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.