B-400610; B-400618; B-400619, Raytheon Company-Integrated Defense Systems, December 22, 2008
DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective Order. This redacted version has been approved for public release.
Sole-source awards of follow-on contracts for the continued development of a sophisticated weapon system are unobjectionable where the agency reasonably determined that award to any other source would be likely to cause unacceptable delays in fulfilling the agency’s requirements.>
Defense Systems (Raytheon IDS) of
The Aegis Combat System (ACS), deployed on 81 cruisers and
destroyers within the
The Navy began development of the Aegis system in the early 1970’s; LM MS2 and its predecessor companies have been the contractors since the program’s inception. Because of the lack of appropriate commercially available software or hardware, Aegis was developed on now-outdated, Navy-specific computers using millions of lines of software code tailored to the capabilities of the hardware. The characteristics of the legacy Aegis architecture precluded the Navy from taking advantage of commercial-off-the-shelf (COTS) computing technology and limited the maintenance of, and improvements to, the Aegis system to LM MS2, the one entity with knowledge of the existing system.
According to the Navy, the solicitations were designed to further a transformation that will create an open and objective architecture that will enable the Navy to take advantage of COTS computing technology and to create a more open system that allows for other software developers to compete for future maintenance and development contracts. That transformation will require exchanging the legacy hardware for COTS hardware, modifying the software to work with the COTS hardware environment, breaking millions of lines of legacy code into discrete components, and modifying those discreet software components to coincide with the OA model.
The Navy schedules Aegis upgrades to be performed while ships are in dry dock for other routine refurbishment of the hull, mechanical and electrical systems. For example, the DDG 53, a guided missile destroyer, will leave service for its only major mid-life overhaul in 2012. If ACB 12 is not ready for installation during the DDG 53’s availability, that vessel will face combat system obsolescence and the prospect of early retirement. AR at 35-36. The parties recognize that the Navy’s solicitation deadlines are driven by the ship overhaul schedule and that the given completion dates are critical to the Navy’s defense capabilities and are within its discretion to establish.
In early September, the agency issued justification and approval (J&A) documents that concluded that sole-source awards to LM MS2 were justified under 10 U.S.C. sect. 2304(c)(1) (2000), which authorizes the use of other than competitive procedures when the property or services needed by the agency are available from only one responsible source, or from a limited number of responsible sources, and no other type of property or services will satisfy the agency’s needs. As relevant here, for purposes of applying that provision, 10 U.S.C. sect. 2304(d)(1)(B) provides as follows:
in the case of a follow-on contract for the continued development or production of a major system or highly specialized equipment, or the continued provision of highly specialized services, such property or services may be deemed to be available only from the original source and may be procured through procedures other than competitive procedures when it is likely that award to a source other than the original source would result in--
(i) substantial duplication of cost to the
which is not expected to be recovered through competition; or United States
(ii) unacceptable delays in fulfilling the agency’s needs.
Specifically, for the 5110 hardware procurement, the
agency argued that the specification and configuration upgrades are currently
being performed by LM MS2. 5110 CJ&A
at 3. “Due to the complexity of the
AWS,” the Navy stated, “a contractor must have intimate knowledge of all system
requirements, weapon specifications, equipment design, and interfaces in order
to produce, field, and test production units initially, prior to validation of
The J&As for the other two procurements are similar to
the first. To justify the decision to
proceed sole-source with 5121, the PSEA solicitation, the agency noted that the
ongoing, concurrent hardware and software upgrades mean that the TDP and
government-purpose software licenses needed to support a competitive
procurement are not available. 5121 J&A
at 3. Without the benefit of the TDP and
those licenses, the agency considers it likely that acquiring the services from
some other source would result in unacceptable delays in meeting the
government’s requirements, because to integrate the new elements of AMOD,
another contractor would need time to gain a working knowledge of AWS software
or to obtain direct assistance from LM MS2.
Similarly, the Navy maintains that without the TDP and government-purpose software licenses needed to support the 5123 AMOD procurement, it is likely that acquiring those services from any other source would result in unacceptable delays, in part because LM MS2 is the only source with extensive experience in the development of each of the war-fighting capabilities that will be incorporated in ACB 12. 5123 J&A at 3. To perform either one or both of these requirements, the Navy estimates that a new contractor would require 18 to 24 months from contract award to hire experienced staff and develop equivalent capabilities, re-engineering skills, and technical understanding of the AWS. 5121 J&A at 4, 5123 J&A at 3. The first solicitation addresses the agency’s requirements through 2013; the other two procurements are 1-year contracts with three 1-year options that could extend the contracts through FY 2012.
On September 11 and 16, the agency notified Raytheon IDS of its intent to proceed sole-source, and these protests followed.
Reasonableness of the Navy’s Sole-Source Determinations
When an agency uses noncompetitive procedures, it must
execute a J&A with sufficient facts and explanation to support the use of
the specific authority. See 10
U.S.C. sect. 2304(f). Our review of an
agency’s decision to conduct a sole-source procurement focuses on the adequacy
of the rationale and conclusions set forth in the J&A. When the J&A sets forth reasonable
justifications for the agency’s actions, we will not object to the award. Turbo Mechanical, Inc., B-231807,
As stated above, the statutory exception relied on here is
10 U.S.C. sect. 2304(c)(1). Specifically,
the agency asserts that it reasonably determined that only LM MS2 could
successfully perform the 5110 hardware contract, and that only LM MS2 could
successfully develop and integrate the four new Aegis functions that are the
subject of solicitations 5121 and 5123.
The sole-source procurements are unobjectionable if the Navy reasonably
found that award to any source other than LM MS2 would likely result in either substantial
duplication of cost to the government that is not expected to be recovered
through competition, or unacceptable delays in fulfilling the agency’s
requirements. 10 U.S.C. sect. 2304(d)(1)(B);
FAR sections 6.302-1(a)(2)(ii), (iii). Because
either basis is sufficient and, as discussed below, we find that the Navy reasonably
determined that acquisition from Raytheon IDS (or any source other than LM MS2)
would likely cause unacceptable delays, we will not address the question of
duplication of costs. Magnavox Elec.
In certain circumstances, it is reasonable for an agency
to determine that overall knowledge of all of the critical components of a
system is essential. Kearfott
Guidance & Navigation Corp., B-292895.2,
Where an agency does not possess a TDP adequate for
competition, the agency may procure its requirement on a sole-source basis from
a contractor whose prior experience reduces the risk to the agency that its
needs will not be timely met. Kollsman,
A Div. of Sequa Corp.; Applied Data Tech., Inc., B-243113, B-243113.2,
Raytheon IDS argues that it has experience producing Aegis
hardware, that the hardware being procured is modified COTS equipment, and that
Raytheon IDS can successfully compete for this contract. The agency challenges the claim that the
hardware being procured is COTS, Agency Post-Hearing Comments at 22-24, and
maintains that without a validated TDP, the government incurs significant
schedule risk when the manufacturer is not the original design agent, because
the data available is not at a sufficient level of detail or maturity.
While the agency recognizes that Raytheon IDS has
substantial experience building hardware, the Navy argues that, in nearly every
circumstance the protester has offered to demonstrate its capabilities to
perform this hardware production, the protester was the original design agent
for the hardware and also the prime contractor for the production of the
Solicitations 5121 and 5123
The agency argues that its decision to proceed sole-source
with solicitations 5121 and 5123 was reasonably based on a determination that
contracting with any other contractor, lacking a thorough, intimate knowledge
of the legacy source code, would likely subject the agency to unacceptable
delays. The code is very “fragile,” as
described by the Navy, and is made up of several different programming
languages, and even multiple versions of some languages. Tr. at 173-76. Because of the way in which the code was
developed, each separate new capability will affect multiple areas of the
code. The agency maintains that
elements--large blocks of software that perform such critical functions as
detecting incoming missiles or launching appropriate weapons--and
components/modules--the smaller blocks of software that combine to form an
element--reflect years of acquired knowledge by LM MS2 and thousands of
hours of software and engineering experience.
Agency’s Post-Hearing Comments at 17.
Moreover, as reflected in the record, relationships between elements and
components/modules are complex. For
example, integrating the BMD capability, the Navy asserts, will affect the
underlying software inside the SPY-1 element, the command and decision element,
the weapon control system element, the Aegis display system element, and the
Aegis combat training system element.
The Navy also asserts that Raytheon IDS lacks specific
Aegis-related experience with respect to S-band radars
and BMD systems, which is also critical to the successful completion of the
Raytheon IDS argues that it will make up for its lack of prior code knowledge and experience through innovation, specifically a technique that it calls “wrapping” the code that eliminates the need to translate it on a line-by-line basis and would assist the protester in completing the contracts on time. The Navy argues that the process of wrapping the functional boxes, or components, is not a viable technical solution. According to the Navy, the successful accomplishment of ACB 12 requires the alteration of many lines of software within Aegis elements and components, as discussed above. “Wrapping code generally preserves the existing functionality within an element or component,” the Navy argues, “but does not make the integration of new functionality into that element or component any easier and does not eliminate the need for detailed knowledge of the software inside the box.” Agency’s Post-Hearing Comments at 26.
Here, based on the record, the agency’s determination that selection of a contractor that lacked specific, Aegis-related experience with critical weapons capabilities could subject the agency to unacceptable delays in performance of solicitations 5121 and 5123 was reasonable.
Adequacy of the Navy’s Description of Its Requirements
Raytheon IDS asserts that the Navy unreasonably failed to supply it with essential schedule and requirements information, and that the Navy’s own estimate of its requirements has been subject to significant change throughout the protest record development. Protester’s Post-Hearing Comments at 12. Raytheon IDS argues that because the agency did not adequately convey its requirements, either in the presolicitation notices and related communications with Raytheon IDS or during the protest, Raytheon IDS has been unduly hampered in its ability to demonstrate that it can meet the agency’s requirements. We disagree.
The Navy’s decision to proceed sole-source rested on its determination that only LM MS2 had the necessary experience to perform the contracts within the prescribed deadlines. The protester acknowledges that only LM MS2 has that experience; instead, Raytheon IDS challenges the Navy’s determination that LM MS2’s experience is necessary to meet the Navy’s needs and, conversely, that Raytheon IDS’ experience is insufficient to meet those needs.
During the course of the record development of this protest, the Navy shared with Raytheon IDS the information available to the agency concerning its requirements. Apparently, the entirety of Raytheon IDS’ prior experience that was offered in support of its claimed ability to meet the agency’s requirements is work performed for the Navy. It was clear throughout the hearing in this case that, while Raytheon IDS was attempting to cast its potentially relevant experience in the most favorable light, it was not describing any undertakings that were not already known to the Navy. See, e.g., Tr. at 89-90 (Warfare Systems Engineer explaining the difference between ACS and AWS and finding misstatements in Raytheon IDS’ description of its experience); Tr. at 222 (PEO IWS explaining the distinction between Raytheon IDS’ efforts under the Zumwalt program and the requirements of the current solicitations); Tr. at 257 (PEO IWS pointing out that Raytheon IDS misidentified a particular weapon as using an S-band radar). It is clear on the record that the Navy made its determination to proceed with sole-source awards to LM MS2 with adequate knowledge of Raytheon IDS’ claimed capabilities; no greater articulation by the Navy of its needs would have altered the outcome of this protest.
Award of a contract using other than competitive procedures may not be made where the shortage of time cited as the justification was the result of a lack of advance planning by contracting officials. 10 U.S.C. sect. 2304(f)(5)(A). The record here confirms that the agency is actively planning for competition. One critical byproduct of the Navy’s years-long effort to modernize Aegis software and hardware systems is the flexibility that the resulting OA will give the Navy to issue future solicitations competitively; the Navy describes the achievement of OA as important to the program’s survival and success. Tr. at 178. As noted above, the J&As anticipate that by the end of the contract periods, the Navy will be well-positioned to offer significantly more opportunities for competitive procurements. See Tr. at 199ff, Statement of PEO IWS. Even now, the modernization effort has advanced sufficiently that the Navy has elected to procure the new common display system through full and open competition in late 2008. AR, Tab 31, Aegis Weapon System Acquisition Plan PEO IWS 1AQ-08-01, at 6. The Navy’s current solicitations, rather than evincing a lack of a advanced planning, are part of a long-range, well-vetted strategy with significant Congressional oversight. See AR, Tab 40, Senate Committee on Armed Services Report, May 12, 2008; Tab 41, Third Quarterly Report to Congress on Naval Open Architecture, Aug. 7, 2008. On the record here, we see no basis to conclude that the Navy’s scheduling constraints are the product of a lack of advanced planning.
The protester argues that where an agency concedes that there may be opportunities for competition in future years, the agency may not presumptively wall off those future years from competition, pending some future review of potential competition. Protester’s Comments on AR at 27. Raytheon IDS asserts that the Navy has done just that, citing unspecified language in the J&As. We will sustain a protest on this basis when, for example, the agency has ordered in excess of its needs, see Ricoh Corp., B-234655, July 5, 1989, 89-2 CPD para. 3, or where the record establishes that competition will exist in a reasonable and certain amount of time. See Precision Logistics, Inc., B-271429, July 18, 1996, 96-2 CPD para. 24 at 6 (sustaining challenge to agency’s purchase of 18 months work of stock parts); Pacific Sky Supply, Inc., B-228049, Nov. 23, 1987, 87-2 CPD para. 504 at 5-6 (sustaining challenge to “broad scope” ($2.5 billion) and “long term” (5 years) for replacement parts sole-source contract). These are not the facts of this protest. While the Navy itself seems to allow for the possibility that its projections regarding when competitive procurements can begin may have been too conservative--in which case the Navy will take steps to competitively procure its requirements sooner than expected--the record does not show that the Navy improperly extended the contract periods past the time at which competitive procurements should be feasible to meet the Navy’s needs. As discussed, the Navy expects these contracts, at their conclusions, to enable the Navy to compete follow-on procurements. We see nothing unreasonable in the Navy’s position.
The protester also asserts that the J&As improperly claim that “rapidly evolving technology means that these three procurements must lock out all competition,” Protester’s Comments on AR at 29, citing the requirement that J&As include an “[e]xplanation of why technical data packages. . . suitable for full and open competition have not been developed or are not available.” FAR sect. 6.303-2(a)(9)(i). Raytheon IDS’ restatement, above, of the J&As is inaccurate; it is not the rapidly changing nature of technology that precludes competition, but rather the complex, time-consuming and deliberate pace of the transition from the legacy system to an OA system. Regardless, the Navy had reasonably justified its lack of development of TDPs, and the record shows that the agency is implementing a plan that will produce the necessary data for competition.
The protests are denied.
Gary L. Kepplinger
 This solicitation includes various hardware components, including the BMD portion of the Aegis system. Components of that system have not yet begun the transition from the Navy-specific legacy hardware to COTS hardware, and the process of decoupling the software from the hardware and modularizing these software applications has not begun. The BMD portion of the system will be upgraded as the transition is performed; the compressed delivery schedule will require development and production to be performed concurrently. The signal processor is that part of the system which separates targets from “clutter.” Development of the next generation of the Aegis signal processor, the Multi-Mission Signal Processor (MMSP), already underway, continues under this solicitation. The MMSP will combine and replace the AAW and BMD signal processors, giving ships equipped with the MMSP the ability to defend against relatively low altitude threats, such as cruise missiles, and high altitude ballistic missiles. Again, as with the BMD upgrade, development and production of the initial MMSP sets will be performed concurrently. The balance of the Aegis hardware must also be upgraded and repackaged, and the design for this hardware development effort is also included under this solicitation. Agency Report (AR), Tab 19 at 2.
 The PSEA will provide engineering assistance in the integration and testing of the new hardware and software. Included in this procurement is computer programming and other support for Aegis ships that incorporate various baselines of the Aegis system. AR at 2.
 The AMOD effort includes the establishment of modular architecture at the component level, with well-documented interfaces so that the government has control of the architecture as it moves towards an open architecture (OA) model. Tr. at 306-08.
 The biannual upgrades, called advanced capability builds (ACB), are denoted by the year in which they are begun. ACB 12 is scheduled for installation in 2012. It is this process of outfitting ships with the latest software and hardware advances available at the time of their overhauls, an evolutionary development process, that results in the multiple Aegis software and hardware baselines.
 ACB 12 includes the development and integration of the four noted functions and the documentation of the existing architecture at the conclusion of the integration effort. Agency’s Post-Hearing Comments at 4.
 In a hearing GAO convened in this protest, the Navy’s Program Executive Officer for Integrated Warfare Systems (PEO IWS) stated that representatives for LM MS2 and General Dynamics had indicated to him that they would not be interested in joining such a national team. Tr. at 261. The protester has not challenged the PEO IWS’ assertion. The only other contractor specifically mentioned by Raytheon IDS is Grumman Electronic Systems. AR, Tab 5, Letter from Raytheon IDS to NAVSEA.
 The Navy will use multiple contract actions to procure the 5110 hardware; a class justification and approval (CJ&A), issued for this solicitation, is appropriate in such circumstances. See FAR sect. 6.303-1(c). We will refer to this CJ&A, but, for simplicity, when discussing all three solicitations, we will refer to the J&A documents collectively as the three J&As.
 The J&As contain no estimate of the length of delay that conducting a procurement might cause. While we focus on the reasonableness of the rationale supplied in the J&As, we note that Raytheon IDS estimates that delay at 4-6 months, Tr. at 118, while the Navy’s conservative estimate is 12-15 months. Tr. at 256.
 “Build-to-print” is a term of art that refers to producing an item based on mature, proven, detailed data packages.
 S-band radars differ from X-band radars in the discrimination algorithms used to intercept targets. Tr. at 238.
The protester states that maintenance of the various Aegis baselines may
logically be the exclusive
Raytheon IDS argues that the J&As are defective because they lack an
explanation of all of the actions attempted by the Navy to make the acquisition
competitive. Protester’s Comments at
25. The protester does not assert any
prejudice from the Navy’s alleged failure to fully explain its attempts in the
J&As, and we see none. Competitive
prejudice is an essential element of a viable protest; where, as here, the
protester fails to demonstrate that, but for the agency’s actions, it would
have had a substantial chance of receiving the award, there is no basis for
finding prejudice, and our Office will not sustain the protest. M&M Investigations, B-299369.2,
 Raytheon IDS may be referring to 5110 J&A at 4 (“On a yearly basis, . . . the Navy will evaluate the government’s ability to compete the MMSP production prior to the CJ&A expiration date.”), and 5123 J&A at 5 (“As other upgrade requirements emerge and are funded, the [PEO IWS] will assess whether future competitions are feasible.”).
The protester argues that the procurements were improper because the decision
to proceed sole-source was not made by the contracting officer, as required by
CICA. See 10 U.S.C. sect.
2304(f)(1)(A). Raytheon IDS raised this
issue in a letter to this Office filed December 1, or 10 days after the date of
the hearing in this protest. While the
protester stated that it would address the issue in more detail in the hearing
comments due 2 days later, the later, more specific arguments cannot be
considered unless they independently satisfy the timeliness requirements under
our Bid Protest Regulations. See Foundation
Eng’g Sciences, Inc., B-292834, B-292834.2,