BNUMBER: B-280397
DATE: September 25, 1998
TITLE: Pemco Aeroplex, Inc., B-280397, September 25, 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:Pemco Aeroplex, Inc.
File: B-280397
Date:September 25, 1998
Ronald K. Henry, Esq., and Mark A. Riordan, Esq., Kaye, Scholer,
Fierman, Hays & Handler, for the protester.
Thomas J. Madden, Esq., John J. Pavlick, Jr., Esq., Lars E. Anderson,
Esq., and Paul N. Wengert, Esq., Venable, Baetjer, Howard & Civiletti,
for Lockheed Martin Aircraft & Logistics Centers, an intervenor.
Gregory H. Petkoff, Esq., and John Lariccia, Esq., Department of the
Air Force, for the agency.
Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest challenging Air Force decision to use a consolidated
solicitation to procure a significant portion of the workload
currently performed by the Sacramento Air Logistics Center--thus
bundling together programmed depot maintenance for the KC-135
aircraft, inspections and painting of the A-10 aircraft, and overhaul
and repair requirements for hydraulic components, electrical
accessories, and flight instruments--is sustained where the Air Force
is unable to show that combining these requirements is reasonably
required to satisfy the agency's needs.
DECISION
Pemco Aeroplex, Inc. protests the terms of request for proposals (RFP)
No. F04606-98-R-0007, issued by the Department of the Air Force for a
public/private competition for a significant portion of the depot
workload currently performed by the Sacramento Air Logistics Center,
McClellan Air Force Base (AFB), California. McClellan AFB is
scheduled to close in 2001, and the Air Force has consolidated the
depot's workload requirements in the following five areas into a
single solicitation: (1) programmed depot maintenance for the KC-135
aircraft, (2) inspections and painting of the A-10 aircraft, and
overhaul and repair requirements for (3) hydraulic components, (4)
electrical accessories, and (5) flight instruments/electronics. Pemco
asserts that it is a potential offeror for the KC-135 workload, and
protests that the solicitation unduly restricts competition by
combining these requirements into one procurement.
We sustain the protest.
BACKGROUND
In July 1995, the Base Realignment and Closure (BRAC) Commission
recommended that McClellan AFB be closed by July 2001, and that the
workload performed by the Sacramento depot be transferred elsewhere
within the Department of Defense, or to the private sector.[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.
Prior Review by Congress and the General Accounting Office
The National Defense Authorization Act for Fiscal Year 1998, Pub. L.
105-85, 111 Stat. 1629, 1696 (1997), established certain requirements
applicable to the transition of the workloads currently being
performed at Sacramento. 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 Technology executed the required determination regarding
combination of the Sacramento workloads, reporting that determination
along with the supporting reasons to Congress. Among other things,
the Undersecretary's report stated that the consolidated workloads
utilize certain common facilities, equipment and personnel skills;
that combining the workloads will provide for a steady overall
workload, compared to the highly variable workload associated with
some portions of the effort; that significant cost savings will be
derived; 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 for the Sacramento and San Antonio depots.
Since the DOD determination, the General Accounting Office (GAO) has
issued three reports concerning transition of the Sacramento workloads
which, among other things, criticize the adequacy of the information
that DOD provided in support of the determination to combine
workloads. In the first report, issued in January 1998,[2] GAO
stated, among other things:
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
"White Paper on Single vs. Multiple Workload Competitions
(Sacramento)" containing additional support for the determination, GAO
issued a second report,[3] 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 . . . Sacramento
white paper . . . for combining the workloads in [a] single
solicitation[] . . . is not well supported.
GAO/NSIAD-98-143 at 3.
Finally, in May, GAO issued a third report,[4] stating:
[T]he Air Force has not, as of April 22, 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-98-48 at 3-4.
In Appendix I, the report also noted, "if a protest is filed the Air
Force will have an opportunity to provide a more detailed
justification." Id. at 19.
The Solicitation and the Bundled Workload
On March 20, 1998, the Air Force issued the solicitation for the
Sacramento workload, which anticipated award of a variably-priced
contract (cost-plus-award-fee, fixed-price, labor hour, and
cost-reimbursement) for a transition period, a 5-year basic ordering
period, and up to 3 additional ordering years. RFP at 2, 8. The RFP
advised that award would be made to the offeror whose proposal
represents the best value to the government, and that, in addition to
other things, offerors would be evaluated with respect to their
proposed approach to performing this workload in the following areas:
KC-135 aircraft, hydraulics, flight instruments/electronics,
electrical accessories, and A-10 aircraft. RFP sec. M-900, paras. 2.0,
4.1.1a.2.
Over the course of the 8-year performance period, the total estimated
value of this contract is approximately $2.47 billion. Contracting
Officer's (CO) Statement at 1.[5] Of this total, approximately $1.172
billion is related to the aircraft portion of the workload (KC-135,
$1.09 billion; A-10, $82 million), and $1.294 billion is related to
the commodities portion of the workload (hydraulics, $587 million;
flight instruments, $286 million; and electrical accessories, $301
million).[6] Id. at 3-5; Acquisition Plan at 13.
The aircraft portion of this workload is stable: it consists of
programmed depot maintenance for the KC-135, and programmed work for
the A-10. The commodities portion, however, is considerably less
stable. The commodities workload includes almost 2,000
items--approximately 800 in hydraulics, and 600 each in instruments
and electrical accessories. Hearing Transcript[7] (Tr.) at 21. For
each of these items
--in all three areas--approximately 20 percent of the items account
for 80 percent of the value of the work. Tr. at 26-27, 35-36, 229,
246. At the other extreme, the Air Force has no computed workload for
approximately 570 of these nearly 2,000 items. Tr. at 35-36. These
items with no predicted need--any one of which, if in need of repair,
might be critical to the continued operation of an airplane--are
called the "orphan workload." Tr. at 36-40, 229-30.
As described above, the decision to bundle the aircraft and
commodities workloads here into one solicitation was based on a
determination that consolidation would permit utilization of certain
common facilities, equipment and personnel skills; provide a steady
overall workload, compared to the highly variable workload associated
with portions of the component work; achieve significant cost savings;
and provide a single coordinated transition that will mitigate the
readiness risks associated with transitioning to multiple contractors.
In its June 17 protest, Pemco argues that even though it is currently
performing programmed depot maintenance for the KC-135, it cannot
participate in this competition because it does not perform the other
services included in the solicitation. Thus, Pemco claims that the
bundled workload here violates 10 U.S.C.A. sec. 2469a and the Competition
in Contracting Act of 1984 (CICA).
PROCEDURAL ISSUES AND SCOPE OF REVIEW
The Air Force raised two procedural challenges to Pemco's
protest--that Pemco filed its protest too late for consideration by
our forum, and that Pemco's protest fails to state a legally
sufficient challenge to the procurement. For the reasons set forth
below, we disagree on both counts, although the scope of review in
this protest is narrower than the review sought by the protester in
its initial filing.
Our Bid Protest Regulations require that protests based upon
improprieties in a solicitation must be filed prior to the time set
for receipt of initial proposals. 4 C.F.R. sec. 21.2(a)(1) (1998). The
Air Force argues that since potential offerors were required to submit
past performance information "no later than 21 days prior to receipt
of proposals," RFP sec. L-900, para. 7.2a, this challenge to the terms of
the solicitation had to be filed prior to submission of the past
performance information.[8] According to the Air Force, the past
performance information was part of the proposal, and as the first
part filed, serves as the "initial" proposal.
The language of the RFP, on its face, leads us to reject the Air
Force's contention. The first page of the cover memorandum attached to
the solicitation clearly states that "[p]roposals are due by 1630 PST
on 20 May 1998." The requirement to submit past performance
information "prior to proposal submittal" was set forth in a separate
paragraph in that memorandum. Within the RFP, the provision requiring
submission of the past performance information clearly states that the
submission must be made "prior to the receipt of proposals." RFP sec.
L-900, para. 7.2a. In our view, the Air Force cannot reasonably
maintain that providing this information constituted submission of the
proposal. We also do not believe that a reasonable and knowledgeable
offeror would interpret this provision to close the door on its right
to challenge a solicitation prior to initial proposal submission.
Accordingly, since Pemco's July 17 protest challenging the terms of
this solicitation was filed prior to the July 19, 1998 deadline for
receipt of initial proposals, we consider it timely filed.[9]
The Air Force's second procedural challenge concerns the requirements
in our Regulations that protesters include a detailed statement of the
legal and factual grounds of their protests, and that those grounds be
sufficient to pursue a protest. 4 C.F.R. sec. 21.1(c)(4), 21.5(f). In
this regard, the Air Force argues that its decision to bundle the
Sacramento workload requirements was expressly authorized by 10
U.S.C.A sec. 2469a, and that this authorization precludes any further
review under CICA.
As discussed in greater detail below, CICA generally requires that
solicitations include specifications that provide for full and open
competition, and requires that solicitations shall "include
restrictive provisions or conditions only to the extent necessary to
satisfy the needs of the agency or as authorized by law." 10 U.S.C. sec.
2305(a)(1)(A)(i), (B) (1994) (emphasis added). The Authorization Act
language, discussed above, states that:
a solicitation may be issued for [bundling of the depot
requirements] only if --
(A) the Secretary of Defense determines in writing that the
individual workloads cannot as logically and economically be
performed without combination . . . ;
(B) the Secretary submits to Congress a report . . .; and
(C) [the agency waits 60 days before issuing the
solicitation].
10 U.S.C.A. sec. 2469a(e). Accordingly, the Air Force argues that since
it has complied with each of the three requirements above--i.e., the
Secretary determined, the Air Force reported, and the solicitation was
delayed--there is no basis for a further review of its actions here.
Our Office does not view the provisions of 10 U.S.C. sec. 2469a(e) as
falling within the meaning of the "authorized by law" provision of
CICA, nor do we conclude that this statute constitutes a stand-alone
authorization which replaces CICA's limitations on bundling. We reach
this conclusion, in part, because several other portions of section
2469a--notably sections 2469a(f), 2469a(g)(1)(A), and
2469a(g)(2)(A)(ii)--indicate that Congress intended any solicitation
issued under this statute to also comply with other applicable
procurement laws and regulations. Based on the language of the
statute itself--read as a whole, and the absence of any legislative
history to the contrary, we view section 2469a(e) as imposing
additional requirements with which the Air Force and the DOD must
comply, which supplement the limitations in CICA. Thus, we disagree
that Pemco has filed a legally insufficient challenge to the
solicitation here.
On the other hand, our bid protest review here need not consider
further whether this solicitation complies with the requirements of
section 2469a. Our earlier report addressing the Sacramento
solicitation's compliance with applicable laws and regulations found
that, other than bundling, the solicitation complies with the
requirements of section 2469a. GAO/OGC-98-48 at 26. In addition,
none of the pleadings after the initial protest filing raised any
further issue regarding compliance with section 2469a. Thus, our
review will focus solely on whether the bundling here was permitted
under CICA.
DISCUSSION
The Air Force response to Pemco's protest set forth five bases for the
determination to bundle the workloads described above into one
solicitation. These were:
concerns about readiness, adequate competition for all of the
portions of the workload, maintaining and promoting efficiency
and economy in production operations, schedule constraints and
staffing resources.
Agency Memorandum of Law, July 24, 1998, at 13. The Air Force
contends that any one of these concerns provides a reasonable basis
for the determination that bundling this workload is necessary to meet
the agency's minimum needs.
As referenced above, the CICA mandate for full and open competition
permits the use of restrictive specifications only to the extent
necessary to satisfy the needs of the agency. 10 U.S.C. sec. 2305(a)(1).
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.
Readiness
The December 19, 1997 determination by the Undersecretary of Defense
for Acquisition and Technology states, as its final consideration,
that:
the transition of these workloads has the potential to
significantly impact readiness and has been identified as a high
risk area. A single solicitation and resultant award provides
for a single coordinated transition of the common areas, which
will reduce the risk that would be associated with managing
multiple transitions of mission critical workloads.
Report of Determination to Combine Multiple Depot-Level Maintenance
and Repair Workloads, Dec. 19, 1997, at 2. In its report in response
to this protest, the Air Force also argues that consolidation of these
workloads will permit increased ability to respond to demands
experienced in times of war and contingency operations, known as
surge. Agency Memorandum of Law, supra, at 15.
With respect to the first issue, transition risk, the Air Force
explains that it must carefully manage the transition of the depot
workload "to avoid production level decreases that could impact the
Mission Capable Rate for the aircraft and equipment currently
maintained at [Sacramento]." Id. at 14. The Air Force maintains that
any workload transition causes productivity declines, and that
transitioning to multiple contractors will increase those declines.
Tr. at 179, 198-200, 248, 255. In this regard, the Air Force argues
that transitioning to multiple contractors will require multiple
reductions in force (RIF) resulting in additional turbulence and
decreased productivity at McClellan, thus further increasing the risk
to readiness. Tr. at 74, 79-80, 198-99.
With respect to the second issue, ability to support a surge in
requirements, the Air Force explains that one consolidated workload
will permit the contractor to shift workers among the aircraft and
commodity workloads to address changing needs. Agency Memorandum of
Law, supra, at 15; Tr. at 106-10, 259. The Air Force also claims that
a single point of contact for the Air Force customer will improve
readiness. Agency Memorandum of Law, supra, at 16; Tr. at 250-51.
Further, the Air Force argues that the bundling here will increase
readiness by providing a guaranteed source for the orphan workload
portion of the commodities effort. Tr. at 79, 92.
We have reviewed in detail each of the Air Force's claims regarding
the readiness considerations here in light of our view that a
combination of workload requirements may be reasonably required by the
agency's needs to ensure military readiness. National Airmotive
Corp., supra, at 9; Southwestern Bell Tel. Co., B-231822, Sept. 29,
1988, 88-2 CPD para. 300 at 4. We conclude that the Air Force has not
shown a convincing relationship between its determination to bundle
these workloads and its readiness concerns.
Our analysis of these readiness claims begins with the recognition
that the Air Force has not provided additional information different
from that previously considered by GAO in its earlier reviews. Tr. at
135-36. On the same issues, the April GAO report to the Congress
concluded that "there is no inherent reason why these workloads cannot
be transitioned without impacting equipment readiness if the
transition is properly planned and effectively implemented."
GAO/NSIAD-98-143 at 8. Even so, the May review of the terms of this
solicitation acknowledged that "[a] statement that identifies and
fully explains these [readiness] concerns may support the solicitation
of combined requirements." GAO/OGC-98-48 at 20.
With respect to transition risks, we agree with the Air Force's claims
that the transition of the depot workload will require careful
management to avoid decreases in production that could cause a decline
in the Mission Capable Rate for certain aircraft and equipment.
However, these general concerns about risks to readiness would be true
even if the transition were simply from McClellan to another Air Force
depot.
The general risks to readiness here stand in marked contrast to the
specific and detailed concerns raised by the Air Force in the San
Antonio procurement, and addressed in our decision in National
Airmotive Corp., supra. There, the Air Force provided data on the
number of net serviceable engines required by the agency to support
its wartime flying requirements, an assessment known as "war readiness
engines," along with its current inventory levels for the engines.
This information had not been offered as support for a single contract
approach during GAO's earlier considerations (in January and April) of
the determination to combine the workloads, and showed that two of
three engines were at unacceptable readiness levels. The evidence of
degraded major system readiness, together with the more uniform nature
of the workloads--i.e., maintenance and repair of three aircraft
engines--and the conclusion that one awardee would more effectively
accomplish the combined workload for all three engines, led our Office
to conclude that the Air Force's stated need to minimize any risk from
unbundling that workload was reasonable.
Here, however, while the Air Force stated that mission capable rates
for the KC-135 and the A-10 are at slightly less than optimal levels
(Tr. at 233, 236-40), there was no convincing relationship shown
between the Mission Capable Rates for these aircraft and a need to
bundle all five workloads together. In fact, after a lengthy
discussion of readiness and Mission Capable Rates during the hearing
(Tr. at 233-45), the Air Force witness summarized his first concern
about readiness as the ability to find a producer for the commodities
portion of the workload. Tr. at 245. However, the question of
competition for the orphan portion of the commodities workload is
different from the question of readiness. We will return to the
question of adequate competition later.
In its claims that multiple transitions will entail greater risks to
readiness, the Air Force attempts to cast our review of this bundling
determination as a choice between a single transition and multiple
transitions. The record shows, however, that there are already
multiple transitions required to implement the closing of McClellan
AFB. Specifically, we note the following examples--the list is not
comprehensive--of transitions that have nothing to do with this
procurement: (1) the BRAC Commission itself directed that the
communications and electronics repair efforts performed at
Sacramento--approximately 25 percent of the total workload--be
transferred to the Tobyhanna Army depot, in Tobyhanna, Pennsylvania
(Tr. at 46); (2) the software portion of the Sacramento workload will
be transferred to Hill Air Force Base (Tr. at 70); (3) the F-15
aircraft portion of Sacramento's repair workload is being consolidated
at Warner Robins Air Logistics Center (GAO/NSIAD-48-143 at 18); (4)
McClellan's management of 24 separate weapons systems comprised of
almost 48,000 items and $10 billion in inventory will be transitioned
to multiple Air Force recipients (Tr. at 16); and (5) approximately
2,800 tenants--like the 940th Air Refueling Wing, which is headed to
Beale Air Force Base--must relocate (Tr. at 17). Under these
circumstances, the Air Force's contention is not reasonable that
unbundling this procurement, and, for example, procuring the KC-135,
A-10 and the commodities workloads separately, will move the agency
from a single transition to multiple transitions, and, as a result,
significantly increase risks to readiness.[10]
In the final issue regarding transition risks, the Air Force contends
that any unbundling of this workload will require multiple RIFs, thus
generating disruption, loss of productivity, and risks to readiness.
Despite these claims, there is nothing in the record here to block the
Air Force from scheduling any transitions that occur as a result of
unbundling this workload on uniform dates, exactly as the Air Force
currently plans. Even if the Air Force finds it necessary to stagger
its competitions to ensure sufficient agency personnel to conduct the
competitions, Tr. at 102-106, there is no requirement that each
workload awarded be transitioned separately. In short, we see no
reason why the Air Force cannot manage the transfer of workloads here
to avoid the multiple RIFs that we agree could be disruptive and could
cause a decline in readiness.
We next turn to the second area of the Air Force's claim regarding
readiness--i.e., that one consolidated workload will permit the
contractor to address surge requirements and will provide a single
point of contact for the customer. Again we disagree.
The April GAO report considered the claims that bundling was justified
here because it would provide the contractor the ability to transfer
employees between the aircraft and commodity workloads in times of
surge. The report concluded that while such shifts might be possible,
Sacramento depot personnel data showed that it had rarely happened
over the last 7 years. GAO/NSIAD-98-143 at 8. During the hearing,
the Air Force challenged GAO's earlier conclusion in two ways. First,
the Air Force stated that our earlier conclusion was suspect because
there have been no serious surge requirements over the last 7 years of
data our evaluators reviewed. Tr. at 261-62. Second, the Air Force
explained that its assertion is supported by daily "loans and borrows"
of personnel from aircraft to commodity work that are not reflected in
personnel records. Tr. at 110-12.
Based on our review of the record, the Air Force has offered no
persuasive evidence that the bundling here is justified by a need to
transfer employees between the aircraft and commodity workloads. Not
only did the Air Force not produce evidence during GAO's earlier
review of this claim, but the Air Force produced no evidence during
the hearing, or at any point afterwards, to support its claimed
practice of "loans and borrows." Tr. at 112.
In any event, the Air Force has now announced publicly that it has
selected for award, pending the outcome of this decision, a proposal
that splits the aircraft and commodities work between different
locations. This approach appears to preclude the ready transfer of
employees from one kind of work to the other, and was evaluated as
acceptable to the Air Force during its review of proposals. Tr. at
182. In our view, the import of this evidence, especially without
data to support any claim of joint use of personnel, is that it is not
necessary to bundle these workloads for contractors to address the Air
Force's valid need to meet surge requirements.
As a final matter, we find unpersuasive the Air Force's contention
that a single point of contact for the customer for all these needs
will improve readiness. As the protester points out, the single point
of contact for KC-135 issues has been, and will continue to be, the
KC-135 program office, regardless of where the depot maintenance of
this aircraft is performed. In addition, the Air Force has provided
no support for any claim that it serves an important agency need to
have the same point of contact for the aircraft maintenance here as
for commodities repairs.
In sum, while our Office will show deference to agency claims that
requirements of military readiness supports a combination of workload
requirements, see National Airmotive Corp., supra, Southwestern Bell
Tel. Co., supra, such claims must be properly documented and
reasonably related to the workload combination. Here, unlike in
National Airmotive, the Air Force has not shown that readiness
requires bundling these workloads, despite extensive opportunities to
do so.
Adequate Competition
The Air Force argues that it is necessary to bundle the aircraft and
commodities workloads together because there was no other way to
achieve competition for the $1.3 billion commodities workload. Agency
Memorandum of Law, supra, at 16. In support of this claim, the Air
Force contends that "the schedule as well as the volume of workload
for any one item is unknown and, to a certain extent, unknowable. . .
." Id. at 17. For the reasons set forth below, we conclude that the
Air Force's contention is not supported by the record, and does not
state a valid basis for consolidating these workloads.
The Air Force explains that after the BRAC Commission decision, it
began studying how best to transfer the Sacramento workload, and
decided to subdivide the workload into several logical groupings. Id.
at 3. After the first few attempts to generate industry interest in
certain of the logical groupings failed, the Air Force decided to
consolidate the Sacramento workload into a larger,
partially-guaranteed package. Id. at 5-6. After awarding three study
contracts to potential offerors and subcontractors to review how best
to transfer this consolidated workload away from the Sacramento depot
to either a private or public entity, the Air Force began the instant
competition. Id. at 6, 8. According to the Air Force, this effort
was a success because the process generated a competition between one
private and one public entity that will lead to substantial cost
savings. Id. at 8; Tr. at 93.
The April GAO report to the Congress expressly considered the nature
of the Air Force's early attempts to interest industry in logical
groupings of the Sacramento depot's workload and reached the opposite
conclusion from that of the Air Force. The report stated:
These analyses indicate that there are substantial numbers of
private sector companies willing and able to maintain and repair
the Sacramento workloads. For each type of workload, the
analyses identified a number of companies with the capabilities,
capacities, and interest in repairing specific commodities or
selected portions of the workload.
GAO/NSIAD-98-76 at 7. GAO also considered the reports prepared by the
three study contractors and concluded that the objective of these
studies was not to examine how to compete these workloads separately,
but rather how best to help the Air Force complete its planned
consolidated acquisition. Id. at 8-9. The GAO report further noted
that even these studies did not present the monolithic support for the
consolidated approach the Air Force claimed. Id. at 9.
Apart from these earlier considerations, we also conclude that the Air
Force's claims about the unpredictability and volatility of the
commodities workload--i.e., that the need for any one item is unknown
and unknowable--are overstated and contradicted by the record.
Throughout the hearing on this procurement, the Air Force stressed
that 20 percent of the commodity items account for 80 percent of the
value of this workload, Tr. at 26-27, 35-36, 229, 246, 295, while 570
items of the nearly 2,000-item workload have no computed value
whatsoever. Tr. at 35-36. Under these circumstances, the value of
the workload for approximately 400 of these items (20 percent of the
2,000 item total) is $1.035 billion (80 percent of the $1.294 billion
commodities total), and appears to be of sufficient magnitude to
permit both some level of predictability and an economic base for
competition.[11] Simply put, in light of the evidence here, we find
unpersuasive the Air Force's statement that competition cannot be
achieved for a $1.4 billion workload, of which nearly $1.035 billion
is stable and predictable.
We recognize that the Air Force must have the orphan workload
performed. That workload is split among the three groups of
commodities included in the solicitation. It may be that each
commodities group will be sufficiently attractive, even including the
orphan items, that the Air Force can conduct separate procurements and
obtain competing offers to perform the work for reasonable prices. It
may be that all of the commodities must be bundled for the Air Force
to obtain a reasonable price. Other combinations may be necessary.
To date, the Air Force has not provided market surveys or any other
evidence sufficient to justify any particular combination of
items--including its proposed combination of all aircraft and
commodities--as necessary to obtain adequate competition for all of
the commodities workload.
Finally, we note that the Air Force's contention that it has received
"outstanding competition" (Tr. at 93) between the public offeror
(another depot) and the one private sector offeror is not dispositive
of whether the bundling is necessary to meet the agency's needs. As
we stated in National Customer Eng'g:
The issue is not whether there are any potential offerors who can
surmount barriers to competition, but rather whether the barriers
themselves--in this case, the bundling--are required to meet the
government's minimum needs.
Id. at 5.
Other Claimed Bases for Bundling
The Air Force also claims that the bundling determination here is
justified by its needs to promote efficiency and economy in production
operations, to meet scheduling constraints, and to address concerns
about dwindling staffing resources. Specifically, the Air Force
explains that consolidating the workload will permit "a series of
common inspection and repair processes in a common set of backshops,"
Agency Memorandum of Law, supra, at 17; facilitate the transition of
this workload prior to the 2001 closing date for McClellan AFB, id. at
18; and achieve savings resulting from the costs of conducting
multiple acquisitions ($6.8 million), administering multiple contracts
($10 million to $32.8 million), and realizing the savings achieved by
the current public/private competition (approximately 10 percent of
the value of the workload). Id. at 19.
Again, our analysis begins with the recognition that each of these
claimed bases for consolidation was reviewed by our Office and
addressed in earlier reports to Congress. In concluding that the Air
Force contention regarding the use of common backshops and processes
was questionable, the GAO report stated:
The efficiencies that are achievable from shared facilities and
personnel may be greater if the workloads being combined are the
same or more similar than the workload[] being combined under the
Sacramento . . . solicitation[]. For example, the Air Force may
achieve greater efficiency by combining [] the management of the
Sacramento KC-135 workloads with other KC-135 workloads to be
competed . . . .
GAO/NSIAD-98-143 at 8. Similar conclusions regarding the other bases
identified above are set forth in the same report at pages 8 through
11.
During the course of this protest, we explored in detail the Air
Force's continued claims regarding the common use of backshops and
savings available from proceeding with the current solicitation.
After numerous pleadings, and a hearing to explore these issues, the
Air Force still has not submitted persuasive information to support
the claimed savings from the bundling determination, or that any such
savings are significant when compared to the potential cost savings
from increased competition if the workloads are unbundled. See Better
Service, B-265751.2, Jan. 18, 1996, 96-1 CPD para. 90 at 2 (duplication of
effort involved if requirements are not bundled--i.e., increase in the
number of offers to be evaluated and contracts to be
administered--does not justify bundling where there is no evidence
that additional contracts would involve significant additional costs
to the government).
We turn finally to the Air Force's claim that the bundling here is
justified by the pending closure of McClellan AFB and the scheduling
and personnel constraints created by that closure. We are mindful of
the disruption--to the mission of the Air Force and to the lives of
thousands of Air Force employees--caused by the requirement to close
an institution the size of McClellan AFB. The May GAO report
recognized that concerns such as these are appropriately related to
the agency's needs and may provide a valid basis for consolidating
this workload. GAO/OGC-98-48 at 20. On the other hand, the record
here does not show that either the pending closing date, or the
personnel disruption that will occur regardless of how these items are
transferred, justifies the bundling of this workload.
As stated above, the choice to transition the workload covered by this
solicitation is not a choice between a single transition and a
multiple transition. The closing of McClellan AFB by July 13, 2001,
already requires multiple transitions, and multiple challenges to
management. Also, the record in this case shows that the Air Force
has ample flexibility to manage the transition of this significantly
diverse workload in a manner that will minimize the disruption to its
people and its mission, and achieve significant competition. The Air
Force's own materials show as many as four likely offerors for the
KC-135 work (Agency Report (AR), Tab 22 at 23), and five likely
offerors for the A-10 work (AR, Tab 24 at vii), while the hearing
testimony of two Air Force witnesses (Tr. at 246, 325) and our
analysis shows the likelihood of competition for approximately $1.03
billion of the commodities workload. Based on the evidence produced
thus far, we cannot conclude that bundling this workload to the
exclusion of numerous potential offerors--in order to achieve
competition on a very small portion of the workload--is necessary to
meet the requirements of the agency.
RECOMMENDATION
We recommend that the Air Force cancel the current solicitation and
resolicit its requirements without bundling these workloads. Among
other options, we recommend that the agency consider using a single
solicitation that will permit competitors to offer on any combination
of the five workloads. We also recommend that the protester be
reimbursed the reasonable costs of filing and pursuing its protest,
including attorneys' fees, if any. 4 C.F.R. sec. 21.8(d)(1). In
accordance with 4 C.F.R. sec. 21.8(f)(1), Pemco's certified claim for
such costs, detailing the time expended and the costs incurred, must
be submitted directly to the agency within 60 days after receipt of
this decision.
The protest is sustained.
Comptroller General
of the United States
1. At the same time, the BRAC Commission also recommended that Kelly
AFB be realigned and that the San Antonio Air Logistics Center be
closed by July 2001. In that instance as well, the Air Force combined
a significant portion of the San Antonio depot's workload into one
solicitation. Our decision denying the protest challenging the
solicitation for the San Antonio workload is set forth in National
Airmotive Corp., B-280194, Sept. 4, 1998, 98-2 CPD para. ___.
2. 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).
3. Public-Private Competitions: DOD's Additional Support for
Combining Depot Workloads Contains Weaknesses, (GAO/NSIAD-98-143, Apr.
17, 1998).
4. Public-Private Competitions: Review of Sacramento Air Force Depot
Solicitation, (GAO/OGC-98-48, May 4, 1998). This report was written
in response to the Authorization Act's requirement that GAO report
within 45 days after issuance of the Sacramento 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)(1).
5. The CO's statement is not dated, but was provided to our Office
attached to a cover letter dated July 24, 1998.
6. Included within the $1.294 billion for commodities is $120 million
for additional effort that the Acquisition Plan does not allocate to
the separate estimated values for the hydraulics, instruments, and
electrical accessories workload. This sum of $120 million must be
added to the individual workload values ($587 million + $286 million +
$301 million) to obtain the total of $1.294 billion. Acquisition Plan
at 13.
7. During the course of this protest our Office convened a hearing
during which Air Force witnesses provided direct testimony and
responded to cross-examination by counsel for Pemco. Air Force
witnesses included: Darleen A. Druyun, Principal Deputy Assistant
Secretary of the Air Force for Acquisition and Management; Major
General Michael E. Zettler, Director of Maintenance for the Air Force;
and Mr. James Barrone, Executive Director of the Sacramento Air
Logistics Center. Citations to the hearing transcript refer to the
hearing held on August 25 and September 9, 1998.
8. This requirement was also set forth in the first page of a March
20, 1998, Memorandum for All Interested Offerors, attached to the RFP
as an executive summary.
9. The May 20 due date initially identified for receipt of proposals
was deleted by amendment 0001 to the RFP, dated March 30, 1998, and
changed to June 19, 1998. On this subject, the amendment stated:
Standard Form 1447, Block 9, the Date for receipt of
offers is changed
From: 20 May 98
To: 19 Jun 98
RFP, amendment 1, Mar. 30, 1998, at 2.
10. We are mindful that the primary consideration of the BRAC
Commission in identifying military installations which might be
appropriately closed, or realigned, was the impact on military
readiness. 1995 Report to the President, BRAC Commission, Appendix H
(Final Selection Criteria). Our task here is to separate the risks to
readiness already considered by the BRAC Commission in its decision to
close the Sacramento depot and transition its workload to other
locations, from any additional risks that could arise from failing to
transition this workload in one bundle. Many of the Air Force's
arguments in this area--i.e., any transition involves risk, see
generally Tr. at 178-179, 248--raise issues we consider already
decided by the BRAC Commission.
11. Our view is supported by the fact that during the hearing two of
the Air Force's three witnesses agreed that the agency would probably
be able to achieve competition for 80 percent of the value of the
commodities workload. Tr. at 246, 325. The third witness was not
asked this question.