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An old lesson had a new airing when a contractor challenged the set-up of a blanket purchasing agreement. The General Services Administration wanted to use a system of highest-technically ranked, and reasonable pricing for awarding equipment deals under the federal supply schedules. That’s a no-no, as procurement attorney Joseph Petrillo of Petrillo and Powell told the  Federal Drive with Tom Temin.

Interview transcript:

Tom Temin: Joe, good to have you in.

Joseph Petrillo: Good to be here, Tom.

Tom Temin: Tell us about this case.

Joseph Petrillo: So this is a situation where GSA was establishing four blanket purchase agreements under the Federal Supply Schedule program. These would organize the procurement by each of the military departments one for each BPA, to purchase commercial hardware items and run basically hardware stores on military bases.

Tom Temin: That’s the most basic, fundamental use of the multiple awards schedules.

Joseph Petrillo: Absolutely. That’s how they started. And this is an extension of them now in into actual physical presence in military bases and an online store as well. Now, GSA decided to, however, use an innovative procurement technique, which is this highest, technically ranked, reasonable price method.

Tom Temin: So that’s like the country cousin of lowest price technically acceptable?

Joseph Petrillo: It’s the exact opposite. You’re looking for any reasonable price, but the highest technical ranking possible.

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Tom Temin: Strange for the MAS for the schedules.

Joseph Petrillo: Well, that’s what [the Government Accountability Office] thought.

Tom Temin: Who protested?

Joseph Petrillo: Well, it was protested by Noble Supply & Logistics, and GAO just came out with a decision on Jan.16 of this year. They thought they had a good, well, GSA thought they had a good position because GAO had already approved this type of procurement evaluation criterion in the Alliance 2 procurement.

Tom Temin: The big [governmentwide acquisition contract]?

Joseph Petrillo: The big GWAC. And they were extending it now to the federal supply schedule. But GAO said not so fast — this is a different situation. For one thing, under the federal supply schedule, you’ve got a special status, which is acknowledged in the Competition and Contracting Act, that buys under the federal supply schedule are considered to be full and open competition, even if they’re only made from a single source.

Tom Temin: Plus, this was a blanket purchasing agreement, and the contractors already had contracts with the government in theory, under the GSA multiple aboard scheduled program, correct?

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Joseph Petrillo: Exactly. The BPA’s kind of an overlay on that to establish a particular program or make ordering easier for an agency. The nub here, though, of the federal supply schedule’s exemption is that you’ve got to accomplish the purchase of the lowest overall price. Now that doesn’t mean the lowest price, because in determining what the lowest overall price is, you can look at factors other than price, like past performance, special features of the item, et cetera.

Tom Temin: So almost not quite lifecycle cost but total acquisition cost, maybe?

Joseph Petrillo: You could certainly use lifecycle cost, total acquisition cost, these are things that factor into it as well as you know, non quantifiable factors as well, like past performance. So GAO now distinguished that kind of situation from the situation, the Alliance 2 procurement, and there the issue was, you know, was the price reasonable? Here we’ve got to look at lowest overall cost, and the difference here is that a determination of price reasonableness is solely whether the price is too high. It’s not looking at or trying to determine what the lowest overall cost is. So GAO held that price reasonableness did not meet that criterion. Basically, it requires, in GAO’s view a comparative evaluation of vendor prices along with any additional features and benefits. So you’ve gotta have a comparative evaluation pitting one vendor against the other and not merely against the standard of reasonableness. And that is the only one to determine in GAO’s view whether one vendor’s proposal will be more or less costly than another.

Tom Temin: We’re speaking with Joseph Petrillo, a procurement attorney with Petrillo and Powell. So what GAO, what GSA, rather should have done then is create an all-new vehicle using that procurement methodology or using that procurement methodology on another vehicle to deliver that equipment to the armed services that needed it, but they couldn’t use that methodology on the schedules.

Joseph Petrillo: That’s the bottom line of the GAO decision. It looks like that meant that particular evaluation method is not gonna work for the federal supply schedule because of the unique legal environment.

Tom Temin: I guess the question is, what was GSA thinking? They’re supposed to know the rules for the scheduled program better than anybody. But it sounded like this particular vendor that protested knew it better than the GSA did.

Joseph Petrillo: Well, they certainly found a limitation. Maybe GSA was pushing the envelope to see how far they could go. But you know, there are some important differences between this procurement Alliant 2, and GAO did mention those. Not only was it under a different set of legal rules but in Alliant 2 the head to head competitions had been pushed down to the ordering process, the task order process. Here there was gonna be a single BPA for each military department and no further competition was going to take place. So, you know, that was a distinction. And GAO also noted that when GSA establishes the federal supply schedule contracts, it makes a determination of price reasonableness. So what’s the point of making a second one?

Tom Temin: Right, so how would a BPA then work properly over the overlay it on the schedule?

Joseph Petrillo: Well, one example, I think, comes from an earlier iteration of this own procurement.  Originally GSA had vendors price out a market basket of commonly used items and then use that for a price comparison purposes. GAO mentioned that, didn’t specifically say it was going to be adequate, but there’s the implication that that’s the type of analysis you need to perform here to make this work under the federal supply schedule program.

Tom Temin: And do you feel that with the consolidation of these 24 schedules into one big schedule, will that make any difference here?

Joseph Petrillo: Oh, I doubt it will. It’s the same legal environment, the same statutory requirement, and that’s carried out in the regulations as well. Now the regulations can be changed to some extent, but changing the statute means an act of Congress.

Tom Temin: And establishing these BPAs, was that done by the Assisted Acquisition Service?

Joseph Petrillo: I’m not quite sure who was doing it in GSA, but —

Tom Temin: Because it could have been done by a division separate from the MAS program, it could have been assisted acquisitions that didn’t quite know the rules for a sister program down the hall and a floor down.

Joseph Petrillo: Well, but there’s adequate —

Tom Temin: That’s speculation on my part.

Joseph Petrillo: There’s adequate expertise in GSA, I think, to figure these things out.

Tom Temin: Meet me in the atrium and tell me what I can do under your program.

Joseph Petrillo: Yeah, I guess GSA is to be complimented for trying to be innovative here. They went a little bit too far in terms of the restrictions they have.

Tom Temin: Joseph Petrillo is a procurement attorney with Petrillo and Powell. As always, thanks so much.

Joseph Petrillo: Thank you, Tom.

Tom Temin: We’ll post this interview at www.federalnewsnetwork.com/FederalDrive. Hear the Federal Drive on demand. Subscribe at Apple Podcasts or Podcastone.

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