Navy Request for Advance Decision

GAO was asked by the Department of the Navy for its opinion on whether the Navy should exercise its option to increase work under a sole-source contract or delay exercising the option pending a court-ordered evaluation of the possibility of competing for the work. The sole-source contract was for for a basic quantity of 13 of the Navy's C-130 series aircraft. Also included in the contract was an option for seven additional aircraft and an option for 29 aircraft which were to be included in follow-on contracts. In March 1980, the court ordered the Navy to further consider the feasibility of competing the contract for at least the follow-on requirement of 29 aircraft. The Navy subsequently ordered the sole-source contractor to divert parts originally ordered for four of five aircraft included in the option quantity for use in four of the follow-on quantity aircraft. The Navy asserted that it took this action to insure that its Service Life Extension Program (SLEP) contract on the four follow-on aircraft would be completed expeditiously and stated that substitute parts for the four aircraft would be reordered. Upon being told of this decision, a firm complained to the court that, if the manufacture of the parts was completed as ordered, the contract for the follow-on aircraft might have to be awarded to the sole-source contractor, thereby reducing the number of aircraft which might be competed. Consequently, the court asked GAO to determine whether, in view of the diversion of the parts, the Navy could exchange the aircraft as well, substituting the four follow-on aircraft for four of the five aircraft. GAO held that the result desired by the court would not necessarily require that the Navy terminate any portion of the sole-source contract. While two of the original seven optional aircraft have been ordered, the option has not been exercised. So long as the option is not exercised, there is no legal impediment to including these aircraft in any new competitive procurement. As a practical matter, GAO believed that the Navy could defer deciding whether to exercise its option to order SLEP for all of the aircraft from Lockheed until the Navy completes a review to determine whether additional SLEP requirements could be procured competitively.