Protest Alleging Agency Action Constitutes an Unjustified Sole-Source Procurement

A firm protested a determination made by the Department of Health and Human Services (HHS) to satisfy its need for certain teleprocessing services by adding this work to an existing HHS contract with a second firm. The protester had performed these services for the Health Care Financing Administration (HCFA) of HHS under a competitively awarded contract and a later noncompetitive order with the General Services Administration (GSA). The order expired June 30, 1980. The second firm was awarded its contract for similar services in support of the Executive Secretariat of HHS. When the protester's order expired, HHS determined that it was in the best interest of the Government to support HCFA under the contract to the second firm. The protester contended that the determination by HHS was improper because: (1) support for HCFA was not within the scope of the second firm's contract; (2) the action by HHS constituted an unjustified sole-source procurement; and (3) GSA did not authorize HHS to support HCFA under the contract by issuing a delegation of procurement authority (DPA) as required by existing regulations. GAO held that: (1) the request for proposals (RFP) did not adequately communicate to potential offerors the agency's intent to award a contract which would permit the addition of similar teleprocessing services for another agency; (2) the funding of the contract with the protester would be approximately the same as with the second firm; and (3) the action by HHS in placing support of HCFA under the contract to the second firm constituted a procurement for which HHS had no authority. GAO recommended that HHS immediately request an interim DPA from GSA to preserve the status quo for a period not to exceed 30 days from the date of this decision. During that period, HHS should present to GSA its proposal to support HCFA through a competitive procurement until the long-term, data center solution is available. GAO further recommended that HHS announce the precise terms of the current contract under which the HCFA services are being provided and invite all vendors to submit proposals based on technically equal services. If a responsible vendor can perform the work at a better price, then HHS should make a new award immediately. If not, then no further action would be required. If GSA denies the DPA, all teleprocessing support services for HCFA must be immediately terminated.