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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: June 13, 2003

SUBJECT: General Accounting Office (GAO); Protests Under OMB Circular No. A-76

SOURCE: Federal Register, June 13, 2003, Vol. 68, No. 114 page 35411

AGENCIES: GAO

ACTION: Request for Comments

SYNOPSIS: GAO is soliciting comments on two key legal questions regarding protests under the recent major revisions to Office of Management and Budget (OMB) Circular No. A-76, Performance of Commercial Activities: (1) do the revisions to A-76 affect the standing of an in-house entity to file a protest with GAO; and (2) who would have the representational capacity to file such a protest.

EDITOR'S NOTE: GAO's protest regulations, which are in Title 4 of the Code of Federal Regulations (CFR), Part 21, govern offeror protests filed with the GAO against alleged improprieties in the government's conduct of acquisitions (GAO's protest regulations are available at http://www.gao.gov/decisions/bidpro/bid/bibreg.html). Federal Acquisition Regulation (FAR) 33.104, Protests to the GAO, provides an overview of the protest process and procedures. However, if there is a conflict between GAO's regulations and the FAR, GAO's regulations govern.

The revised OMB Circular No. A-76 is available at http://www.whitehouse.gov/omb/circulars/a076/a76_rev2003.pdf.

For more on the recent revisions to OMB Circular No. A-76, see the May 29, 2003, FEDERAL CONTRACTS DISPATCH "Office of Management and Budget (OMB); Revision of OMB Circular No. A-76, Performance of Commercial Activities."

DATES: Comments should be submitted on or before July 16, 2003.

ADDRESSES: Comments should be submitted by e-mail to: A76Comments@gao.gov, or by facsimile to 202-512-9749. Because of delivery delays, submission by regular mail is discouraged. Comments may be sent by Federal Express or United Parcel Service to: Michael R. Golden, Assistant General Counsel, General Accounting Office, 441 G Street, NW, Washington, DC 20548.

FOR FURTHER INFORMATION CONTACT: Daniel I. Gordon (Managing Associate General Counsel), Michael R. Golden (Assistant General Counsel) or Linda S. Lebowitz (Senior Attorney) at 202-512-9732.

SUPPLEMENTAL INFORMATION: On May 29, 2003, OMB issued a major revision to A-76 to improve performance of commercial activities by incorporating the principles of Federal Acquisition Regulation (FAR) Part 15, Contracting by Negotiation, into the public-private competition process. A number of changes in the revised A-76 may affect GAO's protest regulations. GAO is soliciting comments on the following issues involving the revised A-76 and its protest regulations:

• The Competition in Contracting Act of 1984 (CICA) grants GAO its statutory authority to hear protests. CICA states that a protest may be filed by an "interested party," which is defined in the statute as "an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract."
  
  Under this definition, GAO hears bid protests filed by private-sector firms that have participated in A-76 cost comparisons since a private firm that participated in an A-76 cost comparison is an actual offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract. Over the past three years, private firms have filed more than 50 protests with GAO challenging the conduct of A-76 competitions.
  
  In contrast, GAO consistently has found that federal employees and their unions cannot protest any aspect of the A-76 competition because they do not meet CICA's definition of an "interested party" -- neither individual federal employees, nor the in-house plan (the "most efficient organization" (MEO)), nor the employees' union representatives are offerors. In addition, GAO has found that the MEO plan submitted in an A-76 competition is not an offer as defined under the FAR because the MEO does not constitute a response to a solicitation -- no contract is awarded where the MEO prevails in the cost comparison.
  
  There are a number of changes in the revised A-76 that may justify GAO reaching a different conclusion regarding the compliance of the in-house entity with CICA's definition of an "interested party." The revised A-76 contemplates that the in-house government entity will submit an "agency tender" in response to the A-76 solicitation, and the tender will be evaluated along with private-sector proposals to determine which competitor, public or private, will be selected to perform the work.
  
  The agency tender will be developed by an Agency Tender Official (ATO) who "represents the agency tender during source selection." If the agency tender wins the competition, the revised A-76 states that an "MEO letter of obligation" will be issued to an official responsible for performance of the MEO. This letter of obligation is required to incorporate appropriate portions of the solicitation and tender, and the public sector source's failure to perform in accordance with its obligations can result in a termination action.
  
  The ATO is among those defined by the revised A-76 as a "directly interested party" for purposes of filing an agency-level protest of the performance decision. The revised A-76 also includes in the definition of a "directly interested party" a "single individual appointed by a majority of directly affected employees as their agent." In contrast to the ATO's defined role in the competition, the revised A-76 does not define a role for this individual other than in contesting agency actions taken in connection with an A-76 competition.
  
  "It is the cumulative legal impact of these changes that GAO is considering in assessing whether an in-house entity should have standing to file a bid protest at GAO when a competition is conducted under the revised Circular," GAO says in the request for comments. "Under the revised Circular, the agency tender appears to be treated more as an offer than under the predecessor Circular, and, if the source selection results in a decision to accept an agency tender, there will be a letter of obligation, which appears intended to bind the in-house entity, in at least a quasi-contractual way, to the terms of the solicitation and tender."
  
  GAO is soliciting comments from contracting agencies, other federal agencies, individual federal employees, federal employee unions, contractors, and other private-sector firms, attorneys (from all sectors), and others wishing to express a view on the following key questions: (1) what method of deciding the matter GAO should use: case law (that is, wait for a protest presenting the question to be decided by GAO), amendment to the bid protest regulations, a notice in the Federal Register announcing GAO's legal conclusion, or no action by GAO; and (2) if GAO should act, what its decision should be -- should the in-house competitor be considered an interested party, and, if so, who should be viewed as having representational capacity to file a protest at GAO on behalf of the in-house competitor.
  
  
• GAO would like comments on whether counsel for the ATO or the appointed individual would need to apply for admission to a protective order that GAO would issue to limit access to nonpublic information regarding the procurement, and what conditions might affect the likelihood of that counsel being admitted.
  
  
• The old A-76 permitted parties affected by the cost comparison decision to challenge the results of the decision under an A-76 administrative appeal process. In light of the availability of this A-76 appeals process, GAO had a longstanding rule that it would generally not hear a protest against the propriety of the cost comparison until the A-76 administrative appeals procedure provided by the agency had been exhausted even though GAO recognized there is no statutory or regulatory requirement that an offeror exhaust available agency-level remedies before protesting to GAO.
  
  The revised A-76 abolishes the administrative appeals process, and instead provides that a "directly interested party" may contest various aspects of a standard competition by filing an agency-level protest. Under GAO's Bid Protest Regulations, protesters are not required to file an agency-level protest before filing a protest at GAO. Since the revised A-76 has abolished the special A-76 administrative appeal process, GAO is soliciting comments on whether it would be appropriate to continue to apply the exhaustion doctrine to A-76 protests or whether protesters should now be permitted to file their A-76 challenges directly with GAO.
  
  
• The revised A-76 states that "no party may contest any aspect of a streamlined competition." Under the revised A-76, a streamlined competition may entail the issuance of a solicitation for proposals from the private sector, but that is not required. GAO is soliciting comments on whether it would have a legal basis to consider a protest, from either the private or the public sector, regarding a streamlined competition.

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

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