARD TO THAT CONCERN AND THAT CONSEQUENTLY THE AWARD IS IN VIOLATION OF DAR SEC. 1-302.6.

THE RECORD IN THIS CASE DOES NOT CONTAIN SUFFICIENT INFORMATION FOR US TO DETERMINE WHETHER TWIN STATES IS, IN FACT, "SUBSTANTIALLY OWNED OR CONTROLLED" BY GOVERNMENT EMPLOYEES. EVEN ASSUMING, HOWEVER, THAT TWIN STATES IS SO OWNED OR CONTROLLED, UNDER THE FACTS OF THIS CASE THAT DOES NOT PROVIDE A BASIS FOR OBJECTION TO THE AWARD.

ALTHOUGH AS A GENERAL POLICY CONTRACTS SHOULD NOT BE ENTERED INTO BETWEEN THE GOVERNMENT AND ITS EMPLOYEES OR BUSINESS ORGANIZATIONS THEY SUBSTANTIALLY OWN OR CONTROL, BECAUSE OF THE APPEARANCE OF FAVORITISM WHICH THIS MAY CREATE, AN EXCEPTION MAY BE MADE FOR "COMPELLING REASONS, SUCH AS WHERE THE NEEDS OF THE GOVERNMENT CANNOT REASONABLY BE OTHERWISE SUPPLIED." DAR SEC. 1-302.6.

HERE, IT WOULD COST THE ARMY AN ADDITIONAL $44,000 IF IT WERE TO REJECT TWIN STATES' BID AND CONTRACT WITH IASO; THIS REPRESENTS AN INCREASE IN THE CONTRACT PRICE OF ALMOST 38 PERCENT. IN ADDITION, FT. CAMPBELL IS NOT LOCATED IN AN URBAN AREA AND IT IS PROBABLE THAT THERE IS ONLY A LIMITED NUMBER OF PEOPLE IN THE AREA QUALIFIED TO DO SPORTS OFFICIATING, AND BECAUSE THIS ESSENTIALLY IS PART-TIME WORK, IN ALL LIKELIHOOD THE SAME INDIVIDUALS WOULD ACTUALLY PERFORM THIS CONTRACT IRRESPECTIVE OF WHETHER IT WAS AWARDED TO THE PROTESTER OR TWIN STATES. SEE INTERNATIONAL ALLIANCE OF SPORTS OFFICIALS, B-210172, SEPTEMBER 15, 1983, 83-2 CPD 328, WHERE THE RECORD INDICATED THAT IN THE URBAN AREA OF PHOENIX THERE WAS A LIMITED NUMBER OF QUALIFIED SPORTS OFFICIALS. IN VIEW OF THE FACT THAT IT WOULD COST APPROXIMATELY 38 PERCENT MORE FOR THE SAME PEOPLE TO PERFORM THE SAME SERVICES IF THE CONTRACT WERE AWARDED TO IASO, WE CONCLUDE THAT THE ARMY HAS NOT ABUSED THE DISCRETION COMMITTED TO IT IN DECIDING THAT IASO CANNOT "REASONABLY" SUPPLY ITS NEEDS. SEE INTERNATIONAL ALLIANCE OF SPORTS OFFICIALS, SUPRA.

IASO ALSO ARGUES THAT ITS BID PRICE IS REASONABLE, AS CAN BE SHOWN BY ITS "SPREAD SHEET," AND THAT IT THEREFORE WAS IMPROPER TO COMPARE ITS PRICE AS A FOR-PROFIT COMMERCIAL CONCERN WITH THAT OF A NONPROFIT ASSOCIATION. ALTHOUGH IASO DID NOT EXPLICITLY MAKE THIS ARGUMENT UNTIL IT SUBMITTED ITS COMMENTS ON THE AGENCY REPORT, WE THINK IT IS SUFFICIENTLY INTERTWINED WITH IASO'S EARLIER ARGUMENT CONCERNING THE PROPRIETY OF THE ARMY'S EXCEPTION TO DAR SEC. 1-302.6 THAT IT SHOULD BE ADDRESSED ON THE MERITS.

WHETHER A BID IS UNREASONABLE DOES NOT DEPEND ON WHETHER THE BIDDER CAN ACCOUNT FOR EVERY ELEMENT IN ITS BID PRICE AND CAN DEMONSTRATE THAT ITS PRICE DOES NOT INCLUDE EXORBITANT MARKUPS. IN OTHER WORDS, A BIDDER'S PRICE MAY ACCURATELY REFLECT THE COSTS UNIQUE TO IT PLUS A MODERATE PROFIT YET NOT BE REASONABLE IF THE GOVERNMENT CAN OBTAIN THE SAME SUPPLIES OR SERVICES FROM THE MARKETPLACE FOR SUBSTANTIALLY LESS. WITH RESPECT TO IFB -0037, IT IS CLEAR THAT OFFICIATING SERVICES ARE AVAILABLE FROM A SOURCE OTHER THAN IASO FOR SUBSTANTIALLY LESS. IN DETERMINING WHAT IT REASONABLY SHOULD EXPECT TO PAY FOR SPORTS OFFICIATING SERVICES, WE DO NOT SEE HOW FT. CAMPBELL COULD IGNORE THE BID OF A LOCAL ORGANIZATION OFFERING TO PERFORM THE SAME SERVICES AS IASO FOR 38 PERCENT LESS. THE CONTENTION THAT THE ARMY IMPROPERLY DETERMINED IASO'S BID TO BE UNREASONABLE IS WITHOUT MERIT.

FINALLY, IASO ALLEGES THAT AWARD TO TWIN STATES WOULD RESULT IN THE IMPROPER DUAL EMPLOYMENT OF INDIVIDUALS BY THE GOVERNMENT WITH RESPECT TO THE ACTIVE DUTY MILITARY PERSONNEL AND CIVILIAN EMPLOYEES, SINCE THEY WOULD BE PAID FOR OFFICIATING SPORTS IN ADDITION TO RECEIVING COMPENSATION FOR THEIR REGULAR POSITIONS. EXCEPT IN LIMITED CIRCUMSTANCES, FEDERAL CIVILIAN EMPLOYEES ARE PROHIBITED FROM RECEIVING PAY FROM MORE THAN ONE GOVERNMENT POSITION FOR MORE THAN AN AGGREGATE OF 40 HOURS OF WORK IN 1 CALENDAR WEEK. 5 U.S.C. SEC. 5533(A) (1982). THIS PROHIBITION ALSO APPLIES TO ACTIVE DUTY MILITARY PERSONNEL. 54 COMP.GEN. 431 (1974). "POSITION" IS DEFINED BY 5 U.S.C. SEC. 5531(2) AS:

"A CIVILIAN OFFICE OR POSITION (INCLUDING A TEMPORARY, PART-TIME, OR INTERMITTENT POSITION), APPOINTIVE OR ELECTIVE, IN THE LEGISLATIVE, EXECUTIVE, OR JUDICIAL BRANCH OF THE GOVERNMENT OF THE UNITED STATES (INCLUDING A GOVERNMENT CORPORATION AND A NONAPPROPRIATED FUND INSTRUMENTALITY UNDER THE JURISDICTION OF THE ARMED FORCES) OR IN THE GOVERNMENT OF THE DISTRICT OF COLUMBIA."

THE QUESTION PRESENTED BY IASO'S PROTEST, THEREFORE, IS WHETHER TWIN STATES IS, IN EFFECT, A FEDERAL INSTRUMENTALITY SUCH THAT MEMBERSHIP IN IT WOULD CONSTITUTE AN EMPLOYMENT RELATIONSHIP WITH THE GOVERNMENT. SEE, E.G., 45 COMP.GEN. 757 (1966). FROM THE RECORD WE HAVE BEFORE US, WE CANNOT CONCLUDE THAT IT IS. THE PROTESTER SIMPLY MAKES THE ASSERTION THAT TO CONTRACT WITH TWIN STATES WOULD VIOLATE THE DUAL COMPENSATION LAWS AND IT HAS NOT PRESENTED INFORMATION CONCERNING OR ANALYSIS OF SUCH CONSIDERATIONS AS WHETHER TWIN STATES WAS ESTABLISHED PURSUANT TO DEPARTMENT OF THE ARMY DIRECTIVES OR ORDERS OR WAS FORMED BY INDIVIDUALS, SOME OF WHOM HAPPENED TO BE EMPLOYED BY THE GOVERNMENT IN A MILITARY OR CIVILIAN CAPACITY, OR WHETHER THE CONNECTION OF THESE INDIVIDUALS WITH THE ASSOCIATION IS A REQUIREMENT OF THEIR OFFICIAL DUTIES OR IS A PERSONAL, VOLUNTARY MATTER. SEE 54 COMP.GEN. 518 (1974). SINCE THE PROTESTER HAS NOT MET THE BURDEN OF PROOF NECESSARY TO SUSTAIN ITS POSITION, WE DENY THE PROTEST AS TO THIS ISSUE. SEE INTERNATIONAL ALLIANCE OF SPORTS OFFICIALS, SUPRA.

THE PROTEST IS DENIED.