____________________________________________________ DISMISSED FOR LACK OF JURISDICTION: July 20, 1995 ____________________________________________________ GSBCA 13323-P, 13333-P SPRINT COMMUNICATIONS COMPANY, L.P., and AT&T COMMUNICATIONS, INC., Protesters/Intervenors, v. GENERAL SERVICES ADMINISTRATION, Respondent. David S. Cohen, William F. Savarino, Carrie B. Mann, and G. Brent Connor of Cohen & White, Washington, DC; and George Affe and Anthony Cogswell of Sprint Communications Company, L.P., Herndon, VA, counsel for Protester Sprint Communications Company, L.P. Thomas C. Papson and James P. Lamoureux of McKenna & Cuneo, L.L.P., Washington, DC; and Nathaniel Friends, G. Ridgley Loux, and Steven W. DeGeorge of AT&T, Silver Spring, MD, counsel for Protester/Intervenor AT&T Communications, Inc. George N. Barclay, Michael J. Ettner, Pamela J. Reiner, Marie N. Adamson, and Jody B. Burton, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges BORWICK, HYATT, and WILLIAMS. HYATT, Board Judge. These protests, filed respectively on June 30, 1995, and July 10, 1995, concern actions contemplated by the General Services Administration (GSA) in connection with the FTS2000 Program. This program provides the Federal Government, over a ten-year period ending in 1998, with a compatible, interoperable, advanced long-distance telecommunications system. Protesters, Sprint Communications Company, L.P. and AT&T Communications, Inc., are the awardees of the two FTS2000 contracts. The protests challenge GSA's planned conduct of the Year 7 Price Redetermination/Service Reallocation (PR/SR) competition between the two contractors. For the reasons discussed herein, we dismiss the protests for lack of jurisdiction. Background The solicitation leading to the award of the FTS2000 contracts, Request for Proposals (RFP) KET-JW-87-02, was initially issued on December 31, 1986. As amended in 1987, the solicitation stated that the overall objective of the FTS2000 program was the replacement of the existing Federal Telecommunications System (FTS) and the provision of additional and enhanced telecommunications capabilities to the Federal Government. In response to concerns expressed by Congress, the solicitation called for services to be obtained from two networks, similar in all aspects except for size, and each to be provided by a different contractor. The awards of Network A to AT&T, which received a sixty percent share of the estimated traffic, and Network B to Sprint, which received a forty percent share of the estimated traffic, were made on December 7, 1988. The contracts were indefinite quantity, indefinite delivery (IDIQ) contracts, with minimum dollar guarantees of $270 million for Network A and $180 million for Network B, which, at this point, have been satisfied. Maximum contract limitations of $15 billion and $10 billion, respectively, are also established in the contracts. It is not expected that any modifications of the contracts resulting from the PR/SR will breach these maximum limitations. The FTS2000 solicitation, at paragraph C.1.3, included the following among the objectives of the FTS2000 program: a. To obtain a comprehensive set of telecommunications services b. To obtain telecommunications services through two prime services contractors responsible for providing all services and network management f. To encourage competition between the two FTS2000 services contractors as a means of ensuring continued improvements in FTS2000 services and prices. Respondent's Exhibit 2 at C-16.[foot #] 1 In section C.1.3.1, the FTS2000 solicitation stated an expectation that for the next ten years these services would "conform as closely as possible with those offered commercially" in terms of quality and price. The Government's entitlement to avail itself of updated technology was addressed in the standard Changes clause and in a special "Service Improvements" clause set forth in paragraph H.16. The solicitation also made clear that price reductions over the ten-year term of the contract were expected; under paragraph B.1.2 "[t]he contractor may lower any price at any time after contract award." Price reductions were formally contemplated under paragraph H.14, which implements the PR/SR which is the subject of this protest. The United States Court of Appeals for the Federal Circuit, in AT&T Communications, Inc. v. Wiltel, Inc., 1 F.3d 1201, 1204 (Fed. Cir. 1993), has noted this feature of the FTS2000 program, explaining that "[a]fter four and seven years of contract performance, the FTS2000 contract permits the two providers to compete for a larger share of the services." Paragraph H.11 of the FTS2000 solicitation addressed allocation of work between the two networks: c. The government has the right to add authorized users as defined in paragraph a. at any time during the term of this contract up to the limits specified in H.5, maximum Contract Limitation. . . . d. Except as necessary to fulfill the minimum contract guarantee, the government is not obligated or required to satisfy its requirements for the services described in this contract from the contractor. However, the government intends to fulfill FTS2000 requirements from these contracts during the ten-year life of the contracts. . . . e. The contractor shall serve authorized users when assigned in accordance with all requirements of this contract. One mechanism to achieve the Government's goal to obtain continued improvements in FTS2000 services and prices is set forth in paragraph H.14. Paragraph H.14.1 provides that the "unit prices and the total estimated price, if any, stated in this contract shall be periodically redetermined in accordance with this clause." Paragraph H.14.2 divides the performance of the contract into successive periods of one four and two three ----------- FOOTNOTE BEGINS --------- [foot #] 1 "Respondent's Exhibits" are the attachments to GSA's motion. ----------- FOOTNOTE ENDS ----------- year periods for this purpose. Selection of requirements for reallocation is addressed in paragraph H.14.3: a. The government shall select requirements for reallocation between the two networks using a target 40% of each network's estimated revenue over the remaining life of the contract using prices then in effect and usage forecasts developed by the government. b. The government will select requirements for reallocation based on an analysis which identifies those requirements which are the least advantageous to the government as delivered and priced at that point in time. The analysis will include consideration of: 1. Price compared to the other FTS2000 services contractor and to the external market 2. Service quality 3. Ease and estimated cost of transition 4. Impact on users and their applications 5. Alignment with agency allocations (i.e., on a whole agency basis, with consideration of community of interest and accommodation of consolidation of boards, to the extent practicable) 6. Ability to maintain ongoing competition between two contractors through the remaining contract life 7. Other factors concerning price, quality, and reliability of service to the government The requirement for contractors to submit price redetermination proposals is described in pertinent part in paragraph H.14.4: a. The contractors shall be required to submit proposals for price redetermination as requested by the government. The government anticipates that the structure of the pricing tables for the price redetermination proposals will be the same as those required for the basic contract proposal. Further, the government anticipates that technical or management proposal information will be limited to addressing the impact of the proposed price redetermination and service reallocation. . . . Repricing proposals will be requested during the fourth and seventh years of the contracts in sufficient time to complete all necessary actions, including negotiation and formal amendments to the contracts, prior to months 49 and 85 respectively. b. Prices proposed at time of redetermination must cover, and will be evaluated for, each remaining period of the contract . . . . c. Prices proposed at time of price redetermination by each contractor must be based on the contractor's existing access areas and volume bands. d. Prices proposed at time of redetermination may not exceed the current contract prices. . . . e. The government anticipates that pricing redetermination proposals and the modification of the contract to reflect redetermined prices and reallocated requirements will be subject to [specified] FAR [Federal Acquisition Regulation] and GSAR [General Services Acquisition Regulation] provisions . . . . These provisions include the standard FAR clauses on submission of offers, preparation of offers and contract award. Respondent's Exhibit 2, H.14.4.e. Evaluation procedures are set forth in paragraph H.14.5: The government will award the requirements designated for reallocation pursuant to H.14.3 based on an evaluation which considers equally the: a. Estimated total contract cost, including transition costs, for the remaining years of the contract life at the current traffic and estimated growth rates. . . . b. Quality of service during the preceding phase of the contract and effectiveness of the most recent transition. Included in the evaluation of contractor performance are service quality and customer satisfaction. The contractor will be provided with the applicable evaluation criteria at the time that the Government requests proposals for price redetermination. Respondent's Exhibit 2 at H-22-23. The "Year 7 Price Redetermination and Service Reallocation Document" (the PR/SR document) was issued by GSA to Sprint and AT&T on April 14, 1995. This document is organized in much the same fashion as a competitive solicitation, containing inter alia, Section B (pricing), Section C (specifications), Section L (instructions, conditions, and notices), and Section M (evaluation factors). Respondent's Exhibit 5. Section C of the PR/SR document states that one of the Government's major objectives is to "[m]aximize competitive incentives for FTS2000 services and features to achieve maximum cost savings to be implemented after Year 7 PR/SR," as contemplated under the FTS2000 contracts. Respondent's Exhibit 5 at C.8.1. To implement this contractually specified objective, the PR/SR document provides for a reallocation of the traffic placed at risk in the competition in light of technical and cost considerations. The document provides for three "award" scenarios. Because forty percent of each contractor's network revenue is subject to reallocation, under the first scenario, an award of the "at risk" requirements to AT&T would increase that contractor's total share of FTS2000 revenues from sixty percent to seventy-six percent (the total of AT&T's existing sixty percent plus forty percent of Sprint's forty percent share). Under the second scenario, an award to Sprint would increase that contractor's total share from forty percent of revenues to sixty- four percent (i.e., the total of Sprint's existing forty percent share plus forty percent of AT&T's sixty percent share). The third scenario permits GSA to preserve the status quo, with the two contractors' network shares remaining unchanged. Respondent's Exhibit 5 at C. Section M of the PR/SR document contains detailed information concerning the evaluation factors applicable to the potential reallocation of services. This section identifies and describes the general evaluation factors and their weightings, identifies and describes technical evaluation criteria and subcriteria and their weightings, and also sets forth the cost evaluation methodology. Finally, Section M states the "selection process" to be used to "determine the winning Scenario." In essence, the agency will compare the first two scenarios, to determine which of the two is more advantageous, and will then compare that scenario to the third scenario to determine which is "the most advantageous scenario to the Government, technical, cost and other factors considered." Respondent's Exhibit 5, M. Prior to the filing of the instant protests,[foot #] 2 GSA met separately with AT&T and Sprint and permitted each contractor to express its concerns about the PR/SR process. GSA met with AT&T on June 9, 1995, and met with Sprint on June 21, 1995. Affidavit of Robert J. Woods, Associate Administrator of FTS2000 (July 14, 1995) (Woods Affidavit) 3-4. Both meetings were solely for the purpose of permitting the contractors to voice their concerns about the PR/SR process -- GSA did not address the merits of either contractor's proposal nor did it release any information to either contractor. Woods Affidavit 6-8. Sprint's protest, filed on June 30, 1995, alleges that GSA has failed to conduct the PR/SR process in accordance with the requirements of the Competition in Contracting Act of 1984, the Federal Acquisition Regulation (FAR), and the PR/SR document itself. Sprint charges that GSA's conduct of the PR/SR utilizes a flawed price evaluation methodology and inaccurate estimates of traffic volumes that preclude competition for the "at risk" business. Count I alleges that GSA has assessed inordinate and disproportionate internal agency costs of transition to be added to Sprint's scenario 2 prices. Count II of Sprint's protest charges that GSA's estimated traffic volumes for Sprint are significantly understated, resulting in evaluation of Sprint at lower volumes, and thus higher prices, than would actually be charged to the Government. Count III alleges that GSA's use of "average pricing" to compute an evaluated price for scenario 2 is irrational and results in evaluation of scenarios that cannot occur under the PR/SR ground rules. Finally, Sprint objects, in count IV, to the deletion of certain DoD traffic from the PR/SR process. On July 10, 1995, AT&T intervened in Sprint's protest and filed its own grounds of protest challenging GSA's conduct of the PR/SR process. AT&T's protest cites to the FTS2000 RFP's provision, in paragraph H.1, that the "program will be mandatory for all federal agency activities subject to PL 89-306 [the Brooks Act] as implemented by the Federal Information Resources Management Regulations." AT&T points out that the mandatory use provision was deleted from the Fiscal Year 1996 Treasury, Postal Service and General Government Appropriations Bill reported by the House of Representatives Appropriations Subcommittee on Treasury, Postal Service and General Government on June 28, 1995. AT&T asserts that GSA's continuation of the PR/SR without modifying its approach to account for the uncertain political climate in which it is possible that the FTS2000 contracts, in the near future, will no longer be mandatory for all federal ----------- FOOTNOTE BEGINS --------- [foot #] 2 On June 16, 1995, Sprint filed what it terms an agency level protest with the contracting officer. ----------- FOOTNOTE ENDS ----------- agencies, results in an irrational evaluation scheme contrary to the Competition in Contracting Act and the FAR. In addition, AT&T contends that in the meeting GSA held with Sprint on June 21, 1995, which occurred after the submission of proposals on June 19, 1995 and after the filing of Sprint's "agency protest" on June 16, important issues concerning this protest were discussed. AT&T further alleges that these issues have a fundamental impact on AT&T's economic interests as a competitor for the work to be reallocated, and, therefore, that its exclusion from these discussions violates FAR 3.101-1, 15.402(b), 15.603, and 15.610. On July 10, 1995, GSA filed a motion to dismiss the protests on the ground that the Board lacks jurisdiction because the issues presented are matters of contract administration. On July 11, 1995, AT&T filed a motion to dismiss Count IV of the Sprint protest on the ground that the DoD traffic volumes in issue are excluded from the Brooks Act jurisdiction under the Warner Amendment. On July 14, 1995, GSA moved to dismiss the separate counts (I and II) asserted in AT&T's protest for failure to state valid grounds of protest. Finally, also on July 14, 1995, Sprint moved to dismiss as untimely AT&T's intervention in Sprint's Count I (AT&T's intervention in this count states that it supports the count in principle but takes the opposite position that the transition costs for scenario 1 are too high and for scenario 2 are too low). Discussion The issue raised in GSA's July 10, 1995 motion is whether these protests are properly before the Board under its protest authority. The facts material to our consideration of this motion are not disputed.[foot #] 3 GSA contends that the conduct of the PR/SR falls within the realm of contract administration. The protesters counter that the PR/SR is an instance of a limited competition under the Competition in Contracting Act. As such, protesters argue, appropriate competitive procedures must be adhered to by GSA and the parties are entitled to protest to the Board. The starting point for an analysis of this issue is the Board's bid protest authority, which is established by 40 U.S.C.A. 759(f) (West Supp. 1995). This statute provides in pertinent part that: ----------- FOOTNOTE BEGINS --------- [foot #] 3 As the Board noted in AT&T Communications, _____________________ Inc., GSBCA 11138-P, 91-2 BCA 23,852, at 119,534, 1991 BPD ____ 59, at 2, disagreements among the parties as to whether GSA is legally or factually correct in its assumptions, projections, or interpretations made with respect to the underlying issues raised in the protest do not affect the disposition of the jurisdictional issue. ----------- FOOTNOTE ENDS ----------- Upon request of an interested party in connection with any procurement that is subject to this section . . . , the board of contract appeals of the General Services Administration . . . , shall review, as provided in this subsection, any decision by a contracting officer that is alleged to violate a statute, a regulation, or the conditions of a delegation of procurement authority. Id., 759(f)(1). The term "protest," in the Brooks Act, as amended, is defined to be . . . a written objection by an interested party to any of the following: (i) A solicitation or other request by a Federal agency for offers for a contract for the procurement of property or services. (ii) The cancellation of such a solicitation or other request. (iii) An award or proposed award of such a contract. (iv) A termination or cancellation of an award of such a contract, if the written objection contains an allegation that the termination or cancellation is based in whole or in part on improprieties concerning the award of the contract. Id., 759(f)(9)(A). An interested party is defined by statute to be "an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or the failure to award the contract. Id., 759(f)(9)(B). In sum, the Board's protest jurisdiction is directed to resolving matters that relate to contract formation and is appropriately exercised when there is a procurement subject to the Brooks Act, an interested protesting party, and alleged violations of law. At the outset, GSA points out that the PR/SR process now characterized by protesters as a limited competition was described in substantial detail in the FTS2000 solicitation and resultant contracts. Since 1987, protesters have been aware that the requirements as competed and awarded in 1988 would be formally subject to reallocation under paragraph H.14 in contract years four and seven, and informally at any time under paragraph H.11. The very nature of the contract and its provisions contemplated an ongoing process under which prices and services would be revisited routinely on one basis or another. Sprint and AT&T respond that the PR/SR process as conducted by GSA will be subject to numerous FAR and GSAR provisions ordinarily applied to competitive acquisitions. GSA has requested proposals from the parties with respect to the "at risk" requirements, will seek clarifications of those proposals, and has stated that discussions will be likely be conducted. Thus, protesters argue, the PR/SR process is "virtually indistinguishable from that used in any other procurement." In other words, Sprint suggests, "PR/SR looks like a procurement, is conducted like a procurement, and should be considered a procurement under the Board's protest jurisdiction." The cornerstone of GSA's motion is that the Sprint and AT&T protests concern a matter of contract administration, not contract formation. Although GSA recognizes that under certain limited circumstances the Board and the General Accounting Office (GAO) will entertain protests of agency actions taken under an existing contract,[foot #] 4 it contends that this is not such a case. In particular, notwithstanding the contractually specified use of familiar FAR procedures for convenience in implementing the PR/SR process, there is no "procurement" at issue here as that term is commonly understood. There is no extant "solicitation" for the award of a "proposed contract" and, thus, there is no procurement which may be protested. Rather, the contracts -- the FTS2000 contracts awarded to protesters on December 7, 1988 -- are already in place. No new contracts will be formed or awarded under the PR/SR process. Sprint and AT&T are already obligated, by the terms of the original (and only) FTS2000 contracts to perform before, during, and after GSA implements the results of the PR/SR. As such, the PR/SR is not a protestable event. In further support of its position, GSA cites to a Board decision dismissing a prior protest brought by AT&T concerning actions taken by GSA under this same contract. In that case, AT&T Communications, Inc., GSBCA 11138-P, 91-2 BCA 23,852, 1991 BPD 59, the Board was asked to review a GSA decision, under the FTS2000 program, to reallocate business from AT&T's Network A to Sprint's Network B in response to Sprint's offer to reduce its prices. The Board dismissed AT&T's protest for lack of jurisdiction, reasoning that the actions taken by GSA were squarely contemplated under the FTS2000 contract (paragraph H.11) and came within the realm of contract administration, not contract formation. No new requirements were involved and thus no competition was mandated. GSA maintains that this decision is directly on point. In arguing that the Board's prior AT&T decision is not controlling with respect to the PR/SR process, Sprint and AT&T ----------- FOOTNOTE BEGINS --------- [foot #] 4 These exceptions include protests alleging that a modification to an existing contract exceeds the scope of that contract, see, e.g., AT&T Communications, Inc., GSBCA 11138-P, ___ ____ __________________________ 91-2 BCA 23,852, at 119,537, 1991 BPD 59, at 7, and protests against the Government's exercise of an option under an existing contract. See, e.g., Banknote Corp. of America, Inc., B-250151, ___ ____ _______________________________ 92-2 CPD 413 (Dec. 14, 1992). ----------- FOOTNOTE ENDS ----------- rely upon certain Comptroller General decisions involving the exercise of options among parallel contracts. The principal precedents cited by AT&T and Sprint are Mine Safety Appliances Co., 69 Comp. Gen. 562 (1990), 90-2 CPD 11, Westinghouse Electric Corp., 57 Comp. Gen. 329 (1978), 78-1 CPD 181, and Honeywell, Inc., B-244555, 91-2 CPD 390 (Oct. 29, 1991). In those cases, GAO held that where competitions were conducted to determine which contractor's options would be exercised, the agency's actions did not constitute contract administration but were properly subject to protest review. Mine Safety involved the exercise of an option under two parallel development contracts. The solicitation had provided that each contractor would develop a prototype, which would be evaluated by the agency under a scheme defined in the RFP. The agency would then decide which option to exercise to purchase additional prototype quantities. The contracts also provided for the exercise of two additional options to build prototypes and further stated that the option contractor would eventually receive a sole-source contract for the production of 1000 units. GAO held that this was a limited competition subject to protest review. Similarly, in Westinghouse, the agency, pursuant to the terms of the initially awarded contracts, conducted a limited competition for the purpose of selecting which of the initial awardees of contracts to develop high temperature turbine technology would be awarded follow-on contracts to proceed with the next phase, which was included as an option under the phase one contracts. GAO rejected the argument that it should not consider the protests because the agency had simply chosen to exercise certain options and not others. Factors considered by GAO in determining that it would review the protest were that the agency had itself denominated the process as a competition, that the follow-on option phases were unpriced, and that the agency recognized that it was "awarding" contracts to the phase two contractors. The Honeywell protest involved two contractors that had been awarded contracts, each of which contained four options giving the Government the right to acquire additional quantities. As a result of various unilateral price reductions submitted by the contractors, who were attempting to market the quantities available under the contracts to foreign governments, the Air Force issued a request to both contractors to submit best and final offers (BAFOs), advising both companies that low price would be substantially determinative with respect to future option exercises. In rejecting the agency's contention that this action constituted contract administration beyond GAO's bid protest review function, GAO observed that the agency had effectively conducted a limited competition between the two contractors, even though it was able to implement the award determination by exercising a contract option. Sprint and AT&T maintain that the controlling consideration in these cases is that limited competitions were found to have been conducted where agencies asked contractors to submit pricing and technical revisions for evaluation in connection with the exercise of options. Protesters argue that this analysis is applicable in the context of this case as well and demonstrates that the Board has authority to entertain these protests. What protesters fail to recognize, however, is that there is a fundamental distinction between the GAO option cases and the PR/SR situation. In Mine Safety, Westinghouse, and Honeywell, the agencies were in fact adding option quantities that were never expressly awarded at the time the original contracts were entered into. That is, the Government had a unilateral right to extend the contracts by adding the option quantities, if it was to the Government's advantage to do so. Since the Government had not yet contracted to purchase the additional quantities, and could actually have chosen to exercise no options and reopen the process to further full and open competition, GAO could properly conclude that "new" requirements were at stake and that the actions in question constituted a limited competition. In the case at hand, GSA is, at most, reshuffling existing requirements already awarded within the initial ten-year span of the FTS2000 contracts.[foot #] 5 As the Board recognized in AT&T Communications, no new procurement action will occur. The PR/SR will do nothing more than reallocate the Government's purchases of the same requirements already subjected to full and open competition under the original solicitation, as the FTS2000 contracts fully entitle it to do.[foot #] 6 As such, the contemplated action is more properly categorized as a matter of contract administration, rather than formation and does not constitute a protestable event. GSA's choice of procurement-like procedures to determine reallocation of work ----------- FOOTNOTE BEGINS --------- [foot #] 5 Protesters' argument that the "at risk" work represents "new" work to the contractor that succeeds in obtaining it under the PR/SR is simply not persuasive. The work is not "new" work in the overall context of the FTS2000 program. The work that potentially could be reassigned under the PR/SR process is part and parcel of the same requirements that were subjected to full and open competition under the solicitation leading to the dual awards made in 1988. Reassignment of work from one network to another under the FTS2000 program does not make it new work subject to the protest process. [foot #] 6 Although the FTS2000 contracts are IDIQ contracts, the contracts also provide that the program is mandatory for the Federal Government, thus ensuring a steady stream of work under the program. We recognize that for the future there may be some doubt as to the continuing mandatory status of the contracts so far as Congress is concerned, but, at this juncture, whether work under the contracts would be impacted is entirely speculative. ----------- FOOTNOTE ENDS ----------- between existing contractors does not transform the reallocation into a "procurement." Cf. United States v. Citizens & Southern National Bank, 889 F.2d 1067 (Fed. Cir. 1989). To the extent that GSA's PR/SR process is mishandled, the remedy is provided under the Contract Disputes Act.[foot #] 7 Decision The protests are DISMISSED FOR LACK OF JURISDICTION. The remaining motions to dismiss various counts of the protests are rendered moot. _____________________________ CATHERINE B. HYATT Board Judge We concur: _____________________________ ______________________________ ANTHONY S. BORWICK MARY ELLEN COSTER WILLIAMS Board Judge Board Judge ----------- FOOTNOTE BEGINS --------- [foot #] 7 See AT&T Communications, Inc., 91-2 BCA at ___ __________________________ 119,538, 1991 BPD 59, at 9.