7j/GAO/129384
July 16, 2003.
Michael R. Golden
Assistant General Counsel
General Accounting Office
441 G Street, NW
Washington, DC 20548
Re:
Comments of American Federation of Government
Employees, AFL-CIO, Regarding Standing to Submit Bid
Protests to the GAO.
Dear Mr. Golden:
This letter is being submitted in response to the notice of the General Accounting Office,
(GAO), that was placed in the Federal Register on June 13, 2003. That notice invited the
submission of comments regarding certain aspects of the recently revised OMB Circular A-76
(“revised circular”), as regards the standing of in-house entities and/or employees to have bid
protests ruled on substantively by the GAO. The American Federation of Government
Employees, AFL-CIO (AFGE), is the largest non-postal federal sector employee union. It
represents more than 600,000 federal employees who work in many federal agencies. AFGE
obviously has a very strong interest in the right of the employees which it represents both to have
fair, even handed public private competitions held when appropriate, and to protest illegal,
improper and unfair contract awards to the GAO when appropriate.
Summary of AFGE’s Responses to the Questions Posed
The following briefly summarizes AFGE’s responses, all of which will be explained
more fully below as necessary: 1. AFGE recommends that GAO redraft its bid protest
regulations to explicitly provide that both the Agency Tender Officials (ATO and the union, as
the employee representative elected by the majority of directly affected employee, have standing
1
to file protests at the GAO, and/or to intervene, like any other directly affected parties. It is
1
The following language should be added to 4 C.F.R. Section 21.0(a): “In the case of a protest pertaining to
an OMB Circular A-76 competition, “interested party” shall include both the ATO and the incumbent union
representing the affected federal employees or, if there is no such incumbent union, the representative of the affected
federal employees.” Individual protests filed by said interested parties shall have standing individually. When both
the ATO and the union or employee representative have filed individual protests regarding the same A-76 matter,
they shall be considered joint protesters with both individual and joint standing.
expected that even with such a regulation, case law development will still be appropriate in some
cases. 2. With reference to an A-76 competition both the ATO and the union, and where there is
no union, a properly elected representative of the employees, should have full rights as interested
2
parties, individually and jointly, under 31 U.S.C. Section 3551-56 and the related bid protest
3
regulations. 3. Counsel for the ATO, the union and/or unrepresented employees, if there is no
union, should all be full participants as legal representatives for their clients, with normal access
to nonpublic information just like any legal representative of any other interested parties. 4. The
decision of the Federal Circuit in American Federation of Government Employees, AFL-CIO et
al. v. United States, 258 F.3d 1294 (Fed. Cir. 2001) interpreted the meaning of the term
“interested party” in 28 U.S.C. Section 1491(b), and its holding in that case is not binding on the
GAO here in interpreting its own statute. The Federal Circuit looked to the case law of the GAO
in interpreting the CICA, and if and when the GAO changes its regulations and/or case law on
this point as the result of the issuance of the revised circular, the Federal Circuit should again
follow GAO’s lead in this area where the GAO is the specialized tribunal on these matters. 5.
Bid protests from revised circular A-76 matters should be allowed to proceed like any other bid
protests. 6. GAO has a legal basis under CICA to consider protests form both the private and the
public sector, i.e., both ATO and the union, pertaining to streamlined competitions since there is
no convincing statutory basis for exempting these competitions from the requirements of being
fair, equitable and otherwise in accordance with law.
Sector Neutral, Fair Competition,
Is The Purported Primary Goal of the Revised Circular
The GAO notice in the Federal Register accurately describes several of the significant
changes that appear in the revised circular. AFGE believes that it is crucial for the present
analysis for GAO to recognize that the revised circular puts a primary emphasis on there being
fair competition between the public and private sector without any presumption that performance
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by the private sector is in any way the goal or the preference of OMB. This represents a very
5
significant change from the prior versions of OMB Circular A-76. OMB’s own Supplementary
Information regarding its revised circular, which appeared in the Federal Register on the day of
its issuance, May 29, 2003, emphasizes the central importance of vigorous, sector neutral
2
The Competition in Contracting Act (CICA).
4 C.F.R. Sections 21.0 et seq.
4
AFGE has no doubt that the goal of the Bush administration is to privatize more “commercial activities.”
However, on the surface, the revised circular takes the position that if, in a fair competition, government employees
provide the best option for the taxpayer, then they should do the work. The question of standing for unions and
representatives of federal employees in GAO bid protests is here analyzed in light of this stated objective in the
revised circular.
AFGE is aware that many features of the competition process itself, e.g., the use of best value instead of
lowest cost, will work to support the irrational choice of private contractors over the MEO. Nevertheless, OMB’s
stated goal of sector neutral fair competition requires equal access to GAO bid protests rights, and that is the focus
of the instant comments. In many cases, there will be no reason to expect that the agency’s FAR contest process
will provide the type of fair and professional evaluation of protest issues that would be available at the GAO.
5
A very comprehensive and useful history of the origins of OMB Circular A-76 is set forth in the majority
opinion of Diebold v. United States, 947 F.2d 787 (6th Cir. 1991), petition for rehearing denied, 961 F.2d 97 (6th
Cir. 1992). That case held that OMB Circular A-76 constitutes law to apply for purposes of a claim under the
judicial review provisions of the Administrative Procedure Act, 5 U.S.C. §701 et seq.
3
2
competition and the removal of any bias in favor of the private sector. Part C, 1, a., I; 68 FR
32134 states in pertinent part:
i. Emphasis on sector neutral competition. Because OMB seeks to emphasize selection
of the best service provider, as determined through competition, the revised Circular
deletes a longstanding statement that the government should not compete with its
citizens.…The deletion is simply meant to avoid a presumption that the government
should not compete for work to meet its own needs. Such a suggestion conflicts with
the Circular’s main function of providing policies and procedures to determine the best
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service provider -- irrespective of the sector the provider represents.
Both The ATO and The Union, Or Where The Employees Are Not Represented By A
Union, the Employees’ Representative, Are Entitled To Full Bid Protest Rights Equal to
Those of Any Other Interested Party
OMB has made sector neutral fair competition the core value of the revised circular. To
encourage sector neutral fair competition, it is obvious that sector neutral access to GAO protest
rights must be provided. It is these GAO protest rights that effectively put all interested parties
on notice that, if a competition is fixed, unfair or illegal, such improprieties will be exposed in
protests to the GAO. This in turn, acts as a powerful incentive for all to hold fair competitions.
Such an approach is implicitly mandated in the revised circular by the OMB’s emphasis on
sector neutral competitions.
The ATO’s Right to File A Bid Protest
7
The revised circular introduces the concept of an Agency Tender Official, (ATO). The
description of the responsibilities of the ATO, found on page B-2 of Attachment B, indicates that
6
This very important reformulation by OMB undercuts and discredits the majority opinion of Judge
Sentelle in NFFE v. Cheney, 883 F.2d 1038, 1049 (D.C. Cir. 1989), cert. denied, 496 U.S. 936 (1990), a case that
has been a primary obstacle to federal employees and unions obtaining standing to challenge an Circular A-76
contract award. Judge Sentelle concluded that the OMB Circular A-76 he was evaluating, which like the revised
circular here was based primarily on the Office of Federal Procurement Policy Act Amendments of 1979
(“OFPPAA”) as amended, showed a clear bias in favor of the private sector performing all commercial workload,
and on this basis he concluded that federal employees and their unions were clearly not within the “zone of interest”
of the statutes underlying Circular A-76.
OMB’s current interpretation of the OFPPAA , which is the primary statute underlying the revised circular,
as set forth above, and which is an interpretation entitled to deference by the courts and the GAO, is that there
should be no bias in favor of the private sector when deciding whether public or private performance is the best for
the federal government. Given that this is a reasonable interpretation of the OFPPAA and the FAIR Act of 1998 by
OMB, it should be followed by the GAO in the instant situation. Chevron, U.S.A. , Inc. v. Natural Res. Def.
Council, 467 U.S. 837 (1984). The revised circular cites as authority for its issuance only two substantive statutes,
the OFPPAA and the FAIR Act of 1998. See paragraph 3 of the revised circular. The FAIR Act also mandates
sector neutral competitions based on fair and realistic cost comparisons. See Section 2(d) and 2(e) of that act.
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Agency and political pressures will undoubtedly influence the ATO. An ATO is on the payroll of the
agency and cannot realistically be expected to protest against a decision of his own agency with the self-interested
vigor of a CEO or manager of a private contractor. While the ATO should have bid protests rights, the union and
employee representative must also have bid protest rights to make sure that those with unambiguous crucial and
“direct economic interests” at stake are participants. See definition in the GAO bid protest regulations at 4 C.F.R.
§21.0(a) (“. . . direct economic interest would be affected. . .. ”). Without the unions and employee representatives
3
the ATO is to behave like a Chief Executive Officer (CEO) of a business or private contractor
that is going to bid on a government workload and should be provided extensive resources to
insure that he/she can formulate the most efficient organization (MEO). An ATO is to be
independent of the contracting officer (CO), the Source Selection Authority (SSA), the source
selection evaluation board (SSEB), and the performance work statement (PWS) team, and is to
develop, certify and represent the agency tender. In every way it appears that the revised circular
envisions that the ATO will act like a CEO of the MEO. The ATO must comply with the
8
circular like other CEOs whose companies are bidding in response to a solicitation. The ATO
will present the Agency Tender, or offer, within the same time limits as other offerors. If the
Agency Tender wins the competition, a “MEO letter of obligation” is formulated, which is like a
contract with the ATO setting forth the obligations of the MEO. In the event of
non-performance, the agency can terminate such a letter of obligation. See Revised circular
Attachment B, Section E. 4. and 6. Under the terms of the revised circular the ATO is a
“Directly Interested Party.” See revised circular at Attachment D at page D-4. It would appear
that OMB’s intent was to treat the ATO as the CEO of the MEO, and thus it seems clear that
such a person should be able to submit a bid protest on behalf of the bidding entity which they
represent to the GAO. The OMB characterized the ATO as a “directly interested party” along
with, e.g., a “private sector offeror”. Hence, the ATO, as is the case with the private sector
offeror, should clearly be considered an “interested party” by the GAO pursuant to 31 U.S.C.
9
Section 3551(2). The ATO is also an actual bidder as that term is used in GAO regulations.10
fully involved as bid protest parties, a bid protest by an ATO will be a protest in name only. It will be a parody of a
real protest. Alternatively, the GAO would be justified in concluding, and if necessary should conclude both by
regulation and by case law, that a bid protest by an ATO, when coupled with a bid protest by an incumbent union or
if there is no union a bid protest by an employee representative, together constitute a joined protest by an “interested
party” as that term is defined in the CICA. See 5 U.S.C. Section 355(2). The ATO is an “offeror”, which is one of
the required characteristics of the statutory definition. The employees, represented as a group by the union, have a
“direct economic interest” at stake which is the other characteristic of the statutory definition.
8
FAR Section 2.101 defines “offer” as “a response to a solicitation that, if accepted, would bind the offeror
to perform the resultant contract.” The term “contract” is in turn defined as “a mutually binding legal relationship
obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them.” FAR
Section 2.101. Under the revised circular, the ATO submits an “agency tender,” tender being defined in a legal
dictionary as an offer, in response to a solicitation (Attachment D at page D-2), which if successful leads to an
“MEO letter of obligation,” id. at D-2, which is a “formal agreement” between the agency and the ATO. Thus, the
criteria found not met in a GAO decision in the year 2000, which held that a costed out MEO under the previous
OMB Circular A-76 was not submitted by an offeror and hence could not be granted bid protest standing, are all met
when an ATO under the new circular submits an agency tender. The ATO is hence clearly an offeror who meets
the requirements of the GAO regulations, 4 C.F.R. Section 21.0(a), that a protest may only be brought by an
“interested party” who is defined an “an actual or prospective bidder or offeror… .” (Emphasis added.) Cf:
American Federation of Government Employees, AFL-CIO: American, B-282904.2, June 7, 2000.
9
See suggested revision to the pertinent GAO regulation set forth in footnote 1, supra.
10
Since an ATO is a professional and an inherently governmental employee of the federal government,
whose skills pertain to bidding on contracts on behalf of the MEO, it is reasonable to assume that in some way the
pay and/or benefits and/or the advancement in grade or pay of the ATO would be dependant on winning some of the
competitions in which she/he is involved. In this sense, the ATO could be said to “have a direct economic interest
[which] would be affected by the award of the contract or by a failure to award the contract.” This further supports
the conclusion that the ATO should have standing to file a bid protest on behalf of the MEO at the GAO. See GAO
regulations at 4 CFR 21.0(a) (2003). Of course, as will be explained, infra, the directly affected employees have a
much greater “direct economic interest” in the outcome of a competition.
4
The Union’s Right to File A Bid Protest
In response to the request for comments on the proposed revised circular published in the
Federal Register in November 2002, OMB received some comments that requested that the
public offeror should have appeal rights directly and not only through the ATO. In response to
these comments OMB explicitly added to the list of entities or persons it had defined as “Directly
Interested Parties.” See Attachment D at page D-4 of the revised circular. The addition was
described as follows: “a single individual appointed by a majority of directly affected employees
as their agent.” OMB describes this added language in its Supplementary Information regarding
the revised circular in material published by it in the Federal Register at 68 FR 32134 Section B,
2,e, on May 29, 2003: “OMB seeks to ensure equal and fair access to challenge processes and
has revised the Circular to broaden the definition of interested party to permit
administrative challenge by a single representative appointed by a majority of directly affected
employees in addition to the ATO.”
In summary, the revised circular states that in connection with a standard competition a
“Directly Interested Party” may contest any action taken. See B-20, F.1. “Directly Interested
Party” includes “a single individual appointed by a majority of directly affected employees as
their agent.” D-4. “Directly Affected Employees” are defined as “civilian employees whose
work is being competed in a streamlined or standard competition.” D-4 “Representatives of
Directly Affected Employees” is defined as a designate of an incumbent “labor organization
accorded exclusive recognition under 5 U.S.C. Section 7111.” D-9. Hence, where there is an
incumbent labor organization the revised circular by its own terms and definitions makes the
incumbent union or the union designate an “interested party” with full rights to pursue a contest
like any other interested party.
It should be further noted that the revised circular itself does not discuss “administrative
or GAO appeals” at all but rather only “contests” held pursuant to FAR Subpart 33.103. See
Attachment B at page B-20 of the revised circular. That section, on page B-20, i.e., at F.1,
indicates that the pursuit of a contest by any and all “directly interested part[ies] and the
resolution of such contest by the agency shall be governed by the procedures of FAR Subpart
33.103.” Thus the “single representative appointed by a majority of directly affected employees”
is given the same right to contest an award or competition related matter as the ATO and as a
private offeror, i.e., a private contractor. The normal situation in a competition among private
offerors is that each offeror or bidder has a right to protest at the GAO, and there is nothing in
the revised circular that in any way suggests that such right, in an OMB A-76 matter, should not
be available to the ATO and the “single representative appointed by a majority of the directly
12
affected employees.”
11
The use of the term “administrative appeal” in its Supplementary Information notice in the Federal
Register instead of the term “contests” appears to be inadvertent and of no significance.
12
While this term is not defined in the revised circular, it could be given its dictionary meaning. An
election could be held in which directly affected employees are allowed to vote. In situations where those
employees are represented by a labor organization/union, it would appear that the union president or her/his
designate would be the employees’ representative. See supra. Note the language in the pertinent part of the Federal
Sector Labor Management Relations Statute at 5 U.S.C. Section 7111(a) (“An agency shall accord exclusive
recognition to a labor organization if the organization has been selected as the representative, in a secret ballot
election, by a majority of the employees in an appropriate unit who cast valid ballots in the election.”).
5
It should be noted that while the ATO, perhaps, has some significant linguistic and
functional similarities to a private offeror under the language of the revised circular, as described
above, beyond question the ATO probably has much less at stake in terms of his/her vital
economic interest than do the directly affected employees who stand to lose their jobs, careers,
and financial and family stability. No individuals have a greater interest in the fairness of the
pubic private competition and in the proper, fair and vigorous adjudication of any bid protest,
brought either by them, the ATO, or by a private sector contractor who did not win the job, than
they do. Bid protests are a significant safeguard to insure that the even handed and vigorous
competition envisioned by OMB, as the core value of the revised circular, does occur. It would
be patently unfair to prohibit only one of the interested parties, as defined by the revised circular,
from participating in the bid protest phase of the competition. The combination of bid protests of
the ATO and the union representative, or employee representative when appropriate, together
equate to the bid protest of an economically self interested private contractor. Obviously, where a
private sector contractor who has not won a competition files a bid protest, both the ATO and the
employee representative should be permitted to intervene. This would fairly balance the right of
a private contractor to intervene when the ATO and/or the employee representative file a bid
protest where the private contractor has been awarded the contract.
Particularly if members of the bar must litigate before the GAO, there is no reason why
the attorneys representing the ATO, the union, and the employee representative could not be
expected to respect the need to keep certain proprietary information confidential as well as can
the attorneys representing private sector contractors. The union or employee representative was
defined as “directly interested parties” in the revised circular. The GAO should, consistent with
their overall mandate under the CICA (see supra), define the union and employee representative
as “interested parties/offerors” out of deference to the expertise and choice of OMB. Since OMB
structured public private competitions in the revised circular and since OMB thought the union
should be able to file contests to insure vigorous and fair competition, GAO should permit the
union and the employee representative to file bid protests at the GAO for the same reasons. It is
only when all interested parties know that a true neutral will adjudicate any disputes about the
fairness of any competition that the competitions are likely to be run even-handedly.
Long Standing GAO Case Law And Relevant Statutes Support
The Conclusion That The ATO, The Union and The Employee
Representative Where There Is No Union, Have Full Bid Protests Rights
It is well-established that the GAO will review bid protests by private offerors alleging
violations of Circular A-76 when the decision favors retaining work in house. The issue in this
situation is whether the Comptroller General has authority to review A-76 competitions when the
agency's decision favors contracting out. If allowed to proceed without a bid protest, an illegal
contract award to a private contractor could displace the federal workers who currently perform
the services at issue.
I. In the context of a public-private competition, the Government MEO, as assisted
by the ATO, the union or the employee representative, competes as an offeror
and is an “interested party” to the same extent as the private sector source.
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The Competition in Contracting Act of 1984 (CICA), 31 U.S.C.A. §§ 3551-56,
establishes the procurement protest system under which your office reviews the contracting
actions of federal agencies. CICA provides for GAO review of objections to awards of contracts.
31 U.S.C. §3551(1). The question presented here for response is whether a federal sector union
could protest the award of a contract to a contractor because the cost comparison supporting the
13
award violated the revised circular, the FAIR Act of 1998 and/or 10 U.S.C. Section 2462, in
that the contractor costs included in the comparison were not “realistic and fair.” The use of any
criteria that was employed for comparison of the competing bids in an unfair manner could
similarly be the basis for a protest. CICA provides that the Comptroller General shall decide
protests "concerning an alleged violation of a procurement statute or regulation." 31 U.S.C.
§3552. Pemco Aeroplex, Inc., Aero Corp., B-275587.9 et al., June 29, 1998, 98-2 CPD ¶ 1. The
FAIR Act, 31 U.S.C. §501 note, imposes the same requirements on all Federal agencies. Thus,
CICA grants your office authority to review agencies’ compliance with these legal standards. To
effectively fulfill this statutory mandate in an era of increased public private competitions
pursuant to the sector neutral revised circular, GAO must provide standing for bid protests to
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both the ATO and the union or employee representative.
In public-private competitions under those legal standards, the Government’s “Most
Efficient Organization” (“MEO”) competes with the private sector contractor to perform the
work. We contend that the MEO is an “ interested party” under 31 U.S.C. § 3551(2) and your bid
protest regulations. They define an interested party as an actual or prospective bidder or offeror
whose direct economic interest would be affected by the award of a contract or the failure to
award a contract. The statute and your rules do not define the term “offeror.” Your office
previously has held that a labor union representing the interests of displaced federal employees is
not an "interested party" because the union does not submit a bid or offer in response to the
solicitation. National Federation of Federal Employees Local 2049, B-220838, 85-2 CPD ¶ 454.
In the unique circumstance of a procurement decision via a public-private competition,
we contend that both competitors are offerors – the contractor and the Government’s MEO. The
MEO offers to perform the work in response to the Performance Work Statement (“PWS”) (part
of the solicitation), while the contractor also offers to perform the work in response to the PWS
in the solicitation. Your office recognizes that the contractor is an “interested party” entitled to
protest an agency decision to have the work performed by the MEO when that decision violates a
procurement statute. Pemco Aeroplex, Inc., Aero Corp., B-275587.9 et al., June 29, 1998, 98-2
CPD ¶ 1. That holding enables your office to review violations of procurement statutes when the
result is to keep the work in-house. We believe that your office should similarly recognize now
that the Government’s MEO is an offeror entitled to protest an agency decision to have the work
performed by a contractor when that decision violates a procurement statute or other legal
standard. That will enable your office to review violations of procurement statutes when the
13
The FAIR Act of 1998 in Sections 2(d) and 2(e), and the DOD oriented 10 U.S.C. Section 2462, both set
forth the same concept of a fair competition between the public and private bidders, which is emphasized in the
revised circular.
14
While AFGE believes that the mandates of the CICA require the GAO to so act, another approach is
available. The revised circular, with its commitment to being pro competition and sector neutral, could be
interpreted by the GAO as a directive that all executive branch federal agencies now permit non-statutory bid
protests by ATO’s and unions or employee representatives. See 4 C.F.R. Section 21.13(a).
7
result is to contract out the work. In most procurements, the universe of competitors offering to
perform the work is defined by the group which responds to a solicitation. Under 10 U.S.C.
§2462, the FAIR Act and revised circular, however, the universe of competitors also includes the
MEO. We submit that there is no principled reason to distinguish between private and public
competitors or to allow one type the right to protest violations but deny that right to the other
competitor. Unless representatives of the MEO are considered interested parties, GAO will not
be able to hear protests where an agency improperly contracts out work, in violation of 10 U.S.C.
§2462, the FAIR Act and revised circular, when a realistic and fair cost comparison would show
that it would be more economical to have the work performed by the Government’s MEO. Since
CICA provides that the Comptroller General shall decide protests "concerning an alleged
violation of a procurement statute or regulation," 31 U.S.C.A. § 3552, GAO cannot fully perform
its statutory function with respect to public-private competitions unless it recognizes that the
MEO is also an interested party.
We ask your office to reevaluate its prior decisions denying unions the right to protest on
behalf of the interests of the Government employees in the Government’s MEO. We believe that
such standing is appropriate in light of recent statutes and case law, and that it is essential for
GAO properly to perform its role under CICA to hear protests of violations of procurement
statutes and regulations, which include 10 U.S.C. §2462, the FAIR Act and the revised circular.
II. The Competition in Contracting Act does not preclude GAO review
of A-76 decisions that favor contracting out.
The only potential obstacle to the GAO's assumption of jurisdiction over protests filed by
displaced federal employees and their labor union representatives is the definition of the term
"interested party" as it appears in the Competition in Contracting Act of 1984 (“CICA”). See 31
U.S.C. § 3551(2). However, the concept of “interested party” pre-dated CICA, and although the
term was generally limited to disappointed bidders or offerors, it was also construed to include
non-bidders who had a sufficient interest in the outcome of the protest. ABC Management
Services, Inc., 55 Comp. Gen. 397 (1975), 75-2 CPD ¶ 245. The protesters here would be held to
be interested parties under the pre-CICA construction of that term. There is no language in CICA
that purports to impose a more narrow interpretation of “interested parties” than the GAO
applied pre-CICA. Indeed, the legislative history shows that Congress intended GAO to have the
same authority to consider protests today as it had prior to the enactment of CICA.
Prior to the enactment of CICA, the GAO incorporated an “interested party” requirement
in its bid protest regulations. 4 CFR § 21.1(a) (1984) (providing that an “interested party may
protest to the General Accounting Office”). As a general rule, the GAO “limited the class of
parties eligible to protest to disappointed bidders or offerors.” Save Columbia Council, Inc.,
B211162, 83-1 CPD ¶ 338, March 31, 1983. The GAO, however, long had "recognized the rights
of nonbidders where there is the possibility that recognizable established interests will be
inadequately protected if [the] bid protest forum is restricted to bidders." Falcon Electric Co.,
B-199080, 81-1 CPD ¶ 271 (Apr. 9, 1981). Indeed, your Office “considered protests by labor
unions and civic, trade and parents associations” where “the stated interest in the procurement
has been sufficiently compelling.” Save Columbia Council, Inc., supra. For example, in District
2, Marine Engineers Beneficial Association – Associated Maritime Officers, AFL-CIO,
B-181265, 74-2 CPD ¶ 298 (November 27, 1974), your Office considered on the merits a protest
8
by a labor union against an agency determination that a contractor for whom its members worked
was non-responsible. In Associated General Contractors of America, Inc., B-177042, January 23,
1973, your Office similarly considered a protest by a trade association against the acceptance of
a bid exceeding the agency’s cost estimate. In both of those cases, your Office did not articulate
its reasons for according interested party status to the protesters, but it did so in another case
brought by non-bidders. In Department of Labor Day Care Parents’ Association, 54 Comp. Gen.
1035, B-183190, 75-1 CPD ¶ 353, June 10, 1975, your Office determined that a parents’
organization was an interested party because it had made a “clear showing of financial interest in
award of the contract for operation of the day care center.” Fees paid by the members of the
organization accounted for about 15 percent of the operating cost of the center.
The 1980 decision in Marine Engineers Beneficial Ass'n, B-195550, 60 Comp. Gen. 102,
80-2 CPD ¶ 418 (Dec. 5, 1980), aff'd on reconsideration, 81-1 CPD ¶ 215 (Mar. 23, 1981)
(“MEBA”), set forth the general rule for determining when non-bidders were interested parties,
as follows:
In determining whether a protester satisfied the interested party criterion,
we examine the degree to which the asserted interest is both established and
direct. In making this evaluation, we consider the nature of the issues raised
and the direct or indirect benefit or relief sought by the protester. . . . Thus,
we have recognized the rights of nonbidders to have their protests
considered on the merits where there is a possibility that recognizable
established interests will be inadequately protected if our bid protest forum
is restricted to bidders in individual procurements.
Id. (citing American Satellite Corp., B-189551, 78-1 CPD ¶ 289 (Apr. 17, 1978). Your Office
would, however, decline to consider such protests if there were "intermediate part[ies] of greater
interest" who would have been able to protest. Id. Accord International Brotherhood of Electrical
15
Workers, Local No. 595, B-215633, 84-2 CPD ¶ 91 (July 23, 1984).
Your Office has explained the policy underlying the "interested party" requirement as
follows. "The requirement that a party be 'interested' serves to ensure a party's diligent
participation in the protest process so as to sharpen the issues and provide a complete record on
which the correctness of a challenged procurement may be decided." Kenneth R. Bland,
Consultant, B-184852, 75-2 CPD ¶ 242 (Oct. 17, 1975). Curiously, your Office never applied
the MEBA test to determine whether federal employees or their unions were interested parties
for protesting contracting out decisions. Instead, it simply concluded, without any analysis, that
displaced employees and their unions were not interested parties because they were not bidders.
See National Federation of Federal Employees Local 2049, B-220838, 85-2 CPD ¶ 454 (October
23, 1985). That conclusory holding was wholly inconsistent with the holdings in cases where
your Office recognized the standing of unions and civic, trade and parents’ organizations. The
inconsistent approach to interested party status in cost comparison protests appears to have been
the result of your Office’s former general policy of not reviewing cost comparison decisions at
15
The directly affected employees have “greater interest” than the ATO, whose financial interests are
generally not at stake. In contrast, a CEO of a private contractor has an immediate financial stake in a bid protest
outcome.
9
all. See, e.g., Local F76, International Association of Firefighters, B-194084, 79-1 CPD ¶ 209
(March 28, 1979) (stating the rule that your Office “does not consider protests concerning the
propriety of an agency’s determination under OMB Circular A-76 to contract-out as opposed to
performing work in-house” because it regarded “the provisions of the Circular as matters of
Executive policy, which do not establish legal rights and responsibilities and which are not
16
within the protest decision function of our Office").
Your Office did recognize an exception to the general rule pursuant to which it
considered protests alleging that the cost comparison did not conform to the solicitation. Crown
Laundry and Dry Cleaners, Inc., B-194505, 79-CPD ¶ 38 (July 18, 1979)(“Crown Laundry”).
Your Office explained, however, that “[t]his exception is narrowly drawn, intended to protect
parties that have submitted bids from arbitrary rejection of their bids, and does not extend to
nonbidders.” Locals 1857 and 987, American Federation of Government Employees, B-195733,
B-196117, 80-1 CPD ¶ 89 (February 4, 1980). Since your Office did not consider unions to be
bidders, it declined to extend the “narrowly drawn” exception to their protests. Id. See also
Hawaii Federal Lodge No. 1998, International Association of Machinists and Aerospace
Workers, B- 214104, 84-1 CPD ¶ 109 (January 23, 1984) (stating that the exception does not
extend to federal employees or unions because your Office did not consider them to be bidders).
Your Office apparently did not apply the MEBA test in this context because of the unique rule
and narrow exception applicable to the A-76 context. With the passage of 10 U.S.C. § 2462 and
the FAIR Act, the Crown Laundry general rule and its narrow exception have disappeared. Your
Office no longer views cost comparison decisions as unreviewable discretionary determinations
but, rather, now considers protests alleging that cost comparisons were not conducted in
accordance with the mandates of 10 U.S.C. § 2462, the FAIR Act and OMB Circular A-76.
Pemco Aeroplex, Inc., Aero Corporation, B-275587 et al., 98-2 CPD ¶ 1 (June 29, 1998).
Moreover, although it was not established in the early 1980s, it is now clear that unions have the
same standing as the employees they represent. International Union, United Automobile,
Aerospace & Agric. Implement Workers v. Brock, 477 U.S. 274, 106 S. Ct. 2523 (1986). In light
of these significant changes in the law, the former general rule of total deference has been
superceded, and there is no occasion to apply the narrowly drawn exception. Instead, your Office
appropriately should analyze whether employees and their unions are interested parties by
applying the MEBA test that it applied in all other contexts prior to CICA. When that test is
applied here, displaced federal employees and their unions must be considered interested parties
eligible to protest an erroneous cost comparison determination.
An incumbent union or an employee representative acting on behalf of the directly
affected employees clearly meet the MEBA test. The employees forming the MEO are directly
in competition with the private contractors. They occupy the position of the government bidder
or offeror and are the only ones with an immediate and acute financial interest in ensuring the
full development of the facts and a proper resolution of the legal issues before the GAO. The
interest of federal employees in ensuring that a cost comparison is conducted properly is
manifest – if the agency makes a mistake, the federal employees in the MEO stand to lose their
jobs. No other party would be so affected. Displaced federal employees also are the only ones
with a direct economic interest in seeing that the agency's cost comparison was conducted
16
For the reasons comprehensively set forth in Diebold v. United States, supra, the revised circular should
be viewed as establishing legal standards.
10
properly. There is no intervening party with a more direct interest in the procurement. For
reasons set forth above, even the ATO lacks as strong an interest. Denying protester status to
these displaced employees effectively insulates the agency's A-76 cost-comparison decisions in
every case where the decision is to contract out and precludes any inquiry as to whether the
agency complied with the mandates of the FAIR Act, 10 U.S.C. § 2462, and the revised circular.
We recognize that the MEBA test was formulated before the passage of CICA, which
defined “interested party” as “an actual or prospective bidder or offeror,” but that definition did
not limit your Office’s historical power to consider bid protests brought by persons with
sufficiently compelling interests in a procurement, as here. Indeed, the intent of CICA was to
strengthen your Office’s bid protest power, not to limit it. Accordingly, your Office reasonably
should interpret CICA’s definition of “interested parties” as encompassing actual or prospective
bidders, as well as those who meet the MEBA test. Such an approach would be consistent with
your Office’s pre-CICA practice and the congressional intent to codify and strengthen existing
(i.e., pre-CICA) bid protest authority.
At the time of CICA’s passage, it was widely believed that, although GAO already had
sufficient statutory authority to decide bid protests, additional, explicit remedial authority should
be granted to make the bid protest process more effective. See H.R. Rep. No. 861, 98th Cong.,
2d Sess. (1984), reprinted in 1984 U.S. Code Cong. & Ad. News, 1445, 2123 (stating that CICA
“ codifies and strengthens the bid protest function”). See also Competition in Contracting Act of
1984: Hearings on H.R. 5184 before the Subcommittee on Legislation and National Security.
Recognizing the standing of displaced federal employees will not open the doors to protests by
other non-bidders, since your Office has consistently held that “where there is an intermediate
party of greater interest, we generally have considered a protester to be too remote from a cause
to establish interest within the meaning of our Bid Protest Procedures.” Service & Sales, Inc.,
B-211868, 83-2 CPD ¶ 469 (October 20, 1983). Thus, employees of private contractors,
subcontractors and taxpayers in general would not be considered interested parties.
The main thrust of CICA was to strengthen GAO’s remedial powers, and there is no
indication that Congress intended to define “interested parties” more restrictively than your
Office did. Indeed, by including the “actual or prospective bidder” language to define “interested
parties,” Congress sought to maintain the status quo because the language was same as that
employed in GAO’s general rule for identifying interested parties. Because there was no
congressional intent to restrict GAO’s bid protest authority or to change the scope of interested
party status, there is no reason for your Office to conclude that its pre-existing case law
precedents relating to interested party status were rendered void by CICA’s inclusion of a
definition of interested party that attempted to capture the existing state of the law with respect to
interested parties. Stated another way, the “interested party” definition in CICA essentially
reflected the then current state of GAO precedents, and it did not overrule the exceptions
recognizing non-bidders as interested parties in certain circumstances.
Accordingly, your Office properly should apply its MEBA test here and find that the
directly affected employees and their union are interested parties. Moreover, CICA did not
overrule your Office’s pre-existing and independent statutory authority for deciding bid protests.
In fact, the legislative history of CICA confirms that your Office had existing authority to decide
bid protests that was independent of anything included in CICA. For example, the House Report
11
on H.R. 5184 (the bill that led to the inclusion of statutory bid protest provisions) noted that the
“General Accounting Office (GAO) has been deciding executive branch award protests for about
60 years based on its authority to determine the legality of public expenditures.” H.R. Report No.
98-1157, 98th Cong., 2d Sess. (1984), p. 23. It further explained that the statutory provisions
were intended to make GAO’s bid protest procedures more effective as a remedy. Similarly, the
Department of Defense stated in hearings that there was “no need for further statutory
underpinning for the Comptroller General of the United States to carry out [the bid protest]
function.” Competition in Contracting Act of 1984: Hearings on H.R. 5184 before the
Subcommittee on Legislation and National Security, Governmental Operations Committee, 98th
Cong., 2d Sess. (1984), p. 118. CICA did not disturb this independent authority for your Office
to decide bid protests. These facts indicate that your Office has ample authority, separate and
apart from CICA, to consider and decide this protest. Such action would be consistent with the
scope of bid protest jurisdiction historically exercised by your Office and with the concepts of
interested party status your Office has long applied.
III. The Comptroller General's statutory responsibility to investigate public
spending requires it to review allegations of faulty A-76 competition decisions
raised by employees displaced by, or likely to be displaced by, such a decision.
In evaluating whether to allow protests by incumbent unions and/or employee
representatives to proceed, the GAO should also be cognizant of its mandatory statutory
responsibility to investigate the use of public money and to ensure that it is spent economically
and efficiently. Congress has directed the Comptroller General to "investigate all matters related
to the receipt, disbursement, and use of public money" and to "analyze expenditures of each
executive agency the Comptroller General believes will help Congress decide whether public
money has been used and expended economically and efficiently." 31 U.S.C. § 712(1) & (3).
The Comptroller General has explained GAO’s responsibilities in this regard as follows: "GAO's
mission is to help the Congress oversee federal programs and operations to assure accountability
to the American people." See www.gao.gov.
The GAO is required by its statutory mandate to consider the merits of employees’
protests challenging an agency's arbitrary and capricious decision to contract out for services
currently performed by federal employees. By definition, an allegation that a federal agency's
cost comparison decision contravenes the requirements of OMB Circular A-76 is an allegation
that the agency plans to use federal funds improperly. The revised circular and the Federal
Activities Inventory Reform Act require that cost comparisons be conducted on an equal basis
and that the comparison be based on realistic and fair costs. See revised circular, Attachment B;
Federal Activities Inventory Reform Act of 1998, Public Law No. 105-270 (Jan. 27, 1998) (set
out as a note following 31 U.S.C. § 501), § 2(e). Errors in the cost comparison will bias the
decision to contract out. If the errors are sufficient to change the contracting-out decision, they
will result in the inefficient or uneconomical use and expenditure of public money.
In a case where the decision is to retain the work in-house, a private contractor may
challenge the decision through an administrative appeal with the agency or a bid protest at the
GAO, the Court of Federal Claims, or an appropriate federal district court. Two recent decisions
illustrate the importance of GAO's oversight function in protests of A-76 cost comparison
decisions. In Trajen, Inc., B-283410 & B-284310.2 (Mar. 28, 2000), the Comptroller General
12
concluded that an agency administrative appeal authority "unreasonably determined that
in-house performance would be more economical than contracting with Trajen." The decision in
American Federation of Government Employees, Local No. 3347, AFL-CIO, B-183487, 75-2
CPD ¶ 12 (July 3, 1975), supports GAO involvement in evaluating alleged A-76 violations
identified by federal employees. In that case, the GAO dismissed the protest because if its
general rule that the provisions of Circular A-76 are matters of executive branch policy. The
GAO nevertheless sent a team of auditors and attorneys to the agency facility "to discuss the
situation with [agency] officials and employee union representatives."
The Comptroller General sustained the protest in Aberdeen Technical Services,
B-283727.2 (Feb. 22, 2000), because the in-house estimate failed to include all costs for
personnel required by the solicitation. There is no policy reason to deny similar GAO review to
displaced employees in cases where the cost comparison decision favors contracting out.
Commentators support this assessment. In an article reviewing the remedies available to
federal employees in challenging A-76 decisions, the author concludes that the Comptroller
General should hear such bid protests:
[T]he GAO possesses the expertise, experience, and procedural capability to
resolve A-76 appeals in a manner that is timely, responsive to sound
procurement principles and the interests of all affected parties, and fosters
consistency in the interpretation of Circular A-76 and implementation of the
commercial activities program. * * * Federal employees adversely affected
by commercial activity conversions should be entitled to a competent,
independent, and responsive forum in which to object to the elimination of
their jobs when not actually justified by increased government efficiency. In
many cases, such challenges may also be the only method by which
taxpayer interests can effectively be asserted. * * * The availability to
federal employees of the GAO's protest procedure . . . would provide
responsive and independent review of agency contracting-out decisions.
Major Richard K. Ketler, U.S.M.C., ”Federal Employee Challenges to Contracting Out: Is There
a Viable Forum?," 11 Mil. L. Rev. 103, 164-165 (1986) (footnotes omitted); accord Comptroller
General's Letter to Committee on Governmental Affairs, B-208159, B-2018159.11 (Apr. 13,
1988); Comptroller General's Letter to Committee on Armed Services, B-208159, B208159.21 (Apr. 4, 1990). All of these authorities indicate persuasively that your Office should
consider protests of displaced federal employees when the decision is made to contract out the
work.
Conclusion
The GAO should explicitly, by regulations regarding A-76 competitions, see supra, grant
standing to both ATO’s and to unions or where there is no union to employee representatives.
Denying these directly interested parties standing contravenes GAO’s mandatory statutory
responsibility to investigate public spending and to ensure that public funds are used
economically and efficiently. Moreover, narrow reliance on the CICA language limiting the
definition of interested parties to actual or prospective offerors ignores the congressional intent
13
to preserve and strengthen GAO’s historical authority to consider bid protests. Finally, in a
17
public-private competition the Federal Circuit’s holding does not bind GAO, or compel a
finding that directly affected employees are not interested parties, because your Office does not
utilize the courts’ doctrine of standing. Fletcher & Sons, Inc., B-212530, B-212530.2, 83-2 CPD
¶ 678 (December 13, 1983). Under revised circular A-76, the union or representative of the
directly affected federal employees and the ATO, individually and jointly, occupy the position of
public offeror. When an agency's revised circular A-76 competition decision favors awarding
their work to a private contractor, directly affected employees, through their union or if there is
no union, through their representative, should be entitled to outside review of that decision. The
Comptroller General is the appropriate forum for that outside review.
Respectfully submitted,
________________________
Martin R. Cohen,
Assistant General Counsel
AFGE 3rd District
Suite 117 10 Presidential Blvd.
Bala Cynwyd, PA 19004
(610) 660-0316
_______________________
Charles A. Hobbie
Deputy General Counsel
________________
Mark D. Roth
General Counsel
AFGE
80 F Street, N.W.
Washington, DC 20001
(202) 639-6415
17
That holding by the United States Court of Appeals for the Federal Circuit means that, if your Office
does not find displaced employees to be interested parties, there will be no independent review of contracting out
decisions. There is no indication in the revised circular, the FAR, the FAIR Act of 1998 or in any other statute, that
Congress intended to insulate contracting out decisions from all review.
14