I;ni t cvf Statwi (;cbnraral Awount.ilg Offiw GAO Report t,o the Cornrnander, U.S. Air Force, Ogden Air Logistics Center SPARE PARTS PROCUREMENT Contractor Qualification Requirements 141236 United States GAO General Accounting Office Denver Regional Office Suite 800 1244 Speer Boulevard Denver, CO 80204 B-220528 April 27, 1990 Major General James W. Hopp Commander, US, Air Force Ogden Air Logistics Center Hill Air Force Base, Utah 84506 Dear General Hopp: Senator Richard Shelby requested that we investigate the use of precon- tract award qualification requirements at the Ogden Air Logistics Center (ALC) to determine whether the Ogden ALC complies with certain federal laws and regulations intended to foster competition. Senator Shelby’s request was based on allegations by a constituent, a small contractor in Alabama, that engineers in the acquisition divisions at the Ogden ALC were restricting competition by subjecting contractors to unnecessary qualification requirements. Specifically, this report addresses precontract award qualification requirements used in the acquisition of aircraft and missile spare parts. Applicable federal laws and regulations describe precontract award qualification requirements as product examinations, tests or other qual- ity assurance demonstrations that must be completed before a contract is awarded. The government uses these requirements to make certain that all potential sources can meet the strict manufacturing tolerances or other operating characteristics needed for critical spare parts that will be installed in airplanes and missiles. While these requirements do restrict the list of bidders to those whose products have passed the tests, they do not preclude competition because all sources have the opportunity to submit their products for testing to become eligible bid- ders. Our objective, scope, and methodology are described in appendix II. Responsible acquisition and competition advocacy personnel at the Results in Brief Ogden ALC are often not complying with federal acquisition laws and regulations, nor are they regularly performing important duties that affect whether contractors will engage in unrestricted competition or will have to meet precontract award qualification requirements when bidding for contracts. There were three areas of non-compliance in Ogden ALC'S use of precontract award qualification requirements: (1) acquisition divisions’ engineers have not included the required item- Page1 GAO/NSIAD-90438SpareParb B-220528 specific information in the written justifications for the use of qualifica- tion requirements, (2) acquisition division personnel have not provided the Competition Advocacy Office (CAO) with the required information needed to make informed acquisition method decisions, and (3) CAOper- sonnel have not adequately documented the basis for their decisions to change the acquisition method assignments, as required. In addition, the record is not always clear whether CAOand Small Business Administra- tion (%A) personnel resolved disagreements with the acquisition divi- sions’ engineers over acquisition method decisions. The Ogden ALC is responsible for managing a number of weapon systems Background and components, including those used in the F-16 and F-4 aircraft. Engi- neers in five divisions under the Directorate of Materiel Management determine whether precontract award qualification requirements apply to the spare parts needed to support these weapon systems and components. The acquisition division personnel prepare the required documentation, which includes any information that may have a bearing on the acquisi- tion method decision. The CAOconducts a technical review of documen- tation received from the acquisition divisions and all other data in the Ogden ALC technical data file. Based on this technical review, the CAO personnel determine and assign the appropriate method of acquisition. The acquisition divisions’ engineers then assess the documentation and technical data, and make their own judgments about whether qualifica- tion requirements apply to specific spare parts. Should the engineers’ findings differ from those of the CAOpersonnel concerning the applica- bility of qualification requirements, the engineers’ decision may prevail. The CAOreviews the engineers’ decisions and if there are disagreements, according to an informal policy within CAO, the disagreements are to be elevated as necessary to higher supervisory, branch, division, or direc- torate levels. The engineers’ decisions concerning acquisition methods and qualifica- tion requirements are also sent to the local SBA representatives for their review. SBA is included in the review process because of its interest in promoting contracts with small business operators through full and open competition. Although the SBA representatives are not officially part of the acquisition method assignment process, they continually interact with acquisition divisions’ engineers and CAO personnel concern- ing the acquisition method assignments. Under Public Law 100-590, if Page 2 GAO/NSIAD-90-138Spare Parts * ,’ B-220528 the ALC rejects SBA'S recommendations on an acquisition method assign- ment, the SBA representatives can file an appeal with the head of the contracting activity and ultimately with the head of the agency. Even though they have these appeal avenues, SBA officials stated that they rarely use the appeal process, but do threaten its use to leverage infor- mal agreements. Similar to CAO,SBA'S practice is to resolve disagreements with the engineers informally, if possible. A final method of resolution, unique to the Ogden ALC, is the Acquisition Method Code (AMC) Review Board, which was established to resolve dis- agreements over acquisition method assignments or the imposition of qualification requirements. CAO,SBA, or acquisition division personnel can bring disagreements before the Board. Principal Findings Engineers Are Not Acquisition divisions’ engineers at Ogden ALC have not included required Preparing Adequate item-specific information in their written justifications of qualification requirements. Instead, they prepared standard justifications that Written Justifications for include general information applicable to many items. Qualification Requirements The Competition in Contracting Act of 1984 (P.L. 98-369) states that a contract may not be awarded using other than full and open competition procedures unless it is justified in writing. According to an Air Force Logistics Command regulation, written justifications must specify the necessity for the requirements and why the qualification must be demonstrated before contract award. Further, according to a local oper- ating instruction, the justifications must link the assignment of qualifi- cation requirements to the spare part being acquired and must specifically and clearly define the reasons used to justify the assignment. We reviewed 24 aircraft and missile spare parts that had been changed from an acquisition method using unrestricted competition to one using precontract award qualification requirements between March 1985 and April 1989. (See app. I.) Our analysis showed that for 21 of the 24 items, the written justifications did not contain the required item-specific information, did not link the qualification requirements to the items being acquired, and did not specifically and clearly define the reasons why qualification was necessary for those items. In fact, the language in Page 3 GAO/NSIAD-90.138Spare Parts B-220528 these 21 written justifications prepared by the engineers in the acquisi- tion divisions was stated in general terms that could apply to many items. The following is an example of what the engineer originally included in the written justification compared to what was available, but was not included. Information originally included in the written justification: Item: Spacer Adapter Application: C-5 A aircraft, nose landing gear Justification for establishing a qualification requirement: “1. Special skills associated with machining and processing of this item can result in product structural or durability degradations if not prop- erly applied.” “2. Execution of the qualification requirements specified herein is neces- sary to verify the structural and/or functional integrity and/or fit and form of the item being procured.” “3. Failure to procure these items from a fully qualified source can result in structural or functional deficiencies that will compromise the mission capability of the respective aircraft.” Information that was available, but not included in the written justification: . This spacer adapter is a large diameter, thin-walled tube that interfaces between the axle and the wheel assembly for the C-5 A/B aircraft. l This part is critical as it prevents the wheels from shifting and the tires from blowing when the aircraft lands. . The dimensional tolerances of the item must be held to thousandths of an inch. Inability to maintain these tight tolerances introduces unstable movement and shifting of loads to the wheel assembly of the nose land- ing gear. l Hard anodizing of the aluminum is a difficult process, especially given the tight dimensional tolerances. The process of hard anodizing changes Page 4 GAO/NSIAD-SO-138 Spare Parta . .\ * B-220528 I the dimensions of the item. If not compensated for or correctly accom- plished, these dimensional changes can result in the condemnation of the part. l Thin-walled aluminum parts can be torn easily during machining operations. . This item requires a forging. The forging sources are identified by the CAO, but the vendor must have prior arrangements with the forging sources to get the contract, and must be able to prove that he or she can get the forgings from an approved source. Our review showed that the same standard written justification used for the spacer adapter was also used for six other items that were distinctly different. These items included a pivot pin on the brake torque link of the main landing gear of the C-141 aircraft and a ball socket on the nose landing gear of the C-5 A/B aircraft. We were told that engineers in the acquisition divisions use standard justifications rather than item-specific justifications to save engineering resources, both human and financial. According to an acquisition divi- sion official, the engineers use to write justifications specific to individ- ual items; however, CAO personnel continually questioned the justifications, causing engineers to fall behind in their work. Conse- quently, the acquisition divisions standardized most of the justifications. However, not all acquisition divisions’ officials agreed that standard jus- tifications should be used. The officials in one acquisition division believe that the standard justifications are inadequate, and their use is discouraged. According to these officials, item-specific justifications may take more time, but the engineers need to take the time to carefully think through the justification of the qualification requirements for every item. Further, these officials stated that they have found it easier to get the more specific justifications through CAO’Sreview process. Item-Specific Information Acquisition division personnel are not routinely providing the CAOwith Not Always Provided to available item-specific information that is needed to determine the appropriate acquisition method. Without complete information, CAOper- GAO Personnel sonnel cannot adequately fulfill their responsibilities. According to Ogden ALC regulation 57-6, acquisition division personnel are to provide all information that may affect the acquisition method assignment. This v information should include specifics concerning (1) known and potential sources, (2) technical actions currently applicable to the item, (3) spe- cific restrictive circumstances, facilities, or processes applicable to the Page 5 GAO/NSIAD-90-138Spare Parts 4 B-220628 item, (4) criticality and complexity of the item, and (6) definitions of government logistics, and technical and economic risks involved with the item. Acquisition division personnel told us that the required information is included in the Ogden ALC technical data file reviewed by c&o. However, CAOpersonnel disagreed and stated that their experience has shown that information in the technical data file (e.g., drawings and specifications) is often outdated and incomplete. Further, the file does not include and CAO personnel are not provided information on such things as engineer- ing judgments, problems with certain sources, or problems with parts in use. According to CAOpersonnel, in some instances, they requested updated, complete information, but certain acquisition division person- nel refused to provide it. Our analysis of 24 aircraft and missile spare parts showed that impor- tant item-specific information was often not provided by acquisition division personnel to CAO. Based on information originally provided by the acquisition divisions, the CAOpersonnel had not agreed with the engineers’ decisions to use qualification requirements for 12 of the 24 items. Two of these disagreements were resolved by the AMC Review Board, which changed the acquisition method back to unrestricted com- petition. For the remaining 10 items, we obtained additional item- specific information from the engineers and provided it to the CAO per- sonnel. They said this information would have supported the engineers’ decisions that qualification requirements were justified for six of the items. For the other four items, they said the information would not have resulted in their agreement with the engineers’ decisions to use qualification requirements. In the example of the spacer adapter, the item-specific information pro- vided by the engineers shows the type of information the acquisition division personnel could provide to CJOpersonnel. When the CAO person- nel originally reviewed the technical package for the spacer adapter, based on the limited information provided to them by the acquisition division at the time, they determined that the acquisition method should be full and open competition without precontract award qualification requirements. However, CAOpersonnel believe that had they been pro- vided the information on the item’s special manufacturing requirements (e.g., the hard anodizing and tight dimensional tolerances), they proba- bly would have agreed that qualification requirements were justified. Further, CAOpersonnel said the item-specific information provided is the Page 6 GAO/NSLAL%90-138 Spare Parts 1 . B220528 kind of information they need, but do not receive early in the process to help them make informed acquisition method decisions. Similarly, when we provided the SBA personnel the additional item- specific information, they changed their opinion on several of the 15 cases that they initially believed could have been acquired without pre- contract award qualification requirements. As explained above, two of these cases were resolved by the AMC Review Board. SBA personnel said that the additional information persuaded them to agree with the engi- neer’s decision to require precontract award qualification for 5 of the remaining 13 items, but not for the other 8 items. According to SBA offi- cials, their criteria for advocating competition on items are broader than those of CAO,because SBA is concerned with the additional factor of how precontract award qualification requirements affect small businesses. CA0 Is Not Adequately Our review indicated that CAOpersonnel had not been complying with Documenting Changes in requirements that they document their technical review results. Accord- ing to Ogden ALC regulation 67-6, CAOis to Acquisition Methods “ . summarize the result of the technical screening performed by . . describing in sufficient detail the specific restrictive circumstances, facilities, or processes . . .” that warrant qualification requirements. For the 12 items we reviewed for which CAOpersonnel had assigned an acquisition method requiring precontract award qualification require- ments, the personnel did not adequately document the circumstances requiring qualification. Instead, they included only the information con- tained in the generally stated written justifications provided to them by the engineers. Accordingly, the documentation disclosed little informa- tion on how or why CAOpersonnel decided on the acquisition method assignment. CAOofficials agreed that the acquisition method decisions are inade- quately documented. They are now developing a system to document decisions made concerning the assignment of acquisition methods and the rationale for these decisions. According to the CAODirector, they plan to begin using the new system in July 1990, Page7 GAO/NSL4D-90-138SpareParts x i B-220528 Record Not Always Clear Although CAOand SBApersonnel disagreed with many of the engineers’ Whether Disagreements decisions to require qualification requirements, they did not adequately document the resolution of these disagreements. In addition, CA0 person- Resolved nel did not regularly use the AMCReview Board to resolve disagreements with engineers. Consequently, we were unable to determine which dis- agreements were resolved or how. Without adequate documentation, the Commander of the Ogden ALC is unable to assess whether disagreements were satisfactorily resolved. Similarly, SBAis unable to assess this per- formance element for its representatives at the Ogden AU;. The CAOpersonnel and acquisition divisions’ engineers disagreed on the use of qualification requirements for 12 of our sample items. For the two disagreements resolved by the AMCReview Board, we found that the basis for resolution was not documented in the case files. For the other 10 disagreements, documentation was generally insufficient to allow a clear understanding of the basis for resolution. In 6 of the 10 cases, no information about resolution was included, so it was unclear not only how, but also whether the disagreements had been resolved. CAOoffi- cials said that they are not required to resolve disagreements or to bring them before the AMCReview Board. If they resolve disagreements, the CAOpersonnel prefer to do so informally. SBArepresentatives disagreed with the engineers’ assignment of an acquisition method requiring qualification on 15 sample items. However, the SRArepresentatives said that since they also have no requirement to resolve disagreements, they did not press the engineers to resolve the disagreements concerning these items. As stated above, two of these dis- agreements were resolved by the AMCReview Board, but the basis for resolution was not adequately documented. To ensure that applicable laws and regulations are followed, and that Recommendations precontract award qualification requirements are used properly, we rec- ommend that you direct the . acquisition divisions’ engineers to properly prepare written justifica- tions that document the necessity for the qualification requirements by stating the reasons why qualifications must be demonstrated before con- tract award, linking the assignment of qualification requirements to the spare part being acquired, and stating specific and clearly defined rea- sons to justify the assignment; Page 8 GAO/NSIAD-90-138Spare Parta 8220528 . acquisition divisions to provide CAOpersonnel with the most up-to-date and complete item-specific technical information before the personnel make acquisition method assignments; l acquisition divisions to respond in a complete and timely manner to requests for information from CAOand SBA; l GAOto diligently seek, from the acquisition divisions’ engineers, the information needed to make informed acquisition method decisions, and regularly use the AMCReview Board to resolve disagreements with engi- neers; and l CAOto adequately document changes in acquisition method assignments and resolutions of disagreements over those assignments. We also recommend that you request the assistance of the SBARegional Administrator to ensure that SBArepresentatives at the Ogden ALC resolve disagreements with ALC personnel over acquisition methods. Responsible officials at the Ogden ALC provided comments on the facts presented in this report and these comments were incorporated, as appropriate. Copies of this report are being sent to Senator Shelby; the Secretary of Defense; and the Administrator, SBA.Copies will also be made available to others on request. Please contact me at (303) 844-0017 if you or your staff have any ques- tions concerning this report. Major contributors to this report are listed in appendix III. Sincerely yours, David A. Hanna Regional Manager Page 9 GAO/NSLAD-90-138 Spare Parts Contents Letter 1 Appendix I 12 Sample of Spare Parts Requiring Precontract Award Qualification Requirements Appendix II 13 Objective, Scope,and Methodology Appendix III 14 Major Contributors to This Report Abbreviations Y Au: Air Logistics Center AMC Acquisition Method Code CA0 Competition Advocacy Office SBA Small Business Administration Page10 GAO/NSL4D-90-138Spare Parta Y Page 11 GAO/NSIAIHO-138 Spare Parts Appendix I Sample of Spare Parts Requiring Precontract * Award Qualification Requirements Additional Acquisition Adequacy of information Item - division0 justificationb availableC 1. Gyro end cover MMG Inadequate Yes - 2. Hinge (wing) MMS Inadequate Yes 3. Hinge pin (wing) MMS Inadequate Yes 4. Parts kit (wina) MMS lnadeauate Yes 5. Duct (env.control) MMA Inadequate Yes 6. Fairing assembly MMA Inadequate Yes 7. Static discharger MMA Adequate N/A 8 Support assembly MMA Inadequate Yes 9. Pivot pin (brake) MMI Inadequate Yes 10. Shoe assembly MMI Adequate WA 11. Piston carrier MMI Inadequate Yes 12. Socket half MMI Inadequate Yes 13. Metering tube MMI Inadequate Yes 14. Spacer adapter MMI Inadequate Yes 15. Cover assembly MMI Inadequate Yes 16. Link assemblv MMI lnadeauate Yes 17. Tnqcrer arm assy. MMI Inadequate Yes 18. Yoke collar MMI Inadequate Yes 19. Stop snubber MMI Inadequate Yes 20. Rod assemblv MMI lnadeauate Yes 21. Swivel assembly MMA Inadequate Yes 22. Bolt MMA Inadequate Yes 23. Wheel bolt MMI Inadequate Yes 24. Gvro mount MMG Adeauate N/A aDrvrsrons under the Drrectorate of Matenel Management: MMA-F-16 System Program Management Drvrsion. MMG-ICBM System Program Management Drvisron. MMI-Item Management Drvrsion MMS-F-4 Aircraft System Program Management Divrsion bAdequate written tustrfrcatrons meet requrrements of regulatrons by contarnrng pertrnent Item-specrfrc rnformatron and lrnkrng the assignment of the qualificatron requrrements to the Item. Inadequate wrrtten justrficatrons contarn only standardized language and Irttle, If any item-specrfrc rnformatron. They do not IInk the assignment of the qualrfrcatron requirements to the Item CYes-Addrtional rnformatron concernrng the use of qualifrcatron requirements was available from the engineers N/A-Justrficatron in source qualrfrcatron statement was Item specific; no addrtronal rnforma- tron needed Page 12 GAO/NSIAD-90-138Spare Parts App@hix II Objective, Scope,and Methodology Our objective was to determine if the Ogden ALC use of precontract award qualification requirements complied with applicable federal laws and regulations. We reviewed the Competition in Contracting Act of 1984, the Defense Procurement Reform Act of 1984, section 9.2 of the Federal Acquisition Regulation, and applicable Air Force regulations pertinent to precon- tract award qualification requirements and interviewed (1) Air Force officials responsible for determining when qualification requirements apply to the acquisition of a spare part and (2) SBArepresentatives responsible for reviewing these acquisition method decisions. We analyzed 24 items that had been changed from an acquisition method using unrestricted competition to one using precontract award qualification requirements between March 1985 and April 1989. To determine what information was available and used throughout the acquisition method decision process, we obtained and reviewed the sup- porting documentation and interviewed CAO,SBA,and acquisition divi- sions’ engineers involved in this process. We also interviewed responsible acquisition divisions’ engineers and obtained additional item-specific information not included in the written justifications. We then asked CAOand SBApersonnel if the item-specific information had been provided previously and if, in their opinions, this information is necessary to complete the process. Our results are reported only as they pertain to the 24 sample items, not the overall population of approxi- mately 150 items. Our review was performed at the Ogden ALC in accordance with gener- ally accepted government auditing standards from June 1989 to Decem- ber 1989. Page 13 GAO/NSlAD-90-138Spare Parta Appendix Ill Major Contributors to This Report Director, Research, Development, Acquisition, and Pro- National Security and pa~?$!m~$~~ -__ (202‘,276-4687 ales International Affairs John A. Rinko: Assis&ii’D%ctor Division, Washington, DC. Ted B. Baird, Regional Management Representative Denver Regional Pamela J. Timmerman, Evaluator-in-Charge Office Pamela K. Tumler, Reports Analyst (:#!MH24) Page 14 GAO/NSLAD-90-138 Spare Parts ‘I’lwrt* is it 25”0 tliscow~t, ou orders for 100 or tnow copiths tnailtd to a sitrglth wddrt*ss.
Spare Parts Procurement: Contractor Qualification Requirements
Published by the Government Accountability Office on 1990-04-27.
Below is a raw (and likely hideous) rendition of the original report. (PDF)