As a general proposition, government should promote competition. As a practical proposition, incumbents always have a leg up over competitors. If the government enhances that incumbent advantage it, in effect, fashions a sole source procurement.
In this case, in the existing contract, the government obtained the beneficial use of certain equipment provided under, and pay for by, the incumbent contract. The government then solicited for a new contract but, in effect, gave a credit bid to the incumbent for having already provided certain equipment which will also be necessary to do the work under the new contract.
In this protest, GAO criticized the government for giving advantage to the incumbent, but had to dismiss the action because of lack of jurisdiction over the dollar limitation of the value of the task order.
In the Matter of: Qwest Government Services, Inc., File: B-404845, March 25, 2011
The [solicited] “hosting services” in question consist of providing a facility, power, network connections, and building security services for USCIS servers and other equipment. An order for the services will be issued to one of the three awardees under a General Services Administration indefinite-delivery/indefinite-quantity (IDIQ) contract for telecommunications services (the Networx Universal contract).1 The protester objects to language in the RFQ providing for the addition of approximately $14 million to the evaluated prices of contractors other than the incumbent service provider, Verizon, to take into account costs that the agency will incur if the services are provided in a new location. Qwest argues that this price evaluation approach is fundamentally unfair and is a de facto sole-source award to the incumbent.
While we do not have jurisdiction to entertain the protest, we point out that the above evaluation scheme appears to be inconsistent with Federal Acquisition Regulation (FAR) § 45.202, which provides that the offered prices of contractors possessing government-furnished property should be adjusted by applying, for evaluation purposes, a rental equivalent evaluation factor. The stated scheme appears to be inconsistent with this guidance in that it attributes to the evaluated prices of offerors other than the incumbent the full cost of the new equipment to be acquired by the government, as opposed to merely its rental equivalent value; the stated scheme also appears to be inconsistent FAR § 45.202 in that it fails to provide for application of a rental equivalent evaluation factor to Verizon’s offered price to take into account the value of the government-furnished equipment already in its possession.
The Guam regulations, taken from the ABA Model Code, recognizes the inherent advantage of incumbent contractors and attempts to alleviate that benefit from fair competition, in particular in case of multi-term contracts.
2 GAR § 3121 says,
The objective of the multi-term contract is to promote economy and efficiency in procurement by obtaining the benefits of sustained volume production and consequent low prices, and by increasing competitive participation in procurement which involve special production with consequent high start-up costs and in the procurement of services which involve high start-up costs or high phase-in/phase-out costs during change-over of service contractors.
A multi-term contract may be used when it is determined in writing by the Procurement Officer that:
(1) special production of definite quantities or the furnishing of long term services are required to meet Territorial needs; and
(2) a multi-term contract will serve the best interest of the territory by encouraging effective competition or otherwise promoting economies in territory procurement.
The following factors are among those relevant to such determination:
(i) firms which are not willing or able to compete because of high start-up costs or capital investment in facility expansion will be encouraged to participate in the competition when they are assured of recouping such costs during the period of contract performance....
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