B-194445.5, L/M, JUN 5, 1981

B-194445.5: Jun 5, 1981

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DIGEST: NAVY DECISION TO NONCOMPETITIVELY PROCURE C-130 AIRCRAFT SERVICE LIFE EXTENSION PROGRAM BEYOND OPTION QUANTITY ALREADY ORDERED IS PREMATURE. RECORD INDICATES THAT INDIVIDUAL AIRCRAFT ARE SCHEDULED TO UNDERGO OVERHAUL OVER FOUR YEAR PERIOD. THAT OVERHAUL CAN BE PERFORMED BY EXPERIENCED MAINTENANCE CONTRACTORS IF MILITARY SPECIFICATION KITS ARE PREPARED. TOOLING AND PARTS REQUIRED ARE AVAILABLE TO THE NAVY. IN THAT ORDER YOU EXPRESSED THE COURT'S DESIRE FOR OUR OPINION REGARDING QUESTIONS WHICH HAVE ARISEN AS A RESULT OF THE NAVY'S PLANS TO ORDER ADDITIONAL WORK FROM THE LOCKHEED CORPORATION UNDER THE NAVY'S C-130 SERVICE LIFE EXTENSION PROGRAM (SLEP). AS THE COURT IS AWARE. FORTY NINE AIRCRAFT ARE INVOLVED.

B-194445.5, L/M, JUN 5, 1981

DIGEST: NAVY DECISION TO NONCOMPETITIVELY PROCURE C-130 AIRCRAFT SERVICE LIFE EXTENSION PROGRAM BEYOND OPTION QUANTITY ALREADY ORDERED IS PREMATURE. RECORD INDICATES THAT INDIVIDUAL AIRCRAFT ARE SCHEDULED TO UNDERGO OVERHAUL OVER FOUR YEAR PERIOD, THAT OVERHAUL CAN BE PERFORMED BY EXPERIENCED MAINTENANCE CONTRACTORS IF MILITARY SPECIFICATION KITS ARE PREPARED, THAT MUCH OF THE INFORMATION, TOOLING AND PARTS REQUIRED ARE AVAILABLE TO THE NAVY, AND THAT KITS CAN BE PREPARED IN SUFFICIENT TIME TO PERMIT SUBSTANTIAL PART OF NEEDS TO BE FILLED THROUGH COMPETITION.

LOUIS F. OBERDORFER, UNITED STATES DISTRICT JUDGE:

THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

THIS LETTER FURTHER RESPONDS TO YOUR REQUEST IN YOUR ORDER OF FEBRUARY 26, 1981 IN CONNECTION WITH AERO CORPORATION V. DEPARTMENT OF THE NAVY, CIVIL ACTION NO. 79-2944. IN THAT ORDER YOU EXPRESSED THE COURT'S DESIRE FOR OUR OPINION REGARDING QUESTIONS WHICH HAVE ARISEN AS A RESULT OF THE NAVY'S PLANS TO ORDER ADDITIONAL WORK FROM THE LOCKHEED CORPORATION UNDER THE NAVY'S C-130 SERVICE LIFE EXTENSION PROGRAM (SLEP).

AS THE COURT IS AWARE, SLEP INVOLVES THE PROCUREMENT AND INSTALLATION OF PARTS TO EXTEND THE PLANNED SERVICE LIFE OF NAVY C-130 SERIES AIRCRAFT FROM 15,000 TO 25,000 HOURS OF OPERATION. FORTY NINE AIRCRAFT ARE INVOLVED, INCLUDING VARIOUS QUANTITIES OF C-130G, KC-130F AND TACAMO (EC- 130G/Q) AIRCRAFT. AN ORIGINAL SOLE SOURCE AWARD TO LOCKHEED COVERED A BASIC QUANTITY OF 13 AIRCRAFT WITH OPTIONS FOR 7 ADDITIONAL AIRCRAFT, INCLUDING AN OPTION FOR 2 TACAMO AIRCRAFT WHICH HAS BEEN EXERCISED. LOCKHEED HAS SINCE BEEN AWARDED OPTIONS FOR SLEP FOR ALL AIRCRAFT (29) WHICH WERE NOT INCLUDED IN THE ORIGINAL AWARD.

IN PART, THE QUESTIONS ASKED IN THE FEBRUARY ORDER WERE ADDRESSED IN OUR LETTER TO YOU AT THE TIME OF OUR DECISION IN AERO CORPORATION, B-194445, MARCH 27, 1981, 81-1 CPD 229. AT THAT TIME WE EXPRESSED OUR VIEW THAT NONE OF THE 34 AIRCRAFT WHICH REMAIN UNDER OPTION SHOULD BE OVERHAULED UNDER THE LOCKHEED SLEP CONTRACT IF COMPETITION BECAME FEASIBLE BY THE TIME THE OPTION WOULD BE EXERCISED, UNLESS A MORE ADVANTAGEOUS OFFER CANNOT BE OBTAINED. HOWEVER, ALTHOUGH WE NOTED THAT OTHER QUESTIONS ASKED IN THE FEBRUARY ORDER DEALING WITH THE NAVY'S DECISION TO ORDER WORK ON FIVE OPTIONAL EC-130G/Q TACAMO AIRCRAFT FROM LOCKHEED WERE RIPE FOR REVIEW, WE DEFERRED ADDRESSING THOSE QUESTIONS IN VIEW OF YOUR DESIRE FOR A PARTIAL DECISION AS SOON AS POSSIBLE.

SINCE OUR MARCH 27 DECISION THE NAVY HAS DECIDED TO ORDER ALL REMAINING SLEP WORK FROM LOCKHEED, A DECISION WHICH EMBRACES NOT ONLY THE FIVE TACAMO AIRCRAFT BUT ALL REMAINING KC-130FS AND C-130GS. (THE DISPOSITION OF TWO OF THE NAVY'S C-130 FLEET WHICH ARE ASSIGNED TO THE TACAMO MISSION AS TRAINERS IS UNCLEAR ON THE PRESENT RECORD.)

IN VIEW OF THE NAVY'S ACTION, THE QUESTIONS POSED IN THE FEBRUARY ORDER NOW CAN BE ADDRESSED WITH RESPECT TO ALL OF THE AIRCRAFT UNDER OPTION WITH LOCKHEED.

AS EXPLAINED BELOW, WE DO NOT BELIEVE THE NAVY HAS JUSTIFIED PLACING ADDITIONAL ORDERS AGAINST THE LOCKHEED CONTRACT WITHOUT FIRST ATTEMPTING TO OBTAIN COMPETITION. WHILE THE PRESENT RECORD INDICATES THAT SCHEDULE CONSTRAINTS LEAVE THE NAVY NO PROSPECT OF COMPETING AIRCRAFT FOR WHICH ORDERS ALREADY HAVE BEEN PLACED, AT LEAST UNDER CIRCUMSTANCES WHICH WOULD AFFORD AERO ANY REALISTIC CHANCE OF SUCCESS, WE BELIEVE THE NAVY SHOULD SEEK COMPETITION AND SHOULD NOT EXERCISE FURTHER OPTIONS EXCEPT ON AN AIRPLANE-BY-AIRPLANE BASIS AND ONLY IF IT IS UNABLE TO COMPLETE MAKING A COMPETITIVE AWARD IN SUFFICIENT TIME TO MEET SPECIFIC SCHEDULE REQUIREMENTS.

I

FIRST, WE CONSIDER WHETHER IN THE WORDS OF YOUR ORDER THERE:

"IS *** A RATIONAL BASIS FOR THE NAVY'S DETERMINATION THAT CERTAIN KITS ARE REQUIRED IF SLEP IS PERFORMED BY EXPERIENCED C-130 MAINTENANCE CONTRACTORS?"

THE NAVY, IN COMMENTS SUBMITTED TO OUR OFFICE, SEES ITS DETERMINATION TO ORDER SLEP FOR ADDITIONAL AIRCRAFT FROM LOCKHEED AS JUSTIFIED BECAUSE IT BELIEVES PERFORMANCE OF SLEP BY FIRMS OTHER THAN LOCKHEED REQUIRES SOCALLED MILITARY SPECIFICATION (MIL. SPEC.) KITS. THE PROBLEM, THE NAVY SAYS, IS THAT IT WILL TAKE AT LEAST 35 MONTHS TO OBTAIN KITS FOR THE TACAMO AIRCRAFT, AND EVEN LONGER TO COMPLETE KITS FOR THE KC- AND C-130 AIRCRAFT. SINCE SUCH DELAY IS UNACCEPTABLE, THE NAVY CONCLUDES THAT ONLY LOCKHEED, WHICH DOES NOT REQUIRE KITS, IS ABLE TO PERFORM THE WORK.

ACCORDING TO NAVY'S REPORTS, THE C-130 SLEP MIL. SPEC. KIT:

"WOULD INCLUDE ALL PARTS, FASTENERS, TOOLING AND TECHNICAL DATA (INCLUDING INSTALLATION INSTRUCTIONS, TOOL USAGE INSTRUCTIONS, DRAWINGS, FIT-UP CRITERIA AND ILLUSTRATIONS) REQUIRED TO ACCOMPLISH THE SLEP MODIFICATIONS."

THERE IS NO LEGAL REQUIREMENT FOR THE USE OF SUCH KITS. THE NAVY'S AERONAUTICAL REQUIREMENTS (AR), WHICH THE NAVY SAYS GOVERN KITS, ONLY ESTABLISH A POLICY THAT "INSOFAR AS PRACTICAL" THE NAVY WILL PROVIDE KITS. AR 41-3.5.1. SECTION 41-3.4.1.2 SPEAKS OF "WIDE LATITUDE" IN DEVELOPING DATA NEEDED TO PREPARE ANY TECHNICAL DIRECTIVES INCLUDED WITH THE KITS. FURTHER, AR 41-3.4.5 PERMITS SO-CALLED "INSTALLATION DATA PACKAGES" TO BE USED IN LIEU OF FORMALIZED KITS TO PERFORM COMPLEX CHANGES AT THE DEPOT LEVEL, I.E., BY A CONTRACTOR SUCH AS AERO, AND STATES THAT IT IS ONLY NECESSARY IN THIS REGARD TO DESCRIBE THE MODIFICATION IN SUFFICIENT DETAIL TO ENABLE NAVY PERSONNEL TO CONFIRM THAT THE WORK WAS DONE. THE WORK TO BE DONE IS DESCRIBED BY FURNISHING PRODUCTION OR REWORK DRAWINGS, SPECIFICATIONS (WHICH MAY INCLUDE NARRATIVE INSTRUCTIONS AND ILLUSTRATIONS) AND ANY NEEDED BILL OF MATERIAL.

NEVERTHELESS, THE NAVY JUSTIFIES ITS INSISTENCE ON THE USE OF KITS AS ESSENTIAL TO CONTROL RISK AND TO ASSURE THAT THE NAVY RECEIVES A UNIFORM, STANDARDIZED PRODUCT. ALSO, THE NAVY SAYS THAT USE OF KITS IS DICTATED BY GOOD MANAGEMENT PRACTICE BECAUSE "BY FURNISHING ALL KNOWN PARTS REQUIREMENTS AT THE BEGINNING OF THE PROGRAM, THE GOVERNMENT CAN MINIMIZE THE SCHEDULE DELAYS CAUSED BY LATE ARRIVAL OF PARTS."

NOTING AERO'S ARGUMENT THAT THE COURT IN ITS ORIGINAL (MARCH 4, 1980) DECISION AND ORDER (AERO CORPORATION V. DEPARTMENT OF THE NAVY, 493 F.SUPP. 558 (1980)) DIRECTED THE NAVY TO EXAMINE THE EXTENT TO WHICH "TAILORED KITS" MIGHT BE USED, THE NAVY SAYS THAT KITS ARE ALWAYS "TAILORED" TO THE SKILL AND EXPERIENCE LEVEL OF THE TYPE OF CONTRACTOR BELIEVED QUALIFIED TO INSTALL IT - IN THIS INSTANCE, THE CAPABILITIES OF EXPERIENCED C-130 MAINTENANCE CONTRACTORS. THUS, AS WE UNDERSTAND WHAT THE NAVY WOULD DO, IT WOULD PREPARE A KIT (ACTUALLY, A SERIES OF UP TO 22 SEPARATE "RETROFIT KITS") WHICH WOULD VARY IN DETAIL FROM TASK TO-TASK, DEPENDING ON THE NAVY'S ASSESSMENT OF THE DEGREE OF DIFFICULTY AND RISK INVOLVED IN PERFORMING EACH TASK.

WE BELIEVE THE NAVY MAY PROPERLY CONCLUDE THAT SUCH KITS ARE NECESSARY IF THE WORK IS PERFORMED BY SOMEONE OTHER THAN LOCKHEED.

IN SOLICITING PROPOSALS FOR A CONTRACT THE GOVERNMENT MAY INSIST THAT OFFERORS AGREE TO CONTRACT TERMS WHICH IT REASONABLY BELIEVES ARE NEEDED TO ADEQUATELY PROTECT ITS INTERESTS. CONSTANTINE N. POLITES & CO., B-189214, DECEMBER 27, 1978, 78-2 CPD 437. WHILE AERO BELIEVES IT NEEDS NO KIT, THE OVERHAUL OF AN ENTIRE FLEET OF AIRCRAFT CLEARLY INVOLVES A VARIETY OF POSSIBLE TECHNICAL AND SCHEDULE RISKS. FOR EXAMPLE, A POOR INSTALLATION EFFORT MAY NOT BECOME EVIDENT UNTIL YEARS LATER AS THE INCIDENCE OF FATIGUE DAMAGE TO INSTALLED PARTS BECOMES APPARENT. BY THAT TIME IT MAY BE IMPOSSIBLE TO PROVE WHY THE DAMAGE OCCURRED. THUS, EVEN IF AERO IS CORRECT IN BELIEVING THAT IT CAN PERFORM AS WELL AS OR BETTER THAN LOCKHEED, THE NAVY MAY IMPOSE CONDITIONS WHICH IT BELIEVES ARE REASONABLY NECESSARY TO ASSURE THAT ITS LEGITIMATE NEEDS ARE MET.

MOREOVER, WERE SLEP COMPETED THE NAVY WOULD USE THE KITS AS THE REQUIRED STATEMENT OF WHAT THE WORK IS AND HOW IT SHOULD BE DONE. (THE DESCRIPTION OF THE WORK TO BE DONE PROVIDES THE FOUNDATION ON WHICH OFFERORS WOULD BE AFFORDED AN EQUAL AND FAIR OPPORTUNITY TO COMPETE.) WE BELIEVE USE OF THE KIT APPROACH WOULD AFFORD AERO ITS ONLY REALISTIC CHANCE OF RECEIVING AWARD AS THE KITS WOULD NEUTRALIZE RISK AS AN EVALUATION AND AWARD CRITERION. (THE DIFFERENCE BETWEEN THE POSITIONS IN WHICH LOCKHEED AND AERO FIND THEMSELVES IS PRIMARILY THAT THE NAVY HAS MUCH GREATER CONFIDENCE THAT LOCKHEED AS THE ORIGINAL AIRFRAME MANUFACTURER CAN MEET ITS SLEP OBJECTIVES USING A LESS DETAILED STATEMENT OF THE WORK TO BE DONE, RELYING TO A MUCH GREATER EXTENT ON ORIGINAL DESIGN DATA AND EXPERIENCE, AND MANUFACTURING OR DIRECTLY SUBCONTRACTING FOR NECESSARY PARTS.)

II

NEXT, YOUR ORDER ASKS:

"IS THERE A RATIONAL BASIS FOR THE NAVY'S DETERMINATION THAT IT WOULD REQUIRE 35 MONTHS TO PREPARE THOSE KITS FROM THE TIME OF THE NAVY'S DECISION TO PROCURE ON A COMPETITIVE BASIS?"

INITIALLY, THE NAVY MAINTAINED THAT THE TIME REQUIRED TO PREPARE KITS FOR THE TACAMO AIRCRAFT WOULD BE DETERMINED PRINCIPALLY BY THE TIME REQUIRED TO OBTAIN SO-CALLED "SCHEDULED" PARTS WHICH WOULD BE INCLUDED IN THE KITS AS GOVERNMENT FURNISHED MATERIAL.

"SCHEDULED" PARTS, I.E., PARTS WHICH THE NAVY EXPECTS TO REPLACE DURING SLEP AND WHICH INCLUDE, INSOFAR AS WE ARE AWARE, ALL LONG LEAD TIME PARTS (THE LONGEST TIMES INVOLVING SUBCONTRACTED ITEMS), ARE INCLUDED AS OPTIONAL ITEMS UNDER THE LOCKHEED CONTRACT WHICH, IN TURN, IS WRITTEN TO PERMIT THE PARTS TO BE ORDERED FROM LOCKHEED REGARDLESS OF WHETHER INSTALLATION IS ORDERED. THE PARTS FOR FOUR OF THE REMAINING TACAMO AIRCRAFT WERE ORDERED BY DIVERTING KC-130F PARTS AS DISCUSSED IN OUR MARCH 27 DECISION. OUR DECISION RECOMMENDED THAT THE NAVY POSTPONE AS LONG AS POSSIBLE MAKING ANY FINAL DECISION REGARDING FINAL MANUFACTURE OF THESE PARTS WHICH MIGHT AFFECT THEIR SUITABILITY FOR USE BY ANYONE OTHER THAN LOCKHEED. AS WE UNDERSTAND THE NAVY'S POSITION, IT NOW CONCEDES THAT THESE PARTS CAN BE USED BY A CONTRACTOR SUCH AS AERO AS WELL AS BY LOCKHEED IF NECESSARY TOOLING IS MADE AVAILABLE. SINCE THE SAME PARTS EVIDENTLY CAN BE MADE AVAILABLE TO WHOEVER IS TO INSTALL THEM, LONG LEAD TIME REQUIREMENTS ARE LARGELY ELIMINATED AS A CONTROLLING FACTOR, A POINT WHICH THE SLEP PROJECT MANAGER SEEMS TO ADMIT IN A MEMORANDUM FILED WITH THE NAVY'S RECENT REPORT REGARDING PROCUREMENT OF THE KC- AND C-130 AIRCRAFT.

HOWEVER, THE NAVY IN REVIEWING LOCKHEED'S INITIAL PERFORMANCE OF THE KC- AND C-130 SLEP ADDS TO RATHER THAN REDUCES THE REQUIRED TIME TO PREPARE KITS AND NOW INSISTS THAT UP TO FOUR OR FIVE YEARS WOULD BE REQUIRED. WITH THE KC- AND C-130 REPORT, THE NAVY HAS SUBMITTED FOUR DISTINCT KIT PREPARATION SCHEDULES, INCLUDING ONE PREPARED BY LOCKHEED, ONE DISCUSSED IN THE NAVY'S SLEP PROJECT MANAGER'S MEMORANDUM, AND A "NOMINAL" AND AN "OPTIMISTIC" SCHEDULE FORMALLY PRESENTED TO THE NAVY REVIEW BOARD. THESE, THE NAVY SAYS, SUPPORT ITS VIEW THAT IT IS NOT FEASIBLE TO CONDUCT COMPETITION IN A TIMELY MANNER.

WE HAVE EXAMINED EACH OF THESE SCHEDULES CAREFULLY, ALONG WITH THE NAVY'S SUPPORTING DOCUMENTATION. TIMING FOR THREE OF THE FOUR SCHEDULES IS DRIVEN BY PARTS AVAILABILITY, ALTHOUGH THE SO-CALLED "OPTIMISTIC" SCHEDULE REDUCES THE REQUIRED TIME TO ACQUIRE PARTS TO TWO YEARS. THE SCHEDULE SUGGESTED BY THE PROJECT MANAGER DISCOUNTS THE TIME REQUIRED TO OBTAIN LONG LEAD TIME PARTS BUT ADDS 16 MONTHS TO LOCKHEED'S PROPOSED KIT PREPARATION TIME FRAMES - 10 MONTHS FOR NAVY PROCESSING OF THE LOCKHEED CHANGE PROPOSALS (KIT DESIGN), APPROXIMATELY ONE YEAR FOR TRIAL INSTALLATION (SO-CALLED "VALIDATION") AT LOCKHEED OF KITS ON TWO TEST AIRCRAFT, AND 6 MONTHS FOR CORRECTION OF ANY DEFICIENCIES FOUND IN THE LOCKHEED PRODUCED KITS. THE OTHER SCHEDULES ALSO ALLOW TIME FOR INTERNAL NAVY REVIEW.

WE DO NOT AGREE WITH THE NAVY THAT THE RECORD SHOWS THAT IT IS IMPOSSIBLE TO COMPLETE KIT PREPARATION IN LESS THAN THREE TO FOUR YEARS.

OUR ANALYSIS OF THE WORK REQUIRED TO PERFORM SLEP AS DISCLOSED BY THE NAVY'S REPORTS INDICATES THAT, ALTHOUGH PREPARATORY WORK REMAINS TO BE DONE, THE NAVY AS A RESULT OF ITS SLEP MONITORING EFFORT NOW HAS A FAIRLY BROAD UNDERSTANDING OF THE TECHNICAL PROBLEMS WHICH MAY BE ENCOUNTERED, GENERALLY KNOWS WHAT EQUIPMENT AND LOCATING TOOLING (TOOLING USED TO ALIGN PARTS DURING ASSEMBLY) IS NEEDED, AND HAS IDENTIFIED MUCH OF THE TECHNICAL DATA WHICH MAY BE NECESSARY TO COMPETE ITS REQUIREMENT. THE RECORD INDICATES THAT THERE IS SOME INFORMATION WHICH THE NAVY DOES NOT YET HAVE, PARTICULARLY SO-CALLED "FIT-UP/CLAMP UP" CRITERIA DESCRIBING ACCEPTABLE TOLERANCES, TORQUE TO BE APPLIED TO BOLTS AND SIMILAR INFORMATION CONCERNING THE ASSEMBLY OF THE PARTS TO BE INSTALLED IN SLEP.

LOCKHEED, HOWEVER, DOES HAVE THAT DATA, AND THE NAVY INTENDS TO TURN TO LOCKHEED TO DESIGN, FABRICATE AND TEST ANY KIT WHICH IS USED. CHARTS SUBMITTED BY THE NAVY WITH ITS REPORTS INDICATE THAT PLANNED ADDITIONAL ENGINEERING CAN BE COMPLETED WITHIN SIX MONTHS. A LOCKHEED PROPOSAL WHICH THAT FIRM SUBMITTED TO THE NAVY WITH REGARD TO KC- AND C 130 SLEP KITS (WHICH PRESENT MORE DIFFICULT WORK THAN DOES AN EC-130 KIT REQUIREMENT) IS CONSISTENT WITH THAT ESTIMATE AND INDICATES THAT KIT FABRICATION (ASSUMING PARTS ARE AVAILABLE) REQUIRES A SIMILAR LENGTH OF TIME. THE COST OF THE LOCKHEED DESIGN EFFORT IN TERMS OF TIME (MANHOURS) AND MONEY (EXCLUDING PARTS) IS NOMINAL WHEN COMPARED WITH THE TOTAL COST OF SLEP.

NEVERTHELESS, THE NAVY EXPLAINS THAT UNLESS IT VALIDATES KIT DESIGN BY HAVING LOCKHEED PERFORM TRIAL INSTALLATION, IT RATHER THAN LOCKHEED MUST ASSUME RESPONSIBILITY FOR THE COMPLETENESS AND ACCURACY OF THE KIT. THE NAVY ALLOWS APPROXIMATELY A YEAR TO PERFORM CONCURRENT VALIDATIONS OF ONE KC- AND ONE C-130 KIT. WHILE WE VIEW THE NAVY'S CONCERN IN THIS REGARD AS APPROPRIATE, THE RECORD DOES NOT INDICATE WHY THE WORK WHICH LOCKHEED WOULD PERFORM TO PREPARE KITS CANNOT BE OVERLAPPED. ASSUMING PARTS AVAILABILITY AT LOCKHEED, ASSEMBLY OF THE TEST KITS MIGHT OVERLAP IN PART WORK RELATED TO KIT DESIGN, WHICH LARGELY INVOLVES DOCUMENTING PROCEDURES LOCKHEED IS NOW USING. FOR THE SAME REASON, VALIDATION THROUGH LOCKHEED TEST INSTALLATION MIGHT BE ACCOMPLISHED IN CONJUNCTION WITH SLEP ON SOME OF THE AIRCRAFT CURRENTLY SCHEDULED FOR SLEP AT LOCKHEED (WHICH INCLUDE A KC- AND C-130 AIRCRAFT SCHEDULED TO UNDERGO SLEP EARLY NEXT YEAR). INSTEAD, BY ASSUMING A DISCONTINUOUS LOCKHEED KIT DEVELOPMENT SCHEDULE PUNCTUATED BY INTERNAL NAVY REVIEW, THE NAVY HAS DEVELOPED AN OVERALL KIT SCHEDULE WHICH PRODUCES A FINISHED KIT DESIGN ONLY AFTER WORK PRESENTLY UNDER ORDER AT LOCKHEED WILL HAVE BEEN COMPLETED.

AS INDICATED, THE SUGGESTED KIT PREPARATION SCHEDULES INCLUDE SUBSTANTIAL LENGTHS OF TIME FOR NAVY ADMINISTRATIVE, GAO AND JUDICIAL REVIEW. SOME OF THESE TIME FRAMES ARE BASED ON AVERAGE TIME SPENT BY INVOLVED ACTIVITIES ON PAST REVIEWS AND DO NOT REFLECT THE TIME WHICH WOULD BE REQUIRED IF AVAILABLE TIME IS CRITICALLY SHORT. OTHERS CAN BE DISREGARDED. THE EIGHT MONTH PERIOD ALLOWED FOR GAO AND JUDICIAL REVIEW IN TWO OF THE PROPOSED SCHEDULES IS NOT RELEVANT TO A DETERMINATION AS TO WHETHER COMPETITION IS POSSIBLE IF THE NAVY ACTED NOW TO PERMIT IT, SINCE IF THE NAVY DID SO THERE WOULD BE NO NEED FOR SUCH REVIEW. IN SOME OF THE SCHEDULES, TIME APPEARS TO HAVE BEEN ALLOCATED TWICE TO CORRECT KIT DEFICIENCIES BY SCHEDULING TIME AFTER VALIDATION IS COMPLETED EVEN THOUGH LOCKHEED'S SCHEDULE (ON WHICH ALL OF THE ESTIMATES ARE BASED) ASSUMES CHANGES WOULD BE MADE AT THE TIME THEY ARE DISCOVERED. NOR IS IT APPARENT WHY SOME OF THE PROPOSED SCHEDULES ALLOCATE MORE TIME TO REVIEW THE LOCKHEED KIT DESIGN THAN LOCKHEED NEEDS TO PREPARE IT IN THE FIRST PLACE.

THE SO-CALLED "OPTIMISTIC" NAVY SCHEDULE, CORRECTING SOME OF THESE DIFFICULTIES, ALLOWS CONSIDERABLY LESS TIME TO NAVY REVIEW THAN DO THE OTHER POSSIBLE SCHEDULES. IT, HOWEVER, REMAINS KEYED TO PARTS AVAILABILITY AND ALLOWS APPROXIMATELY NINE MONTHS FOR ADMINISTRATIVE REVIEW.

WE BELIEVE THE OPTIMISTIC SCHEDULE STILL OVERSTATES THE MINIMUM TIME REQUIRED TO DESIGN, ASSEMBLE, AND VALIDATE AN INITIAL KIT PACKAGE, PROVIDED THE NAVY PERMITS LOCKHEED TO PERFORM ASPECTS OF THE REQUIRED WORK CONCURRENTLY, I.E., TO ASSEMBLE AND VALIDATE THE KITS AS DOCUMENTATION IS PREPARED AND PROVIDED THE NAVY REVIEWS THAT WORK WHILE IT IS IN PROGRESS. BEARING IN MIND THAT LOCKHEED PRINCIPALLY WOULD BE DOCUMENTING PROCEDURES WHICH ARE NOW BEING USED TO PERFORM SLEP, WITH WHICH THE NAVY IS FAMILIAR AS A RESULT OF THE NAVY SLEP MONITORING STUDY, WE BELIEVE KIT PREPARATION CAN BE ACCOMPLISHED IN CONSIDERABLY LESS TIME THAN THE NAVY HAS ALLOCATED AND THAT IT CERTAINLY SHOULD BE POSSIBLE TO COMPLETE IT WITHIN NO MORE THAN ONE TO ONE AND ONE HALF YEARS TIME.

III

BASED ON OUR ANSWERS TO THE FIRST TWO QUESTIONS, YOU ASK WHETHER IN OUR VIEW THERE:

"IS *** A RATIONAL BASIS FOR THE NAVY TO AWARD ANY FURTHER INSTALLATION OF SLEP ON A SOLE-SOURCE BASIS."

ON THE PRESENT RECORD, WE VIEW THE NAVY'S DETERMINATION THAT IT CANNOT COMPETE ANY OF THE REMAINING SLEP AS PREMATURE.

OUR OFFICE HAS RECOGNIZED THAT NONCOMPETITIVE AWARDS ARE JUSTIFIABLE WHERE THE WORK OR SUPPLIES REQUIRED CAN ONLY BE FURNISHED BY ONE SOURCE. THERE MAY BE ONLY ONE SOURCE BECAUSE THE ITEMS OR SERVICES NEEDED ARE UNIQUE; TIME IS OF THE ESSENCE AND ONLY ONE SOURCE CAN MEET THE GOVERNMENT'S NEEDS WITHIN THE TIME AVAILABLE; DATA WHICH WOULD BE NEEDED TO PERMIT A COMPETITIVE PROCUREMENT IS UNAVAILABLE AND CANNOT BE OBTAINED WITHIN THE TIME AVAILABLE; OR ONLY A SINGLE SOURCE CAN PROVIDE AN ITEM WHICH MUST BE COMPATIBLE OR INTERCHANGEABLE WITH EXISTING EQUIPMENT. PRECISION DYNAMICS CORPORATION, 54 COMP.GEN. 1114 (1975), 75-1 CPD 402.

THE RECORD BEFORE US DOES NOT SHOW THAT ONLY LOCKHEED IS ABLE TO PERFORM ALL OF THE REMAINING SLEP INSTALLATION IN A TIMELY FASHION.

THE NAVY'S APPROVED SLEP SCHEDULE, TO WHICH THE NAVY IN ITS REPORTS STATES IT STILL ADHERES, INDICATES THAT WORK ON THE FIRST TACAMO AIRCRAFT STILL UNDER OPTION NEED NOT BE COMMENCED UNTIL APPROXIMATELY JANUARY OF 1982. WORK ON THE NEXT THREE TACAMO AIRCRAFT WOULD BE BEGUN OVER THE PERIOD FROM LATE SPRING TO EARLY FALL, WITH THE FIRST FOUR AIRCRAFT BEING COMPLETED BY THE END OF THE YEAR. WORK ON THE FIFTH TACAMO AIRCRAFT WOULD NOT BEGIN UNTIL 1983. THE FIRST OPTION QUANTITY KC-130F IS NOT SCHEDULED TO UNDERGO SLEP UNTIL MID-1982; THE LAST IS SCHEDULED IN MID-1985. THE REMAINING C-130GS ARE SPREAD OVER THE SAME TIME FRAME. TWO ADDITIONAL TACAMO AIRCRAFT DESIGNATED AS TRAINERS ARE SCHEDULED TO UNDERGO SLEP DURING LATE 1984 AND EARLY 1985.

FROM THE OUTSET OF THIS LITIGATION, THE NAVY HAS MAINTAINED THAT THE SCHEDULE FOR THE TACAMO AIRCRAFT, WHICH SUPPORT BALLISTIC MISSILE FLEET NEEDS, IS CRITICAL. IT NOW VIEWS THE KC-130F SCHEDULE AS CRITICAL IF MARINE CORPS AIRBORNE REFUELING REQUIREMENTS ARE TO BE MET. WE DO NOT QUESTION THE NAVY'S CONCERN IN THIS REGARD. HOWEVER, THE NECESSITY FOR SLEP ON THE C-130G AND TACAMO TRAINING AIRCRAFT IS NOT EXPLAINED.

WE DISCUSS AT THIS POINT THE NAVY'S CONCERN THAT ONLY LOCKHEED CAN AVOID SCHEDULE DELAYS WHICH ARE EXPECTED DUE TO DIFFICULTY IN OBTAINING SO- CALLED "NON-SCHEDULED" PARTS - PARTS WHICH THE NAVY DOES NOT PLAN TO REPLACE IN SLEP BUT WHICH ARE FOUND TO BE CRACKED, DAMAGED OR CORRODED DURING SLEP AND WHICH, THEREFORE, MUST BE FIXED. WHILE THE NAVY MIGHT BE ABLE TO IDENTIFY SOME NON-SCHEDULED PARTS AS PARTICULARLY LIKELY TO BE NEEDED, AND THUS, INCLUDE THEM IN KITS, USE OF SUCH PARTS IS DEFINED AS OUTSIDE THE PLANNED SCOPE OF SLEP, AND THE NAVY ARGUES, MOST SUCH PARTS MUST BE PROVIDED FROM CONTRACTOR INVENTORY OR THROUGH THE NAVY C-130 PARTS SUPPLY SYSTEM.

LOCKHEED CAN MEET MANY UNEXPECTED PARTS PROBLEMS QUICKLY FROM ITS OWN PARTS INVENTORY, BY BORROWING PARTS DESIGNATED FOR NEW PRODUCTION AIRCRAFT, OR BY MANUFACTURING OR REMANUFACTURING PARTS AS NEEDED. THE NAVY, MOREOVER, MAINTAINS AN EXTENSIVE C-130 PARTS SUPPLY SYSTEM, AND INDEED, FURNISHED APPROXIMATELY 30 PERCENT OF THE NON-SCHEDULED PARTS USED BY LOCKHEED FOR THE FIRST AIRCRAFT WHICH UNDERWENT SLEP. MAINTENANCE CONTRACTORS SUCH AS AERO ALSO MAINTAIN STOCKS OF SOME C-130 PARTS.

NOTWITHSTANDING THE NAVY'S VIEW THAT ONLY LOCKHEED CAN AVOID SCHEDULE DELAYS ALTOGETHER, THE NAVY HAS NOT TREATED THE NON-SCHEDULE PARTS PROBLEM AS INSURMOUNTABLE IN ITS REPORTS, BUT RATHER, HAS ASSUMED THROUGHOUT THIS LITIGATION THAT COMPETITION IS POSSIBLE WITH KITS WHICH AS INDICATED WOULD NOT INCLUDE MOST NON-SCHEDULED PARTS. AT WORST, THE NAVY'S REPORTS INDICATE THAT PERFORMANCE OF SLEP BY A FIRM OTHER THAN LOCKHEED MIGHT REQUIRE THAT THE NAVY OR ITS CONTRACTOR MAINTAIN INCREASED STOCKS OF INCIDENTAL PARTS. HOW MUCH TIME WOULD BE REQUIRED TO ESTABLISH A SUFFICIENT INCIDENTAL PARTS INVENTORY IS NOT CLEAR, BECAUSE THE NAVY HAS NOT ADDRESSED THIS QUESTION SPECIFICALLY. HOWEVER, SINCE LONG LEAD TIME PARTS ARE APPARENTLY NOT INVOLVED, AVAILABILITY OF SUCH PARTS DOES NOT APPEAR TO BE A FACTOR PREVENTING COMPETITION WITH RESPECT TO MOST IF NOT ALL OF THE REMAINING AIRCRAFT.

IN TURNING TO EXAMINE WHETHER THE TIME REQUIRED TO COMPETE SLEP ON THE BASIS OF KITS PRECLUDES COMPETITION, WE FIRST NOTE THAT OUR VIEWS REGARDING APPROPRIATE PROCUREMENT PRACTICES WHERE INSUFFICIENT TIME TO COMPETE IS ASSERTED WERE EXPLAINED IN OUR RECENT DECISION IN LAS VEGAS COMMUNICATIONS, INC - RECONSIDERATION, B-195966, OCTOBER 28, 1980, 80-2 CPD 323, WHERE WE REJECTED THE POSITION ADVANCED BY THE VETERAN'S ADMINISTRATION (VA) WHICH CONTENDED THAT IT COULD NOT CONDUCT A COMPETITIVE PROCUREMENT FOR A TELEPHONE SYSTEM BECAUSE TO DO SO WOULD REQUIRE 22 MONTHS. REJECTING VA'S BELIEF THAT SOLE SOURCE PROCUREMENT WAS PROPER UNLESS IT COULD COMPETE ITS REQUIREMENT ON A "BUSINESS-AS USUAL" BASIS, WE FOUND VA'S POSITION TO BE:

"INCONSISTENT WITH OUR VIEWS EXPRESSED *** IN MANY PRIOR DECISIONS WHERE WE HELD THAT URGENCY CAN ONLY BE USED AS A JUSTIFICATION FOR A SOLE-SOURCE PROCUREMENT WHERE THE AGENCY FINDS THAT ONLY ONE KNOWN SOURCE CAN MEET THE GOVERNMENT'S NEEDS WITHIN THE REQUIRED TIME. SEE AMDAHL CORPORATION, B-191133, OCTOBER 18, 1978, 78-2 CPD 284 AND SYSTEMS GROUP ASSOCIATES, INC., B-195392, JANUARY 17, 1980, 80-1 CPD 56 ***. AN AGENCY'S ESTABLISHED PRACTICE MUST BE SUBORDINATED TO THE LEGAL REQUIREMENT FOR COMPETITION WHENEVER SUCH COMPETITION IS FEASIBLE. IT IS WELL ESTABLISHED THAT ADMINISTRATIVE EXPEDIENCY OR CONVENIENCE PROVIDES BY ITSELF NO BASIS FOR RESTRICTING COMPETITION."

THE NAVY'S REPORTS ASSUME THAT COMPETITIVE PROCUREMENT OF A SLEP INSTALLATION CONTRACT CAN BE INITIATED BEFORE KIT FABRICATION AND VALIDATION FUNCTIONS ARE COMPLETED. BY USING AVAILABLE PARTS, BY COORDINATING ITS REVIEW WITH LOCKHEED'S KIT DESIGN EFFORT, AND BY TAKING ADVANTAGE OF CURRENT WORK AT LOCKHEED TO VALIDATE KIT DESIGN, THE NAVY SHOULD BE ABLE TO REDUCE THE TOTAL AMOUNT OF TIME REQUIRED, THUS MAKING COMPETITION POSSIBLE. CONSEQUENTLY, ON THE RECORD BEFORE US, WE ARE NOT PREPARED TO CONCLUDE THAT IT IS IMPOSSIBLE TO COMPLETE THE COMPETITIVE PROCUREMENT OF A SLEP CONTRACT IN SUFFICIENT TIME TO PERMIT AWARD OF A CONTRACT FOR MUCH OF THE REMAINING SLEP INSTALLATION WORK.

ON THE OTHER HAND, WITH RESPECT TO THE NAVY'S PREVIOUS EXERCISE OF THE ORIGINAL LOCKHEED TWO TACAMO AIRCRAFT OPTION QUANTITY, THESE AIRCRAFT ARE SCHEDULED TO UNDERGO SLEP AT LOCKHEED WITHIN THE NEXT SEVERAL MONTHS AND WE SEE NO PRACTICAL POSSIBILITY OF COMPETING THEIR INSTALLATION.

FINALLY, YOU ASK WHETHER:

"THE NAVY, IN ORDER TO MAXIMIZE COMPETITION FOR FUTURE SLEP PROCUREMENT, HAS A DUTY *** TO PROCURE IMMEDIATELY THE PARTS, DATA, AND TOOLING THAT THE NAVY DEEMS NECESSARY FOR A COMPETITIVE PROCUREMENT AND TO TAKE THE ADMINISTRATIVE STEPS THAT THE NAVY DEEMS NECESSARY FOR A COMPETITIVE PROCUREMENT.

ALTHOUGH THE NAVY SAYS THAT IT DOES NOT HAVE SUCH A DUTY, IT IS REQUIRED BY STATUTE TO SEEK MAXIMUM COMPETITION IN PROCURING ITS NEEDS. 10 U.S.C. SEC. 2304(G) (1976). THIS DUTY IS IMPLEMENTED IN THIS INSTANCE BY DEFENSE ACQUISITION REGULATION (DAR) SEC. 3-101(D) WHICH PROVIDES THAT:

"WHEN A PROPOSED PROCUREMENT APPEARS TO BE NECESSARILY NONCOMPETITIVE, THE CONTRACTING OFFICER IS RESPONSIBLE NOT ONLY FOR ASSURING THAT COMPETITIVE PROCUREMENT IS NOT FEASIBLE, BUT ALSO FOR ACTING WHENEVER POSSIBLE TO AVOID THE NEED FOR SUBSEQUENT NONCOMPETITIVE PROCUREMENTS. THIS ACTION SHOULD INCLUDE BOTH EXAMINATION OF THE REASONS FOR THE PROCUREMENT BEING NONCOMPETITIVE AND STEPS TO FOSTER COMPETITIVE CONDITIONS FOR SUBSEQUENT PROCUREMENTS, PARTICULARLY AS TO THE AVAILABILITY OF COMPLETE AND ACCURATE DATA *** AND POSSIBLE BREAKOUT OF COMPONENTS FOR COMPETITIVE PROCUREMENT. ***."

THIS IS NOT THE FIRST NAVY SOLE SOURCE C 130 SLEP PROCUREMENT. THUS, THE NAVY HAS AN EXPRESS REGULATORY DUTY TO TAKE APPROPRIATE STEPS TO AVOID A NONCOMPETITIVE FOLLOW-ON-PROCUREMENT, IF COMPETITION IS FEASIBLE.

THE COURT SHOULD BE AWARE, MOREOVER, THAT THE GOVERNMENT'S POLICY WITH RESPECT TO ACQUIRING SPECIAL TOOLING IN CASES WHERE PRICE COMPETITION IS INADEQUATE IS DISCUSSED IN DAR SEC. 13-205.1(B), WHICH RECOGNIZES AN EXCEPTION TO THE GENERAL POLICY AGAINST SUCH ACQUISITIONS. IN THIS INSTANCE, OF COURSE, THE NAVY HAS INDICATED THAT NECESSARY TOOLING WILL BE PROVIDED IN ANY KITS USED, IN ACCORD WITH ESTABLISHED NAVY PRACTICE, MAKING IT UNNECESSARY TO DECIDE WHETHER THE NAVY WOULD OTHERWISE BE UNDER A DUTY TO PROVIDE SPECIAL TOOLING TO MAKE COMPETITION POSSIBLE.