BNUMBER:  B-261561; B-261777; B-261898; B-261899; B-262018
DATE:  September 18, 1995
TITLE:  BF Goodrich Aerospace

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Matter of:   BF Goodrich Aerospace

File:        B-261561; B-261777; B-261898; B-261899; B-262018

Date:     September 18, 1995
                                                                                                                
Albert C. Ruehmann III, Esq., for the protester.
Robert S. Karpinski, Esq., and Harry D. Boonin, Esq., Department of 
the Navy, for the agency.
Tania L. Calhoun, Esq., and Ralph O. White, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.
                                                                                                                
DIGEST

Under solicitations for spare parts subject to source approval, 
contracting agency properly provided an alternative method of source 
approval by way of a licensing agreement with the original equipment 
manufacturer of the spare parts at issue for such things as 
certification, review, and approval, where the contracting agency is 
unable to assume these responsibilities and where the licensing 
agreement provision will allow for full and open competition.
                                                                                                                
DECISION

BF Goodrich Aerospace (BFG) protests the terms of request for proposal 
(RFP) Nos. N00383-94-R-0401, N00383-95-R-D364, N00383-95-R-D365, 
N00383-95-R-D366, and N00383-94-R-D260, issued by the Department of 
the Navy's Naval Aviation Supply Office (ASO) for various components 
of the landing gear assembly used on the Navy's F/A-18 aircraft.[1]  
BFG objects to the solicitations' alternative source approval 
arrangement whereby successful offerors must have an agreement with 
McDonnell Douglas Aerospace, the original equipment manufacturer and 
design control agent of these parts, for certification, review, and 
approval of the parts prior to award.

We deny the protests.

These flight-critical spare parts are subject to source approval 
pursuant to 10 U.S.C.  2319 (1994).  To obtain source approval from 
ASO, a contractor must submit documentation to demonstrate its 
capability to manufacture the required parts.  The Navy reviews the 
data to determine, among other things, whether the new source is 
introducing any changes, and whether the parts will be as reliable and 
durable as those provided by the original equipment manufacturer, the 
only currently approved source for these parts.

Until recently, ASO had two sources for these parts--McDonnell Douglas 
and BFG.  Also until recently, BFG supplied these parts to McDonnell 
Douglas for use on McDonnell Douglas's Navy aircraft production 
contracts.  As McDonnell Douglas's supplier, the firm received copies 
of all updates to the technical data and was able to propose 
engineering changes, waivers and deviations.  Under these 
circumstances, ASO was able to use BFG as an alternate source for 
these parts.

The Navy's review of these solicitation requirements revealed a number 
of impediments to approving new sources and retaining approval of 
existing sources for these parts.  First, the Navy did not possess all 
of the necessary data for the manufacture of these items and thus 
could not provide it to prospective offerors.  The Navy had also been 
unable to obtain timely updates to the drawings it did possess and 
thus was unable to determine whether the data packages utilized by 
prospective offerors were current.  Second, BFG no longer receives 
technical and data updates and other support from McDonnell Douglas 
because its production contract has expired, and McDonnell Douglas has 
contracted with other suppliers.  Third, the data is subject to 
frequent updates due to the instability of the F/A-18's landing gear 
design.  Fourth, the Navy was not in a position to evaluate the impact 
of various nonconformances documented as waivers, deviations and/or 
Material Review Board (MRB)[2] actions as they occur in manufacture.

The Navy states that when it realized it could not assume the quality 
assurance responsibilities that had been previously performed by 
McDonnell Douglas, its only alternative was to procure these parts on 
a sole-source basis from McDonnell Douglas.[3]  However, McDonnell 
Douglas agreed to expand the source base by offering licensing 
agreements which provide for the services necessary to ensure that the 
product delivered meets the same reliability and durability as the 
items previously provided.  The Navy agreed to approve alternate 
sources if McDonnell Douglas would provide engineering support, MRB 
support, manufacturing data and other support and guidance to firms 
that qualify pursuant to ASO's source approval procedures.

At an August conference for potential sources of the parts, attended 
by BFG, ASO presented the qualification requirements that would be 
incorporated into these solicitations.  At this meeting, McDonnell 
Douglas announced that it was "getting out of the landing gear 
business."

These solicitations here were subsequently issued or amended to 
include the qualification requirements.  Offerors were required to 
demonstrate, by the time of contract award, a bilateral agreement with 
McDonnell Douglas which would provide for (1) McDonnell Douglas 
certification that the offeror possessed complete technical data 
representing the latest configuration, and utilized such data in 
manufacture; (2) McDonnell Douglas review, disposition and 
certification of all MRB actions, requests for waivers and deviations, 
and requests for acceptance of material nonconformities; (3) McDonnell 
Douglas review and approval of process/operation sheets; and (4) 
McDonnell Douglas participation, performance, review and approval of 
first article inspection.  Any offeror not having such a bilateral 
agreement with McDonnell Douglas, but desiring to seek source 
approval, was required to submit data meeting all of the requirements 
of ASO's source approval brochure.[4]  BFG argues that it does not 
need to be licensed by McDonnell Douglas as it has ready access to the 
drawings in question.

When a contracting agency restricts contract award to an approved 
product, and imposes a qualification requirement, it must give 
unapproved sources a reasonable opportunity to qualify.  10 U.S.C.  
2319; Vac-Hyd Corp., 64 Comp. Gen. 658 (1985), 85-2 CPD  2; Advanced 
Seal Technology, Inc., B-249885.2, Feb. 15, 1993, 93-1 CPD  137.  
This opportunity typically takes the form of the source approval 
process described above, wherein offerors submit technical data 
packages for agency approval.  However, because the Navy does not 
physically possess much of the necessary data for source approval,[5] 
it provided offerors the opportunity to compete by way of the 
licensing agreement with McDonnell Douglas.

In its comments, BFG does not dispute the Navy's contention that it is 
no longer provided updates from McDonnell Douglas because its 
production contract has expired, or that there may have been 
significant changes in the data since the expiration of that contract.  
Instead, BFG argues that McDonnell Douglas's processing and 
manufacturing know-how is not exclusive, and that there are many ways 
to manufacture these parts.  This argument overlooks the fact that 
processing and manufacturing procedures, different though they may be, 
must all result in a spare part that conforms to the current design 
controled by McDonnell Douglas.  Because an offeror has the burden of 
demonstrating its qualification and the acceptability of alternate 
products, Sterling Mach. Co., Inc., B-246467, Mar. 2, 1992, 92-1 CPD  
253, and the record is clear that McDonnell Douglas is in the best 
position to gauge that acceptability, we do not believe that the 
alternative licensing arrangement with McDonnell Douglas is 
improper.[6]

As a final matter, we note that Congress has long been concerned with 
the extent of competition for parts such as these.  See, e.g., Defense 
Procurement:  Acquiring Technical Data for Spare Parts Procurement, 
GAO/NSIAD-91-313, Sept. 1991; Spare Parts Procurement:  Contractor 
Qualification Requirements, GAO/NSIAD-90-138, Apr. 1990; Procurement:  
Limited Data on DOD's Parts Breakout Program, GAO/NSIAD-87-16BR, Oct. 
1986.  Although, on this record, we conclude that there is nothing 
inherently improper in the Navy's arrangement with McDonnell Douglas 
to permit that company to assist the Navy in approving new sources for 
these parts, the Navy's reliance on the original equipment 
manufacturer will not absolve the Navy of its ultimate responsibility 
to ensure that potential offerors are receiving a fair opportunity to 
compete for the opportunity to manufacture these parts.  In the event 
this approach does not provide a meaningful opportunity for offerors 
to gain timely approval to produce such parts, the Navy's approach may 
not withstand future scrutiny.

The protests are denied.

 \s\ Ronald Berger
 for Robert P. Murphy
     General Counsel

1. These parts are a restrictor support, an adapter assembly, a piston 
assembly, a spur gear, and a torque arm assembly, respectively.

2. The MRB is the formal contractor-government board established for 
the purpose of reviewing, evaluating and disposing of specific 
nonconforming supplies or services, and for assuring the initiation 
and accomplishment of corrective action to preclude recurrence.

3. If the prime contractor has responsibility for quality that a new 
source cannot assume or obtain, or that the government cannot 
undertake or eliminate, consideration of the new source is precluded.  
Defense Federal Acquisition Regulation Supplement, Appendix E,  
E-303.4(c)(5)(ii).

4. The Navy concedes that, due to the urgency of these requirements, 
there is insufficient time for offerors to complete the source 
approval process prior to award.

5. The Navy states that it has the rights to the data available in the 
data repository but, contrary to BFG's assertion, it does not 
physically possess all of the necessary data for the manufacture of 
these parts.

6. While BFG also argues that the Navy has not properly analyzed the 
potential impact of McDonnell Douglas's future return into the market, 
in light of McDonnell Douglas's express statement that it is "getting 
out of the landing gear business," and the fact that it has not 
submitted a proposal on any ASO procurements for landing gear 
components, we see no reason for the Navy to further analyze the 
situation.