Open-market buys deserve equality

What do you do if you are a government buyer and you want to purchase, for example, a pointofuse automated medication supply system from a General Services Administration schedule vendor and a couple of smaller, related items that aren't yet available on the schedule? If you happen to be the Army

What do you do if you are a government buyer and you want to purchase, for example, a point-of-use automated medication supply system from a General Services Administration schedule vendor and a couple of smaller, related items that aren't yet available on the schedule? If you happen to be the Army Medical Command—or, for that matter, almost any other government buyer—you simply toss your open market items into your schedule shopping bag and proceed to the checkout line. Well, not anymore, according to the General Accounting Office.

Last month, in a protest decision involving the Army Medical Command and Pyxis Corp., GAO ruled that combining nonschedule purchases, commonly known as open-market items, with schedule purchases without following applicable procurement regulations is illegal (See FCW, Aug. 9). This ruling brings to an end a practice that agencies have employed—and GSA and GAO have explicitly endorsed—since the beginning of the multiple-award schedule (MAS) program. From now on, agencies must ensure that their purchases of open-market items comply with all procurement regulations. This change, which is not a change in the law but only in the enforcement of current law, no doubt will be bemoaned by government buyers and GSA alike.

Federal agencies for years have purchased open-market items in conjunction with schedule purchases with GSA's blessing. So long as the purchases remained below a certain threshold (which varied from year to year and even from contracting officer to contracting officer), GSA considered the practice to fall within an exception to the Federal Acquisition Regulation's competition requirements.

In 1997, however, the U.S. Court of Federal Claims in a case involving ATA Defense Industries Inc. declared that there is no small or incidental exception to the legal requirement that agencies obtain full and open competition. According to the court, unless a product could be classified as de minimis—something that is clearly smaller than "small" or "incidental"—in the context of a schedule purchase, the law required that the product be procured on a competitive basis. GSA and its customers, however, largely ignored the ATA decision, relying instead on a contradictory GAO decision issued the same year in a case involving Vion Corp., which affirmed the legality of incidental open-market purchases.

The Pyxis decision explicitly overrules the Vion case and follows the court decision regarding ATA. Thus, according to the U.S. comptroller general, open-market items may no longer be purchased from a schedule vendor "unless applicable acquisition regulations have been followed"—that is, if competition is involved. GAO is correct, just as the court was correct in 1997: There is no incidental exception to competition. And it is a good thing there isn't.

While the Pyxis decision might be viewed by GSA and its customers with a certain amount of melancholy, it is a good decision. The practice of avoiding competition through the purchase of open-market items is not victimless. While it may benefit GSA by increasing its industrial funding fee collections and agencies by reducing their competition expenses, it hurts many vendors, especially small and disadvantaged vendors, whose very survival often depends on their ability to capture orders for those incidental items that the big guys choose, for whatever reason, not to put on the schedule. Without these opportunities, many small vendors would be unable to break into the federal marketplace.

But the practice of purchasing open-market items without following applicable procurement regulations damages the federal procurement system in a more fundamental way. Like many recent regulatory innovations, GSA's MAS program was created to streamline the way the federal government buys commercial goods and services. If agencies are viewed as using this contractual vehicle to avoid competition, we can kiss future streamlining efforts goodbye.

Indeed, to some extent, the Defense Department is seeing this possibility flash before its eyes as it witnesses the fallout from a recent inspector general's audit regarding its use of multiple-award, task-order contracts. According to the IG, DOD no longer takes "full advantage of the benefit of having multiple bidders." As a result of this report, DOD recently announcednew reporting and monitoring requirements relating to task-order awards—clearly not a movement aimed at streamlining the procurement process.

In the end, there are more reasons to like the GAO's Pyxis decision than to dislike it. But whether you like it or not, there is at least one very good reason to abide by it, as the Army Medical Command learned firsthand in July as the subject of the Pyxis protest. Buyers who persist in using the fabled open-market item exception to avoid competition can expect to see their procurements overturned if challenged by disappointed offerors. Most agencies would fare better doing it right the first time than taking their chances before GAO. Having pursued and defended several protests over the past few years, it seems to me to be easier to do it right the first time.

-- Aronie is a member of the law firm Fried, Frank, Harris, Shriver & Jacobson, where he counsels and represents government contractors before a wide array of judicial, administrative and legislative forums. He can be reached at (202) 639-7336.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.