Link: GAO Opinion
Agency: Department of the Army
Disposition: Protest denied.
1. Protest jurisdiction of the Government Accountability Office (GAO) extends to protest of a no-cost contractual agreement for the provision of lodging services to transient soldiers, as part of the Department of the Army’s privatization of Army lodging program, because the contract concerns a procurement for services by a federal agency and results in a benefit to the government.
2. Protest challenging agency’s alleged modification of a contract as an improper relaxation of requirements is denied where there was no change to the scope of work anticipated by the underlying solicitation.
General Counsel P.C. Highlight:
As a preliminary matter, the Army contends that the protest should be dismissed as beyond the bid protest jurisdiction of GAO because while the phase 1 lodging development and management plan (LDMP) development effort was a procurement, as evidenced by the $350,000 contract awarded, the phase 2 LDMP implementation is not a procurement. According to the Army, the implementation phase is separate from the contract awarded for development of the LDMP, and that it is a no-cost real estate transaction in which the Army is merely conveying existing lodging facilities and leasing real property to a private concern. GAO states that under the Competition in Contracting Act of 1984 (CICA) and GAO’s Bid Protest Regulations, GAO reviews protests concerning alleged violations of procurement statutes or regulations by federal agencies in the award or proposed award of contracts for procurement of goods and services, and solicitations leading to such awards. As a general matter, GAO’s jurisdiction does not extend to challenges concerning the sale or lease of government property since these activities, by their nature, are not procurements. In discerning the nature of a contractual transaction, GAO has found that the government need not commit to the payment of funds or incur any monetary liability in order for there to be a procurement. Likewise, the agency need not receive money in order for a contractual transaction to constitute a sale. GAO also recognizes that certain transactions, including concession contracts, can involve both a sale and a procurement.
Here, the underlying RFQ was not an offer to sell or lease government-owned property for a monetary payment. Rather, the RFQ was essentially the solicitation of submissions under which the Army would obtain the much-needed revitalization of lodging facilities, with little to no appropriated fund outlay, by leveraging existing lodging and real property assets. While project implementation involves the Army conveying existing lodging facilities and leasing real property, the Army’s decision to convey and lease property is predicated upon the awardees’ promise to renovate, manage, and maintain existing lodging facilities, as well as build, manage, and maintain new lodging facilities. Quite simply, the agreement between the Army and the awardee for project implementation involves the Army simultaneously selling property interests and obtaining the benefit of lodging facility services.
In reaching this conclusion, GAO finds the reasoning set forth in our decisions regarding the award of concession contracts analogous to the issue presented in this case. With respect to concession contracts, GAO has held that it lacks jurisdiction to consider a protest challenging the award of a “pure” concession contract, that is, a no-cost contract that merely authorizes a concessionaire to provide goods or services to the public, as opposed to the government. GAO has long recognized, however, that where a concession or similar type contract also results in a benefit to the government, the contract is, at least in part, one for the procurement of property or services and therefore is encompassed by GAO’s bid protest jurisdiction. It has consistently been GAO’s view that a mixed transaction, one that both provides a business opportunity to a private sector firm, and which also includes the delivery of goods or services of more than de minimis value/benefit to the government, is a procurement within the meaning of CICA.
In determining whether the government will receive a benefit from the goods or services provided in connection with a concession, GAO examines whether the transaction in question reduces the agency’s workload, or whether the effort is somehow rendered, either directly or indirectly, in support of the agency’s mission requirements. Here, GAO concludes that the lodging construction, renovation, management, and maintenance that the contractor is to perform as part of project implementation, provides a benefit to the Army. Specifically, the RFQ states that “[t]he Army needs to improve the quality of life for soldiers and their families while in a transient status,” and that the purpose of the project is “to provide quality, on-post hotel accommodations that meet the varying needs of a mobile military community through improvements to the on-post lodging inventory and/or new construction, and to appropriately maintain these facilities . . . .” On this record, GAO concludes that the requirements for the contractor to provide transient lodging construction, renovation, management, and maintenance services is designed to directly meet the needs of the Army by directly furthering its mission in support of its soldiers. By leveraging the private sector through the program, the Army reduces its own workload since it will no longer have to perform services that it would otherwise would have needed to perform, or procured under a separate contract. The fact that the Army created separate contractual instruments for the project’s development and implementation efforts does not alter the fact that the agency is receiving benefits at both plan development and implementation. Thus, GAO concludes that it has jurisdiction to hear this protest because it concerns a procurement conducted by the Army to obtain services for the benefit of government.
AFH argues that the Army’s agreement with the awardee to implement the (Group A) project amounts to a material and substantial change in the requirements set forth in the solicitation. GAO states that while CICA generally requires “full and open competition” in government procurements as obtained through the use of competitive procedures, CICA does not govern procurements in which a military agency, as here, does not use appropriated funds to pay for services. As noted above, the Army is not utilizing any appropriated funds to pay for the services that it is receiving from the awardee as part of the phase 2 implementation effort. Thus, the protester’s reliance on CICA’s competition requirements is misplaced. Where CICA does not apply, however, GAO reviews the actions taken by an agency to determine whether they were reasonable.
To the extent the protester argues that it was unreasonable for the Army not to conduct a new competition based on the alleged out of scope reduction in the agency’s requirements, GAO disagrees with the underlying premise of the protester’s contention. Fundamentally, GAO concludes that the Army’s agreement with the awardee to implement the (Group A) project did not materially and substantially deviate from what was originally contemplated by the RFQ since the statement of work put offerors firmly on notice that the specific requirements regarding project implementation were to be made after contract award. The protest is denied.