Support Services International, Inc.

Support Services International, Inc. BNUMBER: B-271559; B-271559.2 DATE: July 16, 1996 TITLE: Support Services International, Inc. ********************************************************************** Matter of:Support Services International, Inc. File: B-271559; B-271559.2 Date:July 16, 1996 Joel C. Mandelman, Esq., for the protester. Mike Colvin, Department of Health and Human Services, for the agency. Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision. DIGEST 1. Indian Health Service (IHS) did not violate the Buy Indian Act by failing to set aside a health care-related acquisition for Indian-owned companies since under the Buy Indian Act IHS has the discretion to set procurements aside for Indian-owned firms, but is not required to set aside any particular procurement. 2. Contracting agency has not adequately justified its decision not to solicit the incumbent and instead to award to another company on a sole source basis where the record fails to demonstrate a reasonable basis for the agency determination that the incumbent could not be expected to perform the services satisfactorily. DECISION Support Services International, Inc. (SSI), an Indian-owned company, protests the award of an interim contract to McKesson Drug Company under request for proposals (RFP) No. 785, issued by the Phoenix Area Indian Health Service (IHS), Department of Health and Human Services (HHS), for the purchase and delivery of drugs on the Federal Supply Schedule (FSS) to Indian health clinics located in Arizona, Nevada, and Utah. The protester complains that the award improperly was made on a sole source basis to a company that is not Indian-owned. We sustain the protest. BACKGROUND In March 1995, the IHS awarded a contract consisting of base year plus two 1-year options contract to SSI under RFP No. 753, a Buy Indian Act set-aside for the distribution of drugs and pharmaceutical items on the FSS to IHS hospitals and clinics located in Arizona, Nevada, and Utah. At the conclusion of the base year, the IHS decided not to exercise the option under SSI's contract since (as discussed more fully below) it was dissatisfied with SSI's performance during the base year and agency officials believed they could obtain the services at a substantially lower cost by negotiating an interagency agreement with the Department of Veterans Affairs (VA).[1] Since, as of the date that SSI's base year was due to expire (i.e., March 31, 1996), the IHS was still in the process of negotiating an agreement with the VA and anticipated that the arrangement would take an additional 90 days to implement in Arizona and an additional 180 days to implement in Nevada and Utah, the IHS awarded an interim contract for the services to McKesson, a pharmaceutical wholesaler which had been acting as a subcontractor to SSI under its contract and which was also the contractor servicing the VA's Arizona facilities. On March 27, 1996, after learning that the option under its contract would not be exercised and that the agency instead intended to negotiate an agreement with the VA to have the services added to a contract that the VA had with McKesson, SSI protested to our Office. SSI argued that an award to McKesson, by means of an interagency agreement with the VA, would violate both the Buy Indian Act (since McKesson is not an Indian-owned firm) and the Competition in Contracting Act of 1984 (CICA) (since companies other than McKesson had not been permitted to compete for the award.) By letter dated April 12, 1996, the agency notified our Office that it agreed with SSI that an award to McKesson, by means of an interagency agreement with the VA, would violate IHS's Buy Indian policy and that it intended to take corrective action by conducting a new procurement under the Buy Indian Act. The agency further informed us that it expected to issue the new solicitation within the next month and that SSI would be given an opportunity to compete. On April 15, SSI learned of the interim award to McKesson, which the agency had decided to leave in place until the recompetition had been concluded. On April 19, the protester filed a supplemental protest with our Office objecting to the interim award. ANALYSIS SSI first argues that, as the satisfactorily performing incumbent, it should have been allowed to continue performing the services until the new competition was concluded. We are aware of no requirement, however, that a procuring agency with an urgent need for interim services extend an incumbent's contract rather than award a new contract. See Automation Management Consultants, Inc., B-243805, Aug. 29, 1991, 91-2 CPD para. 213. SSI next argues that by failing to set the acquisition aside for Indian-owned firms, the IHS violated the Buy Indian Act.