TITLE:  Hawker Eternacell, Inc., B-283586, November 23, 1999
BNUMBER:  B-283586
DATE:  November 23, 1999
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Hawker Eternacell, Inc., B-283586, November 23, 1999

Decision

Matter of: Hawker Eternacell, Inc.

File: B-283586

Date: November 23, 1999

Norman A. Steiger, Esq., Goldberg & Connolly, for the protester.

Maj. Cynthia M. Mabry, and John J. Reynolds, Esq., Department of the Army,
for the agency.

Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Protest allegation that an award under a solicitation would breach the
protester's existing contract concerns a matter of contract administration,
which is outside the scope of the General Accounting Office's bid protest
jurisdiction.

2. Agency properly determined to exclude protester from the competition for
award of batteries, where the protester currently held a contract for the
same batteries and the agency reasonably found that another source was
necessary to ensure the batteries' continuous availability, to satisfy
projected needs, to provide for future competition, and to satisfy national
defense interests.

DECISION

Hawker Eternacell, Inc. protests the terms of request for proposals (RFP)
No. DAAB07-99-R-A273, issued by the U.S. Army Communications-Electronics
Command for a quantity of BA-X590A/U non-rechargeable, high performance
lithium batteries. Hawker, which currently has a contract to supply the Army
with these batteries, challenges its exclusion from the competition for
award.

We deny the protest.

The high performance lithium battery family, of which the BA-X590A/U is a
part, is the main power source for most of the Army's portable, combat
communications and electronic equipment. The BA-5590 battery configuration,
of which the BA-X590A/U is an updated version, is extensively used and has
one of the highest monthly demands of any of the military-unique batteries
managed by the Army. The agency states that this battery configuration is
used in over 50 items, ranging from radio equipment to artillery fire
control and surveillance systems. Accordingly, the BA-5590 battery
configuration and the other members of this battery family have been
identified as critical items. Agency Report, Tab A, Contracting Officer's
Statement, at 1-2.

In September 1996, after a competition that contemplated multiple awards,
the Army awarded Hawker the sole contract to supply the BA-5590A/U battery
(which the protester and agency agree is the equivalent of the battery
sought by the RFP) for a 5-year contract period. Protest at 2; Contracting
Officer's Statement at 2. The agency states that the specifications of that
contract require Hawker to provide the BA-5590A/U with a state of charge
indicator (SOCI), which is also a requirement of the BA-X590A/U. [1]
Contracting Officer's Statement at 2-3. The agency also states that it has
not yet received from Hawker any of the BA-5590A/U batteries with the SOCI
feature because of Hawker's difficulty in passing first article testing for
this battery with this feature. Instead, the Army has allowed Hawker to
provide the battery without the SOCI feature. Id. at 3.

The Army determined that it would seek a second source for the BA-X590A/U
battery. Specifically, the agency found that although the use of
rechargeable batteries has increased in recent years, it has not resulted in
a corresponding decrease, as expected, in non-rechargeable batteries, such
as BA-X590A/U. The Army found as follows:

As a result of [the] problems faced by Hawker, peacetime inventory levels
have dropped dangerously low. Hawker lacks the technical and production
resources to deliver sufficient quantities of batteries in a timely manner
to allow for rebuilding of assets to acceptable levels. Even if Hawker was
able to produce at full capacity, there is no remaining capacity for
rebuilding war reserve battery inventories to the required levels or for the
potential surging of production if a deployment should occur.

Agency Report, Tab 3, Determination and Findings (D&F), Authority to Exclude
Sources for Supplies Being Acquired, June 11, 1999, at 2. In addition, the
agency concluded that obtaining a second source for the battery would
increase future competition that would benefit the agency. Id.,
Justification for D&F, at 2.

Hawker was informed that it would not be allowed to compete for award under
the RFP and of the reasons for its exclusion. Contracting Officer's
Statement at 5, Agency Report, Tab 11, Letter from Contracting Officer to
Hawker 1-2 (July 12, 1999). This protest followed.

Hawker essentially complains that the Army has no reasonable basis to
exclude it from competition for award under the RFP or in fact to issue the
RFP at all. [2] In this regard, Hawker argues that award of a contract under
the RFP would violate the terms of its current contract, which Hawker
asserts is a requirements contract. Protest at 7-8, Comments at 1.

The Army disagrees that Hawker's current contract is a requirements contract
and that an award to another firm under the RFP would constitute a breach of
Hawker's contract. Rather, the agency contends, Hawker has an
indefinite-delivery, indefinite-quantity contract, under which the agency
has already ordered the contract's minimum quantity. Citing our Bid Protest
Regulations, 4 C.F.R. sect. 21.5(a) (1999), the agency asks that we dismiss
Hawker's breach of contract claims as matters of contract administration.
Agency Request for Partial Summary Dismissal at 1-2.

Although Hawker has presented its contract claim allegations as bearing upon
the reasonableness of the agency's decision to issue the RFP, we agree with
the Army that resolving the parties' dispute concerning the interpretation
of Hawker's existing contract and whether the agency's conduct constitutes a
breach of that contract are matters of contract administration. Under the
Competition in Contracting Act of 1984, as amended, our authority to resolve
bid protests extends to resolving disputes concerning the alleged violation
of procurement laws and regulations in connection with the award of
contracts by federal agencies. 31 U.S.C. sect.sect. 3551-3552 (1994). In exercising
this authority, we generally do not review matters of contract
administration, which are within the discretion of the contracting agency
and are, under the Contract Disputes Act of 1978, for review by a cognizant
board of contract appeals or the Court of Federal Claims. [3] 4 C.F.R. sect.
21.5(a); GSX Gov't Servs., Inc., B-239549, July 5, 1990, 90-2 CPD para. 14;
McDermott Shipyards, Div. of McDermott, Inc., B-237049, Jan. 29, 1990, 90-1
CPD para. 121 at 5-6. Thus, we will not review the parties' dispute concerning
the nature of Hawker's existing contract and whether the agency's actions
constitute a breach of that contract.

The protester also challenges each of the agency's findings regarding the
Army's need to obtain a second source for the BA-X590A/U battery.
Specifically, Hawker disputes the agency's determination that Hawker lacks
the technical and production capability to timely provide sufficient
quantities of the BA-X590A/U battery. The protester, however, does not deny
that it has been unable to pass first article testing for the BA-X590A/U
battery with the SOCI feature or that it has not delivered any of these
batteries with the SOCI feature. Rather, Hawker argues that its failure to
deliver is justifiable because the BA-X590A/U battery with the SOCI feature
is a "developmental item" and argues that, in any event, the agency has no
real need for the SOCI feature. Comments at 2-4. In Hawker's view, all of
the agency's needs can be met by Hawker supplying the older version of the
battery (without the SOCI feature) under its existing contract.

The Army disagrees with the protester's allegations that these batteries
with the SOCI feature are a developmental item and that the agency has no
real need for batteries with this feature. In this respect, the agency
states the SOCI feature will contribute to field readiness of soldiers using
equipment powered by these batteries because soldiers can better assess the
remaining battery life, and will reduce related operating and support costs.
Contracting Officer's Statement at 2.

Military agencies are given specific authority to conduct limited
competitions, by excluding a particular source, in order to establish or
maintain an alternative source or sources of supply. An agency head must
determine that an alternate source is necessary to, inter alia, increase or
maintain competition, ensure continuous availability of a reliable source of
supply, satisfy projected needs for high demand supplies or services, or
satisfy national defense interests in having a producer, manufacturer or
other supplier available in case of national emergency or industrial
mobilization. 10 U.S.C.sect. 2304(b)(1) (1994). Given the discretion accorded
agencies in making these judgments, we will disturb an agency's
determination to exclude a particular source only when the agency's judgment
is shown to be unreasonable. See Propper Int'l, Inc., B-229888, B-229889,
Mar. 22, 1988, 88-1 CPD para. 296 at 2-3.

Here, the record shows that the Army reasonably determined that it needed to
establish a second source from which the agency could obtain these
batteries. Although Hawker disagrees with the agency's judgment regarding
the Army's needs and Hawker's ability to satisfy these needs, Hawker does
not show that the agency's judgment is unreasonable. To the contrary,
Hawker's arguments against the agency's needs for the SOCI feature are
belied by its own 1996 contract, under which Hawker agreed to provide this
battery with the SOCI feature. Given Hawker's inability to provide batteries
with this feature, we think the Army justified in determining that it needed
to develop a second source (in addition to Hawker) to satisfy its needs. [4]
Specifically, we find that the agency reasonably determined that developing
another source for these batteries was necessary to ensure their continuous
availability, that there was a national defense interest in having another
source available to furnish the batteries in the event of an emergency, that
another source was necessary to satisfy the agency's projected needs, and
that another source would provide for future increased competition, which
would result in a lower costs to the government. These circumstances satisfy
the statutory and regulatory requirements for excluding a particular source
in a procurement in order to establish an alternative source or sources of
supply. See 10 U.S.C. sect. 2304(b)(1); Federal Acquisition Regulation sect.
6.202(a).

The protest is denied.

Comptroller General
of the United States

Notes

1. Prior versions of this battery did not include the SOCI feature.

2. Hawker also complained that, if it were excluded from the competition,
the 5-year contract period contemplated by the RFP would result in Hawker
being unable to compete for the Army's battery requirements for 1 year when
its current contract expired. Protest at 7. Prior to the filing of the
agency report, the Army agreed with this complaint and took corrective
action by amending the RFP to provide for a 4-year contract period.

3. The few exceptions to this rule include such situations as where it is
alleged that a contract modification improperly exceeds the scope of the
contract and therefore should have been the subject of a new procurement,
CAD Language Sys., Inc., B-233756, Apr. 10, 1989, 89-1 CPD para. 364 at 4; where
a protest alleges that the exercise of a contractor's option is contrary to
applicable regulations, Alice Roofing & Sheet Metal Works, Inc., B-283153,
Oct. 13, 1999, 99-2 CPD para. ___; and where an agency's basis for contract
termination is that the contract was improperly awarded. Condotels, Inc.;
Chester L. and Harvelene Lewis, B-225791, B-225791.2, June 30, 1987, 87-1
CPD para. 644 at 2.

4. In this regard, Hawker's argument that this battery with the SOCI feature
is a developmental item (which the Army denies) does not rebut the agency's
determination that a second source is necessary, given Hawker's inability to
successfully pass first article testing for a battery with the SOCI feature
as required by its contract.