Summary
The COFC commented that the Department of Defense (DOD) is required by statute to acquire services from commercial sources if these sources can provide them at a cost that is lower than government sources can provide.27 Although the statute does not specify how to compare the cost of private versus public performance, it states that the DOD shall ensure that all costs considered are realistic and fair. The COFC also commented that both federal regulatory provisions and the Revised A-76 procedures echo the statutory preference that agencies perform commercial activities with private sector employees if performance by private contractors is less costly than performance by government employees.32 In particular, procurement regulations require the government to compare the cost of government performance versus contractor performance to determine which alternative would be the better value for the government.33 For instance, one provision states that agencies shall perform commercial activities with commercial sources if the services can be procured more economically with commercial sources than with government employees.34 The stated purpose of this series of regulations is to update DOD policies regarding commercial activities as required by E.O. 12615 and OMB Circular A-76. In applying the regulatory provisions and the Revised A-76 to this case, the court found the circular, as an executive policy, is relevant to the DOD only to the extent that the aforementioned federal regulations incorporate it.37 The court stated that these federal regulations do not address a situation, as here, where the government has not completed a resolicitation prior to the expiration of a contract resulting from an earlier A-76 study.38 As such, the court found that under the circumstances of this particular case, the federal regulations did not incorporate the Revised A-76 procedures. Agency heads are also required by Executive Order 12,615 to perform commercial activities with private sector employees if such activities could be performed more economically by private industry. First, only a Contracting Officer may make changes to a contract governing contractors accompanying the force (not the ranking military commander).606 Despite the seemingly plain language in this clause, the way the drafters wrote clause could generate confusion. Specifically, the clause states [i]n addition to the changes otherwise authorized by the Changes clause of this contract, the Contracting Officer may, at any time, by written order identified as a change order, make changes in Government furnished facilities, equipment, material, services, or site . . . Second, the clause clarifies that the security of contractor personnel operating in theater is the responsibility of the Combatant Commander.608 Third, the Contracting Officer has the authority to direct the contractor to remove any of its employees at the contractor's expense.609 Fourth, contractor personnel are entitled to resuscitative care, stabilization, and hospitalization at level III military treatment facilities and transportation in emergencies where loss of life, limb or eyesight could occur.610 This medical care is provided on a reimbursable basis.
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Although the Office of Management and Budget (OMB) published its revised version of OMB Circular A-76 [Revised A-76]1 over two years ago, there are still some unanswered questions concerning its application under certain circumstances. Specifically, one unresolved question is whether the Revised A-76 applies to in-house performance of a commercial activity2 after the expiration of a contract resulting from an earlier standard competition3 or cost comparison.4
In LABAT-Anderson, Inc. v. United States,5 the plaintiff (LABAT) requested that the Court of Federal Claims (COFC) enjoin the government from allowing in-house employees to perform work LABAT had been performing under a contract. LABAT alleged6 the agency violated the Revised A-76,7 32 C.F.R. Parts 169 and 169a, Exec. Order No. 12,615, and 10 U.S.C. § 2462 by permitting in-house employees to perform a commercial activity after the expiration of a contract resulting from a cost comparison under "Old" A-76.8 Because the COFC concluded that the agency did not violate these sources of law, it denied LABAT's request for an injunction.9 Significantly, the COFC found that in this case, the agency was not required to follow the detailed Revised A-76 procedures in deciding who should perform a commercial activity after the contract expired.10In May 2001, after conducting a cost comparison under the "Old" A-76, the Defense Logistics Agency (DLA) awarded a contract to LABAT for the performance of distribution services at a depot in Cherry Point, North Carolina.11 On 30 September 2004, after some disagreement over contract pricing, the DLA formally notified LABAT that it would not exercise the option to extend the term of the contract.12 The contract was scheduled to expire on 30 November 2004.13Prior to performing this work in-house, the DLA conducted an informal cost study14 comparing the cost of government performance to the cost of LABAT's performance.15 This informal cost study did not strictly comply with the Revised A-76 procedures.16 The DLA concluded that performance in-house would be cheaper than performance by LABAT.17 The DLA then informed LABAT that it would perform the distribution service work with government employees until the DLA could resolicit and award a new contract.18LABAT requested the COFC enjoin the DLA from utilizing its in-house employees to perform the distribution services that LABAT had been performing under contract.19 LABAT alleged that in-house performance of this work violated the sources of government procurement authority listed above.20The DLA moved to dismiss for lack of jurisdiction, arguing that LABAT did not have standing under the Tucker Act to file suit because the case did not involve a pending procurement.21 Although the COFC found that this case did not concern a solicitation or the award of a contract, the case concerned the "decision by the Government not to conduct a solicitation."22 As such, the court found that it had jurisdiction over an "alleged violation of statute or regulation in connection with a procurement."23 Additionally, the COFC found LABAT was an interested party under the Tucker Act and had standing.24 After concluding that it had jurisdiction under the Tucker Act,25 the COFC reviewed the merits of LABAT's request for an injunction.26The COFC commented that the Department of Defense (DOD) is required by statute to acquire services from commercial sources if these sources can provide them at a cost that is lower than government sources can provide.27 Although the statute does not specify how to compare the cost of private versus public performance, it states that the DOD "shall ensure that all costs considered are realistic and fair."28Apply the facts of this case, the court found that even though the DLA did not conduct a competition strictly in accordance with the Revised A-76 procedures, the DLA complied with the statutory requirement because the DLA's informal cost study was "realistic and fair."29 In making its determination, the COFC determined that the DLA used the same computer software that it ordinarily uses to conduct competitions pursuant to the Revised A-76.30 The COFC also found that the DLA reasonably compared the personnel costs, material costs, and supply costs of both parties before determining that performance by in-house personnel would be cheaper than performance by LAJBAT.31The COFC also commented that both federal regulatory provisions and the Revised A-76 procedures echo the statutory preference that agencies perform commercial activities with private sector employees if performance by private contractors is less costly than performance by government employees.32 In particular, procurement regulations require the government to compare the cost of government performance versus contractor performance to determine which alternative would be the better value for the government.33 For instance, one provision states that agencies shall perform commercial activities with co...See the full content of this document
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