National Customer Engineering B-251135 March 11, 1993 72 Comp.Gen. 132
B-251135: Mar 11, 1993
The gravamen of NCE's protest is that the RFP unduly restricts competition by requiring offerors to provide both hardware and software maintenance services. Which was purchased under separate contracts by BLM. The equipment is located in 144 systems in 75 nationwide sites. The contract period is anticipated to be a base period of 9 months with 4 option years. BLM obtained a delegation of procurement authority from the General Services Administration as well as approval from the Small Business Administration (SBA) to conduct the procurement on an unrestricted basis (that is. No part of the procurement is set aside for small businesses). The RFP itself was issued on October 2. The agency is essentially mandating three sole source awards.
National Customer Engineering B-251135 March 11, 1993 72 Comp.Gen. 132
Procurement Specifications Minimum needs standards Competitive restrictions GAO review Solicitation requirement that both hardware and software maintenance services be provided by the same contractor unduly restricts competition where the record does not provide a reasonable basis for the determination that the combined requirement reflects the agency's minimum needs.
DECISION National Customer Engineering (NCE) protests the terms of request for proposals (RFP) No. N-652-R-2-0005, issued by the Department of the Interior, Bureau of Land Management (BLM), for remedial and preventative maintenance of hardware and software. The gravamen of NCE's protest is that the RFP unduly restricts competition by requiring offerors to provide both hardware and software maintenance services. NCE contends that the agency should compete the hardware and software maintenance services separately.
We sustain the protest in part and deny it in part.
The RFP anticipates three separate awards: one combining maintenance of Prime Computer, Inc. hardware and software; one combining maintenance of Sun Microsystems, Inc. hardware and software; and one for maintenance of Oracle Corporation software. The hardware and software, which was purchased under separate contracts by BLM, the Bureau of Indian Affairs, the U.S. Fish and Wildlife Service, the U.S. Geological Survey, the National Park Service, and the Office of Surface Mining, support a Geographic Information System shared by these bureaus and agencies of the Department of the Interior. The equipment is located in 144 systems in 75 nationwide sites. The contract period is anticipated to be a base period of 9 months with 4 option years.
Before issuing the RFP, BLM obtained a delegation of procurement authority from the General Services Administration as well as approval from the Small Business Administration (SBA) to conduct the procurement on an unrestricted basis (that is, no part of the procurement is set aside for small businesses). BLM issued a synopsis of the intended procurement in the Commerce Business Daily on August 12, 1992. Approximately 36 vendors responded with expressions of interest. The RFP itself was issued on October 2, 1992. NCE filed this protest prior to the date for receipt of proposals.
NCE contends that, by linking hardware and software maintenance, the agency is essentially mandating three sole source awards. NCE asserts that the proprietary rights of Prime, Sun, and Oracle in their respective software ensure that no other source can compete with each for the maintenance of its software. NCE therefore assumes that award for the software maintenance portion of the procurement must be made to the original equipment manufacturers (OEM). NCE's protest focuses on the "bundling" of this software maintenance with hardware maintenance, for which, according to NCE, other firms have the capability to compete. NCE also challenges the 5-year length of the contract (including the options) as allowing the three OEMs to "lock up" maintenance work throughout the Department of the Interior for too long a period.
NCE asserts that the agency should unbundle the software and hardware maintenance portions of the procurement. In NCE's opinion, this will enable potential sources for hardware maintenance to compete for a contract. In particular, NCE contends that several small businesses could be expected to compete for the hardware maintenance work and that, accordingly, that work was required to be set aside for small businesses.
Further, NCE contends that the RFP fails to inform offerors of minimum requirements with regard to three evaluation criteria: (1) general organizational experience and background; (2) multi-location contract support; and (3) general description of the firm, including organization, resources available, and longevity of the firm. The first two of these appear as subfactors related to past experience and performance. NCE asserts that the RFP's failure to identify minimum requirements in these areas means that offerors cannot know "how high the bar is that an offeror must jump over."
BLM's position is that the bundling reflects the agency's minimum needs. In addition to claiming that bundling of hardware and software maintenance reduces the agency's administrative work load and allows for economies of scale, BLM states that, where separate contracts cover hardware and software maintenance, "it often becomes impossible to determine which vendor's service is at fault and they blame each other for problems. This requires the Government to attempt to determine whether the problem is a software or hardware problem . . . ."
This concern about blame-shifting or "finger-pointing" between contractors led the agency to bundle the hardware and software maintenance in one contract. The record indicates that the agency did consider the possibility of "unbundling" hardware and software maintenance prior to issuance of the RFP, but eventually decided not to do so, primarily because of concern about potential blame-shifting. The agency views that concern as particularly serious here because, for both the Prime and the Sun equipment, the hardware and software are designed to function together as one system, so that any malfunction could implicate either.
BLM disputes NCE's contention that bundling hardware and software maintenance together will effectively create sole source awards for each OEM. BLM argues that separate hardware and software maintenance companies are not precluded from joining in teaming arrangements or prime/subcontractor relationships to satisfy the agency's needs. Moreover, BLM asserts that the question of proprietary data arises only with regard to the source code, and that maintenance of the software does not necessarily require access to the source code. In addition, the agency claims that, even where access to proprietary data is required, companies other than the OEMs can compete through licensing agreements or a subcontracting arrangement with the OEMs for whatever portion of the work that does require access to proprietary information.
To support this argument, the agency points out that Prime has been providing maintenance to the agency for the Sun and Oracle software as well as for the Prime software. As further evidence of the ability of non- OEMs to compete for the bundled contracts, the agency states that non-OEM vendors have indicated the ability to provide maintenance services for all three OEMs' software.
The dispute here is effectively limited to the question of whether the bundling of the Prime and Sun hardware and software maintenance reflects the agency's minimum needs. As to the Oracle products, since only software maintenance is to be covered in the relevant contract, bundling is not at issue. Accordingly, to the extent the protest challenges the RFP provisions related to Oracle products, this aspect of the protest is denied.
The Competition in Contracting Act of 1984 (CICA) generally requires that solicitations include specifications which permit full and open competition and contain restrictive provisions and conditions only to the extent necessary to satisfy the needs of the agency. 41 U.S.C. Sec. 253a(a)(2). The implementing regulations carry out the mandate of CICA. See, e.g., FAR Subpart 6.1; Federal Information Resources Management Regulation Part 201-39. Because procurements on a bundled or total-package approach can restrict competition, we will sustain a challenge to the use of such an approach where it is not needed to satisfy the agency's minimum needs. Airport Markings of Am., Inc. et al., 69 Comp.Gen. 511 (1990), 90-1 CPD Para. 543.
In cases where the agency has been able to point to a reasonable basis for its contention that bundling was necessary to meet the agency's minimum needs, the use of that approach has been upheld. In each such instance, however, the bundling approach was tailored to a concrete agency requirement. For example, we have rejected challenges to a bundling or total-package approach where the restriction was needed to ensure military readiness, Southwestern Bell Tel. Co., B-231822, Sept. 29, 1988, 88-2 CPD Para. 300; and where a single contractor was required to ensure the effective coordination and integration of interrelated tasks, including the timely availability of components, Batch-Air, Inc., B-204574, Dec. 29, 1981, 81-2 CPD Para. 509.
In this case, the agency essentially argues that the bundling of hardware and software maintenance requirements does not preclude competition for the bundled awards. The agency contends that licensing agreements may enable some companies other than the OEMs to compete for the bundled requirements, and it points to the fact that a number of offerors have responded to the RFP.
We find this argument unpersuasive. It is clear that bundling the requirements does restrict the competition by excluding offerors of hardware maintenance that are unable to provide for software maintenance as well. The agency's position that some competition exists despite the bundling simply avoids the question of whether the bundling is necessary to meet the agency's legitimate needs. See Airport Markings of Am., Inc., et al., supra. The issue is not whether there are any potential offerors who can surmount barriers to competition, but rather whether the barriers themselves--in this case, the bundling--are required to meet the government's minimum needs. Id. We assume for the purposes of our analysis that the agency is correct in arguing that the bundled requirements allow firms other than the OEMs to compete. Even if these are not sole-source procurements, however, that does not relieve the agency of the burden, pursuant to CICA, of justifying restrictions on full and open competition. Pursuant to CICA and the implementing regulations, the bundling of the Prime and Sun hardware and software maintenance requirements is permissible only if BLM demonstrates that the bundling is necessary to meet the agency's minimum needs, regardless of whether there are some offerors which may be able to compete for the bundled package.
We now turn to the justification offered by the agency in defense of the bundling requirement. We assume, again for purposes of our analysis, that without the bundling there may be some instances where separate contractors will engage in "finger-pointing" concerning responsibility for technical problems which arise during performance; we further assume that avoidance of such situations may save the agency some amount of time as well as some additional expenses. However, notwithstanding these assumptions in favor of the agency's position, the record does not provide a reasonable basis for the agency's decision to award one contract for the maintenance of hardware and software.
As the General Services Administration Board of Contract Appeals (GSBCA) has held, when concerns of economy or efficiency are being weighed against maximizing competition, CICA and the implementing regulations require that the scales be tipped in favor of maximizing competition. DSI, Inc., GSBCA No. 8568-P, 87-1 BCA Para. 19,407, 1986 BPD Para. 162. While having one contractor handle both hardware and software maintenance may be administratively convenient for the agency, mere administrative convenience cannot justify restricting competition. Burton Myers Co., 57 Comp.Gen. 454 (1978), 78-1 CPD Para. 354.
We recognize that in certain circumstances our Office has upheld the legitimacy of bundling where the agency cited the need to obtain the benefit of dealing with only one contractor accountable for all repairs and maintenance, thus relieving the government of the need to analyze the source of equipment problems and to identify the correct contractor to service the equipment. See, e.g., Institutional Communications Co., B-233058.5, Mar. 18, 1991, 91-1 CPD Para. 292. In those cases, however, the agency rationale was based on the paramount need for the availability of the system in emergency situations. Where time is critical, the agency's requirement may render unacceptable any lapse in service, however brief, caused by the need to coordinate between contractors. See Electro-Methods, Inc., 70 Comp.Gen. 53 (1990), 90-2 CPD Para. 363 (total-package approach justified by critical schedule demands). In other words, the risk of "down time" may justify restricting competition, but only where the agency demonstrates that more is at issue than the routine desire to avoid any period of system malfunction.
Similarly, concern about incurring additional costs can only justify restrictions on competition in unusual circumstances whose existence must be clearly demonstrated. Generally, where an agency concludes that having separate contractors may lead to additional costs, the proper course is not to restrict competition but rather to structure the RFP evaluation criteria so as to take all costs into account. Restricting competition is presumed to raise, not lower, the cost that the government will pay, and the desire to reduce costs is generally neither a permissible nor a logical basis to restrict competition. See 41 U.S.C. Sec. 253.
Here, while we assume that prompt maintenance is valuable to the agency, the record does not provide a reasonable basis for a determination that avoiding all delays is so important that the government must pay the higher price which a limitation on competition is presumed to impose. Nothing in the record indicates that any delay caused by occasional "finger-pointing" between contractors would unduly disrupt performance of the agency's mission.
There is also no merit to the agency's argument that the integrated relationship between Prime hardware and software and between Sun hardware and software precludes awarding separate contracts for hardware and software maintenance. We note that the General Services Administration apparently awards schedule contracts which cover maintenance of hard- ware, but not software, for Prime, Sun, and other companies' equipment. Software and hardware are often integrated, but nonetheless separately maintained. To take an extreme example, while there is an integrated relationship between any printer and the software used to direct the printer's operation, printers are typically maintained separately from software. Indeed, the agency's suggestion that separate hardware and software maintenance firms could jointly submit a proposal pursuant to a teaming agreement or a prime/subcontractor arrangement undercuts the agency's claim that the hardware and software maintenance tasks are essentially indivisible.
After reviewing the agency report, in which BLM cited "frequently experienced" difficulties when hardware and software maintenance is handled by separate contractors, our Office specifically asked BLM whether it, or any entity within the Department of the Interior, had actually experienced problems arising due to blame-shifting between hardware and software maintenance contractors. In response, the agency cited two examples, neither of which involved hardware and software maintenance contractors (both instances involved disputes between software contractors). BLM's response strongly suggests that the agency has no record of problems caused by separation of maintenance work between hardware and software maintenance firms.
In sum, the agency is bundling all of the preventative and remedial maintenance of Prime and Sun hardware and software because of an unsupported concern that in some instances of remedial maintenance there might be some delay in determining whether the problem was caused by a hardware or a software malfunction. There is no evidence either that such delays occur routinely or that they would cause undue hardship or expense. The agency's concern does not relate to any of the preventative maintenance; and as to the remedial maintenance, the agency has not provided any basis to suggest that a meaningful number of cases will arise in which there is a question as to whether the problem lies in the hardware or the software. Even where there is doubt about the cause of the problem, that doubt should in most cases be resolved quickly. The agency's unsubstantiated concern about an ill-defined problem of potentially very limited proportions is simply not adequate justification for overriding CICA's mandate for full and open competition.
Since we find that the agency's decision to bundle the requirements for maintenance of the Prime and Sun hardware and software lacks a reasonable basis, we sustain the protest on this ground. We recommend that the agency resolicit its requirements without mandating one bundled award for the Prime hardware and software maintenance and another one for the Sun hardware and software maintenance. We also find that the protester is entitled to reasonable costs of filing and pursuing the protest. 4 C.F.R. Sec. 21.6(d) (1992). The protester should submit its certified claim for costs directly to the agency within 60 working days of receipt of this decision. 4 C.F.R. Sec. 21.6(f)(1).
The protest is sustained in part and denied in part.