DATE: April 1, 2004

SUBJECT: General Accounting Office (GAO) Decides Federal Employees Have No Right to Protest Under OMB Circular A-76 Streamlined Competition Procedures Conducted Without a Solicitation

SOURCE: GAO Decision B-293840; B-293840.2; Vallie Bray; March 30, 2004


ACTION: Decision

SYNOPSIS: GAO dismisses a protest filed by a federal employee against an agency's decision made under streamlined competition procedures conducted under Office of Management and Budget (OMB) Circular A-76, Performance of Commercial Activities, because the decision to contract out the work was based on the agency's analysis and not made through a solicitation - GAO's jurisdiction is limited to considering protests involving solicitations and awards made under those solicitations.

EDITOR'S NOTE: OMB Circular No. A-76 is available at http://www.whitehouse.gov/omb/circulars/a076/a76_rev2003.pdf.

SUPPLEMENTAL INFORMATION: On May 29, 2003, OMB revised OMB Circular No. A-76 to expand the use of public-private competitions to improve performance of commercial activities, and to incorporate the principles of Federal Acquisition Regulation (FAR) Part 15, Contracting by Negotiation, into the public-private competition process (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"). The revised OMB Circular A-76 authorizes the use of streamlined competition procedures when a commercial activity is performed by 65 or fewer full-time equivalents (FTEs -- two people working four hours a day each are equivalent to one FTE). The revised A-76 states that "no party may contest any aspect of a streamlined competition."

The U.S. Department of Agriculture (USDA) decided to study security services involving 24 FTEs at the Beltsville Agricultural Research Center (BARC). BARC decided to use streamlined competition procedures. As permitted by the streamlined competition procedures, USDA prepared a cost estimate based on the activity, but did not develop an in-house plan for a "most efficient organization" (MEO). USDA based its estimate of the cost of private-sector performance on market research -- it did not solicit any private-sector proposals. On November 5, 2003, USDA announced its decision to have the work performed commercially, and issued an order under the General Services Administration's Federal Supply Schedule. Vallie Bray, president of the American Federation of Government Employees (AFGE) Local 3147, protested the decision on behalf of the BARC federal employees.

USDA requested that Ms. Bray's protest be dismissed because (1) A-76 states that no party may contest a streamlined competition, and (2) GAO does not have jurisdiction to hear the protest because the decision did not involve a solicitation.

GAO denied USDA's first argument for dismissal: "While it is true that the revised Circular states that no party may contest any aspect of a streamlined competition, this language does not preclude a protest to our Office because CICA [the Competition in Contracting Act of 1984], not the revised Circular, provides the basis for our bid protest authority."

However, GAO upheld USDA's second argument for dismissal: "Under CICA...our Office's jurisdiction is limited to considering protests involving solicitations issued by federal agencies and awards made or proposed to be made under those solicitations. In these circumstances, where USDA used streamlined procedures, but did not issue a solicitation for purposes of conducting a procurement to determine whether to contract out or to perform work in-house, we conclude that we lack jurisdiction to consider Ms. Bray's protest."

GAO continued, "If an agency issues a solicitation as part of an A-76 study, thereby using the procurement system to determine whether to contract out or to perform work in-house, our Office will consider a protest by an actual or prospective offeror under that solicitation alleging that the agency has not complied with the applicable procedures in its selection process, or has conducted an evaluation that is inconsistent with the solicitation criteria or applicable statutes and regulations. Where, as here, however, the agency conducts a streamlined competition without the aid of the procurement system to support its decision to contract out or to perform the work in-house, we have no statutory basis to hear a protest by any party, whether from the public or the private sector."

EDITOR'S COMMENT: With this decision, GAO answers one of the concerns it expressed in its June 13, 2003, request for comments: "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" (see the June 13, 2003, FEDERAL CONTRACTS DISPATCH "General Accounting Office; Protests Under OMB Circular A-76").

The big question still remains: does the revised A-76 affect the standing of a federal employees and their unions to file a protest with GAO? In a footnote to the protest, GAO says, “In light of the dismissal of the protest for lack of jurisdiction...we do not reach the question of federal employees’ standing to file protests with our Office under the Competition in Contracting Act of 1984 (CICA)...and this dismissal should not be read as an indication of how our Office will ultimately resolve that question.”

However, GAO has consistently 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 MEO plan, 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. Based on the Vallie Bray decision, it looks like GAO is going to rely on CICA, and GAO has already found that federal employees do not meet its definition of "interested party," so it doesn't look very promising for federal employees.

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