oversight

Public-Private Competitions: Reasonable Processes Used for Sacramento Depot Maintenance Award

Published by the Government Accountability Office on 1999-05-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                   United States General Accounting Office

GAO                Report to Congressional Committees




May 1999
                   PUBLIC-PRIVATE
                   COMPETITIONS

                   Reasonable Processes
                   Used for Sacramento
                   Depot Maintenance
                   Award




GAO/NSIAD-99-124
                   United States
GAO                General Accounting Office
                   Washington, D.C. 20548                                                                         Leter




                   National Security and
                   International Affairs Division

                   B-281525.2                                                                                Letter

                   May 12, 1999

                   The Honorable John Warner
                   Chairman
                   The Honorable Carl Levin
                   Ranking Minority Member
                   Committee on Armed Services
                   United States Senate

                   The Honorable Floyd Spence
                   Chairman
                   The Honorable Ike Skelton
                   Ranking Minority Member
                   Committee on Armed Services
                   House of Representatives

                   This report is a redacted version of a report issued on November 23, 1998,
                   which contained sensitive and protected information. The report responds
                   to one of several requirements in the National Defense Authorization Act
                   for Fiscal Year 1998 relating to depot maintenance activities. 1

                   As required, we reviewed the Air Force’s selection of a source of repair for
                   depot maintenance work at the closing Sacramento Air Logistics Center
                   (ALC), McClellan Air Force Base, California. Specifically, we assessed
                   whether the (1) Air Force’s procedures for conducting the Sacramento
                   competition provided substantially equal opportunity for the public and
                   private offerors to compete for the work without regard to performance
                   location, (2) procedures for conducting the competition were in
                   compliance with 10 U.S.C. 2469a and other applicable laws and regulations,
                   (3) appropriate consideration was given to factors other than cost, and
                   (4) award resulted in the lowest total cost to the Department of Defense
                   (DOD) for performance of the work.



Results in Brief   Our review of the Air Force’s competition for work at the Sacramento ALC
                   showed that (1) the competition procedures provided an equal opportunity
                   for public and private competitors without regard to where the work could
                   be performed; (2) the procedures did not appear to deviate in any material
                   respect from applicable laws and regulations; (3) the Air Force


                   1
                       Appendix I lists the depot maintenance reporting requirements contained in the act.




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             appropriately considered factors other than cost in the selection; and
             (4) within the framework set forth for the competition, the award resulted
             in the lowest total cost to DOD for performance of the work.2 We also
             identified several issues that may be useful for the Air Force to consider in
             future competitions.



Background   As a result of a 1995 Base Realignment and Closure (BRAC) Act decision,
             the Sacramento and San Antonio ALCs, including their maintenance
             depots, are to close by 2001. To mitigate the impact of the closings on the
             local communities and employees, the administration announced its
             intention to maintain employment levels by privatizing the maintenance
             depots’ workloads in place at each location. The Air Force followed by
             announcing a strategy to privatize in place five prototype depot
             maintenance work packages at the two closing centers. In response to
             congressional concerns regarding this strategy, the Air Force decided to
             use public-private competitions to determine the most cost-effective
             source of repair for the closing maintenance depots’ work. Appendix II
             provides a more detailed description of the closure history for both the
             Sacramento and San Antonio centers.

             On March 20, 1998, the Air Force issued a solicitation for the purpose of
             conducting a public-private competition for various aircraft and
             commodity depot maintenance workloads being performed at the
             Sacramento ALC.3 The Air Force received one private sector proposal
             from Lockheed Martin Corporation, which had AAI Aerospace Corporation
             and GEC-Marconi Avionics Incorporated as major subcontractors, and one
             public sector proposal from the Air Force’s Ogden ALC, which was teamed
             with Boeing Aerospace Corporation. After performing technical and cost
             evaluations, on September 21, 1998, the Air Force selected the Ogden ALC’s
             proposal as the best value to the government. Following



             2In our previous report entitled Public-Private Competitions: Review of Sacramento Air Force Depot
             Solicitation (GAO/OGC-98-48, May 4, 1998) and in a bid protest decision, Pemco Aeroplex, Inc., cited
             earlier, we concluded that the Air Force had not provided a sufficient basis to show that the combined
             workloads were necessary to meet its needs. We have not changed our view.

             3
               Some of Sacramento’s maintenance work was to be transferred to other DOD depots outside the
             competition process. For example, the BRAC Commission required that ground communications and
             electronics work be transferred to the Tobyhanna Army Depot in Pennsylvania. The Air Force F-15
             repair work has been consolidated with other F-15 work at the Warner Robins ALC in Georgia, and
             software work has been transferred to the Ogden ALC in Utah.




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                       resolution of a bid protest filed with our Office, the Air Force proceeded to
                       award the work to Ogden, on October 9, 1998.4



Sacramento Air Force   Under 10 U.S.C. 2469a(d), a competitor must be allowed to perform at the
                       location of its choosing and is not to be given preferential treatment for, or
Depot Competition      be limited to, performing the work in place or at any other single location.
Placed No Limitation   On the basis of our review of the Air Force’s evaluation and selection
                       documents related to the Sacramento competition, we found no basis to
on Performance         conclude that the procedures did not provide a substantially equal
Location               opportunity for the offerors to compete without regard to performance
                       location. For example, while, in its evaluation, the Air Force expressed
                       concerns about the risks inherent in Ogden’s plan to transition the
                       workloads to facilities at San Antonio, Texas, and Ogden, Utah, these
                       concerns were based upon legitimate performance considerations related
                       to the transition plan and did not reflect a bias toward performing the work
                       at the closing Sacramento facility. Appendix III provides the details of our
                       analysis.



Competition            Overall, the Air Force’s evaluation and selection of Ogden appeared to be
                       reasonable, fair, and consistent with the solicitation and depot competition
Procedures Complied    procedures. We found no reason to conclude that the competition
With Applicable Laws   procedures used in selecting Ogden deviated in a material way from
                       10 U.S.C. 2469a and other applicable laws and regulations. (See app. III for
and Regulations        our detailed analysis.) In assessing the Air Force’s compliance with
                       applicable laws and regulations relating to the competition for
                       Sacramento’s work, we reviewed the Air Force’s evaluation of the
                       proposals and the selection in the context of applicable laws and
                       regulations. This review included examining documents, reviewing
                       processes and procedures, and discussing the competition with Air Force
                       and DOD officials.


                       4
                         Pemco Aeroplex, Inc. (B-280397, Sept. 25, 1998). On June 17, 1998, Pemco Aeroplex, Inc. (Pemco),
                       filed a protest of the provisions of the solicitation with our Office under 31 U.S.C. 3551-3556. Pemco
                       objected to the solicitation of the workloads on a combined basis. In a decision dated September 25,
                       1998, our Office sustained the protest, concluding that the Air Force was unable to show that combining
                       the requirements was reasonably required to satisfy its needs and recommending that the agency cancel
                       the solicitation and resolicit its requirements without bundling the workloads. On October 9, 1998, the
                       Air Force decided to proceed with the award to Ogden. On October 13, 1998, Pemco filed civil action
                       no. Cv.98-B-2584-S, in the U.S. District Court for the Northern District of Alabama, Southern Division,
                       seeking a declaration that the award is void and an injunction preventing the Air Force from moving
                       forward with performance.




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Competition Procedures   Pursuant to 10 U.S.C. 2469a and its depot competition procedures, the Air
                         Force issued the solicitation in accordance with the Federal Acquisition
                         Regulation (FAR), part 15, which sets forth the source selection procedures
                         for competitively negotiated acquisitions. The solicitation called for
                         proposals from public and private sector sources for some of the aircraft
                         and commodity work currently being performed at the closing Sacramento
                         ALC at McClellan Air Force Base. The solicitation also provided for award
                         to the public or private competitor that was responsible and whose
                         proposal conformed with the solicitation and represented the best value to
                         the government. The proposals were to be evaluated using transition,
                         operation, and cost criteria; a risk assessment; and other general
                         considerations.


Applicable Laws and      Several statutes, in particular, 10 U.S.C. 2469a, govern the solicitation and
Regulations              award process for public-private competitions for the depot workloads of
                         the closing Sacramento and San Antonio ALCs. Because the Air Force used
                         the competitive acquisition system, the standards in chapter 137 of title 10
                         of the United States Code and the FAR apply to the extent they are
                         consistent with 10 U.S.C. 2469a and the other applicable provisions relating
                         to the outsourcing of depot workloads.

                         Consistent with these standards, the Air Force followed the criteria
                         announced in the solicitation, which in this case included those required by
                         10 U.S.C. 2469a, and exercised its judgment in a reasonable manner in
                         selecting the successful competitor.



Air Force Considered     While the competitor selected represented the lowest evaluated cost to the
                         government, the Air Force considered the relative merits of the technical
Factors Other Than       and management approaches of both proposals. For example, the Air
Cost                     Force considered the private competitor’s plan to recruit and maintain the
                         existing work force in place at the Sacramento facility was beneficial. On
                         the other hand, the Air Force concluded that Ogden’s plans for relocating
                         the workloads to San Antonio and Ogden were risky. Thus, for these and
                         other reasons, we found no basis to conclude that factors other than cost
                         were not appropriately considered.




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                          B-281525.2




Evaluation Resulted in    The Air Force’s award of aircraft and commodity depot maintenance work
                          previously performed at the Sacramento depot was made to the Ogden
the Lowest Total Cost     ALC. The award, which was valued at $1,794,488,861, was made in
to the Government         accordance with the provisions of the solicitation and resulted in the
                          lowest total cost to the government.5 Overall, the cost evaluation results
                          appear reasonable. However, while not affecting the selection, we do
                          question some of the estimates supporting the evaluation. However, the
                          selection decision would not have been affected by these questions.
                          Questions relate to estimating costs for (1) overhead, (2) commodity rate
                          risk, (3) warehousing, (4) base operating support, and (5) material
                          surcharge.


Cost Evaluation Appears   Ogden’s total evaluated cost of $1,794,488,861 for the competed
Reasonable                Sacramento depot maintenance workloads was about 6 percent less than
                          Lockheed’s evaluated cost of $1,902,848,080. The Ogden proposal, after
                          cost comparability adjustments provided for in the solicitation and the
                          depot maintenance cost comparability handbook, was determined by the
                          source selection authority to offer the lowest total evaluated cost to the
                          government. Both before and after the cost comparability adjustments, the
                          Ogden proposal was evaluated lower than the private sector proposal.

                          We examined the accuracy and soundness of the data, assumptions, and
                          methodology supporting a number of these adjustments, including an
                          analysis of the various cost elements in each proposal and the final
                          adjustments made by the cost evaluation team in its proposal analysis
                          report. For our analysis, we selected cost elements having variances of
                          10 percent or more between the competitors or between amounts
                          contained in the competitors’ final proposals versus the final evaluated cost
                          estimated by the evaluation team. For these cost elements, we (1)
                          discussed with members of the evaluation team, the methodology they
                          used in determining the evaluated cost; (2) reviewed the calculations and
                          supporting documentation for the various cost elements; (3) attempted to
                          independently collect data to corroborate the evaluated cost estimates,
                          where warranted; and (4) offered to discuss competition issues with both
                          the public and private sector competitors. In some instances, our review


                          5
                            As we have previously reported, we were concerned that because the Department bundled the aircraft
                          and commodity workloads, competition may have been limited. Consequently, there may have been
                          opportunities for increased savings had there been more competition. Notwithstanding this, we based
                          our review of costs under the terms of the existing solicitation.




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                       was limited by a lack of supporting source data. Notwithstanding this
                       limitation, our analysis did not disclose any material weaknesses in the
                       overall cost evaluation. However, as discussed below, in several cases, we
                       identified weaknesses in the evaluated cost estimates.


Cost Estimate Issues   While the overall cost evaluation was reasonable, we question several of
                       the cost estimates. In each case, these questions relate to actions that
                       would have decreased the evaluated cost of the public sector's offer.
                       Therefore, these cases had no impact on the award decision. However, we
                       present them as potential opportunities for improving cost estimates for
                       future competitions. These issues relate primarily to refining cost
                       estimating methodologies and using more accurate data.

Overhead Savings       The Air Force evaluation team reduced Ogden’s projection of overhead
                       savings by 85 percent—from $294.5 million to $46.2 million.6 The team
                       based the reductions primarily on (1) the Defense Contract Audit Agency’s
                       (DCAA) assessment of Ogden’s overhead savings analysis, (2) its decision
                       to limit the number of years overhead savings would be considered, and
                       (3) its assessment of Boeing Aircraft’s proposed cost savings on the C-17
                       maintenance program.7 The first two adjustments were based on
                       conservative assumptions and likely understated the savings between the
                       proposals. Also, in some cases, supporting documentation was lacking or
                       inconsistent approaches to estimating costs were used. Given these issues,
                       we did not attempt to determine a cumulative effect of these adjustments.

                       Directions regarding the preparation of overhead savings were provided in
                       the Sacramento solicitation. It stated that the evaluation of overhead
                       savings would emphasize a competitor's analysis and documentation of
                       proposed management initiatives to ensure that the projected savings
                       would occur—particularly those predicted for more than 24 months after


                       6Ogden’s projection of $294.5 million in overhead savings over the performance period consisted
                       primarily of savings for existing maintenance workloads performed at the Ogden depot as a result of
                       the consolidation of the competition work at that facility, a lesser amount in overhead savings on the
                       C-17 aircraft maintenance program proposed by Boeing Aerospace Corporation as a result of
                       consolidating the KC-135 work with the C-17 and KC-10 work at its new San Antonio facility, and a
                       minor amount in contractor engineering technical support at Sacramento that would no longer be
                       needed if the KC-135 workload was performed by Boeing, the original equipment manufacturer.

                       7
                         The evaluation team did not include the proposed savings in the total evaluated cost because the
                       evaluators concluded that they were not adequately supported in the proposal. Air Force officials
                       stated that they intend to pursue this issue further with the C-17 Program Office.




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B-281525.2




award. The solicitation evaluation criteria provided that the proposed
first-year savings, if determined to be reasonable, would be allowed. The
second-year savings, if supportable, would also be allowed but discounted
for risk. The solicitation also stated that proposed savings for 3 years and
beyond might be allowed if clearly appropriate but would be considered
under the best-value analysis.

Ogden used a regression-based methodology to develop its estimate of
projected overhead savings that should result from consolidating the
commodity and A-10 aircraft work with existing work at Ogden. Ogden
based its analysis on 8 years of historical data to capture the relationship
between changing workloads and their effect on overhead rates. In its
assessment, Ogden normalized the data to reflect cost accounting changes
that occurred over the 8-year period.

After reviewing Ogden’s projections, the Air Force evaluation team
concluded that the regression methodology was an adequate starting point
for projecting future overhead and general and administrative savings.
However, they expressed concern about Ogden’s application of this
methodology and asked DCAA to evaluate Ogden’s overhead savings
analysis. DCAA concurred with the use of the regression methodology but
questioned the workload baseline Ogden used in developing the savings
estimate. DCAA found that in establishing the baseline, Ogden did not
include all the workload that is expected to be transferred into the depot
separate from the competition process.8 The evaluation team reduced
Ogden’s proposed overhead savings for the commodity and A-10 workload
by a significant amount over the 8-year performance period. The team said
they based this reduction on a more realistic projection of Ogden’s baseline
due to the transition of workloads transferring separate from the
competition. We were unable to reconstruct how this figure was derived
because the Air Force did not provide supporting documentation.

After making this adjustment, the evaluation team determined the number
of years that overhead savings would be allowed. Team members said they
had a general lack of confidence in the regression analysis, the overhead


8
  The Air Force’s plan for transitioning workloads from the closing Sacramento and San Antonio depots
includes the transfer of core workloads to remaining military depots outside the competition process.
For example, Sacramento’s F-15 aircraft were transferred to Warner Robins and San Antonio’s gas
turbine engines will be transferred to Ogden. Additionally, Ogden is expected to receive depot
maintenance work from other sources during the performance period. About 1.6 million hours of work
is expected to be transferred to Ogden separate from the competition process.




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rates, and the application of savings beyond the initial years of the
performance period. They said that all overhead fixed costs associated
with excess capacity would be eliminated in the long run. Consequently,
the team said that production overhead savings would occur only on a
prorated basis for the first 3 years.9 Likewise, the team estimated general
and administrative savings for 8 years—with the annual amount prorated
progressively beginning with the second year.10 Taken together these
estimates represent the evaluation team's $46.2 million estimate for
overhead savings.

The Air Force’s estimate of overhead savings is conservative and is likely
understated. We question the Air Force’s assumption that overhead fixed
costs associated with excess capacity would be eliminated beginning in the
first and second year through reductions in force or attrition. For example,
a significant percentage of Ogden’s proposed production overhead cost
savings were related to nonpersonnel costs such as facilities and capital
equipment, which by their nature are long-term assets and would not likely
be eliminated in the evaluators’ estimated time frame. Additionally, the
projected organizational structure in the directorates and divisions
projected to gain competition work showed that some positions have only
one person assigned and that the costs associated with these positions
would likely remain fixed for the life of the requirement. Therefore, it
appears reasonable to assume that some level of overhead savings relative
to these positions would be achieved during the entire performance period.

We noted an inconsistency in how the evaluation team treated Ogden's
regression analysis. On the one hand, the evaluation team accepted the
proposed overhead costs for the competition workload that had been
developed using Ogden’s regression analysis. DCAA officials expressed
confidence in this procedure and stated that it provided a reasonable
estimate of savings and is applied fairly regularly to commercial firms. On
the other hand, when assessing the overhead savings associated with
existing workload at the Ogden facility, the evaluation team expressed a
lack of confidence in the same regression analysis and, based on these
concerns, prorated projected overhead savings associated with this

9Using the recalculated production overhead cost savings, the evaluation team estimated 75 percent
savings the first year, 50 percent the second, and 25 percent the third. The evaluation team estimated
no production overhead savings for the remaining 5 years.

10
  Using the recalculated general and administrative overhead cost savings, the evaluation team gave
full credit for the first year of the performance period. The team estimated 75 percent the second year,
50 percent the third year, and 25 percent for each of the remaining 5 years of the performance period.




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                      B-281525.2




                      workload. This approach also likely resulted in underestimating overhead
                      savings.

Commodity Rate Risk   Commodity rate risk refers to the uncertainty the evaluation team placed in
                      Ogden’s proposed overhead rates on the commodity workloads. The
                      evaluation team did not question Ogden’s identification of projected
                      overhead costs for the combined competition and noncompetition work,
                      but it was concerned that not enough of the total overhead had been
                      allocated to the competition work. Consequently, it made an adjustment to
                      increase Ogden’s proposed overhead costs for the competed commodity
                      workloads. However, the team did not make a corresponding adjustment
                      to reduce the overhead costs for the noncompetition work to fairly
                      represent the total government cost. Consequently, this resulted in a
                      corresponding overstatement of the noncompetition overhead costs and a
                      corresponding understatement of overhead savings for the noncompetition
                      workloads. While making this corresponding adjustment would not have
                      had a material effect on the selection, it would have increased overhead
                      savings. Ensuring that adjustments of this nature are made correctly is
                      important in future competitions.

Warehouse             While an upward cost adjustment to the Ogden proposal for the
                      warehousing function was appropriate, the method the evaluation team
                      used for making this adjustment could have been more accurate. As a
                      result of the adjustment, the team significantly overstated costs.

                      The Defense Logistics Agency (DLA) provides the Air Force material
                      storage, warehousing, and issuing and receiving support. DLA accumulates
                      costs for these services and allocates them to its customers based on
                      standard prices that are computed annually for each type of service. The
                      solicitation required that competitors for the Sacramento workloads
                      provide these services as a part of their proposals.

                      The evaluation team concluded that Ogden’s offer did not represent all the
                      costs associated with the warehousing, storage, and receipt and issuance
                      services. The team estimated that DLA’s full costs to support the competed
                      workload at the closing Sacramento depot would be significantly higher
                      than Ogden’s proposed costs. Air Force evaluators said that while it is
                      possible that Ogden could add the competed work to its existing workload
                      at a marginal cost, they had no basis for estimating the incremental costs of
                      the Ogden warehouse operations. Therefore, they used the full costs of the
                      Sacramento operations.




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                         B-281525.2




                         After considering cost information and discussions with agency officials,
                         we estimated that not more than about half of DLA’s costs for the
                         warehousing function are variable. Consequently, the added warehousing
                         costs were overstated by a significant amount.

Base Operating Support   The evaluation team added a cost comparability adjustment to capture
                         base operating support costs not included in Ogden’s proposal. The
                         methodology used to make this estimate was inappropriate, and as a result,
                         the adjustment was overstated by almost half.

                         “The Defense Depot Maintenance Council Cost Comparability Handbook”
                         provides procedures and techniques to address cost comparability when
                         competing depot maintenance workloads between the public and private
                         sectors. Base operating support cost is one cost category recognized by
                         the handbook. According to the Air Force’s evaluation report, DCAA
                         performed a review of base operating support costs and recommended an
                         adjustment. However, we found no references to base operating support
                         costs in DCAA’s report. Additionally, DCAA officials said that they had not
                         recommended any adjustments in this area.

                         Evaluation team members said that their adjustment was based on
                         McClellan Air Force Base operating support costs for 1996. They said that
                         they did not collect base operating support cost data for Hill Air Force Base
                         because there should be no difference in the base operating support costs
                         at the two locations. A more appropriate approach would be to use
                         reported costs at the location being evaluated. Based on reported Hill Air
                         Force Base operating cost data for 1996, we estimated that the
                         comparability adjustment should have been about half of the evaluation
                         team’s adjustment.

Material Surcharge       The evaluation team disallowed Ogden’s proposed cost comparability
                         adjustment for a material surcharge. While this action was appropriate for
                         this competition, one technical issue may be important for future
                         competitions. The team said that it disallowed the adjustment because
                         Ogden did not include material in its cost proposal. The more appropriate
                         rationale for disallowing this adjustment was that the cost of government
                         furnished material was added as an adjustment to both proposals.
                         Therefore, there was no need for a comparability adjustment. While this
                         was not a factor for this competition, it may be relevant for future
                         competitions if a private competitor chooses to use contractor furnished
                         material.




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Conclusions           The Air Force met the requirements of applicable laws and regulations in
                      the competition for depot maintenance work at the Sacramento ALC.
                      However, the process used for estimating overhead, commodity rate risk,
                      warehousing, base operating support, and material surcharge costs
                      provides issues for the Air Force to consider in its future competitions.
                      Specifically, the evaluation team could have better documented support for
                      certain key cost estimates, followed more appropriate or consistent
                      approaches for estimating costs, and used more accurate or appropriate
                      data.



Agency Comments and   We provided a draft copy of this report to the Air Force for comment and
                      review for procurement sensitive information. Responsible officials stated
Our Evaluation        that they did not have sufficient time to review and comment on the report.
                      As agreed with the responsible committees, to respond to the
                      congressionally mandated reporting date, we issued prepublication and
                      printed copies of this report with appropriate markings to indicate that the
                      report contained procurement sensitive information that must be
                      safeguarded. Subsequently, Air Force officials identified specific data that
                      they said should be removed from the published report. We have removed
                      the sensitive data identified by the Air Force from this version of the report.



Scope and             In conducting our work, we obtained information from and interviewed
                      officials at the Air Force Headquarters, Washington, D.C.; the Air Force
Methodology           Materiel Command Headquarters, Wright Patterson Air Force Base, Ohio;
                      the Sacramento ALC, McClellan Air Force Base, California; and the Ogden
                      ALC, Hill Air Force Base, Utah. We also discussed contracting issues with
                      DCAA officials. We offered to discuss the Sacramento competition and
                      award with both the public and private sector competitors; however,
                      because of the pending litigation the Air Force has not provided either
                      competitor with a debriefing. Since the competitors were not familiar with
                      the specifics of the evaluation, they could not provide us with detailed
                      concerns regarding the evaluation process. Particularly, when we
                      contacted the private-sector competitor, its representative stated that
                      discussions of the selection with our Office, without the benefit of a
                      debriefing, would not be productive.

                      To analyze the Air Force’s decision to award the Sacramento depot
                      maintenance workload to the Ogden ALC, we interviewed officials and
                      collected relevant documents from Headquarters, Department of the Air


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B-281525.2




Force; Headquarters, Air Force Materiel Command; Air Force source
selection team members; representatives from the two competitor; and
DCAA. To verify compliance with the Sacramento competition and
selection with applicable laws and regulations, our Office of the General
Counsel performed a legal compliance review. To determine whether cost
elements considered in the source selection evaluation were complete and
reasonable, we discussed the selection structure with cognizant Air Force
and DOD officials, as well as the qualified competitors. We also reviewed
the Air Force evaluation team's calculating methods for the various cost
estimates for reasonableness and compared the cost elements between
competitors to identify material drivers and to further test for
reasonableness. We discussed with the evaluation team members their
rationale for treating cost elements in the evaluation and in some cases
recalculated cost estimates. A list of our related reports is provided at the
end of this report.

We performed our review between September and November 1998 in
accordance with generally accepted government auditing standards.


We are sending copies of this report to the Honorable William S. Cohen,
Secretary of Defense; the Honorable F.W. Peters, Acting Secretary of the
Air Force; the Honorable Jacob J. Lew, Director, Office of Management and
Budget; and interested congressional committees and members. We will
also make copies available to others upon request.


Please contact me at (202) 512-8412 if you or your staff have questions
concerning this report. The major contributors to this report are listed in
appendix IV.




David R. Warren, Director
Defense Management Issues




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Page 13   GAO/NSIAD-99-124 Public-Private Depot Competitions
Contents



Letter                                                                            1


Appendix I                                                                       16
Summary of Depot
Reporting
Requirements in the
National Defense
Authorization Act for
Fiscal Year 1998

Appendix II                                                                      18
San Antonio and
Sacramento Air
Logistic Centers’
Closure History

Appendix III                                                                     23
Legal Review of
Competition for
Sacramento Air
Logistics Center
Workloads

Appendix IV                                                                      47
Major Contributors to
This Report

Related GAO Products                                                             49




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        Contents




Table   Table III.1: Cost Adjustments Adopted by the SSA                           41




        Abbreviations

        ALC        Air Logistics Center
        BRAC       Base Realignment and Closure
        CCH        Cost Comparability Handbook
        DCAA       Defense Contract Audit Agency
        DLA        Defense Logistics Agency
        DOD        Department of Defense
        FAR        Federal Acquisition Regulation
        GFE        government furnished equipment
        GFM        government furnished material
        GKDC       Greater Kelly Development Corporation
        RIF        reduction-in-force
        RFP        request for proposals
        SSA        source selection authority
        SSAC       source selection advisory council
        SSEB       source selection evaluation board



        Page 15                     GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix I

Summary of Depot Reporting Requirements in
the National Defense Authorization Act for
Fiscal Year 1998                                                                             AppIexndi




              The National Defense Authorization Act for Fiscal Year 1998 contained the
              following depot-related reporting requirements for our Office.

              I. Report on DOD's Compliance with 50-Percent Limitation (Section 358)

              The act amended 10 U.S.C. 2466(a) by increasing from 40 to 50 percent the
              amount of depot-level maintenance and repair workload funds that the
              Department of Defense (DOD) can use for contractor performance and
              revised 10 U.S.C. 2466(e) by requiring the Secretary of Defense to submit to
              Congress by February 1, 1998, a report identifying the percentage of funds
              expended for contractor performance.

              Within 90 days of DOD’s annual report to Congress, we were required to
              review DOD’s report and inform Congress whether DOD had complied with
              the 50-percent limitation.

              II. Reports Concerning Public-Private Competitions for the Depot
              Maintenance Workloads at the Closing San Antonio and Sacramento Air
              Logistics Centers (Section 359)

              The act added section 2469a to title 10 the United States Code to provide
              for special procedures for public-private competitions concerning the
              workloads of these two closing depots. It also required us to issue four
              reports.

              First, within 60 days of its enactment, the 1998 Defense Authorization Act
              required us to review the C-5 aircraft workload competition and
              subsequent award and report to Congress on whether (1) the procedures
              used provided an equal opportunity for offerors to compete without regard
              to performance location, (2) the procedures complied with applicable law
              and the Federal Acquisition Regulation (FAR), and (3) the award resulted
              in the lowest total cost to DOD.

              Second, the act required the Secretary of Defense to submit a
              determination to Congress if any of the workloads were bundled in a single
              solicitation. We were required to report our views on the DOD
              determination within 30 days.

              Third, the act required us to review all DOD solicitations for the workloads
              at the San Antonio and Sacramento ALCs and report to Congress within 45
              days of the solicitations’ issuance whether the solicitations provided
              “substantially equal” opportunity to compete without regard to



              Page 16                       GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix I
Summary of Depot Reporting Requirements
in the National Defense Authorization Act
for Fiscal Year 1998




performance location and otherwise complied with applicable laws and
regulations.

Fourth, the act required us to review all DOD awards for the workloads at
the two closing ALCs and report to Congress within 45 days of the contract
award whether (1) the procedures used complied with applicable laws and
regulations and provided a “substantially equal” opportunity to compete
without regard to performance location, (2) “appropriate consideration
was given to factors other than cost” in the selection, and (3) the selection
resulted in the lowest total cost to DOD for performance of the workloads.

This report addresses the fourth requirement for the award of the
Sacramento aircraft and commodity workloads.




Page 17                            GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix II

San Antonio and Sacramento Air Logistic
Centers’ Closure History                                                                                           ApIpexndi




              The 1995 Base Realignment and Closure (BRAC) Commission
              recommended closing the Sacramento and San Antonio Air Logistics
              Centers (ALC) and transferring their workloads to the remaining depots or
              to private sector commercial activities. In making these recommendations,
              the Commission considered the effects of the closures on the local
              communities, on workload transfer costs, and the potential effects on
              readiness and concluded that the savings and benefits outweighed the
              drawbacks. The Commission’s report noted that given the significant
              amount of excess depot capacity and limited DOD resources, closure was a
              necessity and would increase the use of the remaining centers and
              substantially reduce DOD operating costs. The specific Commission
              recommendations were as follows:

              • Realign Kelly Air Force Base, including the ALC; disestablish the
                defense distribution depot; consolidate the workloads to other DOD
                depots or to private sector commercial activities as determined by the
                Defense Depot Maintenance Council;1 and move the required equipment
                and personnel to the receiving locations.
              • Close McClellan Air Force Base, including the ALC; disestablish the
                defense distribution depot; move the common-use ground
                communication electronics to Tobyhanna Army Depot, Pennsylvania;
                retain the radiation center and make it available for dual use and/or
                research, or close as appropriate; consolidate the remaining workloads
                with other DOD depots or private sector commercial activities as
                determined by the Council; and move the required equipment and any
                required personnel to receiving locations. All other activities and
                facilities at the base were to close.

              In considering the BRAC recommendations to close the two centers, the
              President and the Secretary of Defense expressed concerns about the
              near-term costs and potential effects on local communities and Air Force
              readiness. In response to these concerns, the President, in forwarding the
              Commission’s recommendations to Congress, indicated that the ALCs’
              work should be privatized in place or in the local communities. He also
              directed the Secretary of Defense to retain 8,700 jobs at McClellan Air
              Force Base, which had been recommended for closure, and 16,000 jobs at
              Kelly Air Force Base, which had been recommended for realignment, until
              2001 to further mitigate the closures’ impact on the local communities.


              1
                The Defense Depot Maintenance Council is a senior-level council established to advise the Deputy
              Under Secretary of Defense for Logistics on depot maintenance within DOD.




              Page 18                                  GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix II
San Antonio and Sacramento Air Logistic
Centers’ Closure History




Additionally, the size of the workforce remaining in the Sacramento and
San Antonio areas through 2004 was expected to remain above 4,350 and
11,000, respectively.

The Air Force initially focused on privatizing five prototype workloads—
three at Sacramento (for hydraulics, electric accessories, and software)
and two at San Antonio (for C-5 aircraft paint/depaint and fuel
accessories). The Council approved the Air Force’s plans for the five
prototype workloads on February 1, 1996. The prototype workloads
involved about 11 percent of the San Antonio depot’s maintenance
personnel and about 27 percent of the Sacramento depot’s personnel.2

Shortly after the Council approved the prototype program, the concept’s
appropriateness was questioned. Community and industry groups
expressed an interest in having larger packages, and DOD officials were
concerned about the cost of administering a large number of smaller
contracts. Implementation of the prototype concept was put on hold in
May 1996 as the Air Force considered various options. In April 1996, we
testified that, if not effectively managed, privatizing depot maintenance
activities, including the downsizing of remaining DOD depot infrastructure,
could exacerbate existing excess capacity problems and the inefficiencies
inherent in underused depot maintenance capacity. Privatizing workloads
in place at two closing Air Force depots would not reduce the excess
capacity in the remaining depots or the private sector and consequently
would not be a cost-effective approach to reducing depot infrastructure.3
Later that year, we reported that privatizing in place, rather than closing
and transferring the depot maintenance workloads at the Sacramento and
San Antonio centers, would leave the Air Force with costly excess capacity
at its remaining depots that a workload consolidation would mitigate.4
Our analysis showed that transferring the depot maintenance workloads to
other depots could yield additional economy and efficiency savings of over
$200 million annually.




2
  The BRAC report specified that the Council should determine where depot maintenance workloads
from closing Air Force depots should be moved.
3DefenseDepot Maintenance: Privatization and the Debate Over the Public-Private Mix
(GAO/T-NSIAD-96-146, Apr. 16, 1996) and (GAO/T-NSIAD-96-148, Apr. 17, 1996).
4
 Air Force Depot Maintenance: Privatization-in-Place Plans Are Costly While Excess Capacity Exists
(GAO/NSIAD-97-13, Dec. 31, 1996).




Page 19                                 GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix II
San Antonio and Sacramento Air Logistic
Centers’ Closure History




We recommended that the Secretary of Defense require the Secretary of the
Air Force to take the following actions:

• Before privatizing any Sacramento or San Antonio center workload,
  complete a cost analysis that considers the savings potential of
  consolidating the two centers’ depot maintenance workloads at other
  DOD depots, including savings that can be achieved for existing
  workloads by reducing overhead rates through more efficient capacity
  utilization of fixed overhead at underused military depots that could
  receive this workload.
• Use competitive procedures, where applicable, for determining the most
  cost-effective source of repair for workloads at the closing Air Force
  depots.

In August 1996, the Air Force announced a revised strategy for allocating
the depot workloads at the Sacramento and San Antonio centers. The
strategy involved several large consolidated work packages, essentially one
at Sacramento and two at San Antonio (one for the C-5 aircraft and one for
engines). In December 1996, the Air Force issued procedures to conduct
public-private competitions for the workloads and to allow one of the
remaining public depots to compete with the private sector for each of the
three workload packages. The Air Force's procedures allowed evaluation
credit for public and private sector proposals that offered overhead savings
to other government workloads.

In February 1997, the Air Force issued a request for proposals for the C-5
aircraft depot maintenance workload. In September 1997, the Air Force
awarded the C-5 workload to the Warner Robins Air Logistics Center based
on the Air Force conclusion that it had the lowest total evaluated cost. As
required by the 1998 Defense Authorization Act, we reviewed the C-5
award, issuing our report on January 20, 1998. We concluded that (1) the
C-5 competition procedures provided an equal opportunity for public and
private offerors to compete without regard to where the work could be
performed; (2) the procedures did not appear to deviate in any material
respect from the applicable laws or the FAR; and (3) based on Air Force
assumptions and conditions at the time of award, the award resulted in the
lowest total cost to the government.5



5
 Public-Private Competitions: Processes Used for C-5 Aircraft Award Appear Reasonable
(GAO/NSIAD-98-72, Jan. 20, 1998).




Page 20                                GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix II
San Antonio and Sacramento Air Logistic
Centers’ Closure History




On December 19, 1997, DOD submitted to Congress a determination and
report to support bundling the engine workloads at the San Antonio depot
and a determination and report to support bundling the commodity and
aircraft workloads at the Sacramento depot. DOD was required to submit
these documents before issuing single solicitations at each location for the
combined work. In response to 1998 Authorization Act requirements and
subsequent requests from the Senate Committee on Armed Services and
the House Committee on National Security, we issued two reports and two
testimonies providing our assessment of DOD’s determinations that it was
more logical and economical to combine the workloads being competed at
the closing depots.6 We reported that:

• the determination and reports contained significant weaknesses in logic,
  assumptions, and data;
• DOD had not considered alternatives that appeared to be logical and
  potentially cost-effective;
• DOD’s assumption that efficiencies from shared personnel and facilities
  would be best achieved with a single solicitation for combined
  workloads at each location was questionable; and
• the Air Force’s conclusion from its cost analysis that the workload
  combination would save $22 million to $130 million at Sacramento and
  $92 million to $259 million at San Antonio was questionable because the
  Air Force did not consider all cost factors, such as the cost benefits of
  increased competition resulting from solicitations for individual
  workloads.

On March 20, 1998, the Air Force issued a solicitation for the combined
aircraft and commodity workloads at the Sacramento depot and on
March 30, 1998, issued a solicitation for the combined engine workloads at
the San Antonio depot. We issued our required report on the Sacramento
solicitation on May 4, 1998.7 We concluded that the Air Force had not
provided a sufficient basis to show that soliciting the workloads on a
combined basis was necessary to satisfy its needs. Otherwise, we found
that the solicitation complied with applicable laws, including 10 U.S.C.


6Public-PrivateCompetitions: DOD’s Determination to Combine Depot Workloads Is Not Adequately
Supported (GAO/NSIAD-98-76, Jan. 20, 1998); Public-Private Competitions: Access to Records Is
Inhibiting Work on Congressional Mandates (GAO/T-NSIAD-98-101, Feb. 24, 1998) and
GAO/T-NSIAD-98-111, Mar. 4, 1998); and Public-Private Competitions: DOD’s Additional Support for
Combining Depot Workloads Contains Weaknesses (GAO/NSIAD-98-143, Apr. 17, 1998).
7
  Public-Private Competitions: Review of Sacramento Air Force Depot Solicitation (GAO/OGC-98-48,
May 4, 1998).




Page 21                                GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix II
San Antonio and Sacramento Air Logistic
Centers’ Closure History




2469a. On May 14, 1998, we issued our report on the San Antonio
solicitation, similarly concluding that the Air Force had not provided a
sufficient basis to show that soliciting the workloads on a combined basis
was necessary to satisfy its needs but that otherwise the solicitation
complied with applicable laws, including 10 U.S.C. 2469a.8




8
  Public-Private Competitions: Review of San Antonio Depot Solicitation (GAO/OGC-98-49, May 14,
1998).




Page 22                                 GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix III

Legal Review of Competition for Sacramento
Air Logistics Center Workloads                                                                                           AIpIexndi




               On March 20, 1998, the Department of the Air Force, Sacramento ALC at
               McClellan Air Force Base, California issued requests for proposal (RFP)
               No. F04606-98-R-0007 for the purpose of conducting a public-private
               competition for the depot-level workloads being performed at the closing
               Sacramento ALC. The Air Force received proposals from one private
               sector offeror—Lockheed Martin Corporation (Lockheed)—and from one
               public offeror—the Air Force’s Ogden ALC. Following technical and cost
               evaluations, the Air Force selected Ogden ALC to perform the Sacramento
               workloads on the basis that its proposal represented the best value to the
               government. The Ogden ALC proposal also represented the lowest “most
               probable total evaluated” cost at $1,794,488,861 over the 9-year
               requirement.1

               Section 359 of the National Defense Authorization Act for Fiscal Year 1998,
               Public Law 105-85 (1998 Authorization Act), added section 2469a to title 10
               of the United States Code, which provided for special procedures for
               public-private competitions for the workloads at the closing Sacramento
               and San Antonio ALCs. Section 2469a also requires us to review the
               selection process for the awards made for the workloads at the two closing
               ALCs and report to Congress within 45 days of each award on whether (1)
               the procedures used to conduct the competition provided a substantially
               equal opportunity for offerors to compete without regard to performance
               location and complied with 10 U.S.C. 2469a and all applicable laws and
               regulations, (2) appropriate consideration was given to factors other than
               cost in the selection, and (3) the award resulted in the lowest total cost to
               the DOD for the performance of the workloads.2

               Our review is based on the record of the proposal evaluation and the
               selection. In addition, we spoke to Air Force officials and considered
               concerns raised informally by one of the competitors. We recognize that an
               offeror may file a protest with our Office pursuant to 31 U.S.C. 3551-3556,
               or with the courts, or may file an objection to the award with DOD under
               10 U.S.C. 2469a(h). If a protest is filed, factual information, issues, and
               arguments raised by the interested parties will be reviewed in the context
               of an adversarial process. For that reason, the result of a protest may differ
               from that of our current review. Similarly, the result of an objection filed
               with DOD may differ from our review.


               1The “most probable total evaluated cost” represents the offeror’s proposed costs as adjusted by cost
               comparability factors as well as a range of “dollarized” discriminators and projected overhead savings.
               2
                   Our analysis of the cost of the award is contained in the body of the report.




               Page 23                                      GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix III
Legal Review of Competition for Sacramento
Air Logistics Center Workloads




Based on our review of the procedures the Air Force used to conduct the
Sacramento competition in context of the concerns that were raised by the
competitor, we found no basis to conclude that (1) the procedures did not
provide a substantially equal opportunity for the offerors to compete
without regard to performance location, (2) appropriate consideration was
not given to factors other than cost in the selection, and (3) the procedures
used in selecting the successful offeror deviated in any material respect
from the applicable laws and regulations. While not affecting the legal
sufficiency of the selection, we nevertheless identified several issues
related to the estimates supporting the cost evaluation. These issues are
discussed in the body of the report.

In an earlier review of the Sacramento solicitation, we concluded that the
Air Force had not provided a sufficient basis to show that soliciting the
workloads on a combined basis was necessary to satisfy its needs. We also
concluded that the solicitation was otherwise in compliance with
applicable laws, including the provisions of 10 U.S.C. 2469a, and that it
provided a substantially equal opportunity for offerors to compete without
regard to performance location.3

On June 17, 1998, Pemco Aeroplex, Inc. (Pemco) filed a protest of the
solicitation’s provisions with our Office pursuant to 31 U.S.C. 3551-3556.
Pemco objected to the solicitation of the workloads on a combined basis.
In a decision dated September 25, 1998, our Office sustained the protest,
concluding that the Air Force was unable to show that combining the
requirements was reasonably required to satisfy its needs and
recommending that the agency cancel the solicitation and resolicit its
requirements without combining the workloads.4 On October 9, the Air
Force decided to proceed with the award to Ogden ALC notwithstanding
the protest recommendation. On October 13, Pemco filed civil action
no. Cv. 98-B-2584-S in the United States District Court for the Northern
District of Alabama, Southern Division, seeking a declaration that the
award is void


310 U.S.C. 2469a(g) provides that we review all solicitations issued for the workloads at the two closing
ALCs and report to Congress within 45 days of the solicitations’ issuance regarding whether the
solicitations (1) are in compliance with the provisions of section 2469a “and all applicable provisions of
law and regulations” and (2) provide a substantially equal opportunity for offerors to compete without
regard to performance location. The review of the Sacramento solicitation was the subject of our
report entitled Public-Private Competitions: Review of Sacramento Air Force Depot Solicitation
(GAO/OGC-98-48, May 4, 1998).
4
    Pemco Aeroplex, Inc., B-280397, Sept. 25, 1998.




Page 24                                     GAO/NSIAD-99-124 Public-Private Depot Competitions
                   Appendix III
                   Legal Review of Competition for Sacramento
                   Air Logistics Center Workloads




                   and an injunction preventing the Air Force from going forward with
                   performance.5

                   The following describes the legal standards applicable to the Sacramento
                   competition, relevant aspects of the solicitation and evaluation procedures
                   the Air Force used, and our analysis of those procedures under the
                   applicable legal standards.6



Applicable Legal   The basic authority for the Sacramento workload competition is 10 U.S.C.
                   2469a, which provides procedures for public-private competitions for the
Standards          workloads of the closing Sacramento and San Antonio ALCs that are
                   proposed to be outsourced after the November 18, 1997, enactment of the
                   1998 Authorization Act. Section 2469a sets forth a number of requirements
                   that the Air Force must satisfy in the solicitations it issues and the source
                   selection process it uses, to make awards for the specified workloads.
                   Particularly, the solicitation and the source selection process must (1)
                   permit both public and private offerors to submit offers; (2) take into
                   account the fair market value of any land, plant, or equipment at a closed or
                   realigned military installation that is proposed to be used by a private
                   offeror in the performance of the workload; (3) take into account the total
                   estimated direct and indirect costs that will be incurred by DOD and the
                   total estimated direct and indirect savings (including overhead) that will be
                   derived by DOD; (4) use cost standards to determine the depreciation of
                   facilities and equipment that provide, to the maximum extent practicable,
                   identical treatment to public and private offerors; (5) permit any offeror,
                   whether public or private, to team with any other public or private entity to
                   perform the workload at any location or locations of their choosing; and




                   5Because of the pending litigation, the Air Force did not provide either competitor with a debriefing.
                   Consequently, the competitors were not familiar with the specifics of the evaluation and were unable to
                   provide us with detailed concerns regarding the evaluation process. Also, the private-sector offeror’s
                   representative stated that discussions of the selection with us, without the benefit of a debriefing,
                   would not be productive.
                   6
                    As stated earlier, in the prior reviews of the Sacramento solicitation in our report, Public-Private
                   Competitions: Review of Sacramento Air Force Depot Solicitation, and in a bid protest decision, Pemco
                   Aeroplex, Inc., we found that the Air Force did not provide a sufficient basis to show that the combined
                   workloads were necessary to meet its needs. We have not changed our view. However, in the review of
                   the selection process, we will not again address the issue of the bundled workloads in the solicitation,
                   as our position on the matter is clear and the subject of our review is the selection, not the solicitation.




                   Page 25                                    GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix III
Legal Review of Competition for Sacramento
Air Logistics Center Workloads




(6) ensure that no offeror may be given any preferential consideration for,
or in any way be limited to, performing the workload in place or at any
other single location.7

In addition to 10 U.S.C. 2469a, there are a number of other laws that are
generally applicable to the outsourcing of government-performed depot
workloads. One of the principal laws is 10 U.S.C. 2469, which provides for
the use of “competitive procedures for competitions among private and
public sector entities” when DOD contemplates changing the performance
of a depot workload, valued at $3 million or more, to contractor
performance. In addition, section 8039 of the Department of Defense
Appropriations Act for Fiscal Year 1998, Public Law 105-56, authorizes
public-private competitions for depot workloads as long as the “successful
bids" are certified to "include comparable estimates of all direct and
indirect costs for both public and private bids.” Both provisions state that
Office of Management and Budget Circular A-76 is not to apply to the
competitions. Other than the reference in section 8039 to the use of
comparable estimates of all costs, neither provision prescribes the
elements that constitute a competition. Further, 10 U.S.C. 2470 provides
that depot-level activities are eligible to compete for depot workloads. 8

There are other provisions that apply, generally, to converting DOD
functions to private-sector performance. Section 8014 of the 1998 DOD
Appropriations Act requires that DOD certify its in-house estimate to
congressional committees before converting any activity performed by

7
  In addition, 10 U.S.C. 2469a(e) provides that DOD may issue a solicitation for multiple workloads
under 10 U.S.C. 2469a only if DOD first determines that individual workloads cannot as logically and
economically be performed without combination by potentially qualified sources and submits a report
to Congress setting forth the reasons for the determination. The provision also requires us to review
and provide our views on the DOD report. DOD decided to issue RFPs, including the one here,
containing combined workloads and submitted the required determinations and reports on
December 19, 1997. We reported on January 20, 1998, that the DOD reports did not support the
determinations. See Public-Private Competitions: DOD’s Determination to Combine Depot Workloads
Is Not Adequately Supported (GAO/NSIAD-98-76, Jan. 20, 1998). Under 10 U.S.C. 2469a(e), DOD must
wait 60 days from the submission of its report to issue an RFP containing combined workloads. There
is no other restriction in subsection (e). The Air Force issued the Sacramento solicitation containing
multiple workloads on March 20. After our January report, the Air Force provided additional
supporting rationale for the combined workloads. We reported that the additional rationale was not
well-supported. See Public-Private Competitions: DOD’s Additional Support for Combining Workloads
Contains Weaknesses (GAO/NSIAD-98-143, Apr. 17, 1998).
8
  We see nothing in the other applicable provisions governing the outsourcing of depot workloads that is
inconsistent with 10 U.S.C. 2469a. In fact, the use of comparable cost estimates and the participation of
DOD depot-level activities are provided for in 10 U.S.C. 2469a. Consequently, consistent with the rule of
statutory construction that statutes be construed harmoniously to give effect to all provisions whenever
possible, all of the above-cited provisions are effective and applicable to the Sacramento competition.
See Posadas v. National City Bank, 296 U.S. 503-504 (1936); 53 Comp. Gen. 853 (1974).




Page 26                                   GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix III
Legal Review of Competition for Sacramento
Air Logistics Center Workloads




more than 10 civilian employees to contractor performance; the provisions
of 10 U.S.C. 2461 require that whenever a DOD-performed function, such as
the workloads involved in this competition, is converted to performance by
a contractor, DOD must provide to Congress a cost comparison that shows
that a savings will result. Under 10 U.S.C. 2462, DOD is generally required
to contract with the private sector if a source can provide the supply or
service at a lower cost than DOD can and to ensure that all costs
considered are realistic and fair. 9

The Air Force implements these outsourcing authorities through the Air
Force Materiel Command’s Procedures for Depot Level Public-Private
Competition, December 20, 1996 (Depot Competition Procedures). The
procedures are supplemented by the “Defense Depot Maintenance Council
Cost Comparability Handbook” (CCH), including the January 28, 1998,
revision, the Air Force Materiel Command “Guide to the Cost
Comparability Handbook” and the SAF/AQ Public-Private Competition
Cost Procedures of February 21, 1998. The procedures provide for issuing
a solicitation calling for offers from public and private sector sources and
establish the criteria, including those listed in 10 U.S.C. 2469a, for deciding
how the Air Force will select a source from either sector to perform depot
workloads. According to these procedures, a competitive solicitation is to
be issued in accordance with the applicable provisions of the FAR, which
set forth uniform policies and procedures for the competitive acquisition
system that all executive agencies use and implements the provisions of
chapter 137 of title 10 of the United States Code, which govern DOD
acquisitions.

This use of the competitive acquisition system subjects a depot workload
competition to the applicable provisions of chapter 137 and the FAR to the
extent that they do not conflict with the public-private competition statutes
cited previously. (Newport News Shipbuilding and Dry Dock Company,
B-221888, July 2, 1986, 86-2 CPD 23.) Further, aspects of a competition that
fall outside the competitive acquisition system's parameters as defined by
chapter 137 and the FAR, such as the comparison of public and private
offers for the workloads from the two closing ALCs, are governed by
10 U.S.C. 2469a and the other statutes applicable to public-private depot
competitions as implemented by the Air Force.



9
  Again, these provisions do not conflict with the six 10 U.S.C. 2469a competition requirements listed
previously and are also applicable to the Sacramento competition. See Posadas v. City Bank, cited
above.




Page 27                                   GAO/NSIAD-99-124 Public-Private Depot Competitions
               Appendix III
               Legal Review of Competition for Sacramento
               Air Logistics Center Workloads




               In general, the standards in chapter 137 and the FAR (1) require that a
               solicitation clearly and unambiguously state what is required so that all
               offerors can compete on an equal basis and (2) allow restrictive provisions
               to be included only to the extent necessary to satisfy an agency’s needs.
               Under these standards, an agency must follow the criteria announced in the
               solicitation, which in this case include those required by 10 U.S.C. 2469a,
               and exercise its judgment in a reasonable manner in determining which of
               the competing offers is to be selected. (Dimensions International/QSOFT,
               Inc. , B-270966.2, May 28, 1996, 96-1 CPD 257.)



Solicitation   The RFP for the Sacramento workloads provides for the award of several
               line items representing various performance phases for each of the
               different workloads to be competed. For example, line item no. 0001,
               among other things, calls for offers on a cost-plus-award fee basis10 for the
               transition period for the KC-135 aircraft, the A-10 aircraft, and
               commodities, including hydraulics, instruments/electronics, electrical
               accessories, and nonrouted backshop/manufacturing. Other line items
               provide for firm-fixed priced offers for the performance of these various
               workloads, including “over and above” work,11 once the transition is
               completed, and for other miscellaneous work requirements. The RFP also
               provides for a transition period, which is to begin at the award and to end
               by September 30, 1999, a 5-year basic performance period, and up to
               3 additional years based upon the performance of the awardee. The line
               items representing the work for the KC-135 aircraft and the A-10 aircraft
               during the basic performance period are to be awarded on a multi-year
               basis, with guaranteed minimum quantities, while the other workloads are
               to be awarded on a requirements-type basis, with no minimum quantity
               guaranteed.12




               10
                Public sector offers are to be on a cost reimbursement basis. Public offerors will not be paid an
               award fee.
               11“Over and above” work consists of work items that are not included in the basic work requirements
               but are within the scope of the award and may be ordered on the basis of a fixed hourly rate.
               12
                 The requirements type line items provide that the Air Force will order all the work specified under a
               particular line item that it needs during the performance period. The estimated quantities stated in the
               solicitation are for information only; they do not constitute an order obligation. See FAR 16.503. On the
               other hand, under the multiyear line items, the Air Force is obligated to order the minimum quantity or
               be subject to cancellation charges that represent costs incurred that would have been amortized over
               the multiyear period plus a reasonable profit. See 10 U.S.C. 2306(g) and FAR part 17.




               Page 28                                   GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix III
Legal Review of Competition for Sacramento
Air Logistics Center Workloads




According to the solicitation, the competition is to be conducted in
accordance with FAR 15.101, which sets forth the source selection
processes and techniques to be used in competitive negotiated
acquisitions, as well as the applicable Air Force and Air Force Materiel
Command supplements. Further, the solicitation provides that the Depot
Competition Procedures, the CCH, and their updates are to govern the
selection.

The solicitation states that the award will be made to the offeror—either
public or private—who is deemed responsible in accordance with the
FAR,13 whose proposal conforms with the solicitation and is judged to
represent the best value to the government. According to the RFP, the
Source Selection Authority (SSA) will integrate the source selection team's
assessments of the proposals under the evaluation criteria listed in the
solicitation to arrive at a best value selection.

The evaluation criteria consist of criteria for transition, operations, cost,
and assessment. Transition is made up of the integrated master plan,
personnel plan, and integrated master schedule. The operations criteria
consist of five factors representing the major workloads: (1) KC-135
aircraft, (2) hydraulics, (3) instruments/electronics, (4) electrical
accessories, and (5) A-10 aircraft. The assessment criteria, which will be
used for measuring the extent to which a proposal meets the transition,
operations, and cost criteria, are made up of two parts: (1) understanding
of/compliance with the solicitation requirements and (2) soundness of
approach.

Under the cost criteria, proposals will first be assessed for completeness,
realism, and reasonableness.14 Then each offeror’s total proposed cost is
to be determined by calculating the various cost estimates, unit prices, and
hourly rates proposed for the different line items. Next, the offerors’ total
alternative cost is to be developed by factoring in the numerous
adjustments to public and private offerors’ total proposed cost in
accordance with the CCH and the RFP. Finally, the offerors’ total evaluated

13According to FAR subpart 9.1, a responsible prospective contractor is one that meets the standards in
FAR 9-104, which include having adequate financial resources or the ability to obtain them; the ability to
comply with the performance schedule; a satisfactory performance record; and the necessary facilities
and equipment or the ability to obtain them.
14
  Under FAR 15.404-1(d), a cost realism analysis is the process of reviewing and evaluating specific
elements of an offeror’s cost estimate to determine whether the proposed elements are realistic for the
work to be performed. According to FAR 15.404-1, reasonableness is to be assessed through an analysis
of either cost elements or overall price.




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cost is to be determined by adjusting the total alternative cost to reflect the
“dollarized impact of significant discriminators, to the extent that a dollar
value can be assigned to such discriminators, based on identified proposal
strengths, weaknesses and risks.”15

Further, the RFP provides for the evaluation of general considerations such
as the results of preaward surveys, site visits, and “fair market value.” In
addition, the proposals are to be the subject of two risk assessments:
proposal and performance. A proposal risk assessment is to measure the
risk that is associated with an offeror’s proposed approach to
accomplishing the solicitation requirements relating to each of the three
transition area factors and each of the five operations area factors. A
performance risk assessment is to assess, based on an offeror’s present and
past performance, the probability of the offeror successfully accomplishing
the proposed effort.

Finally, the solicitation provides that in the SSA’s best value assessment, the
criteria for transition and operations areas, and cost criteria are to be
equally important, while the general considerations are to be “considered
substantially less important than Cost, Transition, or Operations.”
According to the RFP, this assessment is also to include “as appropriate”
items listed in the solicitation as “Other Considerations.” This category
essentially reiterates five of the six requirements for the competition listed
in the 1998 Authorization Act.16

The proposals were first evaluated by specialized teams, which reported to
a source selection evaluation board (SSEB), which in turn, reported its
conclusions to a source selection advisory council (SSAC). The SSAC then
advised the SSA, who made the final selection decision on the merits of the
proposals.




15“Dollarized impact,” as we understand it, is the assignment of an estimated dollar value to the
assessment of the benefit or detriment to the Air Force that would result from aspects of an offeror’s
proposal in calculating the offeror’s total evaluated cost.
16
  The one requirement not listed in section M-903 of the RFP is the one that the cost standards used to
determine the depreciation of facilities and equipment provide, to the maximum extent practicable,
identical treatment to public and private offerors. This requirement is addressed in the RFP at
paragraph 6.1.5.6 of section L and paragraph 1.2b(6) of section M-901.




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Evaluation of   Two offerors submitted proposals in response to the solicitation. Ogden
                ALC, the public depot chosen by the Air Force to submit the public sector
Proposals       offer, proposed (1) to perform the commodities work and the A-10 aircraft
                work at its facilities in Utah and (2) to have the KC-135 aircraft work
                performed by the Boeing Aerospace Corporation (Boeing) at the Boeing
                Aerospace Support Center located at the closing San Antonio ALC at Kelly
                Air Force Base. Boeing, a partner to Ogden in the public sector offer,
                proposes to use the San Antonio facilities that have been transferred by the
                Air Force to the Greater Kelly Development Corp. (GKDC) and leased by
                GKDC to Boeing. The private sector offeror, Lockheed, proposed to
                perform all of the work at the closing Sacramento ALC at McClellan Air
                Force Base, where the workloads are currently being performed by
                government employees. The Sacramento ALC facilities are to be
                transferred by the Air Force to Sacramento County. Under the Lockheed
                proposal, the facilities would be leased by the county to Lockheed.
                Lockheed’s major subcontractors are AAI Aerospace Corporation (AAI) for
                the hydraulics workload and GEC-Marconi Avionics Incorporated
                (GEC-Marconi) for the instruments/electronics and the electrical
                accessories.

                The proposals were initially evaluated to determine whether they were to
                be included in the competitive range in accordance with FAR 15.306(c) and
                considered for award.17 On June 23, 1998, the Air Force determined both
                proposals to be within the competitive range.

                Accordingly, discussions were held with the offerors consisting of written
                evaluation notices raising concerns about each of the proposals and
                face-to-face and telephone exchanges about the concerns. As a result, each
                offeror submitted proposal revisions. The Air Force requested final
                proposal revisions on August 26, which were the subject of the Air Force's
                final cost adjustments and evaluation. Based on the results of the
                evaluations and cost adjustments, the advice of the SSAC, and the SSA's
                own analysis in the context of the RFP evaluation criteria, the SSA decided
                that the Ogden ALC proposal met all of the RFP requirements and
                represented the best value to the government over the life of the
                requirement. The SSA’s conclusion was based upon Ogden ALC’s “slight
                advantage” in the operations area and its lower “most probable total


                17
                  FAR 15.306(c) provides that the contracting officer shall determine which proposals are in the
                competitive range for the purpose of conducting discussions.




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                       evaluated cost” of performance. Consequently, the SSA selected Ogden
                       ALC to perform the Sacramento workloads.



Technical Evaluation   As noted previously, the solicitation evaluation criteria provided that the
                       offerors’ management approaches were to be evaluated in the transition
                       and operations areas. Under transition, three factors were to be evaluated:
                       (1) integrated master plan, (2) personnel plan, and (3) integrated master
                       schedule. Operations included five factors: (1) KC-135 aircraft,
                       (2) hydraulics, (3) instruments/electronics, (4) electrical accessories, and
                       (5) A-10 aircraft. Under each of the factors, the proposal risk was assessed.


Transition             The first factor under transition, integrated management plan, was to
                       assess the management, transition activities, and logistics plans and
                       activities of the offerors. Under this factor, the SSA noted that both
                       offerors had been assigned a green, or acceptable, rating, with low risk by
                       the SSAC. The SSA stated that Lockheed’s approach, which was to perform
                       all of the work at the Sacramento ALC facilities, had less potential for
                       disruption to the ongoing operations than the Ogden ALC plan, which
                       involved the transition of the KC-135 aircraft work to the Boeing facility at
                       the San Antonio ALC. The A-10 aircraft and the commodities work was to
                       be done at the Ogden ALC facilities in Utah. While recognizing that the
                       Ogden ALC approach was sound and would minimize disruption to
                       workload production, the SSA nevertheless concluded that the Lockheed
                       plan, which would maintain the existing, experienced government
                       workforce in place at Sacramento “was a benefit.” Since the SSA
                       concluded that neither offeror had significant strengths or weaknesses
                       under this factor, she did not propose to make a “dollarization” adjustment.

                       Under the personnel plan factor, an offeror was to provide a plan that
                       detailed the staffing necessary to perform the workloads and a plan to
                       acquire, train, and maintain the staff. The SSA concurred with the SSAC's
                       green rating for both proposals and the assignment of a low risk rating to
                       the Lockheed proposal and a moderate risk rating to the Ogden ALC
                       proposal. The SSA noted that Lockheed would use the trained and
                       experienced workforce at the Sacramento ALC. The SSA believed that
                       there was risk that some of the current workforce would not wish to leave
                       government service but concluded that a significant portion would want to
                       continue working at the Sacramento location. On the other hand, the SSA
                       had concerns about the Ogden ALC’s ability to hire 328 people from the
                       Sacramento workforce to work on the commodities at Ogden. In this


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             regard, the SSA noted that Boeing intended to hire its workforce for the
             KC-135 aircraft from San Antonio, Texas, and Wichita, Kansas, where it
             currently maintains a facility. The SSA found “real differences” between
             the proposals under this factor, concluding that the weakness in the Ogden
             ALC proposal regarding the availability of the experienced workforce
             resulted in a moderate risk rating. Consequently, the SSA concluded that
             the risk should be offset by an upward “dollarization” cost adjustment18 in
             the determination of Ogden ALC’s most probable total evaluated cost.

             Under the integrated master schedule factor, an offeror was to submit a
             comprehensive transition time line based on the integrated master plan
             that identified all tasks and major event milestones required to transition
             all of the workloads. Both offerors were given green, or acceptable, ratings
             with a low risk by the SSAC. The SSA had a concern with the Ogden ALC
             approach, which would transfer the workload to two locations: Ogden,
             Utah, for the commodities and the A-10 aircraft and San Antonio, Texas, for
             the KC-135 aircraft, which would involve completely a new workforce for
             the KC-135. This concern did not raise to the level of a weakness because
             the SSA had confidence in Ogden ALC's risk mitigation strategy of using
             intense integrated product team oversight. Overall, the SSA considered
             both offerors to be equal under this factor and saw no need for a
             “dollarization” adjustment.


Operations   Under the KC-135 factor, an offeror must submit a contractor work
             specification that will become the contract statement of work, define all of
             the work requirements, and identify work flow and processes to reflect the
             offeror’s specific approach to accomplishing the work. Other information
             to be provided includes (1) a work activity flow plan for one complete
             aircraft to show the sequence of movement through the required processes
             and (2) “waterfall” plans, which are to describe the work flow activity using
             the number of aircraft represented by the best estimated quantity and, in
             the alternative, the maximum order quantity. In addition, any process
             improvements to current practices of performing the work are to be
             explained under this factor.19



             18Asdiscussed later, the cost evaluators developed proposed “dollarization” cost adjustment figures
             under the appropriate factors, which were provided to the SSA.
             19
               The submission of similar information was required under each of the operations factors; however,
             “waterfall” plans only were required for the aircraft workloads.




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For the KC-135 aircraft, the SSAC rated both proposals as blue
(exceptional) and assigned Ogden ALC a low risk rating and Lockheed a
low/moderate rating. In adopting the ratings, the SSA noted that both
proposals contained strengths concerning the reduction of the flowdays
needed for the programmed aircraft depot maintenance. She nevertheless
concluded that the Ogden ALC proposal was the strongest under this
factor.20 According to the SSA, this advantage was grounded in Ogden
ALC’s proposal to exceed the RFP flowday requirement of 175 days by
contractually committing to a reduction to 150 days by fiscal year 2002 and
to 140 days by fiscal year 2003. In addition, the SSA was impressed by
Ogden ALC’s proposal to use in-line jacking to accomplish “over and above”
structural work concurrently with the planned programmed work and its
plan to use a continuous fluid sampling analysis to ensure early recognition
of defects. The SSA, however, did note a weakness in Ogden ALC’s
approach concerning its plan to use fewer labor hours than considered
readily achievable by the evaluation team. The SSA concluded that this
risk could be mitigated by normal monitoring and was not significant
enough for a moderate risk rating.

The SSA recognized that Lockheed also had proposed to reduce the
required flowdays (to 165 in fiscal year 2002 and to 155 by fiscal year 2004),
but Lockheed’s approach, which involved using two shifts, had some risk
because Lockheed had not documented the availability of the workforce
for the extra shift or the way the proposed productivity increases would be
achieved. Another element contributing to Lockheed’s low/moderate risk
rating was the SSA’s concern about the plan to use field team employees to
meet the proposed productivity increases and flowday reductions. The
SSA decided that Ogden ALC’s superior flowday reduction could not be
“dollarized” because the KC-135 was not an aircraft that generated revenue
for the Air Force. However, the SSA recognized that this was a significant
benefit and concluded that Ogden ALC offered an approach to the KC-135
aircraft work that had greater strengths and was more advantageous than
Lockheed’s approach.

Under the hydraulics factor, the SSA concurred with the SSAC’s rating of
each proposal as green and low risk. The SSA concluded both proposals
were essentially equal and proposed no “dollarization.”




20
     Boeing was to perform this work under the Ogden ALC proposal.




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                   Under the factor for instruments/electronics, the SSA agreed with the
                   SSAC’s ratings of both proposals as green and low risk. Again, the SSA
                   concluded that both offerors were essentially equal and proposed no
                   “dollarization.”

                   Under the electrical accessories factor, the SSAC rated both proposals as
                   green; Lockheed was given a low risk rating, while Odgen ALC was rated as
                   a moderate risk. This rating was caused by a process improvement
                   concerning the pretesting of oil-cooled generators and a change in the
                   painting sequence of the repair process. According to the SSA, the new test
                   process could create production bottlenecks due to test equipment
                   constraints with the potential of increased flowdays and the new paint
                   process could increase flowtime. Thus, the SSA concluded that to offset
                   this moderate risk, an upward “dollarization” adjustment to the evaluated
                   cost of the Ogden ALC proposal would be added. This adjustment would
                   reduce, in the SSA's view, the risk rating to low.

                   Under the A-10 aircraft factor, the SSA concurred with the SSAC's ratings
                   of both proposals as blue and low risk. The SSA concluded that both had
                   equal strengths and proposed no “dollarization.”


Risk and General   Under the performance risk analysis for the transition, operations, and cost
Considerations     areas, the SSA determined that each represented a low risk and that there
                   was not a discriminator among them. Further, under the general
                   consideration category, the SSA concluded that both offerors meet all
                   solicitation and responsibility requirements and had acceptable small
                   business plans.

                   The SSA agreed with the SSAC’s analysis of fair market value of the assets
                   of the closing McClellan Air Force Base that were to be transferred to
                   Sacramento County and then leased to Lockheed to perform the
                   workloads. According to the SSA, Lockheed would lease the facilities at a
                   composite rate of $0.33 per square foot a month, the local market rate for
                   similar industrial facilities. Further, the SSA concluded that the Air Force
                   would transfer the facilities to the County at fair market value. Finally, the
                   SSA agreed that the SSAC’s $25,038,804 adjustment to Lockheed’s cost
                   proposal for depreciation of the government furnished equipment (GFE)
                   reflected the fair market value of the equipment.

                   The SSA also evaluated Boeing’s lease of the closing San Antonio ALC
                   facility in connection with its performance of the KC-135 aircraft work



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                            under the Ogden ALC proposal and concluded there was no basis to make
                            any further adjustment (other than that already made for GFE) to either
                            proposal for fair market value. In this regard, the SSA concluded that the
                            lease between GKDC and Boeing was an “arms length” transaction, not
                            contingent on the competition, made at a fair market price.



Cost Evaluation             As noted previously, the cost evaluation consisted of (1) an assessment of
                            the realism and reasonableness of the cost proposals; (2) a determination
                            of the “total alternative cost” of each proposal, calculated through
                            adjustments required by the CCH and RFP; and (3) a determination of the
                            total evaluated cost of each proposal, calculated by taking the total
                            alternative cost and adjusting it to reflect the “dollarization” of significant
                            discriminators among the proposals. In determining the total evaluated
                            cost, the evaluators used ranges based on different estimates for overhead
                            savings and risk “dollarization.” The results for each of these analyses
                            conducted by the cost evaluators are summarized below.21


Realism and                 The cost team evaluators initially reviewed each offeror’s cost proposal to
Reasonableness Evaluation   determine its completeness, realism, and reasonableness. The evaluators
                            ultimately were satisfied that each cost proposal met these standards. In
                            accordance with the Depot Competition Procedures, the Defense Contract
                            Audit Agency (DCAA) audited the Ogden ALC cost proposal and reviewed
                            the public offeror’s disclosure statement22 and accounting and estimating
                            systems. The disclosure statement was found to be adequate and the
                            proposal was determined to be realistic. 23


                            21The calculation of the various cost adjustments and ranges for overhead savings and “dollarization”
                            was made by the cost team and approved by the SSAC. As discussed later, the SSA adopted the
                            adjustments and chose from the ranges for overhead savings and “dollarization” for use in the selection.
                            22The Depot Competition Procedures require that a public offeror provide a disclosure statement of its
                            cost accounting practices in accordance with the requirements of the Cost Accounting Standards
                            Board.
                            23
                              As stated in the Air Force’s February 1998 Competition Cost Procedures, a public offeror is
                            considered to have a funding advantage over the private-sector offeror under the fixed price portions of
                            the requirement in that cost overruns may be paid for by the government through the working capital
                            fund. Thus, in “dollarizing” the risks inherent in the Ogden ALC proposal, the evaluators proposed an
                            upward adjustment of $37,373,690 to represent the risk of cost overruns. This seems to have been in
                            lieu of adjustments to the Ogden ALC cost proposal during the initial evaluation. It is different from the
                            other “dollarization” adjustments as it relates to the method of developing the cost estimates rather
                            than a quantification of a technical performance risk. The body of the report contains a further
                            discussion of this adjustment.




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                         DCAA also reviewed Ogden ALC’s accounting and estimating systems and
                         found in a report dated December 22, 1997, that the accounting system was
                         inadequate, in part, for assuring that all workload costs are properly
                         recorded and that the estimating system was also inadequate, in part,
                         because it relied on accounting system data. Nevertheless, we were
                         informed by the DCAA auditors who performed the review that these
                         inadequacies did not affect the validity of the Ogden ALC cost proposal.


Determination of Total   The cost evaluators determined each offeror’s total alternative cost by first
Alternative Cost         calculating the offeror’s “customer cost”--in essence, its proposed price for
                         performing the requirement, and then making upward and downward
                         adjustments to this figure in accordance with the RFP and the CCH. Ogden
                         ALC’s customer cost was calculated to be $1,097,615,652. Lockheed’s
                         customer cost was $1,256,721,586.

                         Using the customer cost for each offeror as a base, the evaluators made the
                         comparability adjustments called for in the CCH and the RFP. Two sets of
                         adjustments were made. The first set, required by form number 1 of the
                         CCH,24 encompassed adjustments to the public sector offer and the second
                         set, required by form number 2 of the CCH, governed adjustments
                         applicable to the public and private sector proposals.

                         The CCH form number 1 adjustments made to the Ogden ALC proposal
                         included upward and downward changes in a number of categories.25 The
                         most significant were upward adjustments for base operating support,
                         unfunded civilian retirement, and retiree health benefits. The upward and
                         downward adjustments resulted in an adjusted cost of $1,153,415,260 to the
                         proposal. The adjusted cost was lower than Lockheed's customer cost of
                         $1,256,721,586.




                         24Since Ogden ALC proposed to have a private firm, Boeing, perform the KC-135 aircraft work, the
                         portion of the Ogden ALC cost proposal that represented the work Boeing was to perform was not
                         subject to the form number 1 adjustments. The Boeing portion was, however, subject to the form
                         number 2 adjustments applicable to private offerors.
                         25
                           Upward adjustments were made for state unemployment payments, unfunded civilian retirement,
                         depreciation for military construction program facilities, casualty insurance, other recurring costs
                         consisting of impact aid, retiree health benefits, and base operating support. A downward adjustment
                         was made for military nondepot costs (time military members of depot staff spend on nondepot military
                         duties). For each form number 1 category, the public offeror submitted a proposed adjustment in its
                         offer, which was subject to evaluation and adjustment by the SSAC and the SSA.




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Some CCH form number 2 adjustments were made to both proposals.
Upward adjustments were made to both types for GFM for both the
commodities and the KC-135 aircraft, contract administration, reduction-in-
force (RIF) costs; costs associated with the transition of government
personnel (i.e., costs of retaining current work force at McClellan that will
be subject to a RIF and not be rehired by the new source after the workload
is transitioned pending their separation); and costs of performing the work
in process during the transition that each offeror elected not to perform.
Most of these adjustments were similar in size for both proposals. The
largest difference was in the RIF cost adjustment, resulting in increases to
Ogden ALC’s and Lockheed’s costs. Examples of downward adjustments
were those made for the payment of federal income tax on profits to the
Lockheed and Ogden ALC proposals.26

Form number 2 also provided for a downward adjustment for a public or
private offeror that proposed and supported overhead savings to other
government work resulting from the increased work from the competition
sharing the costs of fixed assets.27 While no such savings were proposed
by Lockheed, the evaluators determined that a downward adjustment of
between $70,357,189 and $24,665,837 could be applied to the Ogden ALC
proposal to represent the savings applicable to other workloads at the
Ogden ALC facility during the performance period.28

The net result of the form number 2 comparability analysis for the
Lockheed proposal was an upward adjustment of $630,058,494. The form
number 2 upward adjustments to the Ogden ALC proposal included the
high and low ranges for overhead savings.

This final cost adjustment resulted in a total alternative cost for Lockheed
of $1,886,780,080 and a range of between $1,694,862,974 and $1,740,554,326
for Ogden ALC. No single adjustment accounts for the cost difference at


26
 Since this adjustment was for private offerors, it only was applied to the Boeing portion of the Ogden
ALC proposal.
27The solicitation provided that an offeror’s proposed overhead savings for its workloads performed
outside of the competition would be allowed for the first year if determined to be reasonable, while
second year savings, if supportable, would also be allowed, but discounted for risk. The solicitation
explains that proposed savings for 3 years and beyond “may be allowed if clearly appropriate, but in any
event will be considered under the best value analysis.”
28
  The range set by the evaluators represented a considerable reduction of Ogden ALC’s proposed
overhead savings of $294.5 million. A detailed discussion of this adjustment is contained in the body of
the report.




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                         this point, and at the highest range for Ogden ALC, its alternative cost was
                         more than $140,000,000 lower than Lockheed's.


Determination of Total   To arrive at the total evaluated cost of each proposal, the evaluators took
Evaluated Cost           the total alternative cost and applied “dollarization” adjustments.

                         The initial aspect of the Ogden ALC proposal that was considered to be
                         suitable for quantification was the transition risk as it related to both the
                         KC-135 aircraft and the commodities.29 The first concern was Ogden ALC's
                         proposal to have the workforce at the closing Sacramento depot perform
                         most of the work in process on the KC-135 aircraft before the workload
                         was transitioned to the Boeing facility at San Antonio. While the
                         adjustment for this work in form number 2 assumed normal workforce
                         efficiency (80 percent), the evaluators, based on the experience of previous
                         transitions from closing depots, concluded that it was likely that the
                         closing depot would experience declining efficiency. Consequently, the
                         evaluators calculated the impact of a lower efficiency rate (45 percent) on
                         the work to be completed at Sacramento. This rate resulted in a
                         quantification of the risk of performing the remaining KC-135 work at
                         Sacramento. Next, the evaluators added another adjustment that
                         represented the risk that Boeing would not achieve its proposed
                         90-percent efficiency rate as it began the KC-135 aircraft work at its new
                         facility.

                         The evaluators were similarly concerned about the transition risks in the
                         Ogden ALC proposal for commodities workload. The evaluators calculated
                         the Sacramento efficiency rate for the completion of commodities work in
                         process to be 65 percent.30 Further, the evaluators reduced the efficiency
                         rate proposed for the new commodity work to be performed by the
                         combined workforces at Sacramento and Ogden.31 The total
                         recommendation for “dollarized” transition risk for all the affected
                         workloads (KC-135 aircraft and commodities) under the Ogden ALC
                         proposal was $20,732,000.


                         29
                          There does not appear to have been “dollarization” calculations for transition risk associated with the
                         A-10 aircraft for either offeror.
                         30The  evaluators assumed that since the commodities transition would be to another public depot the
                         efficiency would not decline as drastically as was the assumption for the KC-135 aircraft work.
                         31
                          As we understand it, during the transition Ogden ALC will assume responsibility for the commodity
                         work at Sacramento, which will be gradually transitioned to the Ogden ALC facility.




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The evaluators were also concerned about transition risk in connection
with the Lockheed proposal. Their concerns centered around the
efficiency of the Sacramento workforce in accomplishing the work in
process for both the KC-135 aircraft and commodity workloads. In both
cases the evaluators assumed a Sacramento efficiency rate of 65 percent
(higher than the rates of Ogden ALC and its partner Boeing, as Lockheed
proposed to perform the work at the closing Sacramento facility using
much of the current workforce). Further, for both workloads, the
evaluators did not think that Lockheed could achieve its proposed
efficiency rates at the start of full performance. The calculations resulted
in a proposed total “dollarization” of $16,068,000 for the Lockheed
proposal.

The evaluators concluded that the risks inherent in two aspects of Ogden
ALC’s proposed performance of the commodities workload after transition
should be “dollarized.” The first risk involved Ogden ALC’s process
improvements and whether those improvements (particularly those in the
electrical accessories area) would result in a reduction of workhours. The
evaluators were skeptical that the reduction could be achieved, and they
consequently calculated a proposed upward “dollarization” adjustment of
$17,380,738 to represent the risk that the predicted reduction would not
occur.

The second risk related to the nature of the public depots’ funding under
the working capital fund and the possibility that the government will have
to shoulder the additional cost if Ogden ALC cannot perform at its
proposed labor rates. The evaluators requested DCAA to conduct a rate-
risk analysis on the Ogden ALC cost proposal, comparing the proposed
rates to Ogden ALC’s current and past labor rates. DCAA calculated what it
believed to be more realistic rates and concluded that its rates would result
in a $37,373,690 increase in Ogden ALC's cost. The evaluators concluded
that a “dollarized” risk range representing the high and low historical rates
analyzed by DCAA should be established for this factor.32

As the result of these evaluations, the SSAC presented the SSA with a
recommended total evaluated cost range for each offeror. The
recommendation consisted of a high range, including the lowest overhead
savings, if any, combined with the highest upward “dollarization”


32
 As discussed earlier, this proposed “dollarization” adjustment was different from the others as it was
based on the Ogden ALC cost proposal rather than the offeror's proposed technical performance.




Page 40                                  GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix III
Legal Review of Competition for Sacramento
Air Logistics Center Workloads




adjustments, and a low range consisting of the highest overhead savings, if
any, and the lowest upward “dollarization” adjustments.33 The high range
was $1,819,717,982, and the low range was $1,707,243,712 for Ogden ALC.
The high range for Lockheed was $1,902,848,080, while the low range was
$1,886,780,080. Ogden ALC's high range is below Lockheed's low range by
over $65,000,000.

The SSA reviewed the recommended total evaluated ranges and concluded
that the high range estimate for Lockheed of $1,902,848,080, including the
recommended $16,068,000 “dollarization” for transition risk represented
Lockheed's most probable cost. The SSA concluded that the most probable
cost for Ogden ALC was $1,794,488,861, about $25,000,000 below the
SSAC's high range. The SSA’s estimate for Ogden ALC included $46,217,730
for overhead savings (about midway between the SSAC high and low
ranges), the total amounts recommended by the SSAC for transition risk
($20,732,000) and for performance risk related to commodity workload
process improvements ($17,380,738) and the DCAA recommendation of
$37,373,690, for overall cost risk for the workloads to be performed at the
public depot. A summary of the cost adjustments adopted by the SSA is
shown in table III.1.



Table III.1: Cost Adjustments Adopted by the SSA

                                                      Ogden ALC                         Lockheed
Total Customer Cost                                $1,097,615,652                 $1,256,721,586
Cost Adjustments
      Form 1 Adjustments                                55,799,608                                0
      Overhead Savings                                (46,217,730)                                0
      Form 2 Adjustments                              611,804,903                     630,058,494
Total Alternative Cost                              1,719,002,433                  1,886,780,080
Total “Dollarized” Adjustmentsa                         75,486,428                     16,068,000
Most Probable Total
 Evaluated Cost                                    $1,794,488,861                 $1,902,848,080
a
 This includes the $37,373,690 adjustment to Ogden ALC’s cost proposal to represent the risk of
overruns.




33
     There were no recommended downward “dollarization” adjustments.




Page 41                                  GAO/NSIAD-99-124 Public-Private Depot Competitions
               Appendix III
               Legal Review of Competition for Sacramento
               Air Logistics Center Workloads




Award          Based on the evaluation results, the SSA concluded that the offerors were
               “essentially equal” in performance risk and general considerations. The
               SSA noted that Lockheed had a slight advantage in transition, while Ogden
               ALC had a slight advantage in operations. The SSA selected Ogden ALC
               for award, as the competitor representing the best value to the government
               based upon the public offeror’s operations advantage combined with its
               lower most probable total evaluated cost.



GAO Analysis   As discussed previously, several statutes govern the solicitation and award
               process for public-private competitions for the depot workloads of the
               closing Sacramento and San Antonio ALCs. In particular, 10 U.S.C. 2469a
               sets forth the elements that must be considered in selecting the public or
               private source to perform the workloads. Further, because the Air Force
               used the competitive acquisition system, the standards in chapter 137 of
               title 10 of the United States Code and the FAR apply to the extent they are
               consistent with 10 U.S.C. 2469a and the other applicable provisions relating
               to the outsourcing of depot workloads and to conversions of DOD
               functions to private-sector performance. See (Newport News Shipbuilding
               and Dry Dock Co.,) cited above.

               In addition to reviewing the evaluation and selection records, we spoke to
               relevant Air Force officials and to the public-sector offeror. While the
               public offeror won the competition, it still had some concerns that
               primarily centered around its preliminary understanding of the treatment
               of its proposed overhead savings and some of its proposed cost
               adjustments.

               Reviewing the Sacramento competition in this context, we found no basis
               to conclude that the procedures used in selecting the successful offeror
               deviated in any material respect from the section 2469a requirements or
               other applicable laws or relevant provisions of the FAR. The Air Force
               issued a competitive solicitation in accordance with FAR part 15, which
               provided for the participation of a public sector depot. We found no basis
               to conclude that the selection did not provide for a substantially equal
               opportunity for public and private offerors to compete without regard to
               performance location or that appropriate consideration was not given to
               noncost factors in the selection. Overall, the evaluation process appeared
               to be reasonable, fair, and consistent with the evaluation scheme in the
               solicitation, the Depot Competition Procedures, and the CCH. While not
               affecting the legal sufficiency of the selection, we nevertheless identified



               Page 42                            GAO/NSIAD-99-124 Public-Private Depot Competitions
                       Appendix III
                       Legal Review of Competition for Sacramento
                       Air Logistics Center Workloads




                       several issues related to the estimates supporting the cost evaluation.
                       These issues are discussed in the body of the report.


Performance Location   Subsection (g) of 10 U.S.C. 2469a provides that our report on the
                       competitive procedures is to include our view as to whether the procedures
                       “provided substantially equal opportunity for public and private offerors to
                       compete for the contract without regard to the location at which the
                       workload is to be performed.” In addition, 10 U.S.C. 2469a(d), which lists
                       the requirements for the selection process, provides that a public or private
                       competitor must be permitted to perform at the location of its choosing and
                       a competitor is not to be given preferential treatment for, or be limited to,
                       performing the workload in place or at any other single location.

                       As stated in our prior review of the solicitation for the Sacramento
                       workloads, we found no provisions in the solicitation that designated a
                       particular location at which performance was required or preferred or that
                       evidenced a bias toward any particular performance location.34 Similarly,
                       in our review of the selection process, we found nothing to indicate that a
                       particular performance location was required or that there was a bias
                       toward a particular location in the evaluation of the proposals or the
                       selection of Ogden ALC.

                       In the selection, the SSA expressed concern about the risks inherent in the
                       Ogden ALC plan for transitioning the workloads from the Sacramento
                       facility to the San Antonio and Ogden performance locations. The SSA
                       concluded that Lockheed’s proposal to perform at the closing Sacramento
                       facility gave that firm a slight advantage in the transition area. As we
                       understand the 10 U.S.C 2469a provisions concerning performance
                       location, they are to prevent the Air Force from creating an advantage for a
                       particular location for reasons that are not reasonably related to
                       performance or cost.35 We believe that the SSA’s concerns in the
                       evaluation, which centered on Ogden ALC's ability to convince more than
                       300 experienced Sacramento workers to relocate to Ogden, Utah, were


                       34Public-Private Competitions: Review of Sacramento Air Force Depot Solicitation, cited above. In this
                       review, we also concluded that the solicitation’s improper workload combination did not favor an
                       offeror proposing to perform at the Sacramento facility.
                       35
                         The statement of managers accompanying the 1998 DOD Authorization Act provides that the Air
                       Force “would be expected to consider real differences between bidders in cost or capability to perform
                       the work based on factors that would include the proposed location or locations of the workloads.”
                       (Conf. Rept. No.105-340 on H.R. 1119, at 717 (1997)).




                       Page 43                                  GAO/NSIAD-99-124 Public-Private Depot Competitions
                           Appendix III
                           Legal Review of Competition for Sacramento
                           Air Logistics Center Workloads




                           based upon legitimate performance considerations related to Ogden ALC’s
                           transition plan and did not reflect bias towards performance at
                           Sacramento.


Consideration of Noncost   In accordance with 10 U.S.C. 2469a(g), our review of the selection process
Factors                    is to include our view as to whether “appropriate consideration was given
                           to factors other than cost in the selection of the source for performance of
                           the workload.” We found no basis to conclude that the Air Force did not
                           give “appropriate consideration to noncost factors in the selection
                           process.”36

                           As discussed in our review of the Sacramento solicitation,37 the selection
                           was to be based upon “the best value to the Government.” This selection
                           scheme integrated a relative assessment of such noncost factors as
                           transition, operations, and risk along with a extensive evaluation of the
                           proposed costs. Under this evaluation method, the entity selected might,
                           or might not, be the competitor whose proposal was determined to
                           represent the lowest total evaluated cost.

                           The selection of Ogden ALC was based on the SSA’s assessment that the
                           public offeror’s slight advantage in the operations area (a noncost
                           consideration) combined with its lower evaluated cost resulted in the best
                           value to the government. The evaluation and selection record shows an
                           intensive assessment of the noncost elements of each of the proposals. For
                           example, the SSA considered Lockheed’s plan to recruit and maintain the
                           existing workforce in-place at the Sacramento facility to be a benefit; on
                           the other hand, she concluded that Odgen ALC’s plans for relocating the
                           workloads to San Antonio and Ogden were risky. The record also shows


                           36We  consider noncost factors in this competition to include all of the elements that were evaluated
                           under the transition and operation factors as well as such more general considerations as past
                           performance. Cost factors include all of the elements under the solicitation’s cost criterion. The Air
                           Force “dollarized”, or assigned an estimated dollar value to the benefit or detriment believed to be
                           inherent in particular aspects of the offerors’ technical or management approaches under the transition
                           and operations factors. As we understand the provision in 10 U.S.C. 2469a(g) regarding the evaluation
                           of noncost factors, it was to ensure that the Air Force placed the proper emphasis on matters such as an
                           offeror’s management approach to the transition of the workloads and its technical capability to
                           perform. We do not think the “dollarization” of some of the results under these factors changes the
                           nature of this portion of the evaluation, which was to measure technical and management aspects of a
                           proposal, rather than cost. On the other hand, we believe the “dollarization” of the risk determined by
                           the SSA to be inherent in Ogden ALC’s labor rates in its cost proposal was, in fact, the evaluation of a
                           cost factor.
                           37
                                Public-Private Competitions: Review of Sacramento Air Force Depot Solicitation, cited above.




                           Page 44                                    GAO/NSIAD-99-124 Public-Private Depot Competitions
                           Appendix III
                           Legal Review of Competition for Sacramento
                           Air Logistics Center Workloads




                           that the SSA considered and favorably noted Boeing’s (Ogden ALC’s
                           partner) technical approach for performing the KC-135 aircraft work but
                           expressed concern about the feasibility of Ogden ALC’s plans to implement
                           process improvements in performing the electrical accessories work.

                           While the offeror selected did represent the lowest evaluated cost to the
                           government, as the examples show, the SSA and the other evaluators
                           considered the relative merits of the technical and management
                           approaches of the offerors. Thus, the record provides no basis for us to
                           conclude that factors other than cost were not given appropriate
                           consideration as required by 10 U.S.C. 2469a.


Compliance With Other      In addition to addressing the section 2469a provisions, including
Applicable Provisions of   performance location and consideration given to factors other than cost,
                           we reviewed the Sacramento competition to determine whether it
10 U.S.C. 2469a
                           otherwise complied with the requirements of section 2469a. As noted
                           previously, 10 U.S.C. 2469a sets forth six requirements that must be
                           satisfied in the Sacramento solicitation and selection process. 38

                           Reviewing the evaluation and selection records in the context of the
                           10 U.S.C. 2469a requirements, we found that the six requirements were
                           addressed during the evaluation and selection process in a manner that was
                           consistent with the solicitation evaluation provisions. 39 Thus, we found no
                           basis to conclude that the Sacramento selection process deviated in any
                           material respect from the requirements of 10 U.S.C. 2469a.


Compliance With Other      As stated earlier, the provisions of 10 U.S.C. 2461 requiring a notice to
Applicable Provisions of   Congress of the savings to be achieved from a conversion of a DOD
                           function to private-sector performance, and the requirement in 10 U.S.C.
Law
                           2462 that DOD is to contract with the private sector if a private firm can
                           provide the supply or service needed at a lower cost, apply generally to
                           conversions of DOD functions such as these workloads. Whether the Air
                           Force must comply with either statute in a particular competition depends

                           38As discussed earlier, in our prior review of the solicitation in Public-Private Competitions: Review of
                           Sacramento Air Force Depot Solicitation, cited above, we concluded that all of the 10 U.S.C. 2469a
                           requirements were specifically acknowledged in the solicitation.
                           39
                             An agency has the discretion to adopt any particular evaluation approach, as long as the approach is
                           fair, reasonable, and consistent with the solicitation evaluation criteria. See Universal Shipping Co.,
                           Inc., B-223905.2, April 20, 1987, 87-1 CPD 424.




                           Page 45                                   GAO/NSIAD-99-124 Public-Private Depot Competitions
                Appendix III
                Legal Review of Competition for Sacramento
                Air Logistics Center Workloads




                upon whether a public or private offeror is selected. In this case, the Air
                Force selected the proposal of the public-sector offeror, Ogden ALC, which
                represented the lowest total evaluated cost for the performance of the
                workloads. As we understand it, while the public offeror will use a private
                firm to perform the KC-135 aircraft portion of the requirement, Ogden ALC
                retains the overall responsibility for the performance of all of the
                workloads.

                Section 2469a, which provides specific authority for the Sacramento
                competition, authorizes a public entity to use a private-sector firm as a
                participant in its proposal. In view of this special authority, and
                considering that the Ogden ALC proposal represented the overall lowest
                evaluated cost, we do not believe that either 10 U.S.C. 2461 or 2462 requires
                that portions of the proposal representing work to be performed by the
                public offeror or by its private partner be the subject of separate analyses.
                We, thus, conclude that, in this case, the selection of the low-cost public
                offeror was consistent with 10 U.S.C. 2462 and did not trigger the notice
                requirements of 10 U.S.C. 2461.40



Other Matters   While we found no basis to conclude that the evaluation and selection
                process deviated in any material respect from the provisions of 10 U.S.C.
                2469a and other applicable provisions of law, we identified several issues
                related to the estimates used in the cost evaluation. These issues are
                discussed in the body of the report.




                40
                  Similarly, we believe that the requirement to certify the government estimate in section 8014 of the
                1998 Appropriations Act is not triggered, as the award is one to the public-sector at the lowest
                evaluated cost. Further, we do not think that the evaluation and selection was inconsistent with section
                8039 of the act regarding the use of “comparable estimates” for public and private offers.




                Page 46                                   GAO/NSIAD-99-124 Public-Private Depot Competitions
Appendix IV

Major Contributors to This Report                                                                     ApV
                                                                                                        Ienxdi




National Security and   Barry Holman, Associate Director
                        Julia Denman, Assistant Director
International Affairs
Division, Washington,
D.C.

Office of the General   John Brosnan, Assistant General Counsel

Counsel, Washington,
D.C.

Dallas Field Office     John Strong, Evaluator-in-Charge
                        Penney Harwell, Evaluator
                        Larry Junek, Evaluator
                        Pam Valentine, Evaluator




              eL
               rtet     Page 47                      GAO/NSIAD-99-124 Public-Private Depot Competitions
Page 48   GAO/NSIAD-99-124 Public-Private Depot Competitions
Related GAO Products


               Army Industrial Facilities: Workforce Requirements and Related Issues
               Affecting Depots and Arsenals (GAO/NSIAD-99-31, Nov. 30, 1998).

               Navy Depot Maintenance: Weaknesses in the T406 Engine Logistics
               Support Decision (GAO/NSIAD-98-221, Sept. 14, 1998).

               Defense Depot Maintenance: Public and Private Sector Workload
               Distribution Reporting Can Be Further Improved (GAO/NSIAD-98-175,
               July 23, 1998).

               Defense Depot Maintenance: Contracting Approaches Should Address
               Workload Characteristics (GAO/NSIAD-98-130, June 15, 1998).

               Public-Private Competitions: Review of San Antonio Depot Solicitation
               (GAO/OGC-98-49, May 14, 1998).

               Defense Depot Maintenance: Use of Public-Private Partnering
               Arrangements (GAO/NSIAD-98-91, May 7, 1998).

               Public-Private Competitions: Review of Sacramento Air Force Depot
               Solicitation (GAO/OGC-98-48, May 4, 1998).

               Navy Ship Maintenance: Temporary Duty Assignments of Temporarily
               Excess Shipyard Personnel Are Reasonable (GAO/NSIAD-98-93, Apr. 21,
               1998).

               Public-Private Competitions: DOD’s Additional Support for Combining
               Depot Workloads Contains Weaknesses (GAO/NSIAD-98-143, Apr. 17,
               1998).

               Defense Depot Maintenance: DOD Shifting More Workload for New
               Weapon Systems to the Private Sector (GAO/NSIAD-98-8, Mar. 31, 1998).

               Depot Maintenance: Lessons Learned From Transferring Alameda Naval
               Aviation Depot Engine Workloads (GAO/NSIAD-98-10BR, Mar. 25, 1998).

               Public-Private Competitions: Access to Records Is Inhibiting Work on
               Congressional Mandates (GAO/T-NSIAD-98-111, Mar. 4, 1998).

               Force Structure: Army’s Efforts to Improve Efficiency of Institutional
               Forces Have Produced Few Results (GAO/NSIAD-98-65, Feb. 26, 1998).




       Leter   Page 49                      GAO/NSIAD-99-124 Public-Private Depot Competitions
Related GAO Products




Public-Private Competitions: Access to Records Is Inhibiting Work on
Congressional Mandates (GAO/T-NSIAD-98-101, Feb. 24, 1998).

Public-Private Competitions: DOD’s Determination to Combine Depot
Workloads Is Not Adequately Supported (GAO/NSIAD-98-76, Jan. 20, 1998).

Public-Private Competitions: Processes Used for C-5 Aircraft Award
Appear Reasonable (GAO/NSIAD-98-72, Jan. 20, 1998).

Defense Depot Maintenance: Information on Public and Private Sector
Workload Allocations (GAO/NSIAD-98-41, Jan. 20, 1998).

Air Force Privatization-in-Place: Analysis of Aircraft and Missile System
Depot Repair Costs (GAO/NSIAD-98-35, Dec. 22, 1997).

Outsourcing DOD Logistics: Savings Achievable But Defense Science
Board’s Projections Are Overstated (GAO/NSIAD-98-48, Dec. 8, 1997).

Navy Regional Maintenance: Substantial Opportunities Exist to Build on
Infrastructure Streamlining Progress (GAO/NSIAD-98-4, Nov. 13, 1997).

Air Force Depot Maintenance: Information on the Cost-Effectiveness of B-1
and B-52 Support Options (GAO/NSIAD-97-210BR, Sept. 12, 1997).

Navy Depot Maintenance: Privatizing Louisville Operations in Place Is Not
Cost-Effective (GAO/NSIAD-97-52, July 31, 1997).

Defense Depot Maintenance: Challenges Facing DOD in Managing Working
Capital Funds (GAO/T-NSIAD/AIMD-97-152, May 7, 1997).

Defense Depot Maintenance: Uncertainties and Challenges DOD Faces in
Restructuring Its Depot Maintenance Program (GAO/T-NSIAD-97-112,
May 1, 1997) and (GAO/T-NSIAD-97-111, Mar. 18, 1997).

Navy Ordnance: Analysis of Business Area Price Increases and Financial
Losses (GAO/AIMD/NSIAD-97-74, Mar. 14,1997).

Defense Outsourcing: Challenges Facing DOD as It Attempts to Save
Billions in Infrastructure Costs (GAO/T-NSIAD-97-110, Mar. 12, 1997).

High-Risk Series: Defense Infrastructure (GAO/HR-97-7, Feb. 1997).




Page 50                       GAO/NSIAD-99-124 Public-Private Depot Competitions
Related GAO Products




Air Force Depot Maintenance: Privatization-in-Place Plans Are Costly
While Excess Capacity Exists (GAO/NSIAD-97-13, Dec. 31, 1996).

Army Depot Maintenance: Privatization Without Further Downsizing
Increases Costly Excess Capacity (GAO/NSIAD-96-201, Sept. 18, 1996).

Navy Depot Maintenance: Cost and Savings Issues Related to
Privatizing-in-Place at the Louisville, Kentucky Depot (GAO/NSIAD-96-202,
Sept. 18, 1996).

Defense Depot Maintenance: Commission on Roles and Mission’s
Privatization Assumptions Are Questionable (GAO/NSIAD-96-161, July 15,
1996).

Defense Depot Maintenance: DOD's Policy Report Leaves Future Role of
Depot System Uncertain (GAO/NSIAD-96-165, May 21, 1996).

Defense Depot Maintenance: More Comprehensive and Consistent
Workload Data Needed for Decisionmakers (GAO/NSIAD-96-166, May 21,
1996).

Defense Depot Maintenance: Privatization and the Debate Over the
Public-Private Mix and (GAO/T-NSIAD-96-148, Apr. 17, 1996) and
(GAO/T-NSIAD-96-146, Apr. 16, 1996 ).

Military Bases: Closure and Realignment Savings Are Significant, but Not
Easily Quantified (GAO/NSIAD-96-67, Apr. 8, 1996).

Depot Maintenance: Opportunities to Privatize Repair of Military Engines
(GAO/NSIAD-96-33, Mar. 5, 1996).

Closing Maintenance Depots: Savings, Workload, and Redistribution Issues
(GAO/NSIAD-96-29, Mar. 4, 1996).

Navy Maintenance: Assessment of the Public-Private Competition Program
for Aviation Maintenance (GAO/NSIAD-96-30, Jan. 22, 1996).

Depot Maintenance: The Navy’s Decision to Stop F/A-18 Repairs at Ogden
Air Logistics Center (GAO/NSIAD-96-31, Dec. 15, 1995).

Military Bases: Case Studies on Selected Bases Closed in 1988 and 1991
(GAO/NSIAD-95-139, Aug. 15, 1995).



Page 51                      GAO/NSIAD-99-124 Public-Private Depot Competitions
                   Related GAO Products




                   Military Base Closures: Analysis of DOD’s Process and Recommendations
                   for 1995 (GAO/T-NSIAD-95-132, Apr. 17, 1995).

                   Military Bases: Analysis of DOD’s 1995 Process and Recommendations for
                   Closure and Realignment (GAO/NSIAD-95-133, Apr. 14, 1995).

                   Aerospace Guidance and Metrology Center: Cost Growth and Other
                   Factors Affect Closure and Privatization (GAO/NSIAD-95-60, Dec. 9, 1994).

                   Navy Maintenance: Assessment of the Public and Private Shipyard
                   Competition Program (GAO/NSIAD-94-184, May 25, 1994).

                   Depot Maintenance: Issues in Allocating Workload Between the Public and
                   Private Sectors (GAO/T-NSIAD-94-161, Apr. 12, 1994).

                   Depot Maintenance (GAO/NSIAD-93-292R, Sept. 30, 1993).

                   Depot Maintenance: Issues in Management and Restructuring to Support a
                   Downsized Military (GAO/T-NSIAD-93-13, May 6, 1993).

                   Air Logistics Center Indicators (GAO/NSIAD-93-146R, Feb. 25, 1993).

                   Defense Force Management: Challenges Facing DOD as It Continues to
                   Downsize Its Civilian Work Force (GAO/NSIAD-93-123, Feb. 12, 1993).




(709409)   Leter   Page 52                      GAO/NSIAD-99-124 Public-Private Depot Competitions
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