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AERO CORP. v. DEPARTMENT OF THE NAVY

March 4, 1980

AERO CORPORATION, Plaintiff,
v.
DEPARTMENT OF THE NAVY, Defendant.



The opinion of the court was delivered by: OBERDORFER

MEMORANDUM

I

 This case involves the claim of plaintiff, Aero Corporation ("Aero"), that the determination of defendant, Department of the Navy ("Navy"), to make a sole-source award of a contract to perform the Service Life Extension Program ("SLEP") on twenty C-130 aircraft to Lockheed-Georgia Company ("Lockheed") was improper. Aero also seeks mandamus to compel the Navy to refer the question of Aero's capability to perform the contract for determination by the Small Business Administration.

 On November 16, the GAO notified the Court and the parties that a decision on the protest would not be available before December 18, 1979. Consequently, the Court held hearings on November 19 and 20, 1979, to consider whether relief was necessary pending a decision by the GAO. At those hearings, Aero renewed its request for a preliminary injunction; the Navy reasserted its position that the SLEP program, and the Navy's consequent ability to meet its operational requirements, would be jeopardized if it did not award a contract by November 30, 1979. The Navy represented that (1) no aircraft would be "inducted" into SLEP before May, 1980, and (2) any contract with Lockheed could be terminated without prejudice to Aero if the GAO or the Court so directed.

 On the basis of the Navy's representations and arguments of counsel, the Court entered an Order on November 21 denying Aero preliminary relief. The Order also embodied a Declaratory Judgment that the Navy had breached its statutory duty under 10 U.S.C. § 2304 and 2310 to facilitate review by the Court and the GAO of its decision to make a sole-source award. The Order further declared that the Navy "should not enjoy any equitable or legal advantage on account of the award of the contract, its performance in whole or in part, or the mere passage of time between now and December 31, 1979." The Order left the Navy free to enter into a letter contract with Lockheed for SLEP. The Navy and Lockheed executed such a contract on November 30, 1979. The contract called for the performance of SLEP on 13 planes, with an option to increase the total to 20 C-130's.

 The Order of November 21, 1979, as further explained by Memorandum of November 28, 1979, was predicated on an indication from GAO that it could render a decision in Aero's bid protest, Docket No. B-194445.3 by December 18. The relief granted was intended to preserve the equities, while permitting the Navy and Lockheed to begin necessary pre-performance activities pending the GAO decision.

 On December 14, the GAO, through its Associate General Counsel, informed the Court that it would not be able to render a decision on December 18, but was "making every effort to have a decision by December 21." At a hearing held that afternoon to consider the effect of the delay, plaintiff sought (1) to extend the effect of the Declaratory Judgment beyond December 31, if the hearing on the preliminary injunction, then scheduled for December 21, were delayed; (2) to prevent the Navy from exercising its option to expand the initial SLEP contract from 13 to 20 planes; (3) to limit the contract already in force to the preparation of parts, for which Aero has not sought to compete; and (4) to require the Navy to prepare a competitive bid package in the event that the contract was ruled invalid.

 In response, the Navy represented that it would limit the option for the additional planes to the procurement of parts only. The Navy also asserted that in the event that SLEP installation were ultimately opened for competitive bidding, Lockheed would accrue no competitive advantage from its part-performance of the letter contract, since any parts or plans prepared by Lockheed would become the property of the U.S. Government.

 On December 21, the GAO reached its decision on Aero's bid protest, a copy of which is attached hereto as Appendix I. The GAO found that the Navy's decision to award a sole-source contract to Lockheed for 13 planes was not arbitrary. On the same day, a hearing was held on Aero's further motion for a preliminary injunction, at which it was decided to conduct a final hearing on the merits on February 4 and 5, 1980. An Order filed December 21, 1979, amended the Order of November 21 to reflect additional representations by the Navy that (1) none of the C-130 aircraft would be "inducted" into SLEP before February 5; and (2) that the Navy would not exercise the option for the installation portion of SLEP for the seven additional aircraft before February 5, 1980.

 On January 30, 1980, Aero filed a Pretrial Brief. On February 1, 1980, the Navy filed a motion for summary judgment. The Court has elected to treat the parties' submissions as cross-motions for summary judgment, supported by exhibits, affidavits and testimony which eliminate any material factual dispute. Having reviewed these submissions, and on the basis of the hearings and entire record of this case, the Court finds that the Navy is entitled to partial summary judgment; its determination that competitive procurement of SLEP for the first 20 C-130's was reasonable and supported by substantial evidence. Aero is entitled to partial summary judgment on its claim that under the circumstances of this case, the Navy prevented Aero from obtaining timely and meaningful review of the Navy's procurement decision before this Court and the GAO. The Navy is also entitled to summary judgment on Aero's assertion that its capability to perform SLEP must be referred to the Small Business Administration for determination.

 On February 8, 1980, Aero filed a motion pursuant to Rule 21, Fed.R.Civ.P., to add the Lockheed Corporation as a defendant. Both Lockheed and the Navy have opposed the motion, which the Court will deny without prejudice to its renewal by Aero if the presence of Lockheed as a party ultimately proves appropriate in order to accord Aero complete relief.

 II

 Findings of Fact:

 1. The program at issue is the Service Life Extension Program ("SLEP") of forty-nine Navy and Marine Corps C-130 series aircraft.

 2. SLEP is a program to replace or restore parts of the aircraft to extend its service life to 25,000 flight hours.

 3. SLEP provides for the replacement of approximately thirty-nine parts regardless of whether they are in immediate need of service, with the exception of three parts that are inspected and replaced only if necessary. SLEP also involves several miscellaneous tasks, including upgrading field manuals and related functions.

 4. Three aircraft series are included in the program: the C-130 itself, as well as the KC-130's (tankers used by the Marine Corps), and EC-130's. The EC-130's are so-called "TACAMO aircraft" that are used for communications with fleet ballistic submarines.

 5. SLEP involves both the procurement and the installation of parts required to extend the life of the C-130 aircraft. The dispute underlying this action involves Aero's interest in competing for the installation phase of SLEP.

 6. The Navy's C-130 fleet is currently maintained through periodic induction for Standard Depot Level Maintenance ("SDLM") and through drop-in repair. Under the SLEP program, the Navy plans to perform SDLM concurrently with SLEP.

 7. Under SDLM, each aircraft is inspected and parts are replaced as necessary. Drop-in repair is performed by the SDLM contractor on aircraft in need of repair prior to the next regular SDLM induction.

 9. Navy planning for SLEP began in January of 1977 with the establishment of a C-130 SLEP program subject to formal procurement planning in accordance with the Defense Acquisition Regulation ("DAR") § 1-2100. This required a procurement plan to be prepared to present an analysis of the program and to document the technical, small business, policy, operational, and other procurement considerations.

 10. On February 10, 1978, the Cognizant Field Activity ("CFA") for the C-130 aircraft, the Naval Aircraft Rework Facility ("NARF"), forwarded to the Naval Air Systems Command ("NAVAIR") a detailed Work Requirements Specification for SLEP which identified the parts requiring replacement during SLEP.

 11. On February 24, 1978, Lockheed was provided with a copy of the work specification and commissioned to prepare two Engineering Change Proposals ("ECP") under contract with the Navy, one ECP for accomplishing SLEP at a facility other than Lockheed utilizing kits prepared by Lockheed, the other ECP for accomplishing SLEP entirely by Lockheed without the use of kits.

 12. On May 23, 1978, the Navy's project manager for the C-130 SLEP program notified the other team members that he would recommend to the NAVAIR Acquisition Program Review Board ("APRB"), which is composed of the senior decision-making authorities within NAVAIR, that Lockheed perform the entire SLEP program "in house," i. e., under a sole-source contract. The Project Manager based his recommendation on the grounds that (1) the cost of a kit program would substantially exceed that of an integrated program in which Lockheed manufactured and installed the parts; and (2) a kit program would delay by at least one year the induction of the first aircraft into SLEP, which was then scheduled for May, 1979. This delay was alleged to be critical because many of the aircraft would require interim repairs.

 13. At a meeting on June 9, 1978, the APRB agreed that NAVAIR should contract with Lockheed for initial performance of SLEP on a non-competitive basis and that NAVAIR should develop an alternative plan for transition to a competitive procurement for the installation of kits after two years. The APRB anticipated meeting again in four weeks to consider revisions to the procurement plan consistent with its conclusions. That meeting did not take place.

 14. On August 14, 1978, Lockheed submitted the Engineering Change Proposals requested in February, 1978. The ECP's included separate schedules for ...


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