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AERO CORP. v. DEPARTMENT OF THE NAVY

July 8, 1982

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



The opinion of the court was delivered by: OBERDORFER

 In this protracted litigation plaintiff seeks relief from defendant's decision to award contracts for the Service Life Extension Program ("SLEP") designed for 49 C-130 aircraft to Lockheed-Georgia Corporation ("LGC") without competition open to plaintiff and other experienced military aircraft overhaul contractors. The challenged procurement of SLEP for defendant's C-130 fleet, which began before 1979, will extend into 1985.

 The challenged procurement has been the subject of several opinions by the Acting Comptroller-General, and several motions for preliminary injunctions seeking various remedies for defendant's alleged violation of the Armed Services Procurement Act, 10 U.S.C. §§ 2301-2314, and Section 3 of the Armed Services Procurement Regulations ("DAR"), see 32 C.F.R. parts 1-39 (vol. 1). A Memorandum filed February 18, 1982, 540 F. Supp. 180, concluded that plaintiff would probably prevail on its claim that the sole-source procurement from LGC of SLEP for all 49 aircraft violated 10 U.S.C. § 2304(g) and DAR § 3-101(d), which impose on military procurement agencies strict duties to pursue and obtain all feasible competition for most contracts in excess of $10,000. *fn1" The February 1982 Memorandum concurred in the Acting Comptroller-General's earlier opinion that defendant had never advanced a rational basis for its extraordinary decisions to avoid any competition of this SLEP undertaking. An accompanying Order enjoined defendant to commence forthwith the preparation of the technical documents required to determine whether competition of any aircraft in the group of 49 was still feasible and prudent and to begin preparation of any Engineering Change Proposal ("ECP") and Air Frame Change ("AFC") document it needed for SLEP accomplishment by firms already having extensive technical experience in overhaul of the C-130. To maintain a status quo that would permit competitive award of even a few SLEP contracts to a firm like plaintiff, the Order also directed defendant to take all other steps it believed necessary for a competitive procurement of SLEP, including, but not limited to, procurement of parts needed for SLEP of aircraft under NAVAIR's current schedule. The Order left to defendant the task of reaching and rationalizing its own reviewable conclusion as to whether competition for some of the designed C-130 fleet was feasible and fiscally prudent.

 Defendant has now reported the results of its study, and the matter is before the Court on plaintiff's renewed application for further affirmative relief. *fn2" Plaintiff contends that defendant's purported study of competitive possibilities for SLEP accomplishment is technically defective, irrational, and wholly unresponsive to the requirements of the procurement statutes, regulations, the opinions of the Comptroller-General and the Orders of this Court. Still under advisement from earlier stages of the litigation are plaintiff's prayers for final and plenary relief which would include a permanent injunction to require competition of these SLEP contracts, as well as plaintiff's motions for an order holding defendant in contempt for willful noncompliance with prior Orders of this Court and for attorneys' fees. *fn3"

 I.

 Based upon its study conducted since issuance of the Order of February 18, 1982, defendant has decided to adhere to its earlier conclusion that the law requires no competition of any of its scheduled SLEP contracts for the C-130 fleet. That decision is evidenced by the affidavit of Bruce D. Nordwall, defendant's Program Manager for the C-130 SLEP undertaking. The relevant portion of Capt. Nordwall's affidavit reads as follows:

 
. . . In accordance with the Preliminary Injunction entered by the Court on 18 February 1982, the Navy has determined that competition for SLEP installation on the C-130 series aircraft remaining in the SLEP program, limited as described in the Preliminary Injunction, is neither feasible nor prudent. This decision has been discussed with and concurred in by the Commander, Naval Air Systems Command.

 The "grounds for this decision," the Nordwall affidavit then states, "are contained in the attached Report to the Court." Nordwall Affidavit (filed May 13, 1982) para. 2. That Report is an unsigned and undated document captioned "Defendant's Report to the Court," to which are attached several letters and memoranda between the Naval Air Systems Command ("NAVAIR") and LGC. In light of the decision NAVAIR has made regarding its legal obligations under the statute and the regulations, the substantive question presented by the Report filed with the Nordwall affidavit is a simple one: has defendant so far provided the rational basis for its decisions regarding this procurement? This question must be answered in the negative.

 A.

 NAVAIR had previously identified, and the Court has accepted as valid, three broad management criteria governing NAVAIR's decision to procure SLEP on a sole-source basis from LGC. Under the first criterion -- "technical risk" -- NAVAIR sought to control the risk that a SLEP contractor will not perform SLEP with an acceptable level of technical competence. NAVAIR has never taken the position in this litigation that only LGC can perform SLEP with an acceptable level of technical risk; if SLEP contracts were awarded by competition to a firm other than the C-130's manufacturer, LGC, defendant would simply require the contractor to employ kits of parts, tools, and technical papers that would, if properly used, control the technical risk.

 The second criterion was preservation of NAVAIR's 1980-1985 SLEP induction schedule. The Court has always declined to interfere with that schedule, inasmuch as the schedule reflects defendant's judgment regarding national-defense requirements for the C-130 fleet. The Court has thus steadily refused plaintiff's original request for even a brief delay in the SLEP induction schedule, even though adherence to that induction schedule has meant that, with each passing month, the number of aircraft left for possible competitive procurement has shrunk.

 The third criterion is "prudent" use of public funds in accomplishing SLEP, and it is that criterion that has generated the principal conflict between the GAO's position, taken in the Acting Comptroller-General's opinions, and defendant's approach to this procurement. NAVAIR has been unwilling to develop kits for a competition of SLEP until some firm other than LGC has been determined to be the winner of the competition, since LGC itself would not need kits. The Acting Comptroller-General has taken the position that NAVAIR has seriously overstated the time and resources required to prepare for a kit-based competition. The Memorandum of February 18, 1982, indicated that defendant should attempt to weigh the costs of preparation for a kit-based competition limited to experienced C-130 maintenance firms against possible savings from a competitive procurement in which LGC and other firms would propose to perform SLEP on the best terms they were prepared to offer the government. Aero Corp. v. Department of the Navy, 540 F. Supp. 180 (D.D.C. 1982).

 The parties have always agreed that assessment of the costs and complexities of SLEP accomplishment should build upon NAVAIR's own technical judgments regarding kit design and procurement. The principal difficulty in NAVAIR's articulation of costs and feasibility, however, has been its stubborn refusal to consider the possibility of competition limited to firms experienced in maintenance of the C-130. The Court first instructed defendant to consider such a limited competition in March 1980. See Aero Corp. v. Department of the Navy, 493 F. Supp. 558 (D.D.C. 1980). Notwithstanding the opinions of GAO and this Court's instructions, however, defendant's evaluation of competition has generally assumed that competition should be industry-wide. Defendant's planning therefore failed to consider the possibility that limited competition with simpler SLEP kit requirements could spare NAVAIR the time and cost of developing materials needed for a firm with no background in C-130 work. The ECP ordered by NAVAIR from LGC in 1981, for example, assumed industry-wide competition. And when the Court sought to direct that ECP toward narrower but more practicable competition, defendant stubbornly evaded the effort.

 Thus, prior to February 1982, despite the Court's Order of March 1980 and GAO's opinions on this procurement, defendant had never systematically considered competition limited to experienced C-130 contractors. In affidavits and testimony in 1981, defendant, after ordering its "industry-wide" ECP, attempted to justify its action by asserting that even experienced C-130 maintenance firms would require all the tools and technical directives that any firm in the aerospace industry would require. The Court was obliged to reject defendant's explanations for its refusal to study limited kit-assisted competition as irrational and unsupported by the record. See Aero Corp. v. Department of the Navy, 540 F. Supp. 180 (D.D.C., 1982), slip op. at 60-64. As the Court noted at that time, defendant's position on requirements for limited competition was inconsistent ...


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