_________________________________ GRANTED: August 4, 1992 _________________________________ GSBCA 11857-P WILTEL, INC., Protester, and MCI TELECOMMUNICATIONS CORPORATION, Intervenor, v. GENERAL SERVICES ADMINISTRATION, Respondent, and AT&T COMMUNICATIONS, INC., Intervenor. David W. Burgett, Douglas R. Duberstein, William A. Bradford, and Pierre M. Donahue of Hogan & Hartson, Washington, DC, and Patricia E. Martin of WilTel, Inc., Tulsa, OK, counsel for Protester. Robert Koehler, Mary Beth Bosco, Curtis V. Gomez, and Michael J. Schaengold of Patton, Boggs & Blow, Washington, DC, and Robin L. Redfield of MCI Telecommunications Corporation, Washington, DC, counsel for Intervenor MCI Telecommunications Corporation. George Barclay, Michael J. Ettner, and Seth Binstock, Personal Property Division, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Thomas C. Papson and Daniel E. Johnson of McKenna & Cuneo, Washington, DC, and Jonathan S. Hoak, G. Ridgely Loux, and Michael R. Greene of AT&T Communications, Inc., Silver Spring, MD, counsel for Intervenor AT&T Communications, Inc. Before Board Judges HENDLEY, NEILL, and PARKER. HENDLEY, Board Judge. On March 4, 1992, respondent, the General Services Administration (GSA), and intervenor, American Telephone & Telegraph Communications, Inc. (AT&T), modified the ten-year, comprehensive FTS2000 contract to include a service called T-3, a "dedicated" telephone service that can send data and voice signals through fiber-optic cable at the state-of-the-art rate of 45 million bits per second. Such speed is sufficiently rapid and accurate for two supercomputers to communicate, and for federal workers to tap into the supercomputer programs with ease. Protester, Wiltel, Inc. (Wiltel), and intervenor, MCI Telecommunications Corporation (MCI), contend that the T-3 service is an independent, severable service that respondent did not include in the original FTS2000 contract in 1988 to avoid restricting those carriers which, in 1988, could provide T-3. Thus, the protester contends that the respondent and AT&T could not add this nearly $100 million service to the contract merely by issuing a "modification," but instead should have conducted a competitive procurement to buy T-3. We agree and grant the protest. The Underlying Solicitation and Contracts 1. On December 31, 1987, GSA issued request for proposals (RFP) number KET-JW-87-02 for "comprehensive long distance telecommunications services to the federal agencies," known as the FTS2000 procurement. Transcript at 356. After Congressional intervention, the solicitation was "split into being two awards; 60 percent to one offeror and 40 percent to another." Id. at 357. Respondent then split the contract by assigning each Federal agency to one carrier or the other. AT&T Protest File Supplement, Exhibit 1 at C-15. The FTS2000 solicitation described the program as follows: This contract is for telecommunications services for the FTS2000 program. The FTS2000 program will replace the existing intercity switched voice Federal Telecommunicacations System (FTS) and provide additional and enhanced telecommunications capabilities to the Federal Government. The FTS2000 program will be mandatory for all federal agency activities subject to P.L. 89-306 [the Brooks Act], as implemented by the Federal Information Resources Management Regulation (FIRMR). Id. at C-15. 2. The solicitation also described broad procurement objectives, to wit: The FTS2000 procurement is designed to meet the following government objectives: a. To obtain a comprehensive set of telecommunications services b. To obtain telecommunications services through two prime service contractors responsible for providing all services and network management c. To accurately forecast telecommunications costs over a 10-year contract period . . . . f. To encourage competition between the two FTS2000 services contractors as a means of ensuring continued improvements in FTS2000 services and prices. AT&T Protest File Supplement, Exhibit 23A. 3. Section C of the FTS2000 solicitation addressed the performance specifications for two types of telecommunication services -- Switched and Dedicated -- which were grouped under six general service headings: C.2.2 Switched Voice Service C.2.3 Switched Data Service C.2.4 Switched Digital Integrated Service[foot #] 1 C.2.5 Packet Switched Service C.2.6 Video Transmission Service C.2.7 Dedicated Transmission Service AT&T Protest File Supplement, Exhibit 1, Section C. 4. Those in the trade distinguish the three types of dedicated transmission service (DTS) by the differences in the rate at which they can transmit data. Respondent expected customer agencies to use "analog" DTS to transmit voice and analog data between FTS2000 locations at rates up to 4.8 kilobits per second (kbps = thousands of bits per second) and at 9.6 kbps, then use "digital" DTS to transmit digital data between agencies ----------- FOOTNOTE BEGINS --------- [foot #] 1 Under this heading, the two carriers were to provide switched digital integrated service at the rapid T-1 rate of data transmission, which is 1.544 million bits per second ("mbps"), later as part of the Integrated Services Digital Network ("ISDN"). ----------- FOOTNOTE ENDS ----------- at rates of 9.6 kbps, 56 kbps and 64 kbps. They would use "T-1" DTS for dedicated, nonchannelized transmission between FTS2000 locations at the rate of 1.544 megabits per second (mbps = millions of bits per second). Protest File, Exhibit 1D. The DTS speeds specified in the solicitation were those that long- distance carriers were offering commercial customers between 1987 and 1988. Transcript at 548. 5. Paragraph H-16 of the solicitation was entitled "Service Improvements." It stated, in pertinent part: a. After contract award, the Government may solicit, and the Contractor is encouraged to propose independently, improvements to the services, features, or other requirements of the contract. These improvements may be proposed to save money, to improve performance, or for any other purpose which presents a service advantage to the Government. As part of the proposed changes, the Contractor shall submit a price proposal to the Contracting Officer for evaluation. Those proposed service improvements that are acceptable to the government will be processed as modifications to the contract. . . . . e. If a proposal submitted pursuant to this clause is accepted and applied to this contract, the equitable adjustment increasing or decreasing the contract price shall be in accordance with the procedures of the "Changes" clause. The resulting contract modification will state that it is made pursuant to this clause. Protest File, Exhibit 1A. Respondent asked the FTS2000 offerors to comment on this clause, Transcript at 359, and they voiced no objections. 6. In paragraph L.37.4.4 of the solicitation, titled "Additional Features/Items," respondent encouraged offerors to: offer additional features and items not identified in the price schedules provided in the RFP, but which the offeror normally supplies to its other customers. MCI/Wiltel Protest File Supplement, Exhibit 3B. Offerors were to explain why they were suggesting each item and provide corresponding unit prices. Id. In response, AT&T offered additional features and items under five of the six service categories in the procurement. In the DTS area it proposed five additional items, including T-3. Protest File, Exhibit 2B at 1- 9(f), 1-10. Both US Sprint and Martin Marietta[foot #] 2 also proposed one or more items in response to L.37.4.4, and the Martin-Marietta/MCI team, like AT&T, proposed adding T-3. AT&T Protest File Supplement, Exhibit 4 at L.3-1 to a-2; id., Exhibit 5 at D- 1.[foot #] 3 7. GSA did not accept, or even evaluate, any of these "L- 37" additional features or items, like T-3, that offerors proposed. Transcript at 360-61. Instead, due to time constraints, the agency only used offerors' responses to clause L.37.4.4 as a market survey, but did not negotiate for the inclusion of these items to the contract. Id.; AT&T Protest File Supplement, Exhibit 3. 8. In December 1988, respondent awarded the FTS2000 ten-year[foot #] 4 contracts to AT&T and US Sprint. AT&T Protest File Supplement, Exhibit 1 at C-15. AT&T won contract number GS00K89AHD0008 for Network A, the 60 percent portion of FTS2000. Protest File, Exhibit 3 (contract award). The contract is for fixed prices and indefinite quantities, with a minimum guarantee of $270 million for the 60 percent contractor and a maximum of $15 billion. AT&T Protest File Supplement, Exhibit 1 at H-5. High-Speed T-3 Service 9. T-3 service is a dedicated telecommunications service (DTS) which transmits voice and data signals at a rate of 44.736 mbps between two points. Transcript at 690; AT&T Protest File Supplement, Exhibit 45F. T-3 service transmits signals 28 times faster than T-1 and 672 times faster than a voice grade circuit. Transcript at 690-91; AT&T Protest File Supplement, Exhibit 45F. T-3 service is now commercially available and popular, and both protester and MCI offer it. Id., Exhibit 44; Transcript at 73- 74, 281-85, 315. Protester markets analog, digital, T-1, and T-3 services as part of a "package" or "range" of dedicated trans- mission services. Id. at 72, 75-76; AT&T Protest File ----------- FOOTNOTE BEGINS --------- [foot #] 2 Between 1987 and 1988, MCI participated in the FTS2000 procurement only as a subcontractor teaming with Martin-Marietta. [foot #] 3 Interestingly, protester Wiltel had begun installing T-3 circuits in 1985. Transcript at 58. [foot #] 4 Clause H-14 of the FTS2000 contract requires respondent to conduct a recompetition between the two winning carriers, AT&T and US Sprint, after they complete the fourth and seventh years of the contract work. Protest File, Exhibit 1 at H-14. This recompetition may lead to US Sprint taking over the larger Network A (60 percent) portion of the contract, depending on the prices each carrier offers. ----------- FOOTNOTE ENDS ----------- Supplement, Exhibits 29, 30. MCI, too, markets analog, digital, T-1, and T-3 services as part of a "range" or "spectrum" of dedicated transmission services. Id., Exhibits 16-18; Transcript at 326, 331. AT&T markets and views T-3 as part of a family of DTS services known as the "Accunet family of services." AT&T Protest File Supplement, Exhibits 25, 27; Transcript at 550, 629. 10. Higher speed transmission services, such as T-1 or T-3, carry much more information than do lower speed services. The high speed services, dedicated or not, are either "unchannelized" or "channelized." Customers generally purchase the higher speed transmission services to support applications which slower speed phone lines cannot transmit adequately. For example, customers can use T-3 to transmit data between supercomputers at a rate, and of a character, that T-1 lines cannot carry. MCI/WilTel Protest File Supplement, Exhibit 29 at 5-6. If a customer uses much or all of a T-1 or T-3 line for such "bit-hungry" supercomputer applications, the customer must leave the service whole, or "unchannelized." Transcript at 134-35. Nature of Dedicated Transmission Services 11. Because dedicated transmission services only transmit between two specific points and are available for use at all times, customers purchase them only if they sustain a high volume of traffic between two specific points. Transcript at 343-45, 634-36. While it is technically possible to route a transmission beyond the end point of the dedicated line to another location, id. at 578-79, the government has no need or plans to do so, id. at 636, 772. 12. The Dedicated T-3 lines consist of three parts. (1) The Local Exchange Company (LEC), usually a Bell Operating Company (BOC), provides the connection from the customer premise to the long-distance carrier's "point of presence." Transcript at 557. This LEC link is known as the "originating access portion" of the dedicated line. Id. at 479. (2) An interexchange carrier, such as WilTel, MCI, AT&T, or Sprint, acts as a "backbone" by transmitting the data long-distance between the two LECs. Id. at 558. (3) The last portion of a dedicated line, or "terminat- ing access" to the customer site at the other end, is a mirror image of the first portion. Id. The originating and terminating access together constitute the local access portion of the system. Id. at 557-59. As a technical matter, WilTel, Sprint, MCI, and AT&T can provide T-3 dedicated transmission services without disrupting existing FTS2000 services. Id. at 508-09. T-3 Service Compared to T-1 Service 13. The carriers provide T-3 service nigh exclusively through fiber-optic cable. Transcript at 779, 604. T-1 service, on the contrary, is "provided basically on copper in a copper environment." Id. at 460-61, 124, 129. An expert commented that: "You have a copper environment versus an optical fiber environment." Id. at 502. Nonetheless, most local exchange companies have begun installing fiber optic cable into new commercial and federal buildings. Id. at 224-32. Besides the fact that signals can travel at the T-1 rate quite adequately over copper, while they cannot at the T-3 rate, the "pulse width," "pulse shape," and "jitter" of T-3 signals are quite different from T-1's. Id. at 753-54. Moreover, the "overhead, the bits that are used to keep track of what all is going on in the network, [is] different on a T-1 and a T-3." Id. 14. The T-3 rate of transmission can support some "vastly different" applications than even a large bundle of T-1 lines could, including some that T-1 cannot transmit at all, or carries very poorly. MCI/WilTel Protest File Supplement, Exhibit 29 at 5-6; Transcript at 529-30, 759. These different applications include the supercomputer mainframe applications that are largely at issue here, as well as broadcast quality video applications and three-dimensional computer visualization (imaging) applica- tions. Id. at 164. 15. Customers purchase T-3 and T-1 services separately and carriers market them separately, albeit as part of "families" of dedicated services. Transcript at 285, 549-50. T-3 is in no way derived from T-1. The carriers, and local exchange companies, such as C&P Telephone, provide the T-3 rate of transmission by adding hardware called "multiplexers" to buildings. The multiplexers combine, or aggregate, slow speed voice and data calls into a high-speed data stream. Id. at 265, 750-53. Multiplexing many calls into a single, rapid flow (to the layman, somewhat paradoxically) increases the carrying capacity of the long-distance backbone, since it reduces the total time that the backbone is in use. 16. Modification PS95, quoting the changed pages from AT&T's proposal, explicitly states that analog, digital, T-1, and T-3 are all "independent" and "separate" services, and that "each is designed to provide a different type of service." Protest File, Exhibit 21 at 5.1.7-1 to -2; Protest File, Exhibit 5 at 5.1.7-1. Using T-3 Service to Aggregate T-1 service 17. All agree that T-3 service can carry aggregated T-1 lines. For example, long-distance carriers aggregate T-1 lines into T-3 lines to form their long-distance "backbones" that criss-cross the United States. Transcript at 205-06. However, we find that the federal agencies would use the T-3 service covered by Modification PS95 primarily to support supercomputing applications. They are not likely to buy the hardware necessary to "be [their] Own Bell," i.e. use multiplexing and channel- banking machinery to combine all of the slower rate phone lines into one high-rate line, as the local exchange carriers like C&P Telephone do at large office buildings to save money. Id. at 698. Indeed, AT&T's own expert acknowledged that he was unsure "whether it is wise or not" to try to act as one's own phone company, id., and stated that he had little or no personal knowledge that the agency customers were actually planning such a course, id. at 636, 772. We further find that it will rarely, if ever, be economical for even large federal installations to aggregate 672 voice-grade lines from a single point to another single point. The expert witness for MCI testified that almost no one but a long-distance carrier would use unchannelized T-3 for such aggregation. Id. at 205-07. Another witness also testified that he was aware of only one MCI T-3 customer, other than carriers, that channelized its own T-3 line to aggregate T-1 lines. Id. at 334-35. Changes Clause 18. The FTS2000 contract's "Changes" clause, 48 CFR 52.243- 1 (Alt. II) (1990) (FAR 52.243-1, Alt. II), provides that: (a) The Contracting Officer may at any time, by written order, and without notice to the sureties, if any, make changes within the general scope of this contract in any one or more of the following: (1) Description of services to be performed. (2) Time of performance (i.e., hours of the day, days of the week, etc.) (3) Place of performance of the services. (4) Drawings, designs, or specifications when the supplies to be furnished are to be specially manufactured for the Government, in accordance with the drawings, designs, or specifications. (5) Method of shipment or packing of supplies. (6) Place of delivery. (b) If any such change causes an increase or decrease in the cost of, or the time required for, performance of any part of the work under this contract, whether or not changed by the order, the Contracting Officer shall make an equitable adjustment in the contract price, the delivery schedule, or both, and shall modify the contract. (c) The Contractor must assert its right to an adjustment under this clause within 30 days from the date of receipt of the written order. However, if the Contracting Officer decides that the facts justify it, the Contracting Officer may receive and act upon a proposal submitted before final payment of the contract. (d) If the Contractor's proposal includes the cost of property made obsolete or excess by the change, the Contracting Officer shall have the right to prescribe the manner of the disposition of the property. (e) Failure to agree to any adjustment shall be a dispute under the Disputes clause. However, nothing in this clause shall excuse the Contractor from proceeding with the contract as changed. GSA did not attempt to, nor did it, obtain authority to deviate from the Federal Acquisition Regulation with respect to the Changes clause. Transcript at 365-67. Contract Modification No. PS95 19. On March 4, 1992, AT&T formally submitted its proposal to GSA to modify AT&T's FTS2000 contract by adding a service improvement entitled "DTS Unchannelized T45[foot #] 5." Protest File, Exhibit 5. AT&T proposed adding T-3 as a fourth type of dedicated transmission service (DTS). The proposal offered pricing for T-3 service between thirty specific locations, based on a forecast that AT&T's marketing group conducted. Id., Exhibits 5, 37; Transcript at 598-99. 20. GSA evaluated the technical and contractual merits of AT&T's proposal, decided that federal agencies needed T-3 service, and concluded that T-3 was within the scope of the FTS2000 contracts. Transcript at 421-25, 453-61. GSA's written In-Scope Determination noted: In reviewing agency requirements (NASA, NIH, EPA, etc.), it became apparent that AT&T's dedicated transmission service offering under FTS2000 can not satisfy all of the requirements of these agencies. . . . . ----------- FOOTNOTE BEGINS --------- [foot #] 5 T45 and DS-3 are the same as T3 service. All three terms are used interchangeably in the industry. ----------- FOOTNOTE ENDS ----------- The proposed DTS access to Unchannelized T45 speed, at the 44.736 Mbps (DS3) rate, will provide end users with enhanced, high-volume, data transmission, and is fully compatible with the existing FTS2000 Network Architecture. This functionality is required by several Government agencies. T45 Service (T-3 service, as identified in the commercial environment) provides for an increased transmission speed to 44.736 Mbps. . . . . The DTS T45 feature is a fiber-optic technology that presently resides within existing FTS2000 network technology and architecture but is not accessible by FTS2000 users. The proposed access to the DTS T45 feature will fulfill high-volume bit rate requirements of federal agencies and allow agency subscribers to more fully utilize existing data transmission technology. Protest File, Exhibit 9 at 5-6. 21. After respondent completed its "in-scope" determination in record time, it and AT&T on March 31, 1992, entered into Modification PS95, "a bilateral modification to incorporate an enhancement feature to the Dedicated Transmission Service" under AT&T's FTS2000 contract. Protest File, Exhibit 21 at 3. This modification initially would make T-3 service available at the thirty locations described in AT&T's proposal. Id., Exhibit 5; Transcript at 672-73. Although AT&T submitted its proposal pursuant to the "Improvements" clause, the carrier in its technical proposal characterized T-3, as well as the Analog, Digital and Unchannelized T-1 Services, as "four independent services," and as "four separate services," Protest File, Exhibit 5 at 5.1.7-1. Moreover, AT&T acknowledged that "each [of the four services] is designed to provide a different type of service," with its own individual architecture. Id. 22. The maximum dollar limitation of AT&T's contract is $15 billion, Protest File, Exhibit 3 at 2, and this modification did not raise that maximum dollar amount. However, it raised the estimated dollar amount of the contract by $99,454,620, the value of the modification. With the modification, the total estimated contract value is $5 to $8 billion. Id., Exhibit 21 at 6; Transcript at 474. The modification's estimated value therefore falls between 1.2 percent and 1.9 percent of the total AT&T estimated contract value. Transcript at 474. In May 1992, dedicated transmission service represented about 13 percent of total AT&T contract revenues. Respondent's Exhibit 2. The In-Scope Determination 23. Although respondent usually takes about 200 days to approve a contract modification, it completed Modification PS95 in just 27 days. Transcript at 486-87. GSA began the approval process by preparing a document entitled "Technical Aspects of Scope Determination." Id. at 422-23, 453; Protest File, Exhibit 8. Respondent prepared this document under an FTS2000 expert's supervision, id. at 454, and the Contracting Officer relied on it to determine that the modification was in scope, id. at 422, 442-43. 24. The Technical Aspects of Scope Determination, Protest File, Exhibit 8 at 5, demonstrates that respondent concluded that T-3 was simply an improvement to, or enhancement of, T-1 service. This document characterizes T-3 "[a]s an improvement on existing, T-1 Carrier type digital service." Transcript at 445. The document also demonstrates that respondent's FTS2000 officers' belief that T-3 was simply an improvement to or enhancement of T-1 service led respondent to conclude that Modification PS95 was within the scope of the FTS2000 contract. Protest File, Exhibit 8 at 5. 25. Likewise, respondent's contracting officer testified that she thought that: "T-3 service is just a whole bunch of T-1 lines put together." Transcript at 439. The contracting officer conceded that this belief affected her decision that Modification PS95 was within the scope of the FTS2000 contract. Id. at 439-40. She also admitted that this belief led her to conclude that the modification was within scope. Id. at 446. The contracting officer for the initial FTS2000 award likewise testified to her belief that "T-3 is T-1. It is an enhanced version of T-1." Id. at 396. 26. At paragraph C.2.7, under the descriptive heading "Dedicated Transmission Service," the solicitation listed only three independent and separate dedicated services: 1) Analog, 2) Digital, and 3) Unchannelized T-1. AT&T Protest File Supplement, Exhibit 1 at Section C. The contract's glossary stated that the "Dedicated Transmission Service" meant: "private-line transmission of voice and data." Id. at Section J-16. 27. The FTS2000 solicitation also listed basic telecommuni- cation services and required bidders to price each basic service separately, as follows: "Basic service" is defined as service whose price excludes all features that are identified to be priced separately. Offerors shall propose fixed price schedules for all specified basic services and features. AT&T Protest File Supplement, Exhibit 1 at Section B.1.2. No definitions of "service" or "basic service" appear in the solicitation's Glossary. Id. at Section J.1. 28. However, the FTS2000 solicitation separately lists three basic Dedicated Transmission Services, under the heading "Dedicated Transmission Service," again Analog, Digital and Unchannelized T-1 Services. The solicitation listed specific characteristics and performance requirements for each of these basic services. AT&T Protest File Supplement, Exhibit 1 at Section J. However, it did not list any such requirements for the whole family of "dedicated transmission services." Id. at Section B.8. 29. Besides listing services, such as analog, digital, and T-1 grouped in the DTS family, the solicitation also listed the "features" that a service might include. Thus, a "feature" was a subset of a service, defined as follows: Features may be either an integral capability or an additional enhancement to a service. All features integral to a service must be available when the service is first made available. AT&T Protest File Supplement, Exhibit 1 at Section C.2.1.2. Features were either 1) mandatory, or 2) mandatory optional. Id. at C-20. For example, the Section C, Table of Contents, lists features for: 1) Switched Voice Service, 2) Switched Data Service, and 3) Packet Switched Service and Compressed Video Transmission, Id. at C-4 to C-7. The solicitation also listed "mandatory optional" features for the ISDN, a service not widely available to, or desired by, commercial customers in 1988. 30. Pursuant to Clause H-16, "Service Improvements," either the Government or the Contractor could propose improvements to the services or features: After contract award, the Government may solicit, and the Contractor is encouraged to propose independently, improvements to the services, features, or other requirements of the contract. These improvements may be proposed to save money, to improve performance, or for any other purpose which presents a service advantage to the Government. As part of the proposed change, the Contractor shall submit a price proposal to the Contracting Officer for evaluation. AT&T Protest File Supplement, Exhibit 1 at H-16. Although adding an improvement could be a proper "change" under the "Changes" clause, the parties agree that "neither the 'Changes' clause nor H-16 allows changes outside the scope of the contract," Transcript at 368, and H-16 does not expand the scope of the "Changes" clause, id. at 370. Under the descriptive heading "Dedicated Transmission Service," respondent could improve only the three enumerated basic services (Analog, Digital and Unchannelized T-1) pursuant to the "Improvements" Clause H-16. 31. AT&T internal documents, from 1991 through the modification execution, acknowledged that: unchannelized T45 service was not part of the BAFO and will be treated as a new service with the latest performance objectives. MCI Protest File Supplement, Exhibits 50A at 31, 50B at 25, 50C at 30, 50D at 9, 50E at 9. 32. Respondent justified merely modifying the FTS2000 contract by adding unchannelized T-3 by noting, inter alia, that AT&T's T-3 transmits signals at the same near-45 Mbps rate that AT&T already used to provide long-distance service along its "backbone" under the contract. Respondent also found that AT&T's T-3 service would: "provide end users with enhanced, high-volume, data transmission, fully compatible with the existing FTS2000 Network Architecture." GSA concluded that AT&T's Unchannelized T45 Service was an "enhancement," a "value added feature," and "an improvement" on existing T-Carrier type digital service. Protest File, Exhibit 8 at 5. Likewise, the Contracting Officer determined that T-3 is a "feature" which could be included "into the basic FTS2000 contract Dedicated Transmission Service" as an "improvement to existing contract requirements." Id., Exhibit 9 at 7. 33. Respondent and AT&T calculated the prices in the modification, not on the basis of any increased cost to AT&T, but on the basis of market or tariff prices. Protest File, Exhibits 13, 17. The pricing of the modification was done on the basis of the existing tariffs. In short, the modification was priced as if AT&T were a sole source for T-3 service. Id. 34. Respondent issued Modification PS95 without competitive bidding, although competition in the market among providers of T- 3 service is fierce. Transcript at 60, 488-89, 509. Discussion The Changes Clause Analyzing cases interpreting the "Changes" clause is not particularly helpful or edifying. Nor can any attempt at analysis exceed the factual underpinnings of the case in question, since the results are very much "fact driven," and differ as substantially as do the products and services across the spectrum of the federal inventory. Nonetheless, these "Changes" clause hold that: [P]reservation of the integrity of the competitive procurement system requires that contracting parties not make changes to contracts which have the effect of circumventing the competitive procurement statutes. [citations omitted] This principle is violated when a modification so substantially changes the purpose or nature of a contract that the contract for which the competition was held and the contract which is to be performed are essentially different. Memorex, 61 Comp. Gen. 42 (1981), 81-2 CPD 334. In the instant case, this essential concern for the competitive procurement system seems pointedly applicable. We find that respondent has attempted, through a modification, to acquire a new service, at its commercial price, rather than at the incremental cost difference between T-3 and T-1. Such a change exceeds the ambit of the Changes clause, or the FTS2000 contract's Service Improvements Clause, H-16, since respondent's own regulations, 48 CFR 6.3 (1990) (FAR 6.3), require agencies to treat modifications for work outside the scope of a contract as a new procurement. Businessland, Inc., GSBCA 8586-P, 86-3 BCA 19,268, 1986 BPD 143. We have concluded that Modification PS95 is outside the scope of FTS2000 after considering four basic factors involved in changes that the Comptroller General, in its long exercise of protest jurisdiction, has identified: the degree of change in the (1) pricing of the service; (2) the schedule for delivery of the service; (3) the type of service the contractor would need to perform; and (4) whether the bidders, and the incumbent contractor, reasonably would have expected the changed work to be within the scope of the contract, plus "Changes clause," during the competition. See Neil R. Gross & Company, B-237434, 90-1 CPD 212, at 3 (Feb. 23, 1990), aff'd on reconsideration, B- 237434.2, 90-1 CPD 491 (May 22, 1990)[foot #] 6; ----------- FOOTNOTE BEGINS --------- [foot #] 6 While rulings by the Comptroller General are not binding upon this Board, they nonetheless constitute "persuasive authority." Laser Digital, Inc., GSBCA 10810-P, 91-1 ___________________ BCA 23,499, at 117,847, 1990 BPD 373, at 5. ----------- FOOTNOTE ENDS ----------- American Air Filter Company, 57 Comp. Gen. 285, aff'd on reconsideration, 57 Comp. Gen. 567 (1978). Applying these principles, we first note that the "type of work" that T-3 can provide, such as transmission of broadcast-quality videos, medical imaging, and supercomputer communications, is "work" that T-1 cannot perform. Second, AT&T priced the "change" using tariff, or market prices, rather than by proposing to charge respondent only the incremental difference in cost between providing a T-1 and a T-3 line. Third, we find not only that the solicitation did not advise the offerors that respondent intended to purchase T-3, but also that respondent rejected their offers to do so in the original procurement. The Board previously has applied these same criteria to a Brooks Act, and even an FTS2000, procurement. In MCI Telecommunications Corp., GSBCA 10450-P, 90-2 BCA 22,735, 1990 BPD 55, we found that respondent could add certain enhancements to the FTS2000 contract's toll-free "800" service pursuant to the "Changes" clause, since these changes improved the already- installed "800" service. These changes included allowing the contractor (US Sprint) to route calls differently depending on the hour of the day and to use a recorded announcement to speed completion of calls. Such changes did not add another type of toll-free service to the contract, but rather improved the one already offered and installed. Second, it was impossible as an engineering matter for another carrier to provide different routing of "800" calls, or recordings to aid in "800" call completion, without providing the "800" service itself. In contrast, in the instant case, all parties agree that another carrier could provide T-3 lines without providing any of the other dedicated services. Finally, the attorneys and witnesses appearing for intervenor MCI at this hearing admitted that the change at issue in the "enhanced 800" case cost only $2 million, which was the carrier's incremental increase in cost over providing the toll-free service without the enhancements. Transcript at 378. In contrast, AT&T, while contending that supplying T-3 service is nothing more than a change within the ambit of the Changes clause, nonetheless sought and obtained pricing of that "change" on the basis of its commercial tariffs rather than any increased cost inherent in providing T-3 service in lieu of T-1 service. In fact, both the respondent and AT&T have never considered, much less determined, the cost (in contrast to the price) difference to AT&T in providing T-3 rather than T-1 service. Since the witnesses testified that the local exchange companies, as well as the long-distance carriers, had installed fiber-optic cable right into many new commercial and federal buildings, and that the local companies likewise were "multiplexing" slower calls into a faster stream, one might surmise that the cost increase is rather small to nonexistent. The Competition in Contracting Act Under the Competition in Contracting Act (CICA), 41 U.S.C. 253(a)(1)(A) (1988), the Government must conduct its procu- rements using "full and open competition," subject only to very limited exceptions. Respondent's witnesses admitted that they did not include T-3 service in the 1988 FTS2000 contracts, nor bargain for this service between 1987-88, or even ask offerors to price it as an optional feature. In contrast, respondent asked for quotations for the not-commercially available ISDN, and all agree that respondent has never, between 1988 through 1992, subjected the T-3 requirement to competition. The evidence clearly establishes that the market for T-3 service is exceedingly competitive. At least four major inter- exchange carriers participate in this market: WilTel, MCI, Sprint, and AT&T. If the Government's requirements for dedicated T-3 service were opened to competition, the prices and performance would likely reflect the highly competitive market for dedicated T-3 service, and be substantially lower than those proposed by AT&T in sole-source negotiations with the respondent. Although the Appropriations Act of 1992, Pub. L. No. 102- 141, Section 622, 105 Stat. 834 (1991), requires federal agencies to use the FTS2000, or seek an exception to it, when obtaining the services covered by that contract, if the services are not covered by that contract such services may not be procured by simply modifying the FTS2000 contract to include them. The CICA does not permit the FTS2000 contractors and respondent to avoid the competitive process in procuring new services not covered by the contract for the sake of "economies of scale[foot #] 7," or even to improve Government efficiency by speeding agencies' access to technology breakthroughs, although both are goals of the FTS2000 procurement. Nor can the respondent now argue that the Service Improvement Clause H-16 itself exempts the agency, and AT&T, from compliance with the CICA. The respondent's own contracting officer admitted that the Service Improvements clause was not intended to confer any broader authority to modify the contract, but to "implement" changes related to improved technology consis- tent with the Changes clause. Transcript at 369-70. We have grave doubts that any such authority can exist. Any such envisioned expansion of the Changes clause would eviscerate the statutes governing competitive procurement. Even a close reading of the Service Improvements Clause H-16, which respondent now argues allows it to add T-3 service by mere modification, favors the protester. This clause encourages ----------- FOOTNOTE BEGINS --------- [foot #] 7 We very much doubt that there is any economy "of scale" or otherwise in this non-competitive procurement by contract modification. ----------- FOOTNOTE ENDS ----------- contractors to offer improvements to existing services only, as follows: After contract award, the Government may solicit, and the Contractor is encouraged to propose independently, improvements to the services, features, or other requirements of the contract. Plainly, the word "improvements" entails the notion of doing something to the service which results in better quality or greater value. In addition, this clause does not suggest that the contractor can propose new or additional services. Clearly, to come within the plain meaning of this provision, a change would have to constitute an enhancing[foot #] 8 modification of the services already bargained for during the 1987-88 negotiations, i.e., an improvement limited to analog, digital, and T-1 in the Dedicated Transmission Services' group. Accordingly, we apply the plain meaning of the word "improvements" used in H-16. This plain meaning is thoroughly consistent with the other provisions of the contract, such as Section C.1.3.f of the solicitation, which said that one contract goal was "ensuring continued improvements in FTS2000 services." This language is very close to that of H-16 itself, indicating an interest in future enhancements to existing services. However, even in this fairly lengthy and apparently comprehensive list of objectives, no mention is made of adding new FTS2000 services.[foot #] 9 Even more damaging to respondent's argument is the fact that its own regulations, published as the Federal Information Resource Management Regulations (FIRMR), 41 CFR 201 (1990), present a more limited view of how it, and the two carriers, would adapt the FTS2000 contract over its 10-year life than it makes before the Board today. There, respondent did not say that it would add services to the FTS2000 over time, but rather that it would offer user agencies enhancements of: existing services and add features to the FTS2000 network to maintain technologically current services to ----------- FOOTNOTE BEGINS --------- [foot #] 8 With the exception of modifications which reduce services, any modification would be enhancing, or the ______ government would have no reason to enter into the modification. [foot #] 9 The objectives also refer to procuring a "comprehensive set of telecommunications services." AT&T Protest File Supplement, Exhibit 1 at C-15-1. However, there is no indication that the "comprehensive set" is other than the very long and comprehensive list of services actually procured at the time. Obviously, FTS2000 did not, could not, and was not intended to include every telecommunications service that existed at that time or would later come into existence. ----------- FOOTNOTE ENDS ----------- user agencies. GSA will make service improvements in accordance with agencies' needs, contract provisions, governing regulations and statutes. FIRMR 201-24.101-1(c). As we found, a "feature" is a subset of a "service," defined specifically as "either an integral capability or an additional enhancement to a service." We find the FIRMR indeed permits addition of features to the bargained-for, enumerated services, but does not authorize the addition of services that respondent and AT&T are attempting here. T-3 is an Independent Service, not a Service Enhancement or "Feature" The evidence is uncontroverted that dedicated T-3 service is one that is "greater than the sum" of even a large group of analog, digital, or T-1 lines. First, T-3 transmission can occur only over fiber-optic lines, while the other three enumerated services can operate quite adequately in the old copper environment. Second, a T-3 provider must replace T-1 equipment to add the service, rather than merely increase the number of T-1 lines tied to an agency. Third, unlike the "enhanced 800" service situation, the current FTS2000 contractors can continue providing the three other dedicated services without interruption, whether or not they, or protester, or MCI, ultimately provide T-3 after a competitive procurement. The addition of T-3 results in no change whatsoever to T1 or other dedicated services under the contract. This is no different than what occurs in the commer- cial market, where T-1, T-3, and other services are sold indepen- dently to whomever wants them.[foot #] 10 Fourth, adding T-3 service will permit user agencies to expand dramatically the applications used with DTS. These include transmissions in support of supercomputers, high-quality video, and high-resolution imaging (e.g., weather mapping and medical imaging) signals. The evidence shows that T-3 services acquired under the modification will be used to support new applications not possible with T-1, especially supercomputing applications. As a mere lagniappe, T-3 also will allow agencies to aggregate slower voice and data lines into a single high-speed line. Fifth, carriers will use different equipment when supplying T-3 service, and user agencies will need to acquire new customer ----------- FOOTNOTE BEGINS --------- [foot #] 10 The fact that such separate services are sometimes grouped for ease of reference under a heading or category such as "Dedicated Transmission Service" or "T-carrier family of services" does not make them any the less independent of each other. ----------- FOOTNOTE ENDS ----------- premise equipment, including on-site multiplexers, to support the new applications available with T-3 service. Sixth, we cannot forget the fact that respondent estimated the cost of the modification to be roughly $99 million. This represents the cost of T-3 service to twenty-one paired sites at thirty locations. Future additions of T-3 could raise the figure substantially. In absolute terms, this figure represents an enormous increase in contract value. Obviously, the cost of T-3 lines is large enough to make separate procurement, even on a site-by-site basis, very feasible. Finally, AT&T, in its own T-3 proposal, with an understandable advertising enthusiasm, describes T-3 as a fourth "independent" and "separate" service: Dedicated transmission service (DTS) consists of four independent services: dedicated analog service, dedi- cated digital service, dedicated T1 service, and dedi- cated T45 service. Each of these four services will provide point-to-point, dedicated service. . . . All four services will be provided through the DTS architecture . . . . DTS comprises four separate services: dedicated analog, dedicated digital, dedicated T1, and dedicated T45. Because each is designed to provide a different type of service, this section presents both an overview of DTS architecture and an architecture description for each of the four services . . . . Protest File, Exhibit 5 at 5.1.7-1. Respondent accepted this proposal. The quoted admissions concerning the nature of T-3 are thus set out in the contract itself. These contract provisions, which go into considerable detail about the nature of all services in this case, do not claim that T-3 is an enhancement of any other dedicated trans- mission service. We thus agree with AT&T itself that T-3 is a service separate from T1. Because T-3 service constitutes a new and independent service--not an enhancement to an existing one-- it is not a "service improvement" covered by clause H-16. Applying "Changes" Clause Principles Here, by everyone's admission, respondent did not bargain to procure T-3 service when it was negotiating the FTS2000 contract between 1987 and 1988. It is a technically different service limited to a small, specialized number of applications that AT&T now proposes to price at market rates, rather than at its incremental higher cost over T-1 service. We finally must determine whether the Changes Clause would permit the addition of this service. We conclude that it does not after noting that respondent-- in considering whether to purchase the not-commercially available ISDN--stated in the solicitation that it intended to buy this service under FTS2000, and included this clause: The Government believes that ISDN will reduce costs and enhance the quality of communications services. The Contractor's services shall migrate to ISDN to some locations at some time during the ten year life of the Contract. Offerors shall propose a plan for migration of services to ISDN in conformity with existing and evolving international and national standards and recommendations. AT&T Exhibit 1 at C-18. In contrast, T-3 service was commercially available in 1988, but respondent did not leave the door open to buy it. We conclude that T-3 service is a new service whose procure- ment must be competed by the respondent.[foot #] 11 We cannot conclude that the protester was on notice of the issuance of the modification earlier than claimed when the procurement was not properly synopsized. ----------- FOOTNOTE BEGINS --------- [foot #] 11 This ruling was requested by the protester. ----------- FOOTNOTE ENDS ----------- Decision The protest is GRANTED. _________________________ JAMES W. HENDLEY Board Judge We concur: _________________________ _________________________ EDWIN B. NEILL ROBERT W. PARKER Board Judge Board Judge