B-228049, Nov 23, 1987, 87-2 CPD 504

B-228049: Nov 23, 1987

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Protest against sole-source award of a 5-year requirements contract for a broad range of spare parts justified on the basis of the availability of only one known approved source is sustained where the justification provides no reason for either the broad range or the extended term of the contract award. Sec. 2319 are expressly inapplicable to approved-source products for which specifications were developed prior to the statutory effective date. Protester is entitled to recover costs of filing and pursuing the protest. That the 5-year term of the contract is excessive and anticompetitive. All of which have been procured for 30 years on a sole-source basis from Allison. States that the supplies are critical to maintain operation of four types of aircraft.

B-228049, Nov 23, 1987, 87-2 CPD 504

PROCUREMENT - Noncompetitive Negotiation - Contract Extension - Sole Sources - Propriety DIGEST: 1. Protest against sole-source award of a 5-year requirements contract for a broad range of spare parts justified on the basis of the availability of only one known approved source is sustained where the justification provides no reason for either the broad range or the extended term of the contract award, and both the justification and the solicitation expressly contemplate the availability of other approved sources over the life of the contract. PROCUREMENT - Contractor Qualification - Approved Sources - Qualification - Standards 2. Requirements for the establishment of qualification standards under 10 U.S.C. Sec. 2319 are expressly inapplicable to approved-source products for which specifications were developed prior to the statutory effective date. PROCUREMENT - Bid Protests - GAO Procedures - Preparation Costs 3. Where General Accounting Office sustains protest against unjustified sole-source procurement, protester is entitled to recover costs of filing and pursuing the protest.

Pacific Sky Supply, Inc:

Pacific Sky Supply, Inc., protests the proposed sole-source award to the Allison Gas Turbine Division of General Motors (Allison) of a 5 year requirements contract for 294 line items replacement parts for the T56 aircraft engine under request for proposal No. 41608-87-R-4265, issued by the Air Force's San Antonio Air Logistics Center (ALC).

Pacific Sky contends that the scope of the requirements exceeds the government's minimum needs and violates the agency's obligation under the Competition in Contracting Act of 1984 (CICA) to obtain full and open competition; that the procurement violates statutory synopsizing requirements; that the 5-year term of the contract is excessive and anticompetitive; and that the Air Force has failed to meet its statutory obligation to develop qualification standards for the listed parts. Pacific Sky also claims the costs of filing and pursuing the protest, including attorney's fees.

We sustain the protest.

The procurement encompasses a wide range of T56 aircraft engine spare parts, from turbine vane assemblies to a variety of screws, bolts, spacers, sleeves and brackets, all of which have been procured for 30 years on a sole-source basis from Allison, the only approved source. The solesource justification signed by the Assistant Secretary of the Air Force (Acquisition), to comply with the requirements of CICA, 10 D.S.C. Sec. 2304(c)(1) (Supp. III 1985), as implemented by the Federal Acquisition Regulation (FAR), 48 C.F.R. Sec. 6.302-1 (1986), states that the supplies are critical to maintain operation of four types of aircraft, only one responsible source was available at the time of acquisition, and no other source had been approved as a supplier. The justification imposes a $2.5 billion contract award ceiling over the 5-year contract period. The justification does not address the need or basis for this extended award period, rather, the request for the justification merely states that: "Due to the five to six month administrative lead time required to process this J & A (justification and approval) under current CICA procedures (the procuring activity has) proposed a 5-year J & A."

Our Office closely scrutinizes sole-source procurements under 10 D.S.C. Sec. 2304(c)(1). Where the agency has complied with the procedures prescribed by 10 U.S.C. Sec. 2304, we will not object to a sole-source award unless it is shown that there is no reasonable basis for the contracting agency's stated needs for using that exception to the requirement for full and open competition. American Systems Corp., B-224008, Dec. 22, 1986, 86-2 CPD Para. 6917. Here, however, the agency's justification for the sole-source procurement is not only insufficient to establish a reasonable basis for this procurement, it also shows that the scope of the procurement is excessive and unwarranted. particular, we find that the Air Force has failed to justify either the broad range of the parts which are aggregated under the solicitation or the 5-year length of the requirements contract.

The Air Force justification and the collateral documentation strongly emphasize that the contemplated contract has a line item deletion clause to permit deletion and breakout for competitive procurement, and that maximum efforts will be made by the Air Force to obtain new sources for the various line items over the life of the contract. The clause provides specifically that: "Items listed ... for which a second source is developed during the term of this contract will be deleted and no further orders will be placed against this contract for these items." In this regard, the Air Force points out that it has qualified numerous alternate approved sources for parts which were listed under the predecessor 2-year, sole-source requirements contract with Allison, and that it expects to continue to break out currently-listed parts as new sources are approved over the life of the proposed 5-year contract. The Air Force also points out that the procurement needs for each of the items will be listed in the ALC Planned Hardware Acquisition List (ALPHAL), which advises potential suppliers about the Air Force's needs and the timing of these needs for all of the various line item requirements. The Air Force contends that these efforts fulfill its requirement under CICA to obtain full and open competition, notwithstanding the fact that there will be no Commerce Business Daily (CBD) publication of any synopses, other than the original notice of intent to sole-source all 294 parts on an aggregate, 5-year requirements contract basis.

Pacific Sky contends that FAR, 48 C.F.R. Sec. 16.503 prohibits the use of multi-year requirements contracts for noncommercial parts such as those being procured here. We have previously considered this question and concluded that the regulation does not prohibit such contracts and that they are legally permissible. See Mills Mfg., B-224004, B-224005, Dec. 18, 1986, 86-2 CPD Para. 679. However, while this form of contract is not prohibited per se, the line item deletion clause and the associated efforts to achieve competition, along with the Air Force's assurance that alternate approved sources will be obtained for numerous line items, which will then be broken out establish that the Air Force anticipates that other approved sources will become available during the contract period. In addition, Pacific Sky contends, and the Air Force does not deny, that there may be some other currently approved sources, or shortly to be approved sources, for some of the 294 listed items. The Air Force's approach to provide ongoing review and updating, and to utilize the deletion clause for breaking out and competing these items, is inconsistent with the Air Force's finding, as required under CICA, 10 U.S.C. Sec. 2304(c)(1), that noncompetitive procedures are necessary because only one responsible source is available.

The Air Force position is essentially that it has aggressively pursued alternate source approval, and will continue to do so over the life of the contract, and that these efforts comply with the CICA mandate for full and open competition. However, while such efforts are salutary, their use in an aggregated, massive, long-term, sole-source contract for a broad spectrum of spare parts-- including such items as spacers, bolts, screws, and flanges, all of which have been procured on a sole source basis for 30 years, does not comport with the overriding mandate of CICA that military agencies obtain "full and open" competition in their procurements through the use of competitive procedures. Rotair Industries Inc., B-224332.2, B-225049, Mar. 3, 1987, 89-1 CPD Para. 238. The agency has broad discretion concerning the establishment of its minimum needs with respect to the number of years for which a contract is required. Kings Point Mfg. Co., Inc., B-220224, Dec. 17, 1985, 85-2 CPD Para. 680. However, this discretion does not cover the use of an extended time period for which the agency's justification provides no basis, but rather implies the need for administrative convenience in the face of the burden of complying with CICA requirements as the only reason for the 5-year term. Even prior to the enactment of CICA, our Office would not approve a multi-year, sole source procurement of a quantity of items extending beyond the scope of a sole-source justification, where the agency justification, as here, was tantamount to an acknowledgment of potential competition for the agency's future requirements during the life of the proposed sole source contract. See Command, Control & Communication Corp., B-210100, Oct. 12, 1983, 83-2 CPD Para. 448.

As Pacific Sky points out and the Air Force agrees, only one CBD notice concerning the contemplated 5-year $2.5 billion sole-source requirements contract is required over the entire 5-year life of the contract, because the individual orders placed under a requirements contract need not be published in the CBD. 15 D.S.C. Sec. 637(e) (Supp. III 1985),; FAR, 48 C.F.R. Sec. 5.202(a)(6). Pacific Sky questions the propriety of such limited notice; however, the statute and regulation make it clear that one notice is all that would be required for this requirements contract if a sole-source procurement of the full scope encompassed is justified. this regard, while the Air Force points to the notice to be given by its intended ALPHAL publication of contemplated agency parts needs, we note that such notice is nowhere authorized as a substitute for CBD publication. The fact that no further CBD notice would be required after award of the initial sole-source contract highlights the anticompetitiveness of the procurement vehicle which the Air Force is using here.

With respect to aggregating the parts, the Air Force has provided no justification to establish that all 294 parts must be bundled together, which effectively limits competition to Allison. As a general rule, the decision whether to procure by means of a total package approach, rather than by separate procurements, or awards for divisible portions of a requirement, is within the discretion of the procuring agency. MASSTOR Systems Corp., B-211240, Dec. 27, 1983, 84-1 CPD Para. 23. However, we will sustain a protest of a solicitation providing only for aggregate rather than line item awards where no reasonable or legitimate reason for bundling the requirement has been shown. Systems, Terminals & Communications Corp., B-218170, May 21, 1985, 85-1 CPD Para. 578.

Here, the only apparent basis for the packaging of the requirements is one of administrative convenience, which the Air Force does not argue provides a valid justification, but merely contends is a recognized factor in agency decisions, as long as statutory mandates are followed. However, in the same manner that the Air Force's stated intention to obtain other sources and break out various items serves to show that the 5-year period has not been justified, it also shows that there is no reason to aggregate the requirements for this length of time. The Air Force has provided no basis beyond administrative convenience for utilizing the broad requirements package, and the Air Force's own contemplated endeavors establish that the items may be broken out.

In sum, the Air Force justification provides no basis for either the broad scope or long term of the contract. /1/ On the contrary, it establishes that both are known by the Air Force to be in excess of its needs.

We recommend that the Air Force reconsider its actual needs with respect to the various T56 replacement parts, in particular to determine for which parts there are now, or shortly will be, alternate approved sources. The Air Force should continue its efforts to develop specifications and to obtain additional alternate approved sources. In the interim, sole- source, non-aggregated requirements contracts for such shorter term periods as the Air Force can properly justify may be appropriate for those items for which there are no alternate approved sources.

In view of our decision and recommendation, Pacific Sky is entitled to the costs of pursuing its protest, including attorneys fees. Rotair Industries, Inc., B-224332.2, B-225049, Mar. 3, 1987, 87-1 CPD Para. 238.

The protest is sustained.

/1/ Pacific Sky also contends that the Air Force has failed to comply with the Defense Procurement Reform Act of 1984, 10 U.S.C. Sec. 2319(b) (Supp. III 1985), which requires that certain procedural steps be completed before an agency establishes a qualification requirement. the Air Force points out, the statute specifically exempts items for which qualification requirements were established prior to the October 19, 1984, enactment date. All qualification requirements for all of the parts in question were established before this date, and while they have been rescreened subsequent to this date, there is nothing in the statute which suggests that it applies to rescreening in addition to the establishment of a requirement. In addition, Pacific Sky points out that 10 U.S.C. Sec. 2319(c)(6) requires that agencies promulgate written qualification requirements prior to enforcement of a qualified products or bidders list. However, this section does not pertain to the procurement of approved source items; it applies only to qualified products. See generally Olympus Corp., B-225875, Apr. 14, 1987, 87-1 CPD Para. 407.