An offeror was not entitled to hold itself out as having a Federal Supply Schedule contract by virtue of its relationship with an affiliated company that held the FSS contract.

In a recent bid protest decision, the Court of Federal Claims held that a FSS award was improper where the awardee’s affiliate–but not the awardee itself–held the proper FSS contract.

The Court’s decision in ARKAY, USA, Inc., v. United States, No. 14-233C (2014) involved a Defense Health Agency procurement for self-monitoring blood glucose strips.  The solicitation contemplated the award of a Blanket Purchase Agreement under the Federal Supply Schedule.  The solicitation specified that offerors were “required to have an existing FSS contract” at the time quotes were submitted.

After evaluating competitive quotations, the government awarded the BPA to Abbott Diabetes Care Sales Corporation.  A competitor, ARKAY USA Inc., filed a bid protest with the Court.  ARKAY argued that ADCSC did not possess an FSS contract at the time quotes were submitted, and thus was ineligible for award.  The Court remanded ARKAY’s initial protest to the Contracting Officer for further review.

The DHA conceded that ADCSC did not possess a FSS contract.  However, the DHA concluded that ADCSC could properly hold itself out as having an FSS contract because ADSCS’s affiliate, Abbott Laboratories, Inc., held such a contract.  ARKAY then filed a second protest, contending that the DHA’s determination was unreasonable.

The Court agreed with ARKAY.  Based on the factual evidence in the record, the Court rejected the DHA’s contention that ADCSC had been acting as ALI’s agent when it submitted its quote.  The Court then addressed the DHA’s contention that the relationship between ADCSC and ALI was “sufficiently close to allow ADCSC to rely on ALI’s FSS contract . . ..”

The Court noted that although ADCSC and ALI were alleged affiliates, they were separate legal entities.  The Court noted that both the Solicitation and the FAR prohibited the DHA from entering into a FSS BPA with a non-Schedule contractor.  Thus, the Court held, “ADCSC’s reliance on ALI’s FSS contract is clearly prohibited by FAR 8.405-3 and the plain language of the solicitation.”  The Court granted ARKAY’s motion for judgment and entered a permanent injunction setting aside the award to ADCSC.

Affiliated companies can sometimes come to think of themselves as one entity, but legal distinctions between affiliated companies cannot be ignored.  As the ARKAY USA decision demonstrates, an offeror cannot rely on its affiliate’s FSS contract to qualify for a Schedule award.  Instead, the offeror itself must hold the FSS contract.