Link: GAO Opinion
Agencies: Department of the Interior
Disposition: Protests denied.
Voith Hydro, Inc. protested the terms of two Department of the Interior Requests for Proposals (RFPs) for generator and excitation systems for the Folsom and the Nimbus power plants in California. Voith claimed that the RFPs, which were issued as negotiated procurements under Federal Acquisition Regulation (FAR) Part 15 as construction contracts, should have been issued in accordance with the terms of FAR Part 12, Commercial Item Acquisitions.
The RFPs provided for the award of fixed-price construct contracts on a best value basis considering the evaluation factors as set forth in the solicitations. Voith previously filed a protest with the GAO, challenging the terms of the Folsom RFP. In that protest, Voith argued that the Interior Department’s determination that it would award a contract for construction was unreasonable, and that the solicitation thus improperly included a number of provisions related to construction contracting in accordance with part 36 of the FAR. In its view, Voith felt that the items and work being solicited were commercial items and services, and that the solicitation should have been issued as a commercial item acquisition under part 12 of the FAR. In response, the Interior Department stated that it took corrective action by re-examining its “procurement approach,” and “conduct further market research and analysis to determine whether commercial items are available that could meet [the agency’s] requirements.” In addition, the Interior Department decided that if it found that commercial items were appropriate it would cancel the solicitation and solicit the requirement in accordance with FAR Part 12.
The GAO dismissed this first protest in response to the corrective action. Following its corrective action, the Interior Department concluded that the Folsom Power Plant project should not be solicited as a commercial item acquisition under FAR Part 12, but rather, as a Negotiated Procurement under FAR Part 15, and thus informed Voith and the other firms that had submitted proposals of its determination.
Voith re-filed its protest alleging that the acquisition did not involve “construction,” as that term is defined in the FAR. In Voith’s view, the Interior Department was required to issue the solicitations as commercial item acquisitions in accordance with FAR Part 12, rather than as Negotiated Procurement under FAR Part 15. More particularly, it alleged that the actual items and services that are required to be furnished under the RFPs meet the definition of “commercial item” as set forth in the FAR.
The GAO began by stating that the contracting agency has the primary responsibility for determining its needs and the best method of accommodating them, and that this principle applies to the contracting format used to purchase items that the agency has determined necessary, and that the GAO will not object to an agency’s determination in this regard unless the protester shows that it is clearly unreasonable. As it relates here, FAR Part 12 prescribes policies and procedures unique to the acquisition of commercial items and implements the preference for the acquisition of commercial items that meet the needs of an agency. FAR Part 12 was intended to establish acquisition policies more closely resembling those of the commercial marketplace as well as other considerations necessary for proper acquisition planning, solicitation, evaluation, and award of contracts for commercial items.
As such, agencies are required to conduct market research pursuant to FAR Part 10 to determine whether commercial items are available that could meet the agency’s requirements. If market research establishes that the government’s needs can be met by a type of item (including services) customarily available in the commercial marketplace that would meet the definition of a commercial item, the contracting officer is required to solicit and award any resulting contract using the policies and procedures in FAR Part 12. This determination of whether or not a product or service is a commercial item is at the discretion of the agency, and is given great deference by the GAO.
Here, the GAO found that the Interior Department’s determinations that the work and items required under the RFPs should be acquired under a construction contract, and cannot be acquired as commercial items using FAR Part 12, to be reasonable. The Interior Department found that, while there are vendors that manufacture and install equipment similar to that being acquired here, such equipment would have to be custom manufactured or built based upon unique specifications to such an extent that it cannot be considered as commercial items or, when designed and built, cannot be considered “of a type” available in the commercial marketplace given the unique requirements of the complete system sought here.