[Protest of DLA Sole-Source Contract Award]

Two firms protested a Defense Logistics Agency (DLA) sole-source contract award and the agency's inclusion of certain option provisions in the contract. DLA justified its sole-source procurement on the basis that the awardee had produced a system for the Navy that was the only known system capable of meeting its minimum needs within the required time period. The first protester contended that the contract award on a sole-source basis was improper because the bases upon which it was made were inaccurate. It stated that several firms are capable of performing the work and that the Navy system was not yet proven. Furthermore, the protester contended that DLA could have competed separate parts of this contract. A review of the Navy system's progress reports showed that the system was well behind schedule and was not yet operational or fully accepted by the Navy. Moreover, GAO found that substantial changes will be required to make the Navy system and the existing DLA system compatible. Therefore, GAO found that DLA's sole-source justification was inadequate and unreasonable. DLA offered no evidence that only the Navy system could meet its needs, and GAO could find no evidence of a market survey or efforts to provide public notice of the procurement prior to award. Therefore, the protest was sustained. DLA is presently considering options for a divisible portion of the contract effort. This provides an opportunity for corrective action through issuance of a solicitation. Therefore, GAO recommended the issuance of a new solicitation and consideration of the responses in evaluating whether to exercise options in the awardee's contract. Because of its resolution of the first protest and recommendations for corrective action, GAO considered the second protest only to the extent that it was relevant to the first.