Virginia Electric and Power Company; Baltimore Gas & Electric, B-285209; B-285209.2, August 2, 2000

Virginia Electric and Power Company; Baltimore Gas & Electric, B-285209; B-285209.2, August 2, 2000 TITLE: Virginia Electric and Power Company; Baltimore Gas & Electric, B-285209; B-285209.2, August 2, 2000 BNUMBER: B-285209; B-285209.2 DATE: August 2, 2000 ********************************************************************** Virginia Electric and Power Company; Baltimore Gas & Electric, B-285209; B-285209.2, August 2, 2000 Decision Matter of: Virginia Electric and Power Company; Baltimore Gas & Electric Company File: B-285209; B-285209.2 Date: August 2, 2000 Michael W. Clancy, Esq., and Thomas D. Leland, Esq., Holland & Knight, for Virginia Electric and Power Company; and Kevin P. Mullen, Esq., Carl L. Vacketta, Esq., Karen Gray, Esq., and David P. Handler, Esq., Piper, Marbury, Rudnick & Wolfe, for Baltimore Gas & Electric Company, the protesters. Madeline L. Shay, Esq., Douglas W. Kornreich, Esq., and J.J. Cox, Esq., U.S. Army Corps of Engineers, for the agency. David A. Ashen, Esq., Office of General Counsel, GAO, participated in preparation of the decision. DIGEST 1. Protest that solicitation for privatization of utilities at military installations is defective for failure to acknowledge a requirement for state and local approval before selected contractor can commence performing natural gas and electric distribution services at the installations is denied, where 10 U.S.C. sect. 2688(b) requires that if more than one utility or entity expresses an interest in a conveyance, the conveyance shall be carried out using competitive procedures; section 2688 does not authorize restricting competition by requiring state and local approval (which would effectively eliminate all but one source for each utility), and while agencies may impose restrictions necessary to meet their needs, they may not, unless authorized by statute, impose restrictions not based on their needs. 2. Protest against requirement, in solicitation for privatization of 13 utility systems (including electric, natural gas, water, and wastewater) at five military installations, that offerors propose on all utility systems at an installation (with no more than one, consolidated contract to be awarded for each installation) is denied, where agency not only anticipated realizing significant savings from consolidation, but also determined that there was a significant risk that permitting offerors to propose on the basis of 13 individual utility systems would result in not receiving an acceptable offer for some or all of the water and wastewater systems; where an agency reasonably does not anticipate that it will receive competition for all of its requirements if it solicits separately for them, it properly may combine them in a single procurement. DECISION Virginia Electric and Power Company (VEPCO) and Baltimore Gas & Electric Company (BG&E) protest the terms of request for proposals (RFP) No. DACA31-00-R-0026, a competitive solicitation issued by the U.S. Army Corps of Engineers (Corps) for the privatization of utilities at five installations in the National Capital Region under the Military District of Washington (MDW). VEPCO and BG&E contend that the RFP is improper because it fails to recognize that the privatization of the utilities is subject to state and local utility law and regulation. In addition, VEPCO challenges the solicitation provision for the award of one consolidated contract that includes all of the (different types of) utility systems at each installation. We deny the protests. The RFP was issued on March 28, 2000, as part of the overall Department of Defense (DOD) program to privatize utility systems. That privatization program is governed by section 2688 of Title 10, United States Code, enacted in 1997, which provides that the "Secretary of a military department may convey a utility system, or part of a utility system, under the jurisdiction of the Secretary to a municipal, private, regional, district, or cooperative utility company or other entity." 10 U.S.C. sect. 2688(a) (Supp. IV 1998). Further, section 2688 provides that "[i]f more than one utility or entity . . . notifies the Secretary concerned of an interest in a conveyance . . . the Secretary shall carry out the conveyance through the use of competitive procedures." 10 U.S.C. sect. 2688(b); see Government of Harford County, Maryland, B-283259, B-283259.3, Oct. 28, 1999, 99-2 CPD para. 81 at 4 n.6. Following enactment of section 2688, DOD first issued DOD Reform Initiative Directive (DRID) No. 9, directing the military departments to develop plans for privatizing electric, water, wastewater, and natural gas utility systems by January 1, 2000, and then in 1998 issued DRID No. 49, directing the military departments to develop plans providing for the award not later than September 30, 2003 of privatization contracts for all utility systems except those exempted in the attached guidance. DRID No. 9, Privatizing Utility Systems, Dec. 10, 1997; DRID No.