GRANTED: November 22, 1994
                                                 
 
 
                         GSBCA 13023-P, 13024-P
 
 
                    INTEGRATED SYSTEMS GROUP, INC.,
 
                                           Protester,
 
                                   v.
 
                      DEPARTMENT OF THE TREASURY,
 
                                           Respondent.
 
        Stephen  L. Mills, VP Marketing of Integrated Systems Group,
   Inc., Vienna, VA, appearing for Protester. 
 
        William  A. Goss  and Robert  E. Norman, Office  of Regional
   Counsel,  Internal  Revenue  Service,  Atlanta, GA,  counsel  for
   Respondent.
 
   Before Board Judges DANIELS (Chairman), BORWICK, and GOODMAN.
 
   DANIELS, Board Judge.
 
        Integrated  Systems  Group, Inc.  (ISG),  protests  that the
   Internal Revenue Service (IRS), a bureau of the Department of the
   Treasury, violated mandates of the Federal  Information Resources
   Management  Regulation (FIRMR) when it issued two delivery orders
   for  computer workstations and  associated equipment.   We agree,
   granting the protests as to both delivery orders.
 
                            Findings of Fact
 
        1.   The  IRS's  Charlotte  Development  Center (CDC)  needs
   "programmer  workstations  and  software to  provide  a  generic,
   standards-based environment, complete with the tools necessary to
   enable total quality  software engineering, design,  development,
   documentation, and maintenance."  Protest File, Exhibits A2 at 5-
   6  (unnumbered),  B3  at 8-9  (unnumbered).1    Specifically, the
   agency says --
 
 
             The   proposed  workstation   must  have   an
             operating system  that is  based on  System V
             Release  4,  complying  with  the  System   V
             Interface  Definition  (SVID),  and complying
             with  standards  such as  POSIX  (FIPS 151-1,
             FIPS  151), X/Open  XPG3 (common  Application
             Environment Application Programmer Interfaces
             -  OSF CAE), and basic C-2 security as stated
             in the IRS Standards  Based Architecture.  It
             must offer  support  for  a  broad  range  of
             communications  and  networking  environments
             (e.g. TCP/IP,  X.25, FDDI,  etc.) to  support
             the  development and  testing of  software in
             diverse heterogenous networked environments.
 
   Id., Exhibits A2 at 6 (unnumbered), B3 at 9 (unnumbered).
 
        2.   On  August 8,  1994,  the IRS  placed  in the  Commerce
   Business Daily (CBD)  two notices of intent to  place orders with
   Government Technology Services, Inc. (GTSI), against  that firm's
   General  Services  Administration  non-mandatory  automatic  data
   processing equipment  schedule contract (GSA  schedule contract).
   The notices both mentioned  Sun workstations called "SPARCstation
   5."   The  specifics  pertaining  to  the  workstations  were  as
   follows:
 
                                 First notice     Second notice
                                 (subject of      (subject of
                                 GSBCA 13023-P)   GSBCA 13024-P) 
 
             Quantity            10 each          3 each
             Model number        85               85
             Processor speed     85Mhz            85Mhz
             Disk drive          1.05GB           1.05GB
             Color monitor       17"              20"
 
   The  second notice  also  mentioned  several  items  of  computer
   hardware associated with  Sun workstations.  Each  notice stated,
   "All responsible  sources able to  provide the specific  make and
   model  equipment are  invited  to  identify  their  interest  and
   capability  to  meet  the  requirement."    Each  notice  further
   explained  that "all responses  from responsible sources  will be
   fully considered" and that "[a]s  a result of analyzing responses
                       
   ____________________
 
        1    The  IRS submitted separate  protest files for  the two
   cases, which  were docketed  as GSBCA 13023-P  and 13024-P.   For
   simplicity's  sake, when  citing to  a protest  file exhibit,  we
   refer  to  a  single  file,  with  the   GSBCA  13023-P  exhibits
   designated by  an "A"  before the exhibit  number, and  the GSBCA
   13024-P exhibits designated by a "B" before the exhibit number.
   to this synopsis of intent, the contracting officer may determine
   that a solicitation will be  issued."  Protest File, Exhibits A4,
   B4.  
 
 
        3.   Two weeks after  these notices were published,  the IRS
   prepared Justifications for Other than Full and Open Competition,
   explaining  why the specific  makes and  models described  in the
   notices were required.  Each Justification states that the agency
   "has  reviewed  the   market  for  workstations  that   meet  the
   requirements stated  [in Finding 1]  and has determined  that the
   SUN  SPARCstation  5   Model  85  is  the  best   choice."    The
   Justifications also say that the CDC "already has  an established
   base  of SUN  Workstations  running  the  Solaris  2.3  Operating
   System"; that  the  staff  is familiar  with  this  hardware  and
   operating system;  and that the  agency would benefit  from using
   software products which  are available for the  Solaris operating
   system.  The  Justifications explain further  that the IRS  knows
   that three manufacturers in  addition to Sun make equipment  that
   meets the  agency's needs, but  that the prices charged  by those
   firms  are  "significantly  higher" than  Sun's.    Protest File,
   Exhibits A3 at 6-7 (unnumbered), B3 at 9-10 (unnumbered).
 
        4.   ISG timely  responded to  both CBD  notices by  quoting
   prices for  Tatung equipment which,  according to ISG,  meets all
   salient characteristics  stated in  the notices.   Protest  File,
   Exhibits A10-11,  B10-11.  Other  vendors responded, too.   As to
   the first notice, two companies quoted open-market prices for Sun
   equipment, and two quoted open-market prices for Tatung products;
   the  lowest price  was nearly  $14,000 less  than prices  for the
   items on GTSI's GSA schedule contract.   Id., Exhibit A5.  As  to
   the second notice,  four companies quoted open-market  prices for
   Sun equipment,  and one for  Sun and Tatung products;  the lowest
   price was nearly $2,000 less than the GTSI schedule prices.  Id.,
   Exhibit B5.
 
        5.   After the IRS received these quotations, the members of
   the agency's technical evaluation team  changed their minds as to
   precisely what  items, and how  many of each, the  agency needed.
   Protest  File, Exhibit B9 at  2.  The  changes were regarding the
   SPARCstation 5 equipment, as follows:
 
                                 Stated in
                                 CBD notice     As changed
 
             First notice:
               quantity          10 each        14 each
               model number      85             70
               processor speed   85Mhz          70 Mhz
               disk drive        1.05GB         535MB
 
             Second notice:
               quantity          3 each         5 each
               model number      85             70
               system memory     32MB RAM       16MB RAM
               disk drive        1.05GB         535MB
               color monitor     20"            17"
 
   Id.,  Exhibits  A2, B2.    These changes  were  significant; they
   reduced the GTSI unit price of a SPARCstation 5 as configured per
   the first notice by 32 percent,  and as configured per the second
   notice by 42 percent.  Id., Exhibits A5, B5.
 
        6.   The IRS then asked the firms which had responded to the
   CBD notices by  providing price quotations  for Sun equipment  to
   provide   quotations  for   equipment  which   met  the   revised
   specifications.  Because  ISG had provided quotations  for Tatung
   equipment,  it  was not  asked  to  give  quotes on  the  revised
   specifications.   Protest  File,  Exhibit  B9.    Only  one  firm
   responded.  Id., Exhibits A5, B5.
 
        7.   The  contracting officer added  $14,500 to each  of the
   prices  quoted by the  responding vendor; this  amount apparently
   represents  what the  contracting  officer  believes  to  be  the
   administrative cost  of  conducting  a  competitive  procurement.
   Because each  of  these prices,  with the  $14,500 handicap,  was
   higher  than GTSI's schedule  prices, she determined  that orders
   should be placed against the GTSI GSA schedule contract.  Protest
   File, Exhibit  B9.  The orders were placed  on September 13.  The
   one covering items resembling those in the first CBD notice is in
   the amount  of $70,644; the  other is in  the amount of  $62,174.
   Id., Exhibits A6, B6.  The items ordered from GTSI were different
   from the items specified as agency requirements in Finding 5.  As
   to the  order resembling the  one described in the  first notice,
   the  agency asked for  workstations with  system memory  of 16MB,
   rather than 32MB, of random access memory.  As to each order, the
   agency asked  for a  TGX graphics card  which was  not previously
   described.  Id.
 
        8.   The IRS  admits that  the contracting  officer did  not
   notify any  of the firms  which had provided price  quotations of
   the issuance of the delivery  orders to GTSI.  Respondent's Post-
   Submission  Brief  at 4.    ISG  states that  it  learned of  the
   issuance in a conversation with an agency employee on October 12.
   Amended Complaint, Facts   3.  
 
        9.   The protests were  filed on October 13.   By that time,
   the equipment  covered by  the orders had  been delivered  to the
   CDC, and some of  it had been installed, but none of  it had been
   accepted.  After receiving the protests, the agency issued a stop
   work  order which  precludes acceptance  and agreed  to  keep the
   order in place as  long as the protests remain  before the Board.
   Board's  Memorandum  of  Conference  of  Oct.  18,  1994,  at  2;
   Respondent's Post-Submission Brief at 4-5.
 
        10.  While   the  protests   were   pending,  IRS   computer
   specialists  examined the product literature for the Tatung items
   specified by  ISG and determined that those items do not meet the
   agency's  technical specifications for the workstations it needs.
   The specifications against  which the  specialists evaluated  the
   Tatung products had not been  mentioned as agency requirements in
   either CBD notice, or even in either Justification for Other than
   Full and Open Competition.  Protest File, Exhibits A8, B8.
 
                               Discussion
 
        The FIRMR  prescribes  special,  simplified  procedures  for
   acquiring automatic  data processing equipment using GSA schedule
   contracts,  and for  publicizing those  actions.   41  CFR subpt.
   201-39.5, 201-39.803 (1993) (FIRMR  201-39.5, 201-39.803).  These
   procedures exist to ensure that  agencies place orders under  the
   contracts only  when doing  so "would result  in a  lower overall
   cost   than  other  contracting   methods,  such  as   issuing  a
   solicitation."  FIRMR 201-39.803-1(b).  Thus, the procedures make
   use  of schedule contracts  consonant with the  statutory mandate
   that the  Government do  business with the  firms whose  bids and
   offers are most advantageous to the United States.  See 41 U.S.C.
     253b(c), (d)(4)  (1988); Integrated Systems  Group, Inc., GSBCA
   11494-P, 92-1 BCA   24,621, at 122,809, 1991 BPD   335, at 5.
 
        The basic structure of these procedures is as follows.  When
   an  agency intends  to  place  an order  against  a GSA  schedule
   contract,  it  must  first  justify  any restrictive  requirement
   pertaining to that  order.  FIRMR  201-39.803-3(a)(1).  Then,  if
   the  total value of the order is greater than $50,000, the agency
   is to publicize its intent by synopsizing the nature of the order
   in  the Commerce Business  Daily.  FIRMR  201-39.501-1, -2(a)(1).
   The  synopsis  must contain  sufficient information  that vendors
   reading it are able to respond in enough detail as to  permit the
   agency to determine, from the  responses, how the agency can meet
   its  requirements at  lowest cost  -- by placing  the originally-
   intended  order, placing an order against another firm's schedule
   contract,  or  conducting  a   competitive  procurement.    FIRMR
   201-39.501-3(c),  201-39.803-3(b).  If an order is placed against
   a  schedule contract, the  agency must "promptly  provide written
   notification of award  to the synopsized  schedule vendor and  to
   all  parties responding  in writing  to the  CBD notice."   FIRMR
   201-39.803-3(c).
 
        The  IRS  followed  none  of  these  rules  in  the  actions
   challenged  through  ISG's  protests.   The  agency  attempted to
   justify a restrictive  requirement -- that only  Sun workstations
   would satisfy  its needs --  after it published the  CBD notices,
   rather than  before.   The justifications  it wrote pertained  to
   different workstations from  the ones it eventually  bought.  The
   agency  never synopsized the  orders it placed;  the workstations
   ultimately  ordered  were  significantly less  powerful  and less
   expensive than the ones it announced an  intention to buy.  Thus,
   neither ISG  nor any other  vendor had sufficient  information to
   provide a response as to what items it might provide, and at what
   prices, if  it were allowed  to satisfy the  revised requirements
   through a competitively-awarded contract.  Federal Systems Group,
   Inc., GSBCA 9924-P,  et al., 89-2 BCA   21,758,  at 109,500, 1989
   BPD    105, at  8.   Consequently,  the  IRS had  no  data as  to
   alternatives  to placing the  orders it issued,  and therefore no
   basis  for concluding that  GTSI's schedule contract  offered the
   lowest cost  alternatives.2   Finally, the  agency  did not  give
   ISG, which did  respond to the CBD  notices, written notification
   that the orders had been made.
 
        On the basis of the record in these protests, we have  three
   additional   concerns  about  the  IRS's  actions.    First,  the
   Justifications for Other than Full and Open Competition, on their
   face,  establish that  restricting  competition to  the  specific
   makes and models of equipment  stated is inappropriate.  The fact
   that agency  personnel know and like Sun  products is not a valid
   reason for  restricting competition.   Because  the agency  knows
   that  several manufacturers  make products  which  will meet  its
   needs,  permitting   only  Sun   products  to   be  supplied   is
   unnecessarily  restrictive and  therefore contrary  to  law.   41
   U.S.C.   253a (1988).   Additionally, once  the IRS learned  that
   vendors  believed that  Tatung products  could  also meet  stated
   agency needs, the IRS should have reviewed  the Justifications to
   see whether they were in error.
 
        Second,  the IRS's determination  that ISG's Tatung products
   are   inadequate   was   improper  because   it   was   based  on
   qualifications which  were never stated  in the CBD notices.   If
   the  specifications against which the Tatung products were judged
                       
   ____________________
 
        2    The  IRS appears to  believe that the  FIRMR permits an
   agency to  send successive rounds of synopses  to limited numbers
   of vendors, subsequent  to redeterminations of agency  needs, and
   then to decide  on a course of  action based on responses  to the
   latest round.   This is  not so.   Even if  it were, however,  we
   still  could not find  that the IRS  had information  on which to
   base a  conclusion that  placing its orders  was the  lowest cost
   alternative available.   The agency ordered goods  different from
   those denominated  in the  list it sent  to the limited  group of
   vendors; thus,  it never sought  or received any price  data from
   any firm  other than the  selected schedule contractor as  to the
   precise goods it finally received.
   represent  actual  needs,  they  should have  been  stated  in  a
   synopsis; a vendor reading the  notice would then have known that
   his response would  have to state an ability to  supply a product
   with  requisite components.   Federal Systems Group,  89-2 BCA at
   109,500,  1989  BPD   105,  at 8-9.    The IRS  had no  basis for
   concluding that  ISG (or  another vendor),  upon learning  of the
   agency's  complete  requirements, could  not  configure  a Tatung
   workstation to meet  those requirements.  The  specifications may
   also  have an  impact  on whether  restricting  competition to  a
   particular manufacturer's goods is permissible.
 
 
        Third, the  IRS has provided  absolutely no support  for the
   proposition  that  the  administrative  cost  of  conducting  the
   procurement necessary to  acquire each group of items in question
   is $14,500.   The amount of administrative costs  is dependent on
   the complexity of a procurement, and ascribing such a high figure
   to what should be a simple acquisition (probably involving sealed
   bidding) seems arbitrary  in the absence of any  evidence that it
   is  reasonable.    Computer   Sales  International,  Inc.,  GSBCA
   10443-P,  90-2 BCA    22,736, at  114,137, 1990  BPD   49,  at 8;
   ISYX, GSBCA 9407-P, 88-2 BCA   20,781, at 105,000, 1988 BPD   78,
   at 8.  Further, as ISG suggests, because the items covered by the
   two notices are so similar, there appears to be no reason why the
   agency could not  conduct a single procurement for  all the goods
   in question; that would reduce  by half the administrative  costs
   of  the acquisition.   On the  basis of  what the  agency learned
   about  the  relationship  between  open-market  prices  and  GTSI
   schedule contract  prices for the  items in question,  it appears
   that  a  competitive procurement  could  well permit  the  IRS to
   acquire  needed goods at less cost, even including administrative
   expenses.
 
                                Decision
 
        The protests are GRANTED.   The IRS shall rescind the orders
   it placed  against GTSI's  GSA schedule  contract.   Because  the
   goods in question have not  been accepted, the orders may not  be
   presumed valid.   40 U.S.C.    759(f)(6)(B) (1988).   The  agency
   shall reconsider its justification for restricting competition to
   vendors who offer Sun workstations, and determine the appropriate
   specifications  for the workstations it  needs.  The agency shall
   then  decide  whether  to conduct  a  competitive  procurement to
   satisfy its requirement,  or to follow the mandates  of the FIRMR
   as to placement of an order against a GSA schedule contract.
 
                                      _________________________
                                      STEPHEN M. DANIELS
                                      Board Judge
   We concur:
   _________________________          _________________________
   ANTHONY S. BORWICK                 ALLAN H. GOODMAN
   Board Judge                        Board Judge