Public-Private Competitions: Review of San Antonio Depot Solicitation
(Letter Report, 05/14/98, GAO/OGC-98-49).

The Air Force lacked a well-supported rational for combining, under a
single contract, the diverse workloads at the closing San Antonio air
logistics center. This requirement may unduly restrict competition by
eliminating potential bidders who are capable of performing some, but
not all, of the individual workloads. For the San Antonio contract, the
Air Force included three dissimilar engine workloads as a single
requirement. The law requires that a workload competition be reasonably
required to satisfy the agency's needs, and not simply an outgrowth of
the agency's desire for administrative convenience or an unsupported
claim that economies will be achieved. GAO found that the Air Force's
supporting rational does not justify the workload combination. However,
the rationale for the combination includes some elements, such as
readiness concerns and potential competition enhancements, that, if
supported, could establish the reasonableness of the combination under
the acquisition laws.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  OGC-98-49
     TITLE:  Public-Private Competitions: Review of San Antonio Depot 
             Solicitation
      DATE:  05/14/98
   SUBJECT:  Air Force procurement
             Aircraft maintenance
             Base closures
             Defense economic analysis
             Military cost control
             Military downsizing
             Privatization
             Aircraft engines
IDENTIFIER:  T-56 Engine
             TF-39 Engine
             F-100 Engine
             
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Cover
================================================================ COVER


Report to Congressional Committees

May 1998

PUBLIC-PRIVATE COMPETITIONS -
REVIEW OF SAN ANTONIO DEPOT
SOLICITATION

GAO/OGC-98-49

Public-Private Competitions

(709330)


Abbreviations
=============================================================== ABBREV

  BRAC - Base Closure and Reallignment Commission
  CCH - Cost Comparability Handbook
  DOD - Department of Defense
  FAR - Federal Acquisition Regulation
  RFP - request for proposals
  SSA - Source Selection Authority

Letter
=============================================================== LETTER


B-280009

May 14, 1998

The Honorable Strom Thurmond
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Floyd Spence
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on National Security
House of Representatives

This report responds to one of several reporting requirements
contained in the National Defense Authorization Act for Fiscal Year
1998, Public Law 105-85, relating to the allocation of depot
workloads currently performed at the closing San Antonio and
Sacramento Air Logistics Centers.  Section 359 of the act, codified
at 10 U.S.C.  2469a, requires us to review solicitations issued for
the workloads at San Antonio and Sacramento, and to report within 45
days of the solicitations' issuance on whether they (1) are in
compliance with applicable laws and regulations and (2) provide a
"substantially equal opportunity for public and private offerors to
compete for the contract without regard to the location at which the
workload is to be performed."\1

On March 30, 1998, the Air Force issued a solicitation for the
purpose of conducting a public-private competition for various
depot-level workloads being performed at the San Antonio Air
Logistics Center at Kelly Air Force Base, Texas.  As described in
detail in appendix I, the solicitation provides for a single award,
for a period of up to 15 years, for the performance of workloads for
the T56, TF39, and F100 engines and fuel accessories.  This letter
provides our assessment of the solicitation as required by
10 U.S.C.  2469a. 


--------------------
\1 On March 20, the Air Force, Sacramento Air Logistics Center at
McClellan Air Force Base, California, issued a solicitation for the
various depot-level workloads being performed at Sacramento.  We
recently issued a report addressing the requirements of section 2469a
with respect to that solicitation.  Public-Private Competitions: 
Review of Sacramento Air Force Depot Solicitation (GAO/OGC-98-48, May
4, 1998). 


   BACKGROUND
------------------------------------------------------------ Letter :1

Several laws govern the solicitation and selection of offerors to
perform depot workloads.  Section 2469a of title 10 of the United
States Code provides for special procedures for public-private
competitions at the closing San Antonio and Sacramento depots.  In
particular, section 2469a sets forth certain elements that must be
reflected in the solicitation and considered in making the selection
of the source for the performance of the workloads.  These include
requirements that all estimated savings and costs to the Department
of Defense (DOD) related to the award must be considered, and that no
offeror may be given preferential consideration for, or be limited
to, performing the work at a particular location. 

In addition to 10 U.S.C.  2469a, there are a number of other laws
that generally apply to the outsourcing of government-performed depot
workloads.  In particular, 10 U.S.C.  2469 provides for the use of
"competitive procedures for competitions among private and public
sector entities" whenever DOD contemplates changing the performance
of public depot workloads of $3 million or more to contractor
performance.  Further, because the Air Force will use the competitive
acquisition system for the workload competitions, these competitions
are subject to the standards in 10 U.S.C.  chapter 137 and the
Federal Acquisition Regulation to the extent they are consistent with
10 U.S.C.  2469a and the other applicable provisions relating to the
outsourcing of depot workloads and conversions of DOD functions to
private-sector performance. 

As required by 10 U.S.C.  2469a, we reviewed the San Antonio
solicitation in the context of the applicable laws and regulations to
determine whether it (1) complies with those laws and regulations and
(2) provides a substantially equal opportunity for public and private
offerors to compete for the contract without regard to performance
location.  We did our review based on the solicitation terms as of
May 5, and, in addition, we spoke to Air Force officials and
considered concerns raised informally by potential competitors.  We
recognize that the terms of the solicitation may be amended and that
the concerns raised may change until the time for receipt of
proposals, and that a potential offeror may file a protest with our
Office or with the courts.  If a protest is filed, factual
information, issues and arguments raised by the parties will be
reviewed in the context of an adversarial process; for that reason,
the result of a protest may differ from that of our current review. 

The results of our review, described in detail in appendix I, are
summarized below. 


   REVIEW RESULTS
------------------------------------------------------------ Letter :2


      COMPLIANCE WITH APPLICABLE
      LAWS AND REGULATIONS
---------------------------------------------------------- Letter :2.1

Based on our review of the San Antonio solicitation and concerns
raised informally by potential offerors, we found that the Air Force
has not, as of May 5, provided a sufficient basis to show that
soliciting the workloads on a combined basis is necessary to satisfy
its needs.  Otherwise, we found that the solicitation is in
compliance with applicable laws, including the provisions of 10
U.S.C.  2469a.\2

The specific issues raised by potential offerors, and our
conclusions, follow. 


--------------------
\2 In addition to reviewing specific compliance issues arising under
10 U.S.C.  2469a, such as the treatment of overhead savings, and
addressing the section 2469a provisions concerning performance
location, we reviewed the San Antonio solicitation to determine
whether it includes the specific elements required by section 2469a. 
All of the section 2469a requirements are specifically acknowledged
in the solicitation, and we found no basis to conclude that the
solicitation deviates in any material respect from the section 2469a
requirements. 


         SOLICITATION OF COMBINED
         WORKLOADS
-------------------------------------------------------- Letter :2.1.1

One potential competitor has expressed concern about the inclusion in
the San Antonio solicitation of workloads for three different engines
as a single requirement.  The potential competitor argues that the
combination of the three dissimilar engine workloads will result in a
requirement that is beyond the capability of a single firm and that
is unduly restrictive of competition. 

Because the Air Force issued a solicitation combining multiple engine
workloads, it was required to issue a determination that the
workloads could not as logically and economically be performed
without combination by potentially qualified sources, accompanied by
a supporting report.  (See 10 U.S.C.  2469a(e).) On December 19,
1997, DOD issued the required determination.  We reviewed the report
and found that it did not provide adequate information to support the
determination.\3

Subsequently, the Air Force provided additional supporting rationale
for the workload combination.  We reviewed the Air Force's rationale
and found that it was not well supported.\4

Because a combination of requirements can restrict competition, the
acquisition laws require that a workload combination be reasonably
required to satisfy the agency's needs, and not simply an outgrowth
of the agency's desire for administrative convenience or an
unsupported claim that economies will be achieved.  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. 


--------------------
\3 Public-Private Competitions:  DOD's Determination to Combine Depot
Workloads Is Not Adequately Supported (GAO/NSIAD-98-76, Jan.  20,
1998). 

\4 Public-Private Competitions:  DOD's Additional Support for
Combining Workloads Contains Weaknesses (GAO/NSIAD-98-143, Apr.  17,
1998). 


         BEST-VALUE SELECTION
         CRITERIA
-------------------------------------------------------- Letter :2.1.2

The San Antonio solicitation provides that the award will be made to
the responsible offeror whose conforming proposal represents "the
best value to the Government." Under the solicitation's evaluation
scheme, described in detail in appendix I, it is possible that the
entity selected--whether public or private--may not be the competitor
whose proposal is determined to represent the lowest evaluated cost. 
A potential competitor has questioned the Air Force's authority to
select a source that does not represent the lowest total evaluated
cost for performing the workloads. 

We found nothing in 10 U.S.C 2469a, the basic authority governing the
San Antonio competition, that limits the Air Force to a selection
based on low evaluated cost.  However, while the Air Force is not
required to use any particular source selection method, it still must
comply with provisions that apply generally to conversions of
functions to private sector performance.  For example, if the San
Antonio competition results in the selection of a private-sector
source, the Air Force will have to comply with 10 U.S.C.  2461(a)(2). 
This provision requires that whenever a DOD-performed function is
converted to performance by a contractor, DOD must provide Congress
with a cost comparison that shows that savings will result. 


         EVALUATION OF OVERHEAD
         SAVINGS FOR OTHER
         WORKLOADS
-------------------------------------------------------- Letter :2.1.3

A potential competitor has raised concerns about the solicitation's
method for crediting an offeror with overhead savings it expects to
achieve in its other government work as a result of adding the
competed workloads.  In essence, the solicitation requires more
support for savings that are proposed to be achieved in the later
years of the performance period.\5 The potential competitor's concern
is that this methodology may not capture an offeror's projected
overhead savings for the entire performance period. 

We found that the solicitation establishes a reasonable method for
measuring estimated overhead savings consistent with the requirements
of 10 U.S.C.  2469a.  Under section 2469a, the source selection
process for the San Antonio workloads must take into account "the
total estimated direct and indirect savings (including overhead) that
will be derived by the Department of Defense." This provision is
sufficiently general to permit the Air Force broad discretion to
decide exactly how to measure estimated overhead savings as those
savings apply to a successful offeror's other government work. 
Considering that the performance period for the San Antonio workloads
could last for as long as 15 years, we believe it is reasonable for
the Air Force to require strong support for projected future savings
and to consider that such projections may well be less accurate for
the later portion of the performance period. 


--------------------
\5 For example, the evaluation formula provides that the proposed
first year savings, if determined to be reasonable "will be allowed,"
while second year savings if supportable will also be allowed, but
"discounted for risk." The solicitation goes on to explain that
proposed savings for 3 years and beyond "may be allowed if clearly
appropriate, but in any event will be considered under the best value
analysis."


      PERFORMANCE LOCATION
---------------------------------------------------------- Letter :2.2

As discussed earlier, 10 U.S.C.  2469a requires us to determine
whether the San Antonio solicitation provides a "substantially equal
opportunity for public and private offerors to compete for the
contract without regard to where the workload is to be performed." In
addition, under 10 U.S.C.  2469a(d), a competitor must be allowed to
perform at the location of its choosing and a competitor is not to be
given preferential treatment for, or be limited to, performing the
workload in place or at any other single location. 

We found nothing in the solicitation that designates a particular
location, such as the closing San Antonio depot, at which performance
is required or preferred.  Nor do any of the solicitation evaluation
criteria evidence a bias toward any particular performance location. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :3

We informally obtained comments on our analysis from representatives
of the Air Force.  The Air Force raised several points concerning our
statements with respect to the applicable legal standards and the
workload combination and provided specific suggestions which we have
incorporated when appropriate.  The Air Force's comments and our
evaluation are presented in appendix II. 


---------------------------------------------------------- Letter :3.1

Please contact John Brosnan, Assistant General Counsel, on (202)
512-8177 if you or your staff have any questions. 

Robert P.  Murphy
General Counsel


REVIEW OF SOLICITATION FOR SAN
ANTONIO AIR LOGISTICS CENTER
WORKLOADS
=========================================================== Appendix I

On March 30, 1998, the Department of the Air Force, San Antonio Air
Logistics Center at Kelly Air Force Base, Texas issued request for
proposals (RFP) No.  F41608-98-R-0084 for the purpose of conducting a
public-private competition for propulsion business area depot-level
workloads being performed at the closing San Antonio Air Logistics
Center.  An amendment to the solicitation was also issued on March
30, which, among other things, provided the following due dates for
the receipt of various portions of the proposals:  (1) May 15 for
volume IV, concerning past and present performance, (2) June 15 for
volumes I and II, the executive summary and technical volume,
including transition and repair operations, and (3) June 30 for
volumes III and V, concerning cost and contract information. 

Section 359 of the National Defense Authorization Act for Fiscal Year
1998, Public Law 105-85 (1998 Authorization Act) added section 2469a
to title 10 of the United States Code, which provides for special
procedures for public-private competitions for the workloads at the
closing San Antonio and Sacramento Air Logistics Centers.  Among
other things, section 2469a also requires that we review all
solicitations issued for the workloads at the two closing Air
Logistics Centers and report to Congress within
45 days of the solicitations' issuance regarding whether the
solicitations (1) are in compliance with the provisions of section
2469a and "all applicable provisions of law and regulations" and (2)
provide a "substantially equal opportunity for public and private
offerors to compete for the contract without regard to the location
at which the workload is to be performed."\1

Our review is based on the terms of the San Antonio solicitation as
of May 5.  In addition, we spoke to Air Force officials and
considered concerns raised informally by potential competitors.  We
recognize that the terms of the solicitation may be amended and the
concerns raised may change until the time for receipt of proposals. 
Further, a potential offeror may file a protest with our Office
pursuant to 31 U.S.C.  3551-3556, or with the courts, or may file an
objection to the solicitation with the Department of Defense (DOD)
under 10 U.S.C.  2469a(h).  If a protest is filed, factual
information, issues and arguments raised by the interested parties
will be reviewed in the context of an adversarial process.  For that
reason, the result of a protest may differ from that of our current
review. 

Based on our review of the San Antonio solicitation and the
applicable laws and regulations, we conclude that the Air Force has
not, as of May 5, provided a sufficient basis to show that soliciting
the workloads on a combined basis is necessary to satisfy its needs. 
Otherwise, we conclude that the solicitation is in compliance with
applicable laws, including the provisions of 10 U.S.C.  2469a, and
that it provides a substantially equal opportunity for offerors to
compete without regard to performance location.  Whether the actual
evaluation process and the final selection meets these standards and
the others prescribed by 10 U.S.C.  2469a will be the subject of a
separate review by our Office after the award is made.\2

The following sections describe the legal standards applicable to the
San Antonio RFP and our analysis of the RFP under those standards. 


--------------------
\1 On March 20, 1998, the Air Force, Sacramento Air Logistics Center
at McClellan Air Force Base, California, issued a solicitation for
various depot-level workloads being performed at Sacramento.  We
recently issued a report addressing the requirements of section 2469a
with respect to that solicitation.  Public-Private Competitions: 
Review of Sacramento Air Force Depot Solicitation (GAO/OGC-98-48, May
4, 1998). 

\2 10 U.S.C.  2469a(g) provides that within 45 days after any award
is made, GAO is to review the selection process and report to
Congress on whether (1) the procedures provide a substantially equal
opportunity for offerors to compete without regard to performance
location (2) the procedures were in compliance with all applicable
laws and regulations (3) appropriate consideration was given to
factors other than cost in the selection and (4) the award resulted
in the lowest total cost to DOD for the performance of the workload. 


   APPLICABLE LEGAL STANDARDS
--------------------------------------------------------- Appendix I:1

The basic authority for the San Antonio workload competition is 10
U.S.C.  2469a, which provides procedures for public-private
competitions for the workloads of the closing Sacramento and San
Antonio Air Logistics Centers that are proposed to be outsourced
after the November 18, 1997, enactment of the 1998 Authorization
Act.\3 Section 2469a sets forth a number of requirements which the
Air Force must satisfy in the solicitations it issues and the source
selection process it uses, to make awards for the specified
workloads.  Particularly, the solicitation and the source selection
process must:  (1) permit both public and private offerors to submit
offers; (2) take into account the fair market value of any land,
plant, or equipment at a closed or realigned military installation
that is proposed to be used by a private offeror in the performance
of the workload; (3) take into account the total estimated direct and
indirect costs that will be incurred by DOD and the total estimated
direct and indirect savings (including overhead) that will be derived
by DOD; (4) use cost standards to determine the depreciation of
facilities and equipment that provide, to the maximum extent
practicable, identical treatment to public and private offerors; (5)
permit any offeror, whether public or private, to team with any other
public or private entity to perform the workload at any location or
locations of their choosing; and (6) ensure that no offeror may be
given any preferential consideration for, or in any way be limited
to, performing the workload in place or at any other single
location.\4

In addition to 10 U.S.C.  2469a, there are a number of existing laws
that are generally applicable to the outsourcing of
government-performed depot workloads.  One of the principal
requirements is in 10 U.S.C.  2469, which provides for the use of
"competitive procedures for competitions among private and public
sector entities" when DOD contemplates changing the performance of a
depot workload, valued at $3 million or more, to contractor
performance.  In addition, section 8039 of the Department of Defense
Appropriations Act for Fiscal Year 1998, Public Law 105-56,
authorizes public-private competitions for depot workloads as long as
the "successful bids" are certified to "include comparable estimates
of all direct and indirect costs for both public and private bids."
Both provisions state that Office of Management and Budget Circular
A-76 is not to apply to the competitions.  Other than the reference
in section 8039 of the act to the use of comparable estimates of all
costs, neither provision prescribes the elements that constitute a
competition.  Further, 10 U.S.C.  2470 provides that depot-level
activities are eligible to compete for depot workloads.\5

There are other provisions that apply, generally, to conversions of
DOD functions to private-sector performance.  For example, section
8014 of the 1998 DOD Appropriations Act requires that DOD certify its
in-house estimate to congressional committees before converting any
activity performed by more than 10 civilian employees to contractor
performance; the provisions of 10 U.S.C.  2461 require that whenever
a DOD-performed function is converted to performance by a contractor,
DOD must provide to Congress a cost comparison which shows that a
savings will result.  Under 10 U.S.C.  2462, DOD is generally
required to contract with the private sector if a source can provide
the supply or service at a lower cost than DOD can and to ensure that
all costs considered are realistic and fair.\6

The Air Force implements these outsourcing authorities through the
Air Force Material Command, Procedures for Depot Level Public-Private
Competition, December 20, 1996 (Depot Competition Procedures).  The
procedures are supplemented by the Defense Depot Maintenance Council
Cost Comparability Handbook (CCH), including the January 28, 1998,
revision, the Air Force Materiel Command Guide to the Cost
Comparability Handbook and the SAF/AQ Public-Private Competition Cost
Procedures of February 21, 1998.  Among other things, the procedures
provide for issuing a solicitation calling for offers from public and
private sector sources.  They establish the criteria, including those
listed in 10 U.S.C.  2469a, for deciding how the Air Force will
select a source for the performance of depot workloads from the
private or public sector.  According to these procedures, a
competitive solicitation is to be issued in accordance with the
applicable provisions of the Federal Acquisition Regulation (FAR). 
The FAR sets forth uniform policies and procedures for the
competitive acquisition system used by all executive agencies and
implements the provisions of chapter 137 of title 10 of the United
States Code, which govern DOD acquisitions. 

This use of the competitive acquisition system subjects a depot
workload competition to the applicable provisions of chapter 137 and
the FAR to the extent that they do not conflict with the
public-private competition statutes cited above.  ( Newport News
Shipbuilding and Dry Dock Company, B-221888, July 2, 1986, 86-2 CPD
23.) Further, aspects of a competition that fall outside the
competitive acquisition system's parameters as defined by chapter 137
and the FAR, such as the comparison of public and private offers for
the workloads from the two closing Air Logistics Centers, are
governed by 10 U.S.C.  2469a and the other statutes applicable to
public-private depot competitions as implemented by the Air Force. 

In general, the standards in chapter 137 and the FAR (1) require that
a solicitation clearly and unambiguously state what is required so
that all offerors can compete on an equal basis and (2) allow
restrictive provisions to be included only to the extent necessary to
satisfy an agency's needs.  Further, under these standards, an agency
must follow the criteria announced in the solicitation and exercise
its judgment in a reasonable manner in determining which of the
competing offers is to be selected.  (Dimensions International/QSOFT,
Inc., B-270966.2, May 28, 1996, 96-1 CPD 257.)


--------------------
\3 The workload for the C-5 aircraft that had been performed at the
San Antonio Air Logistics Center was awarded in September 1997 to the
Warner Robins Air Logistics Center as a result of a public-private
competition.  That competition, which was the subject our report
entitled Public-Private Competitions:  Processes Used for C-5
Aircraft Appear Reasonable (GAO/NSIAD-98-72, Jan.  20, 1998), was not
conducted under 10 U.S.C.  2469a as it was completed before the
enactment of the provision. 

\4 In addition, 10 U.S.C.  2469a(e) provides that DOD may issue a
solicitation for multiple workloads under 10 U.S.C.  2469a only if
DOD first determines that individual workloads cannot as logically
and economically be performed without combination by potentially
qualified sources and submits a report to Congress setting forth the
reasons for the determination.  The provision also requires GAO to
review and provide its views on the DOD report.  DOD decided to issue
RFPs, including the one here, containing combined workloads and
submitted the required determinations and reports on December 19,
1997.  We reported on January 20, 1998, that the DOD reports did not
support the determination.  Public-Private Competitions:  DOD's
Determination to Combine Depot Workloads Is Not Adequately Supported
(GAO/NSIAD-98-76, Jan.  20, 1998).  Under 10 U.S.C.  2469a(e) DOD
must wait 60 days from the submission of its report to issue an RFP
containing combined workloads.  There is no other restriction in
subsection (e).  The Air Force issued the San Antonio solicitation
containing multiple workloads on March 30.  Subsequent to our January
20 report, the Air Force provided additional supporting rationale for
the combined workloads.  As discussed in more detail later, we
reported that the additional rationale was not well supported. 
Public-Private Competitions:  DOD's Additional Support for Combining
Workloads Contains Weaknesses (GAO/NSIAD-98-143, Apr.  17, 1998). 

\5 We see nothing in the other applicable provisions governing the
outsourcing of depot workloads that is inconsistent with 10 U.S.C. 
2469a.  In fact, the use of comparable cost estimates and the
participation of DOD depot-level activities are provided for in 10
U.S.C.  2469a.  Consequently, consistent with the rule of statutory
construction that statutes be construed harmoniously to give effect
to all provisions whenever possible, all of the above-cited
provisions are effective and applicable to the San Antonio
competition.  See Posadas v.  National City Bank, 296 U.S.  503-504
(1936); 53 Comp.  Gen.  853 (1974). 

\6 Again, these provisions do not conflict with the six 10 U.S.C. 
2469a competition requirements listed above and are also applicable
to the San Antonio competition.  See Posadas v.  National City Bank,
cited above. 


   SOLICITATION
--------------------------------------------------------- Appendix I:2

The RFP for the San Antonio workloads contains several line items
representing the transition and performance of various combinations
of the propulsion workload.  For example, (1) line item no.  0001
calls for offers for the transition and performance of the T56, TF39,
and F100 engine workloads, (2) line item no.  0002, for the
transition and performance of the work for the same three engines,
plus fuel accessories, (3) line item no.  0003, for the transition
and the work for the same three engines, the fuel accessories and for
two-level maintenance on the T56 engines, and finally (4) line item
no.  0004, for the transition and the work on the three engines, the
fuel accessories and for two-level maintenance for the T56 and TF39
engines. 

The RFP provides for a transition period, which is to begin at the
award and to end not later than July 13, 2001, and a 7-year basic
performance period, which may be reduced to 5 years after transition,
or extended up to
15 years after award, based upon the performance of the awardee.  The
fixed-price requirements-type award is to be based on the work as
represented either by line item no.  0001, no.  0002, no.  0003, or
no.  0004.\7 The size of the workload to be awarded to a private
sector source is, according to the solicitation, to be determined
based on the constraints of 10 U.S.C.  2466(a).  That provision
restricts the funds, which can be expended for private sector
performance of depot-level workloads to no more than 50 percent of
the funds made available to the Air Force for such work in a
particular fiscal year. 

According to the solicitation, the competition is to be conducted in
accordance with FAR 15.101, which sets forth the source selection
processes and techniques to be used in competitive negotiated
acquisitions, as well as the applicable Air Force and Air Force
Materiel Command supplements.  Further, the Depot Competition
Procedures, the CCH and their updates are to govern the selection. 

The solicitation states that the award will be made to the
offeror--either public or private--who is deemed responsible in
accordance with the FAR,\8 whose proposal conforms with the
solicitation and is judged to represent the best value to the
government.  According to the RFP, the Source Selection Authority
(SSA) will integrate the source selection team's assessments of the
proposals under the criteria listed in the solicitation to arrive at
a best value selection. 

The evaluation criteria include criteria for the transition and
repair operations areas, cost criteria, and assessment critera. 
Transition is made up of four factors:  (1) capability and resources,
(2) equipment, (3) responsibility transfer milestones, and (4) risk
management.  Repair operations consists of five factors:  (1)
continuing operations plan, (2) risk management, (3) process
improvements, (4) additional workloads, and (5) small business.  The
assessment criteria, which will be used for measuring the extent to
which a proposal meets the transition, repair operations and cost
criteria, is made up of two parts:  (1) understanding of/compliance
with the solicitation requirements and (2) soundness of approach. 

Under the cost criteria, proposals will first be assessed for
completeness, realism and reasonableness.\9 Then each offeror's total
proposed cost is to be determined by calculating the various unit
prices and hourly rates proposed for the different line items.  Next,
the offerors' total alternative cost is to be developed by factoring
in the numerous adjustments to public and private offerors' total
proposed cost in accordance with the CCH and the RFP.  Finally, the
offerors' total evaluated cost is to be determined by adjusting the
total alternative cost to reflect the "dollarized impact of
significant discriminators, to the extent that a dollar value can be
assigned to such discriminators, based on identified proposal
strengths, weaknesses and risks."\10

Further, the RFP evaluation scheme provides for the consideration of
general considerations such as the results of pre-award surveys, site
visits and "fair market value." In addition, the proposals are to be
the subject of two risk assessments:  proposal risk and performance
risk.  Proposal risk is to measure the risk associated with an
offeror's proposed approach to accomplishing the solicitation
requirements relating to the transition and repair operations areas. 
Performance risk is to assess, based on an offeror's present and past
performance, the probability of the offeror successfully
accomplishing the proposed effort. 

Finally, the RFP provides that an "integrated assessment of best
value" is to be conducted by the SSA in order to select the
successful proposal.  In this assessment, the criteria for transition
and repair operations areas and cost criteria are to be equally
important, while the general considerations are to be "considered
substantially less important than transition, repair operations, or
cost." According to the RFP, this assessment is also to include "as
appropriate" items listed in the solicitation as "Other
Considerations." This category essentially reiterates five of the six
requirements for the competition listed in the 1998 Authorization
Act.\11


--------------------
\7 According to the solicitation, the prices would be subject to
economic adjustment based on various measurement standards and to
prospective redetermination based on revisions in the estimated
quantities of the work and process improvements. 

\8 According to FAR subpart 9.1, a responsible prospective contractor
is one that meets the standards in FAR 9-104, which include having
adequate financial resources, or the ability to obtain them, the
ability to comply with the performance schedule, a satisfactory
performance record, and possession of the necessary facilities and
equipment or the ability to obtain them. 

\9 Under FAR 15.404-1(d), a cost realism analysis is the process of
reviewing and evaluating specific elements of an offeror's cost
estimate to determine whether the proposed elements are realistic for
the work to be performed.  According to FAR 15-404-1, reasonableness
is to be assessed through an analysis of either cost elements or of
the overall price. 

\10 "Dollarized impact" as we understand it, is the assignment of an
estimated dollar value to the assessment of the benefit or detriment
to the Air Force that would result from the aspects of an offeror's
technical proposal in the calculation of an offeror's total evaluated
cost. 

\11 The one requirement not listed in section M-902 of the RFP is the
requirement that the cost standards used to determine the
depreciation of facilities and equipment provide, to the maximum
extent practicable, identical treatment to public and private
offerors.  This requirement is addressed in the RFP at paragraph
5.f.6 of section L and paragraphs 2.6.  (7) and (8) of section M-901. 


   ANALYSIS OF SOLICITATION
--------------------------------------------------------- Appendix I:3

As noted previously, subsection (g) of 10 U.S.C.  2469a requires us
to review the solicitation issued by the Air Force for the San
Antonio workloads and to report to Congress on whether (1) it is in
compliance with the requirements of 10 U.S.C.  2469a and other
applicable laws and regulations and (2) it provides a substantially
equal opportunity for all offerors to compete without regard to the
performance location.  The results of our review are set forth below. 


      COMPLIANCE WITH APPLICABLE
      LAWS AND REGULATIONS
------------------------------------------------------- Appendix I:3.1

As discussed previously, several statutes govern the solicitation and
award process for public-private competitions for the depot workloads
of the closing San Antonio and Sacramento Air Logistics Centers.  In
particular, 10 U.S.C.  2469a sets forth the elements that must be
considered in making the selection of the public or private source
for the performance of the workloads.  Further, because the Air Force
will use the competitive acquisition system, the standards in chapter
137 of title 10 of the United States Code and the FAR apply to the
extent they are consistent with
10 U.S.C.  2469a and the other applicable provisions relating to the
outsourcing of depot workloads and to conversions of DOD functions to
private-sector performance.  (See Newport News Shipbuilding and Dry
Dock Co., cited above.)

In addition to reviewing the solicitation, we have spoken to
potential competitors who have informally raised several specific
concerns.  The major concerns,\12 analyzed below, are that (1) the
combination in the solicitation of different engine workloads will
result in a requirement that is beyond the capability of a single
firm and that is unduly restrictive of competition; (2) the use of a
best-value selection process, which can result in the selection of a
public or private source that does not represent the lowest total
evaluated cost, is contrary to the laws applicable to the conversion
of DOD functions to private-sector performance; and (3) the
solicitation evaluation scheme for measuring the credit to be given
for an offeror's projected overhead savings on its other government
work as a result of adding the San Antonio workloads will not reflect
the impact of the savings for the entire performance period. 


--------------------
\12 A number of other questions have been raised concerning various
aspects of the solicitation, such as the lack of detail on how fair
market value of the closing San Antonio facility and equipment will
be evaluated.  While we have carefully considered all of the matters
raised during our review, these matters did not raise questions that,
in our view, impacted the solicitation's compliance with 10 U.S.C. 
2469a or other applicable laws and regulations so we have not treated
them as separate issues in our report. 


      SOLICITATION OF COMBINED
      WORKLOADS
------------------------------------------------------- Appendix I:3.2

One potential competitor has expressed concern to us about the
inclusion in the San Antonio solicitation of workloads for three
different engines as a single requirement.  The potential competitor
states that no single firm has the capability to perform the work for
three such dissimilar engines as the T56, TF39 and F100.  Thus, the
potential offeror argues that consolidation of workloads for the
three engines will limit the competition to those firms that can
enter into subcontract or joint venture arrangements with others,
without achieving a corresponding reduction in cost or efficiency,
except possibly, in the case of an offeror proposing to perform at
the closing San Antonio location. 

Since the Air Force issued an RFP combining multi-engine (T56, TF39
and F100) and accessory workloads, DOD was required to issue a
determination that the workloads could not as logically and
economically be performed without combination by potentially
qualified sources, accompanied by a supporting report.  (See 10
U.S.C.  2469a(e).) On December 19, 1997, DOD issued the required
determination.  In accordance with 10 U.S.C.  2469a(e), we reviewed
the DOD report and informed Congress on January 20, 1998, that we
found that it did not provide adequate information to support the
determination.\13

Subsequently, the Air Force provided additional rationale supporting
the determination to combine the workloads.  Essentially, the Air
Force maintained that combining the San Antonio multi-engine and
accessory workloads would enable potential competitors to take
advantage of efficiencies from shared personnel and facilities for
all of the workloads and to achieve overhead savings.  In addition,
the Air Force pointed out that a single award for the multi-engine
and accessory workloads was favored by potential competitors and
would reduce the performance and readiness risks inherent in managing
multiple workload transitions and the resulting sequential personnel
reductions at the closing San Antonio depot.  According to the
agency, the delay and administrative burden as well as the additional
costs of awarding and managing multiple contracts for each of the
workloads, in combination with the other factors mentioned above,
necessitated the solicitation of the combined workloads. 

We also reported our views on the additional supporting rationale to
the Subcommittee on Readiness, Senate Committee on Armed Services and
the Subcommittee on Military Readiness, House Committee on National
Security.\14 While we recognized that the Air Force had submitted
considerable additional information relevant to the determination to
solicit combined workloads and that the use of a solicitation for
combined workloads represented a management judgment based upon
various qualitative and quantitative factors that well may be
appropriate, we concluded that, for the purpose of the determination
required by 10 U.S.C.  2469a(e), the supporting information had
significant weaknesses in logic, assumptions and data. 

For the purpose of the current review the issue is whether the
combination of the workloads in the San Antonio solicitation complies
with the laws governing the competitive acquisition system and
applicable provisions of 10 U.S.C.  2469a.  The applicable statute
governing DOD acquisitions is 10 U.S.C.  2305(a)(1), which generally
requires that solicitations permit full and open competition, and
contain restrictive provisions and conditions only to the extent
necessary to satisfy the agency's needs, or as authorized by law. 
Since consolidated acquisitions combine separate, multiple
requirements into one award, they have the potential for restricting
competition by excluding potential competitors that can only furnish
a portion of the requirement.  Consequently, the combination of
requirements must be reasonably required to satisfy the agency's
needs, and not simply an outgrowth of the agency's desire for
administrative convenience or an unsupported claim that economies
will be achieved.  (See National Customer Eng'g, 72 Comp.  Gen.  132
(1993), 93-1 CPD 225; The Sequoia Group, Inc., B-252016, May 24,
1993, 93-1 CPD 405.)

Normally, we review the solicitation of combined requirements in the
context of a bid protest based upon the argument that the combination
unduly restricts competition.  (See 31 U.S.C.  3551-3556.) In
response to the protest, the agency will usually attempt to justify
the combined requirements by showing that the combination is
reasonably related to its needs or that the combination may actually
enhance, rather than inhibit, competition.  The Air Force's rationale
for the structure of the San Antonio solicitation was prepared in a
different context, in order to establish that it was more logical and
economical, than not, to combine the workloads, and if a protest is
filed, the Air Force will have an opportunity to provide a more
detailed justification.  As explained below, our assessment is that
although the rationale contains some elements that could be used to
support a combined requirement under the acquisition laws, it is not
at this point sufficient to justify the workload combination. 

Several of the reasons cited by the Air Force for the combination of
the various engine and accessory workloads pertain to matters related
to hoped for efficiencies.  For example, the agency says that the
engines constitute a single commodity and that regardless of the type
or model series of the engine, the repair processes are common and
use the same personnel skills.  Thus, according to the Air Force, a
single contractor will be able to share personnel skills, fixed
overhead-type functions (planning, scheduling, materiel support,
etc.) and backshops for the work on the three engines.\15 To the
extent these projected efficiencies are based on the assumption that
all of the workloads will be performed at the closing San Antonio
location or some other single location that can accommodate them,
these efficiencies cannot be used to justify the workload
combination.  The solicitation does not, and by law it cannot,
require that the workloads be performed in place at the San Antonio
facility or at any other location.  In fact, 10 U.S.C.  2469a(d)
provides that any offeror may propose to perform at any location or
locations it chooses and that no offeror may be given preferential
consideration, or be limited to, performing the workloads in place or
at any other single location.  So, the perceived benefits from the
performance of the combined engine workloads at a single location
cannot serve as a justification for combining the three engine and
accessory workloads in the solicitation. 

On the other hand, the Air Force has cited factors such as the risk
to readiness as a reason for combining the workloads into a single
award.  According to the agency, "Engine support is the number one
readiness problem facing the Air Force today." The readiness risk
here is associated with the management of separate transitions of the
multiple workloads and with the decreased efficiency of the workforce
at the closing depot due to multiple reduction-in force actions.  As
an example of the kinds of readiness problems that may arise, the Air
Force cites the transition of engine workloads that were transferred
from the closing Naval Aviation Depot at Alameda, California, to the
Jacksonville, Florida Naval Aviation Depot and to the San Antonio Air
Logistics Center.  The agency states that the gaining facilities were
unable to meet production requirements during the transition, and
maintains that production has yet to recover.  Moreover, the Air
Force states these factors would be exacerbated by the Base Closure
and Realignment Commission (BRAC) decision requiring that the depot
be closed and the workloads transferred by July 2001.  Elements such
as these do relate to the Air Force's needs.  A statement that
identifies and fully explains these concerns may support the
solicitation of combined requirements.\16

In addition, the Air Force maintains that the workload combination
will promote competition by providing a large economically attractive
package.  The Air Force points out that most of the potential
competitors it surveyed in 1995 preferred a single award for the
three engine and accessory workloads.\17 In fact, Air Force officials
expressed doubt as to whether one of the engine workloads solicited
separately would generate more than a single private-sector response. 
In this context, the impact of the solicitation of the multi-engine
and accessory workloads on competition, if backed by sufficient
evidence, could also be a factor in support of the combination.  (See
Canon U.S.A., Inc., B-23226, Nov.  30, 1998, 88-2 CPD 538.)

Our bid protest decisions have held that in order to determine
whether the solicitation of combined requirements is unduly
restrictive of competition in a particular instance, the agency's
justifications must be balanced against the possible restriction of
competition represented by potential competitors who maintain that
they can perform only a portion of the requirement.  (See, for
example, Phoenix Technical Services Corp., B-274694.2, March 12,
1997, 97-2 CPD 142.) Here, there is a solicitation that contains
combined requirements, a potential competitor who says that no single
firm can perform all of the requirements and some Air Force
justifications for the workload combination, including readiness
concerns and potential competition enhancement, which, if supported,
may establish the reasonableness of combined requirements.  Based on
what is available at this time, however, we cannot say that the Air
Force has sufficiently justified the solicitation of combined
multi-engine and accessory workloads as being reasonably related to
its needs as opposed to the desire to avoid management difficulties
that may accompany the movement of workloads at different times to
different locations.  We recognize that the management difficulties
could have a potential readiness impact.  However, as noted earlier,
equipment readiness problems associated with workload transition can
be mitigated if the transition is properly planned and effectively
implemented.  \18 Moreover, the agency has not sufficiently supported
its view that the workload combination will likely enhance
competition.  If a protest is filed, the Air Force will have an
opportunity to provide further support to show that the San Antonio
solicitation is not unduly restrictive of competition.  (See National
Customer Eng'g, cited above.)\19


--------------------
\13 Public-Private Competitions:  DOD's Determination to Combine
Depot Workloads Is Not Adequately Supported (GAO/NSIAD-98-76, Jan. 
20, 1998). 

\14 Public-Private Competitions:DOD's Additional Support for
Combining Depot Workloads Contains Weaknesses (GAO/NSIAD-98-143, Apr. 
17, 1998). 

\15 While these factors may indeed represent potential efficiencies,
the Air Force has not maintained that they are related to technical
requirements or risks inherent in performing these workloads or
represent performance methods that are needed to successfully
accomplish the work. 

\16 We have previously reported on the transition of the workloads
cited by the Air Force and concluded that readiness problems
associated with workload transfers can be mitigated by careful
management.  Depot Maintenance:  Lessons Learned From Transferring
Alameda Naval Aviation Depot Engine Workloads (GAO/NSIAD-98-10BR,
Mar.  25, 1998). 

\17 We have reported that this survey was conducted in the context of
the then-current strategy of privatizing the C-5 aircraft and the
engine work at the closing San Antonio depot.  The results are less
relevant under the current public-private competition for the engine
work to be performed at the location of the successful offeror's
choice.  See Public Private Competitions:  DOD's Additional Support
for Combining Workloads Contains Weaknesses cited earlier. 

\18 Depot Maintenance:  Lessons Learned From Transferring Alameda
Naval Aviation Depot Engine Workloads, cited earlier. 

\19 As discussed later, we do not find, however, that the workload
combination in the San Antonio solicitation is necessarily
inconsistent with the 10 U.S.C.  2469a(d) requirement that
competitors be permitted to perform at their chosen locations and not
be given preferential treatment for performing at any single
location.  While many of the factors cited by the Air Force in favor
of combining the workloads are related to projected efficiencies of
performance at the closing San Antonio location, they could well
apply to other locations that can accommodate all of the workloads. 
Moreover, there is no restriction as to performance location in the
solicitation. 


      BEST-VALUE SELECTION
      CRITERIA
------------------------------------------------------- Appendix I:3.3

As discussed previously, the San Antonio solicitation provides that
the award will be made to the responsible offeror whose conforming
proposal represents "the best value to the Government." According to
the solicitation, the Air Force is to determine best value by
integrating the evaluations of the proposals under the specific
criteria, including transition and repair operations, cost criteria,
assessment criteria and general considerations.  Transition, repair
operations and cost are to be accorded equal weight, while general
considerations are to be substantially less important than cost,
transition, or repair operations.  Under the RFP evaluation scheme,
it is possible that the entity selected--whether public or
private--may not be the competitor whose proposal is determined to
represent the lowest total evaluated cost. 

A potential competitor has questioned the Air Force's authority to
select a source that does not represent the lowest total evaluated
cost for performing the workloads.  In this regard, some have
suggested that
10 U.S.C.  2469a, the basic authority governing the San Antonio
competition, limits the Air Force to a selection based on low
evaluated cost.  We find nothing in 10 U.S.C.  2469a that prescribes
the use of any particular evaluation method or requires that cost be
the determining factor in the selection of the successful offeror. 
Subsection (d) of 10 U.S.C.  2469a sets forth requirements the Air
Force must satisfy in the selection process.  While they include a
number of cost elements that must be considered in the selection,
such as depreciation, noncost factors such as performance location
are also specified.\20 In view of the mixture of cost and noncost
elements and the lack of any specific reference to a particular
evaluation method, in our view the subsection (d) requirements do not
dictate that cost be the deciding factor in the selection of a source
for the San Antonio and Sacramento workloads.\21

While the Air Force is not required to use any particular source
selection method, it still must comply with provisions that apply
generally to the conversion of functions to private-sector
performance, particularly
10 U.S.C.  2461.  Section 2461(a)(2) requires that whenever a
DOD-performed function, such as the San Antonio workloads, is
converted to performance by a contractor, DOD must provide to
Congress a cost comparison which shows that savings will result. 
This provision would apply if the San Antonio competition resulted in
the selection of a private-sector source.  Similarly, the Air Force's
selection would have to comply with 10 U.S.C.  2462, which requires
that DOD procure the services it needs from the private sector if a
private source can provide that service at a lower cost.\22


--------------------
\20 The fact that a number of the requirements in subsection (d)
concern elements of cost that must be considered in the evaluation
does not mean that the selection must be based only on cost.  It does
mean, we think, that cost must be a significant factor in any
selection.  This would be the case under the San Antonio RFP, as cost
is weighted the same as each of the two major noncost or technical
areas. 

\21 This interpretation is consistent with subsection (g) of 10
U.S.C.  2469a, which provides for GAO review of the awards made under
the San Antonio and Sacramento competitions.  In the reviews we are
to consider whether "appropriate consideration was given to factors
other than cost" in the selection and, on the other hand, to report
on whether the award "resulted in the lowest total cost to the
Department of Defense for the performance of the workload."

\22 In addition, the Air Force would be required to certify to
congressional committees the various cost estimates in accordance
with section 8039 of the 1998 Defense Appropriations Act and, if a
private sector source is selected, the Air Force would have to
certify to congressional committees its "in-house estimate" in
accordance with section 8014 of the act. 


      EVALUATION OF OVERHEAD
      SAVINGS FOR OTHER WORKLOADS
------------------------------------------------------- Appendix I:3.4

A potential competitor has raised concerns to us about the method
provided in the RFP for evaluating the overhead savings that may be
attributed to an offeror's existing government work resulting from
the addition of the competed workloads.  The concerns center on
whether the projected savings will be applied to the entire
performance period for the San Antonio workloads.  For the reasons
stated below, we conclude that the RFP establishes a reasonable
method for measuring the estimated overhead savings that can be
attributed to the addition of the competed workloads to existing
government work and that it complies with the relevant provisions of
10 U.S.C.  2469a. 

The solicitation states that an adjustment will be made to a public
or private offeror's proposal for overhead savings to be realized for
other workloads.  At the outset of the applicable provision, the
solicitation warns:  "Due to uncertainty in forecasting long term
overhead rates by both public and private offerors, the ability to
forecast associated out-year savings significantly diminishes with
time." The RFP further explains that the evaluation will emphasize an
offeror's analysis and documentation of proposed management
initiatives to ensure that the projected savings, particularly those
predicted for more than 24 months after award, will occur.  The
evaluation formula provides that the proposed first year savings, if
determined to be reasonable "will be allowed,"\23 while second year
savings if supportable will also be allowed, but "discounted for
risk." The RFP goes on to explain that proposed savings for 3 years
and beyond "may be allowed if clearly appropriate, but in any event
will be considered under the best value analysis."\24

To help ensure that the proposed savings that are evaluated are
realized by the agency, the solicitation further provides that
private offerors must agree, after award, to negotiate appropriate
government contract and forward pricing rate reductions.  A winning
public offeror would similarly be required to adjust the rates
charged for the workloads that were the subject of the evaluation
credit. 

We have no reason to question the Air Force's method for evaluating
overhead savings.  It seems reasonable for the agency to carefully
evaluate an offeror's projected savings in terms of the information
and analysis provided to the agency during the evaluation process and
to factor into that evaluation the possibility that conditions could
change over time so that what may be achievable savings in the short
term may be less so in the longer term.  Similarly, we have no basis
to conclude that the RFP evaluation process for the projected
overhead savings on other workloads is other than a reasonable
implementation of the 10 U.S.C.  2469a(d)(2)(B) requirement that the
source selection process take into account "the total estimated
direct and indirect savings (including overhead) that will be derived
by the Department of Defense." This provision is sufficiently general
to permit the agency broad discretion to decide exactly how to
measure "estimated" overhead savings as those savings apply to a
successful offeror's other government work.  Considering that the
performance period for the San Antonio workloads could extend for as
long as 15 years, we believe it is a legitimate exercise of the
agency's discretion to require strong support for projected future
savings and to consider that such projections may well be less
accurate for the later portion of the performance period. 


--------------------
\23 As we understand it, the term "allowed" means that the amount of
the projected savings that the agency considers to be reasonable will
be credited to the offeror in the determination of the offeror's
total alternative cost. 

\24 This part of the evaluation scheme provides for the consideration
of out-year savings that are not clearly supported by backup data,
but which otherwise seem to be achievable, at least in part, as a
positive element in the noncost portion of the SSA's integrated
assessment of best value. 


      PERFORMANCE LOCATION
------------------------------------------------------- Appendix I:3.5

Subsection (g) of 10 U.S.C.  2469a provides that our report on a
solicitation for workloads from the closing depots is to include our
view as to whether the solicitation under review provides a
"substantially equal opportunity for public and private offerors to
compete for the contract without regard to the location at which the
workload is to be performed." In addition,
10 U.S.C.  2469a(d), which lists the requirements for the source
selection process, provides that a public or private competitor must
be permitted to perform at the location of its choosing and a
competitor is not to be given preferential treatment for, or be
limited to, performing the workload in place or at any other single
location. 

We have found no provisions in the solicitation that designate a
particular location, such as the closing San Antonio depot, at which
performance is required or preferred.  Nor do any of the solicitation
evaluation criteria evidence a bias towards any particular
performance location. 

Nonetheless, as discussed earlier, a potential competitor has
expressed the concern that the consolidation of workloads in a single
solicitation, in effect, would favor an offeror proposing to perform
the work at the closing San Antonio facility.  The basis of this
concern is that the multi-engine and accessory workloads have little
in common--the potential competitor maintains that no single firm has
the capability to perform the workloads for all three engines--and
were arguably combined only because they had been performed together
at the San Antonio depot. 

As we understand the 10 U.S.C.  2469a provisions concerning
performance location, they are to prevent the Air Force from
specifying a performance location or from creating an advantage for a
particular location for reasons that are not reasonably related to
performance or cost.  In this regard, the legislative history of 10
U.S.C.  2469a makes clear that the provision does not prohibit
offerors from selecting the best performance location and receiving
an evaluation credit for that location based upon legitimate
performance considerations.  In fact, the statement of managers
accompanying the 1998 Authorization Act states that the agency "would
be expected to consider real differences among bidders in cost or
capability to perform the work based on factors that would include
the proposed location or locations of the workloads." Conf.  Rept. 
No.  105-340 on
H.R.  1119, at 717 (1997).  While it may be that the closing San
Antonio depot would be an advantageous performance location for the
combined workloads, as stated earlier, other locations or
combinations may also be suitable.  Thus, we cannot say that the
workload combination, without a corresponding location restriction in
the solicitation, directly interferes with an offeror's right under
10 U.S.C.  2469a(d) to compete without regard to performance
location. 


      COMPLIANCE WITH OTHER
      APPLICABLE PROVISIONS OF
      10 U.S.C.  2469A
------------------------------------------------------- Appendix I:3.6

In addition to reviewing specific compliance issues arising under
10 U.S.C.  2469a, such as the treatment of overhead savings, and
addressing the section 2469a provisions concerning performance
location, we reviewed the San Antonio solicitation to determine
whether it otherwise complies with the requirements of section 2469a. 

As noted previously, 10 U.S.C.  2469a sets forth a number of
requirements that must be satisfied in the San Antonio solicitation
and selection process.  Particularly, the solicitation and the source
selection process must:  (1) permit both public and private offerors
to submit offers, (2) take into account the fair market value of any
land, plant, or equipment at a closed or realigned military
installation that is proposed to be used by a private offeror in the
performance of the workload, (3) take into account the total
estimated direct and indirect costs that will be incurred by DOD and
the total estimated direct and indirect savings (including overhead)
that will be derived by DOD, (4) use cost standards to determine the
depreciation of facilities and equipment that provide, to the maximum
extent practicable, identical treatment to public and private
offerors, (5) permit any offeror, whether public or private, to team
with any other public or private entity to perform the workload at
any location or locations of their choosing, and (6) ensure that no
offeror may be given any preferential consideration for, or in any
way be limited to, performing the workload in place or at any single
location.  Section 2469a requires that all six of these conditions be
stated in the solicitation. 

Reviewing the solicitation in the context of the 10 U.S.C.  2469a
requirements we found that all of the requirements are specifically
acknowledged in the solicitation.\25 Further, we are unaware of other
provisions of the solicitation that are inconsistent with the 10
U.S.C.  2469a requirements.  Thus, we find no basis to conclude that
the San Antonio solicitation deviates in any material respect from
the requirements of
10 U.S.C.  2469a. 


--------------------
\25 Five of the six requirements are listed in section M-902 of the
solicitation.  The one requirement not listed in this section is the
requirement that cost standards used to determine the depreciation of
facilities and equipment provide, to the maximum extent practicable,
identical treatment to public and private offerors.  This requirement
is addressed in the solicitation at paragraph 5.f.6 of section L and
paragraphs 2.6.(7) and (8) of section M-901, as well as in the SAF/AQ
Public-Private Competition Cost Procedures of Feb.  21, 1998. 


AGENCY COMMENTS AND OUR EVALUATION
========================================================== Appendix II

We informally obtained comments on our review from Air Force
officials.  They had concerns with our statements that provisions of
law other than 10 U.S.C.  2469a apply to the San Antonio competition
and that the Air Force had not as of May 5, 1998, provided a
sufficient basis to show that soliciting the various engine and
accessory workloads on a combined basis is necessary to satisfy the
agency's needs.  The Air Force's concerns and our responses follow. 

First, the Air Force states that our discussion of the applicable
legal standards may suggest that the Air Force will have to comply
with provisions that it characterizes as inapplicable because of
inconsistency or incompatibility with the basic authority in 10
U.S.C.  2469a, or the Defense Base Closure and Realignment Act of
1990.  The Air Force maintains that it will fully comply with 10
U.S.C.  2469a, the relevant BRAC decision and other applicable
provisions of law.  The Air Force does not specify which provisions
it views as inapplicable. 

Our report states that in addition to 10 U.S.C.  2469a, a number of
laws such as 10 U.S.C 2469, 10 U.S.C.  2470, and section 8039 of the
1998 DOD Appropriations Act, that are generally applicable to the
outsourcing of depot workloads, are also applicable to the San
Antonio competition.  Further, we state that other provisions such as
10 U.S.C.  2461, 10 U.S.C.  2462 and section 8014 of the 1998 DOD
Appropriations Act, that apply generally to DOD outsourcing could be
applicable to the San Antonio competition depending upon the outcome
of the selection process.  Finally, we state that the competition is
subject to the applicable provisions of chapter 137 of title 10 of
the United States Code and the FAR, to the extent they do not
conflict with the public-private competition statutes.  While the Air
Force disagrees with at least some of the above mentioned statements
it has not specified what provisions it views as inapplicable. 

Second, the Air Force takes exception to our conclusion that as of
May 5, the Air Force had not provided sufficient support for
soliciting the workloads as a combined requirement.  In this regard,
the Air Force states that it has shown that engine repair work has
many common elements and that shared facilities for different engine
types are commonly used by commercial repair sources.  The agency
further states that we have understated the impact of multiple
solicitations on readiness by failing to consider the impact on war
readiness and by not fully considering the inability of the closing
depot to keep key management and supervisory personnel in place to
manage multiple solicitations. 

We recognize in our report the Air Force's position that the repair
of the various engines involves common processes and skills that
could lead to efficiencies.  However, we also point out that these
projected efficiencies cannot be used to justify the workload
combination as they are based on the assumption that all of the
workloads are to be performed at a single location that can
accommodate them all.  The solicitation does not, and by law cannot,
require that the workload be performed at the San Antonio facility or
at any other location.  As far as readiness is concerned, we fully
considered all of the support provided by the Air Force.  However, it
is our view that the possible readiness problems, as thus far
described by the Air Force, can be mitigated if the transition is
properly planned and effectively implemented.  Our report
acknowledges that readiness concerns do relate to the agency's needs
and with further explanation could support the solicitation of
combined workloads. 

We have incorporated changes suggested by the Air Force when
appropriate. 


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