Agencies must allow competition once a procurement begins

Infotech and the law | Legal insights for today's market

The Court of Appeals for the Federal Circuit has just decided a case that clarifies the limits of an agency's efforts to avoid competition by subcontracting the acquisition to an integrator under a prime contract.

The facts of the case demonstrate how agencies that use task-order contracts to avoid holding competitions for goods or services can violate requirements for full and open competition.

The government issued a task order to a contractor under a General Services Administration government-wide acquisition contract for technical support services in connection with the integration of commercial off-the-shelf (COTS) packages into an accounting system for the U.S. Agency for International Development and the State Department.

The government then issued a request for information seeking information about COTS software packages that would be incorporated into the agency's accounting system by the integration contractor. After receiving responses to its RFI from industry, the government issued a notice stating that it would use the integration contractor to acquire the COTS software under subcontracts rather than open the COTS acquisition to competition. Two of the COTS vendors that had responded to the agency's RFI protested the government's decision not to hold a competition for the COTS software in the Court of Federal Claims.

The government sought to have the protest dismissed on the grounds that the protestors were merely protesting the award of subcontracts by a federal prime contractor, rather than the award of a contract by a federal agency. The government argued that the Court of Federal Claims had no jurisdiction to hear the protest. The trial court agreed. It reasoned that the government's choice to conduct market research through the RFI before deciding to have the integrator acquire the COTS software was no different from including the duty to acquire the COTS software in the initial task order, which could not be protested to the federal court.

Accordingly, the court dismissed the protest. In August, the Court of Appeals for the Federal Circuit reversed the trial court, reinstated the action, and remanded it for trial. The decision is set forth in Distributed Solutions Inc., et al. v. United States, Case No. 2007-5145 (slip op.) (Fed. Cir. Aug. 28, 2008).

The reasoning of the Court of Appeals is interesting, and has significance beyond the circumstances of the case. First, the court concluded that the protestors had standing to challenge the government's decision not to compete the COTS procurement because they had demonstrated that they were prospective offerers by submitting responses to the government's RFI and had a direct economic interest in the outcome of the procurement process.

The remaining issue was whether the issuance of an RFI initiated a procurement process that gave the court the jurisdiction to decide the propriety of the government's conduct. The court reasoned that an agency procurement includes all stages of the process of acquiring goods or services, starting with the process for determining a need for property or services and ending with contract completion and closeout. Furthermore, the Court of Federal Claims has jurisdiction to decide protests that are made "in connection with a procurement or proposed procurement." Therefore, once the agency begins the process of deciding its need for a good or service, the procurement process is subject to protest by an interested party even if the government never issues a solicitation, receives proposals or makes a contract award.

In this case, the government used an RFI to obtain product information from potential vendors, and then used that information to determine the scope of products and services required by the government. The government ultimately decided to acquire the software by adding work to an existing task order with the integrator rather than conduct a procurement. However, once the government commences the procurement process, it may not then sidestep its obligation to make the acquisition through competition by subcontracting it to an existing contractor

Jonathan Cain (jtcain@mintz.com) is a member of law firm Mintz Levin.

About the Author

Jonathan Cain is a member of law firm Mintz Levin.

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