B-298627, eFedBudget Corporation, November 15, 2006
Decision
Matter of: eFedBudget Corporation
John E. Cleckner for the protester.
James K. Kearney, Esq., and Holly Emrick Svetz, Esq., Womble Carlyle Sandridge & Rice, LLC, for RGII Technologies, Inc., an intervenor.
Dennis
J. Gallagher, Esq., Department of State, for the agency.
Kenneth Kilgour, Esq., and Christine S. Melody, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Agency reasonably concluded that protester is not an acceptable source to perform a contract for maintenance and support of contracting agency’s software system, where the record shows that use of proprietary software belonging to the incumbent contractor, and currently unavailable to any other firm, is necessary for successful performance of the contract.
2. Protest of
proposed sole-source award is sustained where the record shows that the agency
did not satisfy its obligation to engage in reasonable advance planning and to
promote competition.
DECISION
eFedBudget Corporation protests the proposed award of a contract on a sole-source basis to RGII Technologies, Inc. pursuant to presolicitation notice No. B‑P‑06, issued by the Department of State (DOS) for continued implementation, maintenance, enhancement, and support for DOS’s worldwide budget and planning software systems. The protester asserts that the agency’s decision to procure the software services on a sole-source basis was improper. Specifically, the protester argues that the required justification and approval (J&A) was deficient; that the agency unreasonably refused to consider the protester’s approach of developing a non-proprietary software system; and that, in any event, the need for the sole-source procurement arose from the agency’s lack of advance planning.
BACKGROUND
Under contract with DOS, beginning in 1997, RGII, with the protester as a subcontractor,[1] developed the central resource management system of the agency’s Bureau of Resource Management, including the allotment control system, the budget control system, and the budget resource management system. For the past 9 years, the agency has relied on the services of RGII exclusively to maintain and enhance that budget and planning software. In 2000, the agency and RGII entered into a licensing agreement limiting the government’s rights in the software that operates the budget and planning systems; [2] the original software was then copyrighted by RGII under the name “Monument.”
The scope of the license, however, is broader than simply the Monument software. Under the license agreement, “Licensed Product” means:
any product made by, made for, used, sold, offered for sale, leased, offered for lease by Licensor that includes, combines, incorporates and/or implements the Software, and any modification or derivation thereof, with software and/or hardware provided by Licensor for purposes of adding to and/or increasing the value, functionality or utility of the Software.
AR, Tab 1, License Agreement, at 2.
The agreement provides DOS rights to use the licensed
product only within the agency, precludes the combination of the licensed
software with other software for the purpose of implementing the software, and
precludes the agency from disclosing the licensed software to other contractors
or to other government agencies. At the
agreement’s inception, the agency’s expectation was that the agency “would
benefit from receipt without additional cost of improvements that would be made
to RGII’s software,” an expectation that has been “disappointed.” Agency’s Response to GAO Questions,
The agency published a presolicitation notice stating that the proposed sole-source award to RGII was for a “follow-on contract for continued implementation, maintenance, enhancement, and support for the [agency’s] worldwide budget and planning systems” that are based on proprietary software packages owned by RGII, and that the contract period would be for a base year plus four 1-year options. The notice stated that the contractor “will be required to maintain and support legacy core systems and interfaces and to provide the services necessary to develop improvements which enhance the functionality and efficiency of the systems.” AR, Tab 4, Modification of Presolicitation Notice, at 1. Although the estimated value of the services in the presolicitation notice was $19 million, the agency states that, currently, the estimated value is approximately $10 million, with the work now expected to focus on maintaining the existing software, with little emphasis on developing enhancements.
In support of the proposed award to RGII, the agency drafted a J&A citing as authority to proceed on a sole-source basis 41 U.S.C. sect. 253(c)(1) (2000), which states that an agency may use noncompetitive procedures only when the property or services needed by the agency “are available from only one responsible source and no other type of property or service” will satisfy the agency’s needs. The J&A states that “[w]ithout seeking a follow-on contract with its current software vendor, the [agency] would experience an immediate and substantial time delay or actually be unable to fulfill its requirements to adequately meet agency budgeting and financial responsibilities,” and lists several attributes of the incumbent that “make it a unique source for these services.” AR, Tab 3, J&A, at 1, 2.
The J&A also describes the burden on the agency of
adopting any other approach. Without
continued support from the incumbent, according to the J&A, the agency “would
need to redesign its budget and planning systems to work with another software
product, redesign its interfaces and duplicate the requirements analysis,
design, and development stages of implementation to accommodate a new software
package to perform the business functions” of the current, proprietary
software.
Although the J&A states that “[l]icensing restrictions
dictate that only RGII Technologies can do this work,” id. at 2, it identifies
no actions the agency has considered taking to remove or overcome any barriers
to future competition resulting from the restrictive license, such as
purchasing additional, broader license rights.
The J&A notes only that RGII is “assessing the ability” to license
other vendors to operate its software, and that the agency “will consider other
application, maintenance, and support options based on the degree of success
RGII achieves in these endeavors.”
RGII had been providing support on a labor hours basis
under a DOS task order that was set to expire
DISCUSSION
Although the overriding mandate of the Competition in
Contracting Act of 1984 (CICA) is for full and open competition in government
procurements obtained through the use of competitive procedures, 41 U.S.C. sect. 253(a)(1)(A),
CICA permits noncompetitive acquisitions in certain circumstances, such as when
the services needed are available from only one responsible source. 41 U.S.C. sect. 253(c)(1). When an agency uses noncompetitive procedures
under section 253(c)(1), it is required to execute a written J&A with
sufficient facts and rationale to support the use of the cited authority. 41 U.S.C. sect. 253(f)(1)(A), (B); FAR sections
6.302-1(d)(1), 6.303, 6.304. Our review
of an agency’s decision to conduct a sole-source procurement focuses on the
adequacy of the rationale and conclusions set forth in the J&A. As a result, an agency’s decision in this
regard will not be questioned by our Office so long as the J&A sets forth
reasonable justifications for the agency’s actions. Lockheed Martin Sys. Integration--Owego,
B-287190.2, B‑287190.3,
The agency asserts that, because the licensing agreement restricts access to the software source code, its conclusion that the protester is not an acceptable source was reasonable. The protester argues, first, that the agency improperly refused to consider the protester’s alternative proposal--that the agency replace the proprietary software system with a non-proprietary system--and, second, that the protester is able to perform the contract without holding a license to the proprietary software.
Our review of the record indicates that the agency
reasonably chose not to accept the protester’s proposed alternative. The protester’s proposal presupposes a
transition period during which the incumbent, RGII, would operate the existing
systems while the protester develops non-proprietary software systems to
replace them. Protester’s Response to
AR,
The protester next asserts that, even if the agency properly
rejected its proposal to develop a replacement system, it can perform the
requirements of the proposed contract without holding rights under the license,
and without violating the license. The
agency and RGII both challenge that assertion.
As explained below, we conclude that the protester has failed to show
that the proprietary software is unnecessary to satisfactory performance of the
contract here. See Federal
Computer Int’l Corp., B-251132,
One of the agency’s overriding concerns with the implementation of the protester’s proposal to perform the contract without a license is the potential disruption to its performance of mission-critical tasks posed by the risk of litigation between the protester and RGII. Besides disagreeing over whether the extraction of DOS data necessary to perform as the protester proposes would violate the license agreement, RGII and the protester dispute at least three fundamental issues related to the scope of the license.[4] We find it reasonable for the agency to reject an alternative approach to meeting its needs that carries with it the serious possibility of litigation between two contractors. See Tucson Mobilephone, Inc., supra.
The protester points to the successful development and
launch of the Executive Dashboard (ED) software as proof that enhancements to
the existing system can be created without access to RGII’s proprietary source
code.[5] The agency challenges that assertion on two
grounds. The agency argues that the ED
is a minor piece of software that merely displays data and is not required to
interface with Monument, while at least some portion of the contract
performance here would require creating software with such an interface. In addition, before the contractor could
begin development of the ED software, a separate database containing the
necessary DOS raw data had to be created by the agency’s own IT personnel,[6]
since extraction of data from the existing system by any unlicensed party would
violate the license. The agency explains
that a similar effort, and the corresponding burden on the agency’s staff
resources, would be required here, only this time on a much larger scale. In
response, the protester states only that it “believes” that the extraction of
data could be performed without violating the license. Video Hearing Transcript (VHT),
Further, even if the launch of ED supports the protester’s
position--and neither the agency nor the intervenor concedes that it does--the
scope of work of the contract at issue here has shifted from creating virtually
stand-alone enhancements for the software to maintaining and supporting it. The record shows that maintenance and support
of the software systems would require not only that the protester extract data
from the system, but restore and add data to the system, as well. For example, when the data is extracted from
the current system for reuse in a program such as ED, the contractor constructs
new fields and arranges the data in a manner suitable to that new program. In this case, however, if a contractor
working without a license were required to add a new employee as part of its
support responsibilities--that is, to add to and not extract data from the
existing systems--that contractor will not know precisely into which existing fields
the data pertaining to that individual should be added or how the existing fields are
structured. VHT, supra, at
The protester asserts that through a quick and fairly
simple system of trial and error, it will be able to make additions to the
database. The agency argues that such
modifications to the database happen repeatedly throughout the day, every day,
and are sometimes very complex. The
agency maintains that delays will inevitably result from a contractor who is
learning data field locations and structure by trial and error and that those
unknown delays are a burden that the agency may reasonably choose to
avoid. We agree. The protester itself estimates that, in the
instances where issues with the software require the contractor to write new
programs, the new programs could take as little as a day or as long as 3 weeks
to write. The protester’s own estimation
is that operating without access to the proprietary software would increase the
time necessary to write programs to generate needed reports by 10 to 15 percent,
VHT, supra, at
We conclude that the protester has not met its burden of
demonstrating that the contract could be performed without access to the source
code and without violating the license agreement. In fact, the record demonstrates the need for
any contractor other than RGII to have access to the proprietary software, by
means of a license from RGII, to adequately perform the full scope of
work. An agency may properly take into
account the existence of software licenses when determining whether only one
responsible source exists. FAR sect.
6.302-1(b)(2); see AAI ACL Techs., Inc., B-258679.4,
Under CICA, 41 U.S.C. sect. 253(a)(1)(A), contracting
officers have a duty to promote and provide for competition and to provide the
most advantageous contract for the government. In their role of promoting and providing for
competition, contracting officials must act affirmatively to obtain and
safeguard competition; they cannot take a passive approach and remain in a
noncompetitive position where they could reasonably take steps to enhance
competition. VSE Corp., Johnson
Controls World Servs., Inc., B-290452.3 et al.,
CICA further provides that under no circumstance may
noncompetitive procedures be used due to a lack of advance planning by
contracting officials. 41 U.S.C. sect. 253(f)(5)(A); Signals & Sys., Inc., B-288107,
With regard to the feasibility of alternatives to a sole-source award, the agency principally focuses on the difficulties associated with either acquiring a new software system, or having another firm perform the required services without license rights to the RGII software. The agency also asserts that its advance planning efforts have been reasonable in that it has taken steps to avoid expansion of its reliance on RGII. In this regard, the agency notes, for example, that it has been considering using a program developed by another agency office, the Bureau of European Affairs, to meet its needs here, instead of contracting with RGII for the development of additional proprietary software. Agency’s Response to GAO Questions, supra, at 4.
While, as discussed above, it is reasonable to conclude that,
given the restrictive nature of the agency’s current licensing agreement with
RGII, only RGII can now meet its needs, the agency’s arguments simply do not
address the issue of whether the agency’s acquisition planning--in the face of
those restrictions--was reasonable, given the requirement that the agency make
an affirmative effort to obtain competition.
The agency has produced no record of any steps that it has taken to end
its reliance on the services of the incumbent to maintain the existing software
systems; in fact, this latest proposed sole-source award has a potential term
of 5 years. It is possible, for example,
that the agency could purchase additional rights to the proprietary software in
order to promote competition, see
Environmental Tectonics Corp., B‑248611,
Under the circumstances here--where the agency ceded substantial rights in the software created by RGII under the development contract, and where there is no indication that the agency has explored the possibility of acquiring additional rights from RGII--we think that, to satisfy its obligation to engage in reasonable advance planning and to promote competition, the agency was required to consider whether the costs associated with a purchase of additional license rights, or some other alternative, outweigh the anticipated benefits of competition. See HEROS, Inc., supra, at 7, 10.
RECOMMENDATION
Consistent with our discussion above, we recommend that the agency conduct a documented cost/benefit analysis reflecting the costs associated with obtaining competition, either through purchasing additional rights to the proprietary software or some other means, and the anticipated benefits. If the cost/benefit analysis reveals a practicable means to obtain competition, we recommend that the agency proceed with a competitive procurement.
We also recommend that the protester be reimbursed for the expenses it incurred in filing and pursuing its protest. Bid Protest Regulations, 4 C.F.R. sect. 21.8(d)(1) (2006). In accordance with section 21.8(f)(1) of our Regulations, eFedBudget’s certified claim for such costs, detailing the time expended and the costs incurred, must be submitted directly to the agency within 60 days after receipt of this decision.
The protest is sustained.
Gary L. Kepplinger
General Counsel
[1] The protester, whose principals had left RGII by the end of 2004 under less than amicable circumstances, asserts that its principals wrote more than 50 percent of the code implemented at DOS for this system. Protest at 7.
[2] The parties recognized that the government was relinquishing the broad rights it otherwise would have had in the software, in exchange for receiving full use of any enhancements and modifications to the software developed in the future by RGII. Agency Report (AR), Tab 1, Contract Modification No. 6, at 1-2; see also Federal Acquisition Regulation (FAR) sections 27.404(f)(iv), 52.227-14(c)(1).
[3] In 2004, prior to having its own personnel perform the task of extracting DOS data from the software system for use in developing another software program called the “Executive Dashboard,” discussed further below, the agency entered into a memorandum of understanding with RGII that modified the license agreement. That memorandum specifically granted the agency the “right to receive and use the Source Code solely to allow its direct-hire personnel to construct a staging database that extracts and separates State Department data from RGII software for use in a separate executive reporting application.” AR, Tab 2, Memorandum of Understanding, at 1.
[4] First, the protester maintains that the license does not prohibit third party “use” of the proprietary software, only DOS “disclosure” of the same. Second, the protester and RGII disagree on the extent to which the protester may use its staff’s knowledge of the software, gained through their prior employment relationship with RGII, in performing the contract. Third, the protester asserts that RGII has waived its right to assert that certain information is proprietary because RGII has placed it in the public domain, and that therefore the protester may rightfully use that information.
[5] The contract for the development of the ED was awarded to Booz Allen Hamilton; the protester served as a subcontractor.
[6] Before the agency could begin constructing the database, the agency and RGII had to resolve licensing issues surrounding access to that data. See note 3, supra.