Major Contracting Services, Inc., B-401472, September 14, 2009

Link:   GAO Opinion

Agency:          Department of the Army

Disposition:  Protest sustained.

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GAO Digest:

Agency improperly extended a contract on a sole-source basis where it did not establish that only the incumbent could provide the services and the agency could have avoided the urgency that ultimately led to the sole-source award through advance procurement planning.

General Counsel P.C. Highlight:

MCS protests the Army’s four-month sole-source extension of DAV Prime JV’s contract, in essence arguing that the Army should have instead issued a solicitation which would have afforded MCS the opportunity to compete.

The agency extended DAV Prime JV’s contract for four months beyond the base year end date of May 31 by exercising an option in the existing contract. FAR sect. 17.207(f) requires that a contracting officer, before exercising an option, make a written determination that the exercise of the option is in accordance with the terms of the option and the requirements of FAR sect. 17.207 and FAR Part 6. FAR sect. 17.207(f) further states that to meet the requirements of FAR Part 6, regarding full and open competition, the option must have been evaluated as part of the initial competition and be exercisable at an amount specified in or reasonably determinable from the terms of the basic contract. The option to extend the contract here under FAR clause 52.217-8 was not evaluated as part of the initial competition, so that the exercise of this option amounts to a contract extension beyond the scope of the contract, and therefore effectively constitutes a new procurement. Thus, the agency could not have met the FAR Part 6 standards for full and open competition by simply exercising the option under FAR clause 52.217-8.

In such circumstances, the agency must justify the use of noncompetitive procurement procedures in accordance with FAR Subpart 6.3 before exercising the unevaluated option. An agency may use noncompetitive procurement procedures to procure goods or services where its needs are of such an unusual and compelling urgency that the government would be seriously injured if the agency is not permitted to limit the number of sources from which it solicits proposals. When citing an unusual and compelling urgency, the agency is required to request offers from as many potential sources as is practicable under the circumstances. An agency using the urgency exception may restrict competition to the firms it reasonably believes can perform the work in the available time so long as the agency did not create the need for the sole-source award from a lack of advanced planning. GAO will object to the agency’s decision to limit competition on grounds of urgency if the determination lacks a reasonable basis.

The contemporaneous justification for the exercise of this option contained no specific justification for the sole-source extension in accordance with FAR sect. 6.303 and simply stated that the exercise of the option complied with FAR sect. 17.207 and FAR Part 6. The agency in its report on the protest explained, “FAR 52.217-8 is typically used for continuity of services when solicitation ‘slip’ occurs. A solicitation ‘slip’ or delay in a follow-on procurement can occur for various reasons, and in this instance, the need for the four-month extension was due to the following reasons: First, following the decision not to renew the DAV Prime/Vantex contract, the market research for the new procurement took longer than anticipated. This was mainly due to the rather broad NAICS Code, 562991 — Septic Tank and Related Services, which applied to many categories of contractors (e.g., general plumbing contractors) beyond those specifically providing chemical toilet services. . . . In addition, since the DAV Prime/Vantex contract was not going to be renewed, the services provided under the base year of the contract were scheduled to end on May 31, 2009; however, the summer months are heavy training months at Fort Drum during which time there is a high-volume need for portable chemical toilets and continuity of such services during the summer period is essential. The limited contract extension will allow for continuity of services and avoid the potential disruption that would accompany a changeover of contractors during the summer months.”

GAO agrees with the agency that the circumstances presented met the requirements for an exception to full and open competition due to an unusual and compelling urgency, when, at the end of DAV Prime JV’s contract, it did not have a follow-on contract in place for services during the summer months–when the portable chemical toilet services would be most used. However, the record here evidences that the urgency resulted from the Army’s failure to adequately plan for this procurement in advance and that DAV Prime JV was not the only firm interested and capable of performing these services. The Army knew in August 2008 of the OHA’s decision that DAV Prime JV was not an SDVOSBC. Both the SBA and GAO’s decision in November 2008 suggested that the Army should consider whether to exercise an option, since DAV Prime JV had been found not to be an eligible SDVOSBC. In early March 2009, approximately five months later, the agency finally determined that it would not exercise the first option year because DAV Prime JV was not pursuing efforts to meet the eligibility requirements for an SDVOSBC joint venture. Based on this record, the agency has not provided a reasonable basis for the sole source extension. It is apparent that the Army did not properly plan in advance for its requirement to extend this contract; GAO does not think that the agency could sit idly by in the face of the circumstances here and not take action to obtain more competition for its requirements. The protest is sustained.