Link: GAO Decision
Protestor: Northrop Grumman Technical Services, Inc.
Agency: Department of the Air Force
Disposition: Protest Denied.
- Consolidation of requirements for contractor logistics support for the C-20 and C-37 aircraft requiring 5 years of fixed-price flying hour rates is reasonable, where the agency determined that consolidation will result in significant cost savings and operational efficiencies.
- A solicitation for aircraft logistics support is not unduly restrictive of competition or inconsistent with customary commercial practices, where the record supports the agency’s market research identifying its requirements and mitigating risk to offerors.
General Counsel PC Highlight:
Northrop Grumman Technical Services, Inc. protested the terms of an RFP for contractor logistics support for the C-20 and C-37 aircraft. The aircraft are militarized versions of commercial business jets manufactured by Gulfstream Aerospace Corporation. Northrop Grumman is the incumbent contractor providing logistics support for the C-20, while Gulfstream is the incumbent contractor for the C-37 aircraft. The agency issued four RFIs over a four year period, in which it asked potential offerors for their views regarding the consolidation of the logistics support requirements, the length of the contract, the time required to phase in a new contractor, and the type of contract that should be awarded. After determining that consolidation would result in efficiencies in cost, contract management, and field maintenance capabilities, the agency held an industry day, and made several revisions to its draft PWS based on industry input.
The RFP issued provided for a 90-day phase-in period, during which the awardee, the incumbent, and the agency would complete a joint inventory of the contractor operated and maintained base supply system/main operating bases and depot facility, including all parts, support equipment, and furniture. The PWS required an agreement with the original equipment manufacturer (OEM) to obtain the approved data and technical support needed to maintain the airframes, engines, accessories, and systems at a level that would ensure FAA airworthiness is retained.
Northrop Grumman argued that the RFP is unduly restrictive of competition because it required a “sufficient inventory” of C-37 parts, fixed-price flying hour rates, and a 90-day phase-in period. It argued that the agency should not consolidate the logistics support for the two aircraft because only Gulfstream could reasonably perform the C-37 aircraft logistics support. It further asserted that the pricing and phase-in requirements deviate from customary commercial practices, and claimed that Gulfstream’s position as OEM and incumbent on the C-37 logistics support contract created an impermissible OCI.
The GAO found that the agency reasonably determined that consolidation of the logistics support requirements for the C-20 and C-37 aircraft would result in significant cost savings and operational efficiencies, noting that the agency had considered several different contracting approaches over the course of several years of evaluation. It disagreed that the requirement to maintain “sufficient inventory” of C-37 parts was unduly restrictive, noting that the awardee was not required to have a complete inventory at the end of the phase-in period and that Northrop Grumman had not demonstrated that Gulfstream would not sell it the necessary parts. The GAO also rejected Northrop Grumman’s argument that there was insufficient information to permit offerors to reasonably estimate fixed-price flying hour rates. It noted that all offerors received 34 months of usage data and that Gulfstream gave offerors access to its proprietary CMP database, which provided maintenance data on each aircraft for all maintenance actions, including part removals and installations that were completed since the aircraft were placed in service.
The GAO then concluded that Northrop Grumman had not demonstrated that the agency’s requirement for a 90-day phase-in was unreasonable, agreeing with the agency that the PWS made clear that it was up to the contractor to determine the spares inventory necessary to meet the mission capability requirements and that the agency was not requiring a specific inventory investment. The GAO also held that Northrop Grumman had not demonstrated that the 90-day phase-in period was not consistent with customary commercial practice. It rejected the argument that fixed-price flying hours rates were inconsistent with customary commercial practice, pointing out that FAR Part 12 directs agencies to use fixed-price contracts, or fixed-price with economic price adjustments, for the acquisition of commercial items. Finally, the GAO denied the claim that Gulfstream had an impermissible OCI, noting that Northrop Grumman had not identified any evidence of preferential treatment or other improper action on the part of the agency. It also pointed out that the agency had attempted to mitigate any competitive advantage by obtaining from Gulfstream, and providing to all offerors, 34 months of usage data.
Agencies are permitted to consolidate or bundle requirements where the agency reasonably determines that doing so will result in significant cost savings or efficiencies. While a potential offeror may believe that the consolidation will restrict competition because it will prevent firms that only furnish a portion of the requirement from competing, the potential offeror must challenge whether the agency will in fact be able to achieve the cost savings or efficiencies justifying the bundling. Protests regarding improper bundling or consolidation must be filed prior to the time for the submission of proposals or they will be considered untimely.