Matter of: Digital Systems Group, Inc. File: B-258262.2 Date: January 20, 1995

Matter of: Digital Systems Group, Inc. File: B-258262.2 Date: January 20, 1995

Protest that agency specification of data rights clauses exceeds agency's minimum needs is denied where based on alleged actions of procurement agency under prior contract which are not relevant to current procurement. Solicitation requirement that offeror propose any additional products necessary to implement its proposed software is not ambiguous for failing to identify additional products, since each offeror is in the best position to know which additional products are necessary for its software. Agency reasonably determined that neither total nor partial small business set-aside was appropriate for handling requirements of federal executive agencies under the mandatory Financial Management Software Systems Multiple Award Schedule.

Attorneys

DECISION

Digital Systems Group, Inc., a small business concern, protests the failure of the General Services Administration (GSA) to set aside solicitation No. KECP-94-001 for exclusive small business participation. The solicitation is for the Financial Management Software Systems mandatory Multiple Award Schedule (FMSS Schedule) for computer software and support services. DSG also protests various provisions of the FMSS Schedule solicitation.

We deny the protest.

BACKGROUND

The FMSS Schedule is a multiple award schedule for commercially available accounting/financial management systems software packages to modernize and standardize the federal government's financial management systems. In developing the FMSS Schedule, GSA developed certain uniform requirements in five functional areas, known collectively as the "core financial system," which represent a minimum standard which must be met by any financial system design included on the FMSS Schedule. The FMSS Schedule is mandatory for all federal executive agencies, including the Department of Defense, for acquisition of commercial software for primary accounting systems and for the acquisition of services and support related to the implementation of such software. Federal Information Resources Management Regulation (FIRMR) Secs. 201-24.107, 201-39.804-2.

In May 1994, prior to the issuance of this solicitation, the GSA contracting officer reviewed the procurement to determine whether to set it aside for small businesses. Although she found there were two small businesses that currently held FMSS Schedule contracts, she concluded that a set-aside was not appropriate. Her decision was based in part on the recognition that it was not possible to know in advance whether any one or two companies could meet all of the federal government's FMSS needs and that the small businesses offered their own software packages which would not all run in the same operating environments.

The solicitation was issued July 1 for the period October 1, 1994 (or date of award, whichever is later) through September 30, 1995, with two 12- month renewal options. On July 12, DSG protested to GSA that the solicitation should have been set aside for exclusive small business participation. By letters of July 12, August 22, and August 25, DSG also challenged provisions of the solicitation which it alleged either exceeded GSA's needs or were ambiguous, as well as GSA's failure to partially set aside the procurement for small businesses. GSA denied DSG's set-aside protests, and DSG protested to our Office prior to the August 30 closing date for receipt of proposals. After the closing date passed without the agency responding to its other two protests, DSG filed a supplemental protest with our Office raising the same issues.

SOLICITATION PROVISIONS

DSG first argues that the data rights clauses identified in the solicitation, Federal Acquisition Regulation (FAR) Secs. 52.227-14 (Rights in Data-General (Alternates II and III)) and 52.227-19 (Commercial Computer Software-Restricted Rights), exceed the government's minimum needs. In support, DSG alleges that under the last FMSS Schedule contract, which included the same data rights clauses, an FMSS contractor provided data rights that were less than those specified. From this DSG concludes that the lesser rights must reflect the government's actual needs and that GSA should apprise all offerors of those needs. See FAR Sec. 15.606(a).[1]

The protester has not identified what minimum rights GSA failed to obtain from the contractor, and that contractor advises our Office that during negotiations for the last FMSS Schedule it made its data rights offer subject to the applicable clauses. DSG has submitted no evidence that GSA intends to accept less than the data rights covered by the applicable clauses.

In the absence of relaxed or changed requirements, the agency has no responsibility to amend the solicitation. Further, to the extent GSA may have accepted less than the required data rights under a prior procurement, such a relaxation of requirements is irrelevant to this procurement. Each procurement action is a separate transaction and the action taken under one is not relevant to the propriety of the action taken under another procurement for purposes of a bid protest. Komatsu Dresser Co., B-251944, May 5, 1993, 93-1 CPD Para. 369.

DSG next argues that the solicitation is ambiguous with regard to the terms and conditions of the delivery orders to be placed against the FMSS Schedule contracts. Section H.6.5.1 of the solicitation states that "[a] written order, in accordance with the terms, conditions, and prices set forth herein, shall be the only basis for software purchases and acquisition of services from this contract." DSG alleges that even though the identical language was included in the last FMSS Schedule's contracts, GSA permitted user agencies to vary the terms and conditions of the contracts for delivery orders.

An agency's statement of its requirements, including letters of interest (LOI) terms and conditions, is unobjectionable so long as the requirements are consistent with the FMSS Schedule contract and do not exceed the agency's needs. Digital Sys. Group, Inc., B-257899, Nov. 15, 1994, 94-2 CPD Para. 188. DSG has not specified which terms or conditions it believes are ambiguous. To the extent DSG is referring to the terms and conditions it challenged in its prior protests to our Office, we found none of them to be inconsistent with the FMSS Schedule contract. See, e.g., Digital Sys. Group, Inc., supra. To the extent DSG is referring to other terms and conditions allegedly varied by user agencies, it has not specified them. In any event, as with the data rights clause issue, any prior improprieties would not be relevant here. Komatsu Dresser Co., supra. The FMSS Schedule contract sets forth a clear standard for issuance of delivery orders and DSG's speculation that user agencies may violate the terms and conditions in LOIs yet to be issued provides no basis for protest. See Independent Metal Strap Co., Inc., B-231756, Sept. 21, 1988, 88-2 CPD Para. 275.

DSG next contends that solicitation section C.10.4.4 exceeds the scope of the FMSS Schedule program because it permits and encourages offerors to propose software in addition to, and distinct from, the FMSS Schedule. As support, DSG states that executive agencies may only obtain "commercial software for primary accounting systems." FIRMR Sec. 210-39.804-2. We find the contention without merit.

Section 210-39.804-2 of the FIRMR is the FMSS Schedule program policy statement. DSG unreasonably interprets a single portion of this statement as substantiating its view that only primary accounting system software is to be obtained under the FMSS Schedule. The balance of the policy statement provides that agencies shall use the Schedule "for the acquisition of services and support related to the implementation of such software." Thus, it is clear that in addition to software, agencies are to use the Schedule for services and support in implementing the software.

To the extent that this policy statement can be interpreted as defining limits to the proper scope of solicitations, the challenged solicitation provision is well within that scope. Section C.1.2 of the solicitation describes the scope of the FMSS Schedule as "commercial financial management systems software and related support as described herein." Section C also sets forth the core requirements and outlines the required support. Specific user agency requirements are to be contained in the LOI. Section C.10.4.4 (Interface of Existing Software/Data) states that the contractor "shall provide support in the specification, development, and implementation of interface or `bridge' software that will allow the processing of transactions/data from existing agency systems through the commercial/standard software package [proposed by the contractor]." Actual programming support is limited to software "for which a requirement would not exist" but for implementation of the commercial package and "shall NOT include modifications to existing agency systems" (emphasis in original). Nothing in this provision requires the offer of any product beyond the scope of the FMSS Schedule; these activities are plainly support services related to implementing the commercial financial management software. FIRMR Sec. 210-39.804-2.

DSG also contends that section C.10.4.3 encourages offerors to propose software other than the FMSS software, but does not limit the products which may be offered. DSG sought clarification by asking GSA for a list of all licenses and products that may be proposed. GSA responded that it was impossible to provide an all-inclusive list and referred DSG to the scope and requirements of the solicitation in formulating its proposal. DSG found this response unsatisfactory.[2]

Section C.10.4.3 (Installation and Implementation Support) provides in part:

"Depending on the financial management system configuration, the financial management software license may include license for other contractor products (computer programs, databases, etc.) as an integral supporting aspect of the software. The use of any such product is restricted for use with the licensed software only, and its use as a stand-alone system or for any other purpose is prohibited."

This part of the provision concerns licensing and use of other contractor products which are integrally related to operation of the proposed commercial software package. While DSG claims that the solicitation and GSA's response are "too vague," we believe they are sufficiently clear. The limit on what may be offered is plain: only additional products which form an integral supporting aspect of the proposed software are to be included. Without knowing what DSG or other offerors intended to propose, including what additional products might be necessary to implement their software, GSA reasonably referred DSG to the scope of the solicitation. Clearly, DSG as an offeror was in the better position to know which products and thus which licenses would be involved in implementing its software. Accordingly, we find nothing vague about this provision of the solicitation.

SET-ASIDE DETERMINATION

It is the government's policy to place a "fair proportion" of its acquisitions with small businesses. 15 U.S.C. Sec. 631 (1988); FAR Sec. 19.201. Accordingly, contracting officials have a responsibility to consider setting aside an acquisition, including one establishing an FMSS Schedule. Digital Sys. Group, Inc., B-256422; B-256521, June 3, 1994, 94-1 CPD Para. 344. In particular, an acquisition must be set aside for exclusive small business participation if the contracting officer determines there is a reasonable expectation that offers will be obtained from at least two responsible small businesses at fair market prices. FAR Sec. 19.502-2. A partial set-aside shall be made if a total set-aside is not appropriate, the requirement is severable into two or more economic production runs or reasonable lots, and one or more small business concerns are expected to have the technical competence and productive capacity to satisfy the set-aside portion at a reasonable price. FAR Sec. 502-3.

Here, the contracting officer was aware of two small businesses, including DSG, which were on the current FMSS Schedule. In determining not to set aside the Schedule, the contracting officer considered that use of the Schedule is mandatory for all federal executive agencies and that all contractors included on the Schedule must meet minimum, core technical requirements for accounting and financial management software. However, in addition to the core requirements, each user agency has individual financial management systems software requirements and an existing technical infrastructure with which the selected software must be compatible. In this regard, the Schedule was not intended to dictate a particular hardware and technical environment and instead was to provide user agencies with as many options as possible.

In reviewing the two small businesses' capabilities, the contracting officer noted that both met the core requirements, but that GSA would not know at the time of issuance of the Schedule solicitation what each user agency's specific requirements would entail. She also noted that each small business offered different technical solutions to meet the software requirements. According to the contracting officer, many agencies do not have environments on which the small businesses' software could run and many smaller agencies which might appear able to use those products could not because the agencies would be sharing mainframe computers on which the small businesses' software would not run. These agencies could not use the small concerns' products without incurring prohibitive costs for additional hardware, system software, and support not covered by the FMSS Schedule. Since GSA could not define the scope and nature of the user agencies' requirements prior to award of the Schedule contracts, the contracting officer concluded that it could not determine whether the two small businesses could meet the government's FMSS needs.

DSG contends that the contracting officer failed to properly consider whether to set aside the FMSS Schedule, in whole or in part, for small businesses. GSA responds that the Schedule is not appropriate for any set-aside for small businesses. In view of the mandatory nature of the FMSS Schedule and the varied functional and technical requirements of the executive agencies, and the total potential volume of these requirements, we agree with GSA that it is clear that two small businesses could not handle all of the government's FMSS needs. DSG essentially concedes the reasonableness of the contracting officer's decision in this regard, but argues that the agency has provided an inadequate rationale for not making the Schedule a partial set-aside.

For example, DSG suggests that a partial set-aside could be established for agencies which employ an open systems architecture. Such agencies, regardless of size, could be flexible about their computer environment and thus what FMS software and services they would require. DSG also suggests that segregable portions of requirements for materials and services could be set aside for small businesses, including validation and verification tasks, certain systems in addition to the core FMS software, and quality assurance tasks.

As with a total set-aside, the determination as to whether a particular acquisition should be partially set aside for small business is left to the discretion of the contracting officer. Atlas Headwear, Inc., B-231488.2, Sept. 14, 1988, 88-2 CPD Para. 244. Nevertheless, that determination must be one which can reasonably be supported. Id. Here, while the agency's original rationale concerning its rejection of a partial set-aside was incomplete, its responses to the protest provide sufficient analysis to reasonably support its decision.[3]

The contracting officer considered a partial set-aside, essentially on the basis of agency size, but rejected it because an agency's size was unrelated to its functional needs. Since functional needs determined the appropriate software, and GSA could not ascertain those needs, a set-aside was not viewed as feasible. While GSA states that it can ascertain a user agency's technical environment, it notes that it is unable to predict what the functional needs of those agencies will be at the time it issues the FMSS Schedule solicitation. In GSA's view, any attempt to set aside this mandatory Schedule on the basis of functional requirements would dictate those requirements to the user agencies. In this regard, basing a partial set-aside on an agency's utilization of open architecture would not solve the problem. If the Schedule were set aside based on a particular open architecture technical platform, such as UNIX, an agency which has a UNIX- based system still may have functional requirements which cannot be met by the participating small business(es). Thus, unless the agency was able and prepared to tailor its requirements to those which the small business(es) could meet, the set-aside would serve no purpose. The agency could simply obtain a waiver from the Schedule (FIRMR Sec. 201-39.804-3), and would then lose the economies of scale present under the mandatory schedule, which would frustrate a primary purpose of the Schedule, as well as defeat the partial set-aside.

Different problems would result from the creation of a set-aside based on severing products or services under the Schedule. First, some agencies may have a requirement for a single vendor. In general, vendors develop their FMS software to work with their own core systems. Thus, a set-aside of a payroll system could result in compatibility and performance issues and require agencies to adjust their requirements to meet the set-aside restrictions. Agencies with more than one vendor would be required to expend additional resources to develop interfaces between the core and subsystems with a potential for degraded performance. In addition, separation of support services could result in the creation of a separate schedule which would not necessarily be mandatory. Further, since some FMSS products are proprietary, a service contractor could require access to proprietary information to perform adequately. (See FAR Sec. 9.505-4 concerning restrictions on use of proprietary information). Under the circumstances, we agree that a partial set-aside is inappropriate for this FMSS Schedule solicitation.

The protest is denied.

1. The allegation that GSA accepted less than the required data rights was the subject of another DSG protest (B-257046.2), which was dismissed by our Office on September 23.

2. In a related argument, DSG contends that section C.10.4.3 is "unclear" regarding the data rights which must be furnished with any additional proposed software. In this regard, DSG argues that "it appears" that this provision is inconsistent with the solicitation's data rights clauses (FAR Secs. 52.227-14 and 52.227-19). However, DSG does not specify how section C.10.4.3 and the data rights clauses are inconsistent. We find no obvious inconsistency in them and accordingly, no merit to this ground of protest.

3. In determining whether an agency decision is reasonable and supported, we consider the entire record including statements and arguments made in response to a protest. See PHP Healthcare Corp., B-251933, May 13, 1993, 93-1 CPD Para. 381. Notwithstanding our Office's consideration of a rationale provided after a decision has been made, it is more appropriate for an agency to properly analyze the matter fully before making its set- aside determination. While it appears that a total or partial set-aside is not feasible for this procurement at this time, GSA has a responsibility to fully consider the propriety of a set-aside in light of the existing circumstances each time it issues a new FMSS Schedule solicitation, including renewals of this solicitation.