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.