Infotech and the Law

Ban on Bundling May Not Be Done Deal

Carl Vacketta

By Carl Vacketta



The past five years have seen tremendous growth in federal agencies' use of the General Services Administration's Multiple Award Schedule (MAS) program, with spending jumping from $4 billion in fiscal 1995 to $10.5 billion in fiscal 1999.

In two recent decisions, a common MAS practice, the bundling of an item on a contractor's MAS price list with so-called open-market items, was restricted severely. As a result, many in the government contracting community have said the only useful exception to the anti-bundling rule is an open-market item under the micropurchase threshold of $2,500.

But the 1996 Commercial Item Test Program may offer contracting officers a legitimate way around this bundling prohibition.

The GSA's Federal Supply Service administers the MAS program, contracting with thousands of vendors to provide millions of commercial products and services at reduced prices to authorized buyers. Once an MAS contract is awarded, the federal agency places an order with the vendor without the time-consuming process of issuing a request for proposals or an invitation for bids. The vendor then delivers the product directly to the authorized buyer.

Since the late 1970s, the General Accounting Office had permitted any federal agency to add an open-market item to an MAS purchase, as long as the item was "incidental" to the purchase. In one 1997 decision, GAO upheld an agency's purchase of off-schedule cables and accessories under the MAS purchase for central processing units. Typically, GAO looked at the price of the open-market items to determine whether they were indeed incidental and relatively small compared with the schedule purchase.

Over time, however, the value of open-market items began to grow. For instance, in a 1992 decision, GAO approved a contract award where the incidental items amounted to 17 percent of the total contract value.

In 1997, the U.S. Court of Federal Claims held that bundling violated the Competition in Contracting Act because there was no basis for concluding that the open-market item acquisition had been the product of full and open competition, as the act required.

Last year, GAO reversed its precedent and agreed with the court that open-market purchases under a MAS buy were illegal unless the open-market items were under the micropurchase price threshold of $2,500.

But is the door on bundling closed, except for micropurchases? The Commercial Item Test Program implemented in Federal Acquisition Regulation Subpart 13.5 may provide a mechanism to bundle high-value open-market items with MAS purchases.

Originally authorized only until Jan. 1, 2000, the National Defense Authorization Act for fiscal 2000 extended this program until Jan. 1, 2002. It permits a contracting officer to use "simplified acquisition procedures" to buy commercial supplies and services valued at $100,000 to $5 million.

The test program vests contracting officers with discretion and flexibility so that commercial item acquisitions between these two may be solicited, offered, evaluated and awarded in a manner that maximizes efficiency and minimizes administrative costs, as noted in FAR 13.500(a).

Interestingly, acquisitions under FAR Part 13's simplified acquisition procedures are exempt from the act's "full and open competition" requirement. Thus, an agency is not required to use the burdensome invitation for bids or request for proposals process. Instead, these acquisitions typically are issued as requests for quotes.

By using a request for quotes, the agency may be able to buy up to $5 million of open-market items in conjunction with a schedule purchase. The contracting officer could issue the requests for quotes to three or more MAS vendors. Such a request solicits quotes for MAS items and also informs vendors that any incidental open-market items will be procured using the test program. This should increase administrative efficiency through one-stop shopping.

While it is not clear whether GAO or the federal claims court would approve such an acquisition, there is little in existing law, regulations or case law to indicate it is not permissible. As stated in FAR (1.102-4), "if a policy, or procedure, or a particular strategy or practice is in the best interests of the government and is not specifically addressed in the FAR, nor prohibited by law (statute or case law), Executive order or regulation, Government members of the [Acquisition] Team should not assume it is prohibited ... Contracting Officers should take the lead in encouraging business process innovation."



Carl Vacketta is a partner and head of the Government Contracts Practice Group at Piper Marbury Rudnick & Wolfe LLP in Washington. His e-mail address is carl.vacketta@piperrudnick.com.

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