BNUMBER:  B-280194 
DATE:  September 4, 1998
TITLE: National Airmotive Corporation, B-280194, September 4, 1998
**********************************************************************

DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective 
Order.  This redacted version has been approved for public release.
Matter of:National Airmotive Corporation

File:     B-280194

Date:September 4, 1998

David R. Johnson, Esq., Diana G. Richard, Esq., James C. Dougherty, 
Esq., and Rachel Courtney, Esq., Gibson, Dunn & Crutcher, for the 
protester.
Gregory H. Petkoff, Esq., Marian Sullivan, Esq., and John Lariccia, 
Esq. Department of the Air Force, for the agency.
Glenn G. Wolcott, Esq., Paul E. Jordan, Esq., and Paul Lieberman, 
Esq., Office of the General Counsel, GAO, participated in the 
preparation of the decision.

DIGEST

In procurement for maintenance and repair of three aircraft engines 
presently performed at the same depot, where the Air Force has shown a 
currently degraded war readiness posture for the specific engines at 
issue and has provided support for its assessment that transitioning 
the engine workloads to multiple contractors, rather than to a single 
contractor, would likely reduce productivity during the transition, 
the Air Force did not act unreasonably in concluding that 
transitioning the workloads to multiple contractors would create an 
unacceptable risk to the readiness status of these engines and, 
therefore, that combining the three engines' workloads in one 
procurement is necessary to meet the agency's needs. 

DECISION

National Airmotive Corporation protests the provisions of request for 
proposals (RFP) No. F41608-98-R-0084, issued by the Department of the 
Air Force for the public/private competition of various workload 
requirements related to the depot-level maintenance and repair of 
T-56, TF-39, and F-100 aircraft engines.  The requirements are 
currently being performed at the San Antonio Air Logistics Center, 
Kelly Air Force Base (AFB), Texas, which is scheduled to be closed in 
2001.  National Airmotive maintains that it is a potential offeror for 
work relating only to the T-56 engine and protests that, by combining 
the workloads and requiring offerors to submit proposals for all of 
the combined work, the solicitation unduly restricts competition.

We deny the protest.

BACKGROUND

In July 1995, the Base Realignment and Closure (BRAC) Commission 
recommended that Kelly AFB be realigned and the San Antonio Air 
Logistics Center be closed by July 2001.[1]  Since that decision, 
there has been a continuing debate over the process for deciding 
where, and by whom, the workloads at the closing depots will be 
performed.

Last year, the National Defense Authorization Act for Fiscal Year 
1998, Pub. L. 105-85, 111 Stat. 1629, 1696 (Nov. 18, 1997) established 
certain requirements which are applicable to transition of the 
workloads currently being performed at Kelly AFB.[2]  10 U.S.C.A.  sec.  
2469a (West Supp. 1998).  Among other things, the Authorization Act 
provides that a procurement which combines multiple depot-level 
maintenance and repair workloads is permissible only if:  (1) the 
Secretary of Defense determines in writing that the individual 
workloads cannot "as logically and economically" be performed without 
combination; (2) the Secretary submits a report to Congress setting 
forth the determination along with the reasons for the determination; 
and (3) no solicitation is issued for 60 days following submission of 
the report.  10 U.S.C.A.  sec.  2469a(e)(1).  

On December 19, 1997, the Undersecretary of Defense for Acquisition 
and Training executed the required determination regarding combination 
of the San Antonio workloads, reporting that determination along with 
the supporting reasons to Congress.  Among other things, the 
Undersecretary's report stated that the three engines' workloads are 
currently managed as a single commodity; that the workloads share 
certain common processes which utilize common facilities, equipment 
and personnel skills; and that a single coordinated transition will 
mitigate readiness risks associated with transitioning to multiple 
contractors. 

The Authorization Act also required that the Comptroller General 
review and report on various aspects of the Department of Defense's 
(DOD) transition activities.  Since the DOD determination, the General 
Accounting Office (GAO) has issued three reports concerning transition 
of the San Antonio workloads which, among other things, criticize the 
adequacy of the information that DOD provided in support of the 
determination to combine workloads.[3]  In the first report, issued in 
January 1998,[4] GAO stated, among other things, that:  

        It may be that the individual workloads at the closing San 
        Antonio, Texas, and Sacramento, California, Air Force 
        maintenance depots cannot as logically and economically be 
        performed without combination . . . .  However, the DOD 
        reports and supporting data do not provide adequate 
        information supporting the determinations.

GAO/NSIAD-98-76 at 3.

In April, following DOD's issuance of a February 24 document titled 
"Rationale for Combining Multiple Depot-Level Maintenance and Repair 
Workloads (San Antonio)" containing additional support for the 
determination, GAO issued a second report[5] stating:

     While we recognize that the determination[] ultimately 
     represent[s] a management judgment based on various qualitative 
     and quantitative factors and that DOD's determination[] may well 
     be appropriate, the rationale presented in the . . . San Antonio 
     report for combining workloads in [a] single solicitation[] . . . 
     is not well supported. 

GAO/NSIAD-98-143 at 3.

Finally, in May, GAO issued a third report,[6] stating:

        [T]he Air Force has not, as of May 5, provided a sufficient 
        basis to show that soliciting the workloads on a combined 
        basis is necessary to satisfy its needs.  Otherwise, we found 
        that the solicitation is in compliance with applicable laws, 
        including the provisions of 10 U.S.C. 2469a.

                   *     *    *    *    *    

        Normally, we review the solicitation of combined requirements 
        in the context of a bid protest; in that context, the agency 
        has an opportunity to justify the combination by showing it is 
        reasonably related to its needs or that it may actually 
        enhance competition.  The Air Force's supporting rationale, 
        which was prepared in a different context, is not at this 
        point sufficient to justify the workload combination.  
        However, the rationale for the combination contains some 
        elements--such as readiness concerns and potential competition 
        enhancements--that if supported could establish the 
        reasonableness of the combination under the acquisition laws.

GAO/OGC-98-49 at 3-4.

In Appendix I, the report noted, "if a protest is filed, the Air Force 
will have an opportunity to provide a more detailed justification."  
Id. at 17.

On May 29, National Airmotive filed the protest at issue here.

DISCUSSION

The Competition in Contracting Act of 1984 (CICA) generally requires 
that solicitations include specifications that provide for full and 
open competition, and contain restrictive provisions only to the 
extent necessary to satisfy the needs of the agency.  10 U.S.C.  sec.  
2305(a)(1)(A)(i),(B) (1994).  Since solicitations which combine 
multiple requirements have the potential for restricting competition 
by excluding firms that can furnish only a portion of the combined 
requirements, we review such solicitations to determine whether the 
procuring agency's approach is reasonably required to satisfy the 
agency's needs.  See, e.g., National Customer Eng'g, B-251135, Mar. 
11, 1993, 93-1 CPD  para.  225 at 4-5.  In reviewing the propriety of 
combined requirements, we recognize that contracting officials must 
base their decisions regarding consolidation of requirements on the 
individual facts involved in each procurement.  The Sequoia Group, 
Inc., B-252016, May 24, 1993, 93-1 CPD  para.  405 at 5.  

In considering National Airmotive's protest, we have reviewed the 
agency's initial response to the protest, along with the documents 
produced by the Air Force in response to National Airmotive's document 
production requests, and the record of hearings conducted both at GAO 
headquarters and via telephone conference calls during which various 
Air Force witnesses provided direct testimony and responded to 
cross-examination by counsel for National Airmotive.[7]  We have also 
considered additional affidavits submitted by Air Force and DOD 
personnel and by executives of National Airmotive's parent 
corporation,[8] as well as the various briefs and other submissions 
filed by counsel for both parties.  

The Air Force states that the determination to combine the engine 
workloads was driven by the agency's need to meet war readiness 
requirements as measured by criteria specifically tied to the three 
engines at issue.  The Air Force explains that current inventories for 
two of the three engines are below acceptable readiness levels, and 
that inventories for the third engine have only recently reached 
minimally acceptable levels.  Hearing Transcript (Tr.) at 219-20, 
300-04.  The Air Force maintains that any workload transition may 
cause productivity declines, thereby further weakening the currently 
degraded readiness posture of these engines, and that transitioning to 
multiple contractors will increase the risk of lost productivity, 
creating what the Air Force states is an unacceptable readiness risk.  
Tr. at 11, 18-19, 194-98, 201-05; Zettler Affidavit at  para.  8.[9] 

The criterion on which the Air Force primarily relies for its war 
readiness assessment is "war readiness engines" (WRE), which 
represents the number of net serviceable engines required by the Air 
Force to support its wartime flying requirements.[10]  Because data 
regarding WRE as a readiness measurement was not offered as support 
for the single contract, it was not considered by GAO evaluators in 
preparing the prior reports.[11]  However, consistent with the Air 
Force's reliance on WRE, section L of the solicitation, titled 
"Instruction to Offerors," requires that offerors' proposals "shall 
describe the contractor's ability to . . . [i]mprove fleet readiness 
through increased War Readiness Engine (WRE) levels," and identifies 
the current levels of serviceable engines and the WRE levels sought 
for the various engines.  RFP  sec.  L-900.4.3.1, 4.3.6.  

In considering whether the WRE requirements constitute valid readiness 
measurements, we note that the Air Force has calculated both the WRE 
requirements and the inventory levels on a monthly basis for an 
extended period of time.[12]  For a period of time substantially 
preceding the BRAC Commission's recommendation to close Kelly AFB, the 
WRE requirements levels have not changed dramatically.[13]  Further, 
National Airmotive does not challenge the validity of WRE as a 
readiness measurement tool.  Tr. at 346, 363.  Based on this record, 
we found no basis to question the WRE data on which the Air Force 
bases its assertion regarding the current readiness posture of the 
three engines.  

Recognizing the legitimacy of the Air Force concern with the currently 
degraded readiness status of the specific engines at issue here, we 
next considered the support presented by the Air Force for its 
determination that transitioning the workloads to multiple contractors 
is likely to result in a greater loss of productivity than 
transitioning to a single contractor.  National Airmotive maintains 
that it is unreasonable for the Air Force to conclude that there is 
any greater risk of productivity loss associated with transition to 
multiple contractors.  We disagree.

First, the record reflects, and National Airmotive does not dispute, 
that there are a substantial number of common processes involved in 
the three engines' workloads.  More specifically, approximately 35 
percent of the overall time spent in the overhaul and repair process 
is spent performing processes that are common to all three 
engines.[14]  Contracting Officer Statement at 7; Agency Report, Tab 
20 at 7.  Consistent with this significant level of common work, the 
Air Force states that the three engines are currently managed as a 
single commodity and, thus, current management activities would have 
to be altered if the workloads were divided.  Tr. at 194-98.  The Air 
Force concludes that transitioning the workload in a manner that is 
inconsistent with the manner in which the engine work is currently 
performed would likely cause additional inefficiencies and additional 
loss of productivity at both the closing and gaining facilities, 
thereby creating further deterioration of the currently degraded 
readiness status of the engines.
  
In the context of the significant common processes, the record also 
shows that there is a significant amount of common equipment currently 
used to perform the three engines' workloads, use of which the 
offerors may include in their proposals.[15]  If the solicitation 
permitted proposals for only individual portions of the combined 
workloads, the agency would have to evaluate proposals based on 
offerors' potentially inconsistent assumptions regarding the 
availability of the existing equipment or, alternatively, designate in 
the solicitation an allocation of the common equipment between the 
individual workloads.[16]  Tr. at 204-05.  Either alternative presents 
substantial risk of inefficiencies and negative impacts on 
productivity, both with regard to completion of the work in process 
and new work initiated by the contract awardees following award.  

By combining the workload requirements, the agency effectively 
requires the prime contractor for each offering team to be responsible 
for coordinating its subcontractors' proposed use of common resources 
and to avoid or resolve subcontractor disputes before proposals are 
submitted as well as maintain such responsibility following contract 
award, which the Air Force believes will increase productivity and 
decrease the potential further degradation of readiness.[17]  In this 
context, the Air Force notes that its ability to manage transition 
efforts has steadily diminished since the BRAC Commission's closure 
recommendation, specifically referencing the fact that it has 
experienced attrition rates of 30 percent per year with regard to 
engineers and contract specialists at San Antonio.  Tr. at 203.  

The Air Force also relies on its past experience with other workload 
transition efforts, noting that in the past it has experienced 
significant productivity losses associated with, among other things, 
multiple coordination points, differing interpretations of task 
orders, and multiple learning curves.  The Air Force also states that 
the size and complexity of the workloads involved here are greater 
than that presented in prior transitions and, accordingly, contain 
inherently greater risks than the Air Force has previously 
experienced.  Finally, the Air Force notes that the transition of the 
San Antonio workloads must be completed in time to completely close 
the Air Logistics Center by July 2001; accordingly, the Air Force 
maintains that it has scheduling constraints which further increase 
the risks associated with multiple transitions.  Tr. at 202. 

We have explicitly recognized that a combination of workload 
requirements may be reasonably required by the agency's needs to 
ensure military readiness.  Southwestern Bell Tel. Co., B-231822, 
Sept. 29, 1988, 88-2 CPD  para.  300 at 4.  Similarly, we have upheld an 
agency's combination of workload requirements:  where a single 
contractor was necessary to ensure the effective coordination of tasks 
due to the agency's significant loss of personnel capable of handling 
the coordination, Border Maintenance Serv., Inc., B-260954, 
B-260954.2, June 21, 1995, 95-1 CPD  para.  287 at 3; to ensure availability 
of a system in emergency situations, Institutional Communications Co., 
B-233058.5, Mar. 18, 1991, 91-1 CPD  para.  292 at 8; and where there are 
critical schedule demands.  Electro-Methods, Inc., B-239141.2, Nov. 5, 
1990, 90-2 CPD  para.  363 at 5.  Cf. National Customer Eng'g, supra, at 6 
("mere administrative convenience cannot justify restricting 
competition").

Here, in the context of the Air Force's currently degraded readiness 
status with respect to the engines at issue, we cannot find 
unreasonable the Air Force determination that combining the workloads 
is necessitated by the Air Force's war readiness needs.  First, the 
agency has documented the specific basis for its concerns regarding 
its current readiness posture.  Next, the agency has provided a basis 
for concluding that transitioning to multiple contractors creates a 
greater risk of decreased productivity than does transitioning to a 
single contractor.  Specifically, we cannot find unreasonable the Air 
Force's conclusion that these workloads have significant common 
processes, and that transitioning such workloads in a manner 
consistent with the manner in which the workloads are currently 
performed, to a prime contractor who is contractually motivated to 
avoid or resolve subcontractor disputes both during proposal 
preparation and after contract award, will reduce the risk of 
productivity declines that could occur if the Air Force were to 
administer multiple contracts for individual workloads with its 
diminishing personnel resources.[18]  

It is true that, when an agency's interests in administrative 
convenience are weighed against interests in maximizing competition, 
CICA requires the scales to tip in favor of maximizing competition.  
Id.  However, in contrast, when legitimate, properly documented, 
national security concerns are weighed against interests in maximizing 
competition, the scales must tip towards national security.  See 
Southwestern Bell Tel. Co., supra.  The situation presented here is 
not akin to "mere administrative convenience." Cf. National Customer 
Eng'g, supra.  Based on the record, we view the risk of an adverse 
impact on readiness as constituting a legitimate need which outweighs 
National Airmotive's competing concerns regarding restrictive 
specifications.  Because, in the specific factual circumstances 
present here, we conclude that the Air Force has reasonably determined 
that potential productivity declines associated with transition to 
multiple contractors risks further weakening of the Air Force's 
currently degraded readiness posture, we cannot find the determination 
to combine the workloads unreasonable and, accordingly, we have no 
basis to sustain the protest. 

The protest is denied.[19]

Comptroller General
of the United States 

1. At that time, the BRAC Commission similarly recommended closure of 
the Sacramento Air Logistics Center at McClellan AFB, California 
within the same time frame.

2. The Authorization Act's requirements in this regard are also 
applicable to the work being performed at McClellan AFB, California.

3. In March, GAO testified before a Congressional Subcommittee that 
lack of access to information within DOD was seriously impairing GAO's 
ability to carry out its reporting requirements, specifically noting 
that the Air Force had not been responsive to GAO's continuing 
requests for information relative to the San Antonio competition.  
Testimony of Henry L. Hinton, Jr., Assistant Comptroller General, 
National Security and International Affairs Division, before the 
Senate Armed Services Committee, Subcommittee on Readiness, 
(GAO/T-NSIAD-98-111, March 4, 1998) at 1-2.

4. Public-Private Competitions:  DOD's Determination to Combine Depot 
Workloads Is Not Adequately Supported, (GAO/NSIAD-98-76, January 20, 
1998).  This report was written in response to the Authorization Act's 
requirement that "[t]he Comptroller General shall review [the DOD 
report] and . . . submit to Congress the Comptroller General's views 
regarding the determination of the Secretary."  10 U.S.C.A.  sec.  
2469a(e)(2).

5. Public-Private Competitions:  DOD's Additional Support for 
Combining Depot Workloads Contains Weaknesses, (GAO/NSIAD-98-143, 
April 17, 1998).

6. Public-Private Competitions:  Review of San Antonio Depot 
Solicitation, (GAO/OGC-98-49, May 14, 1998).  This report was written 
in response to the Authorization Act's requirement that GAO report 
within 45 days after issuance of the San Antonio solicitation 
regarding:  (1) whether the solicitation complies with applicable laws 
and regulations; and (2) whether the solicitation provides a 
"substantially equal opportunity for public and private offers to 
compete for the contract without regard to the location at which the 
workload is to be performed."  10 U.S.C.A.  sec.  2469a(g).

7. Air Force witnesses included: Darleen A. Druyun, Principal Deputy 
Assistant Secretary of the Air Force for Acquisition and Management; 
Colonel Darryl A. Scott, Director of Contracting at the San Antonio 
Air Logistics Center; Major General Michael E. Zettler, Director of 
Maintenance for the Air Force; General George T. Babbitt, Commander of 
the Air Force Materiel Command; Mark Burrell, Audit Manager, Air Force 
Audit Agency; and Lt. Colonel Richard Lombardi, Program Manager of the 
Propulsion Business Area at San Antonio Air Logistics Center.  
Citations to the hearing transcript refer to the hearing held on 
August 5-6.

8. Following the hearing conducted at GAO on August 5-6, affidavits 
were submitted by General Joseph W. Ralston, USAF, Vice Chairman of 
the Joint Chiefs of Staff; Major General James S. Childress, Commander 
of the San Antonio Air Logistics Center; and General Richard E. 
Hawley, Commander of Air Force Air Combat Command.  Thereafter, 
National Airmotive submitted affidavits by Aaron P. Hollander, 
Chairman of the Board, First Aviation Services (National Airmotive's 
parent corporation); and Michael C. Culver, Chief Executive Officer of 
First Aviation Services.  

9. The Air Force's perceptions and conclusions regarding the impact on 
readiness were confirmed in the affidavit submitted by General Joseph 
W. Ralston, USAF, Vice Chairman of the Joint Chiefs of Staff.

10. WRE requirements are drawn from a model in the Air Force's 
propulsion requirements system which assesses the number of engines 
necessary to sustain the higher levels of aircraft usage mandated by a 
wartime scenario--for example, elevated numbers of sorties flown per 
day, per aircraft.  The WRE requirements for each engine represent the 
inventory levels necessary to sustain required combat capabilities for 
a period of time after initiation of a war effort and until the Air 
Force is able to increase its resupply efforts to keep pace with the 
higher wartime flying requirements.  Tr. at 343-44.

11. To the extent GAO's prior reports regarding the San Antonio 
procurement considered readiness issues, they were based only on "unit 
readiness" data.  That data reflects Air Force units' ability to begin 
responding to combat requirements at the outset of a conflict.

12. The protest record contains monthly data going back to December 
1993.  Agency Report, Tab 7.  Consideration of the data to a point 
substantially preceding the BRAC Commission recommendation is relevant 
in assessing whether that recommendation or subsequent events may have 
had an impact on the requirements data.  

13. To the extent the WRE requirements have changed, they have 
generally declined.

14. The common processes include brazing, cleaning, electronics, 
inspecting, machining, metal spray work, plating, painting, sheet 
metal work, testing, and welding.

15. For example, the RFP provides that any existing equipment that the 
public offeror identifies in its proposal for its use at a location 
other than Kelly AFB "shall be transferred to the public offeror's 
custody."  RFP  sec.  L-900.4.2.5.2.3.1.  Similarly, the RFP provides that 
existing equipment identified in a private offeror's proposal for use 
at a location other than Kelly AFB "will be provided by the Government 
as GFE."  RFP  sec.  L-900.4.2.5.2.2.2.  

16. Although counsel for National Airmotive suggested at the hearing 
that, if permitted to submit a proposal for a single engine's 
workload, National Airmotive would not rely on any resources currently 
in use, Tr. at 523, we have no basis to conclude that the contracting 
officer should make a similar assumption with regard to all potential 
offerors regarding each of the individual workloads.

17. The Air Force notes that the solicitation is specifically drafted 
in a way to motivate the prime contractor to successfully accomplish 
an efficient transition.  In this regard, RFP  sec.  M-900.4.4 provides 
that, in conducting an integrated assessment of best value, transition 
is equal in importance to the other two criteria--repair operations 
and cost--even though transition efforts will extend for only a 
relatively small portion of the potential 15-year period of contract 
performance.

18. National Airmotive's protest maintains that each of the three 
engines' workloads should be competed separately.  During the course 
of the protest, National Airmotive focused more specifically on the 
assertion that, even if the workloads for the F-100 and TF-39 engines 
were found to be reasonably combined, the agency should separately 
compete the T-56 workloads.  The Air Force response focuses much of 
its discussion on the risks associated with three contract awards 
rather than on the risks associated with separately competing only the 
T-56.  Nonetheless, the overriding basis for the Air Force's 
determination to combine the workloads is that multiple transitions 
increase the identified risks, while a single transition minimizes 
those risks, and that the risks associated with more than one award 
create an unacceptable threat to readiness.  In our view the Air Force 
determination that, in the factual context of this procurement, 
transition to multiple prime contractors presents an unacceptable risk 
to readiness is applicable to the separation of the T-56 workloads 
from the F-100 and TF-39 workloads as well as to the separation of all 
three.

19. National Airmotive's protest contains various other complaints 
regarding this procurement.  We have considered all of National 
Airmotive's allegations and, in light of our conclusions discussed 
above, find no basis to sustain the protest.