What GAO is Saying About Schedule Orders

I recently described in this column the rules governing the placement of GSA Schedule orders under the Federal Acquisition Regulations (FAR) Subpart 8.4 (Placing GSA Schedule Orders). To recap, when an agency orders goods or services from a GSA Schedule contractor, FAR § 8.404 requires an agency to place the order with the Schedule contractor whose product represents the “best value” and meets the agency’s needs at the lowest overall cost. In this month’s installment, I discuss the lessons to be learned from recent General Accounting Office (GAO) procurement decisions interpreting those FAR rules.

To begin with, the GAO has consistently denied most contractor protests against an agency’s placement of a GSA Schedule order. The GAO’s standard in these cases is whether the agency’s issuance of the Schedule order was reasonable. In particular, the question the GAO asks in reviewing such cases is not whether the agency action was the most reasonable course of action it could have taken, but whether there is any reasonable basis for the decision. Therefore, in the case of GSA Schedule contracts, GAO asks whether the agency’s best value determination was at all reasonable.

If an agency, for example, places an order against a federal supply schedule contract at a price higher than that offered by another, the GAO will deny the protest if the record shows that the agency reasonably concluded that the ordered product is the lowest price schedule item meeting the agency’s actual needs. CPAD Technologies, Inc., B-278582, Feb. 19, 1998, 98-1 CPD ¶ 55. The determination of the agency’s needs and which product meets those needs is considered by the GAO to be the agency’s responsibility. In CPAD the GAO has deemed reasonable an agency’s selection of a detection system when it considered the system’s lighter weight, smaller size, and effectiveness of operation over a competitor’s in its decision.

The GAO has also considered reasonable an agency’s purchase of medical devices through a delivery order placed under a GSA Schedule contract when the agency took into account warranty conditions and special safety features considered essential to meet the agency’s needs. Midmark Corporation, B-278298, Jan. 14, 1998, 98-1 CPD ¶ 17. In this situation, the GAO found that the agency reasonably determined that the awardee’s device met agency requirements and that the competitor’s product did not. Furthermore, the GAO ruled that the losing vendor’s assertions that it could have provided the same safety features and offered the same warranty as the chosen vendor, at an unspecified price, did not establish that the model would meet the agency’s requirements at the lowest price.

In Midmark, the GAO also stated that there is no requirement under the regulations governing the use of the GSA Schedules that vendors holding GSA Schedule contracts be provided with an exact statement of the agency’s needs or that agencies negotiate special terms or conditions with GSA Schedule contractors for individual purchases. Such a requirement, the GAO feels, would be inconsistent with the catalog-type approach of the GSA Schedule program.

Although the GAO gives agencies wide latitude and much deference when reviewing the reasonableness of procurement decisions, there are limits. In Comark Federal Systems, B-278343, Jan. 20, 1998, 98-1 CPD ¶ 34, the agency issued a Request for Quotations (RFQ) to several GSA Schedule contractors that had been issued Blanket Purchase Agreements for information technology products. The RFQ called on the Schedule vendors to select, from among the numerous possible configurations of the items on their Schedules, a particular configuration on which to submit a quotation. The agency later conducted a detailed technical evaluation and cost/technical trade-off determination on the vendors responses to the RFQ.

The GAO ruled the RFQ went beyond the bounds of a simple best buy into the realm of a negotiated procurement. The agency’s RFQ, as drafted, shifted the responsibility for selecting items from the agency to the vendors. The agency’s detailed technical evaluation and cost/technical trade-off determination also amounted to a negotiated procurement under FAR Part 15.

Therefore, if an agency intends to use the vendor’s responses as the basis of a detailed technical evaluation and cost/technical trade-off, the agency has elected to use an approach that is more like a competition in a negotiated procurement than a simple GSA Schedule “best buy.” In such a situation, the RFQ must provide for a fair and equitable competition, including advance notice regarding the agency’s needs and selection criteria. However, an agency’s issuance of an RFQ merely to solicit final pricing or price reductions from competing GSA Schedule contractors does not amount to a negotiated procurement. CPAD.

Considering the important role that GSA Schedules now play in the federal procurement process, current and prospective GSA Schedule vendors must understand the rules of the game and how the GAO is interpreting those rules in order to take advantage of hundreds of millions of dollars a year in GSA Schedule business opportunities.

Note: Recent decisions from the GAO are available on the web at www.gao.gov under the heading Comptroller General Decisions and Opinions.