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Public-Private Competitions: Review of Sacramento Air Force Depot Solicitation

 (Letter Report, 05/04/98, GAO/OGC-98-48).

The Air Force lacked a well-supported rationale for combining, under a
single contract, the diverse workloads at the closing Sacramento air
logistics center. This requirement may unduly restrict competition by
eliminating potential bidders who are capable of performing some, but
not all, of the individual workloads. GAO reviewed an Air Force report
and found that it did not provide adequate information to support the
determination that the workloads could not as logically and economically
be performed without combination by potentially qualified sources.
Subsequently, the Air Force provided additional supporting rationale for
the workload combination. GAO reviewed the Air Force's rationale and
found that it was not well supported. Although the Air Force's rationale
is not at this point sufficient to justify the workload combination, the
rationale for combination contains some elements, such as readiness
concerns and potential competition enhancements, that, if supported,
could establish the reasonableness of the combination under the
acquisition laws.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  OGC-98-48
     TITLE:  Public-Private Competitions: Review of Sacramento Air Force 
             Depot Solicitation
      DATE:  05/04/98
   SUBJECT:  Air Force procurement
             Aircraft maintenance
             Base closures
             Defense economic analysis
             Solicitation specifications
             Military downsizing
             Privatization

             
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Cover
================================================================ COVER


Report to Congressional Committees

May 1998

PUBLIC-PRIVATE COMPETITIONS -
REVIEW OF SACRAMENTO AIR FORCE
DEPOT SOLICITATION

GAO/OGC-98-48

Public-Private Competitions

(709329)


Abbreviations
=============================================================== ABBREV

  BRAC - Base Closure and Realignment Commission
  CCH - Cost Comparability Handbook
  DOD - Deparment of Defense
  FAR - Federal Acquisition Regulation
  RFP - request for proposals
  SSA - Source Selection Authority

Letter
=============================================================== LETTER


B-279897

May 4, 1998

The Honorable Strom Thurmond
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 National Security
House of Representatives

This report responds to one of several reporting requirements
contained in the National Defense Authorization Act for Fiscal Year
1998, Public Law 105-85, relating to the allocation of depot
workloads currently performed at the closing Sacramento and San
Antonio Air Logistics Centers.  Section 359 of the act, codified at
10 U.S.C.  2469a, requires us to review solicitations issued for the
workloads at Sacramento and San Antonio, and to report within 45 days
of the solicitations' issuance on whether they (1) are in compliance
with applicable laws and regulations and (2) provide a "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."

On March 20, 1998, the Air Force issued a solicitation for the
purpose of conducting a public-private competition for various
depot-level workloads being performed at the Sacramento Air Logistics
Center at McClellan Air Force Base, California.  As described in
detail in appendix I, the solicitation provides for a single award,
for a period of up to 8 years, for the performance of workloads for
the KC-135 and A-10 aircraft and for commodities, including
hydraulics, instruments/electronics, electrical accessories, and
miscellaneous backshop work.  This letter provides our assessment of
the solicitation as required by 10 U.S.C.  2469a.\1


--------------------
\1 On March 30, the Air Force, San Antonio Air Logistics Center at
Kelly Air Force Base, Texas, issued a solicitation for the propulsion
business area workloads being performed at San Antonio.  We will be
issuing a report addressing the requirements of section 2469a with
respect to that solicitation. 


   BACKGROUND
------------------------------------------------------------ Letter :1

Several laws govern the solicitation and selection of offerors to
perform depot workloads.  Section 2469a of title 10 of the United
States Code provides for special procedures for public-private
competitions at the closing Sacramento and San Antonio depots.  In
particular, section 2469a sets forth certain elements that must be
reflected in the solicitation and considered in making the selection
of the source for the performance of the workloads.  These include
requirements that all estimated savings and costs to the Department
of Defense (DOD) related to the award must be considered, and that no
offeror may be given preferential consideration for, or be limited
to, performing the work at a particular location. 

In addition to 10 U.S.C.  2469a, there are a number of other laws
that generally apply to the outsourcing of government-performed depot
workloads.  In particular, 10 U.S.C.  2469 provides for the use of
"competitive procedures for competitions among private and public
sector entities" whenever DOD contemplates changing the performance
of public depot workloads of $3 million or more to contractor
performance.  Further, because the Air Force will use the competitive
acquisition system for the workload competitions, these competitions
are subject to the standards in 10 U.S.C.  chapter 137 and the
Federal Acquisition Regulation 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 conversions of DOD functions to
private-sector performance. 

As required by 10 U.S.C.  2469a, we reviewed the Sacramento
solicitation in the context of the applicable laws and regulations to
determine whether it (1) complies with those laws and regulations and
(2) provides a substantially equal opportunity for public and private
offerors to compete for the contract without regard to performance
location.  We did our review based on the solicitation terms as of
April 22 and, in addition, we spoke to Air Force officials and
considered concerns raised informally by potential competitors.  We
recognize that the terms of the solicitation may be amended and that
the concerns raised may change until the time for receipt of
proposals and that a potential offeror may file a protest with our
Office or with the courts.  If a protest is filed, factual
information, issues and arguments raised by the 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. 

The results of our review, described in detail in appendix I, are
summarized in the following sections. 


   REVIEW RESULTS
------------------------------------------------------------ Letter :2


      COMPLIANCE WITH APPLICABLE
      LAWS AND REGULATIONS
---------------------------------------------------------- Letter :2.1

Based on our review of the Sacramento solicitation and concerns
raised informally by potential offerors, we found that the Air Force
has not, as of April 22, provided a sufficient basis to show that
soliciting the workloads on a combined basis is necessary to satisfy
its needs.  Otherwise, we found that the solicitation is in
compliance with applicable laws, including the provisions of 10
U.S.C.  2469a.\2

The specific issues raised by potential offerors and our conclusions
follow. 


--------------------
\2 In addition to reviewing specific compliance issues arising under
10 U.S.C.  2469a, such as the treatment of overhead savings, and
addressing the section 2469a provisions concerning performance
location, we reviewed the Sacramento solicitation to determine
whether it includes the specific elements required by section 2469a. 
All of the section 2469a requirements are specifically acknowledged
in the solicitation, and we found no basis to conclude that the
solicitation deviates in any material respect from the section 2469a
requirements. 


         SOLICITATION OF COMBINED
         WORKLOADS
-------------------------------------------------------- Letter :2.1.1

One potential competitor has expressed concern about the inclusion in
the Sacramento solicitation of diverse workloads as a single
requirement.  The potential competitor argues that the combination of
workloads into one requirement may eliminate potential sources that
are capable of performing some, but not all of the individual
workloads, and thus is unduly restrictive of competition. 

Because the Air Force issued a solicitation combining multiple
workloads, it was required to issue a determination that the
workloads could not as logically and economically be performed
without combination by potentially qualified sources, accompanied by
a supporting report.
(See 10 U.S.C.  2469a(e).) On December 19, 1997, DOD issued the
required determination.  We reviewed this report and found that it
did not provide adequate information to support the determination.\3

Subsequently, the Air Force provided additional supporting rationale
for the workload combination.  We reviewed the Air Force's rationale
and found that it was not well supported.\4

Because a combination of requirements can restrict competition, the
acquisition laws require that a workload combination be reasonably
required to satisfy the agency's needs, and not simply an outgrowth
of the agency's desire for administrative convenience or an
unsupported claim that economies will be achieved.  Normally, we
review the solicitation of combined requirements in the context of a
bid protest; in that context, the agency has an opportunity to
justify the combination by showing it is reasonably related to its
needs or that it may actually enhance competition.  The Air Force's
supporting rationale, which was prepared in a different context, is
not at this point sufficient to justify the workload combination. 
However, the rationale for the combination contains some
elements--such as readiness concerns and potential competition
enhancements--that if supported could establish the reasonableness of
the combination under the acquisition laws. 


--------------------
\3 Public-Private Competitions:  DOD's Determination to Combine Depot
Workloads Is Not Adequately Supported (GAO/NSIAD-98-76, Jan.  20,
1998). 

\4 Public-Private Competitions:  DOD's Additional Support for
Combining Workloads Contains Weaknesses (GAO/NSIAD-98-143, Apr.  17,
1998). 


         BEST-VALUE SELECTION
         CRITERIA
-------------------------------------------------------- Letter :2.1.2

The Sacramento solicitation provides that the award will be made to
the responsible offeror whose conforming proposal represents "the
best value to the Government." Under the solicitation's evaluation
scheme, described in detail in appendix I, it is possible that the
entity selected--whether public or private--may not be the competitor
whose proposal is determined to represent the lowest evaluated cost. 
A potential competitor has questioned the Air Force's authority to
select a source that does not represent the lowest total evaluated
cost for performing the workloads. 

We found nothing in 10 U.S.C.  2469a, the basic authority governing
the Sacramento competition, which limits the Air Force to a selection
based on low evaluated cost.  However, while the Air Force is not
required to use any particular source selection method, it still must
comply with provisions that apply generally to conversions of
functions to private sector performance.  For example, if the
Sacramento competition results in the selection of a private-sector
source, the Air Force will have to comply with 10 U.S.C.  2461(a)(2). 
This provision requires that whenever a DOD-performed function is
converted to performance by a contractor, DOD must provide Congress
with a cost comparison that shows that savings will result. 


         EVALUATION OF OVERHEAD
         SAVINGS FOR OTHER
         WORKLOADS
-------------------------------------------------------- Letter :2.1.3

A potential competitor has raised concerns about the solicitation's
method for crediting an offeror with overhead savings it expects to
achieve in its other government work as a result of adding the
competed workloads.  In essence, the solicitation requires more
support for savings that are proposed to be achieved in the later
years of the performance period.\5 The potential competitor's concern
is that this methodology may not capture an offeror's projected
overhead savings for the entire performance period. 

We found that the solicitation establishes a reasonable method for
measuring estimated overhead savings consistent with the requirements
of 10 U.S.C.  2469a.  Under section 2469a, the source selection
process for the Sacramento workloads must take into account "the
total estimated direct and indirect savings (including overhead) that
will be derived by the Department of Defense." This provision is
sufficiently general to permit the Air Force broad discretion to
decide exactly how to measure estimated overhead savings as those
savings apply to a successful offeror's other government work. 
Considering that the performance period for the Sacramento workloads
could last for as long as 8 years, we believe it is reasonable for
the Air Force to require strong support for projected future savings
and to consider that such projections may well be less accurate for
the later portion of the performance period. 


--------------------
\5 For example, the evaluation formula provides that the proposed
first year savings, if determined to be reasonable "will be allowed,"
while second year savings if supportable will also be allowed, but
"discounted for risk." The solicitation goes on to explain 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."


      PERFORMANCE LOCATION
---------------------------------------------------------- Letter :2.2

As discussed earlier, 10 U.S.C.  2469a requires us to determine
whether the Sacramento solicitation provides a "substantially equal
opportunity for public and private offerors to compete for the
contract without regard to where the workload is to be performed." In
addition, under
10 U.S.C.  2469a(d), a competitor must be allowed 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. 

We found nothing in the solicitation that designates a particular
location, such as the closing Sacramento depot, at which performance
is required or preferred.  Nor do any of the solicitation evaluation
criteria evidence a bias toward any particular performance location. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :3

We informally obtained comments on our analysis from representatives
of the Air Force.  While the Air Force did not disagree with most of
our conclusions, it raised several points concerning our conclusion
with respect to the workload combination and provided specific
suggestions, which we have incorporated where appropriate.  The Air
Force's comments and our evaluation are presented in appendix II. 


---------------------------------------------------------- Letter :3.1

Please contact John Brosnan, Assistant General Counsel, on (202)
512-8177 if you or your staff have any questions concerning this
report. 

Robert P.  Murphy
General Counsel


REVIEW OF SOLICITATION FOR
SACRAMENTO AIR LOGISTICS CENTER
WORKLOADS
=========================================================== Appendix I

On March 20, 1998, the Department of the Air Force, Sacramento Air
Logistics Center at McClellan Air Force Base, California, issued
request for proposals (RFP) No.  F04606-98-0007 for the purpose of
conducting a public-private competition for various depot-level
workloads being performed at the closing Sacramento Air Logistics
Center.  An extensive amendment to the solicitation was issued on
March 30, which, among other things, extended the due date for the
receipt of proposals from May 20 to June 19. 

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 provides for special
procedures for public-private competitions for the workloads at the
closing Sacramento and San Antonio Air Logistics Centers.  Among
other things, section 2469a also requires that we review all
solicitations issued for the workloads at the two closing Air
Logistics Centers 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 public and private
offerors to compete for the contract without regard to the location
at which the workload is to be performed."

Our review is based on the solicitation terms as of April 22.  In
addition, we spoke to Air Force officials and considered concerns
raised informally by potential competitors.  We recognize that the
terms of the solicitation may be amended and the concerns raised may
change until the time for receipt of proposals.  Further, a potential
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
solicitation with the Department of Defense (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. 

Based on our review of the Sacramento solicitation and the applicable
laws and regulations, we conclude that the Air Force has not, as of
April 22, provided a sufficient basis to show that soliciting the
workloads on a combined basis is necessary to satisfy its needs. 
Otherwise, we conclude that the solicitation is in compliance with
applicable laws, including the provisions of 10 U.S.C.  2469a, and
that it provides a substantially equal opportunity for offerors to
compete without regard to performance location.  Whether the actual
evaluation process and the final selection meets these standards and
the others prescribed by
10 U.S.C.  2469a will be the subject of a separate review by our
Office after the award is made.\1

The following sections describe the legal standards applicable to the
Sacramento RFP and our analysis of the RFP under those standards. 


--------------------
\1 10 U.S.C.  2469a(g) provides that within 45 days after any award
is made, GAO is to review the selection process and report to
Congress on whether (1) the procedures provide a substantially equal
opportunity for offerors to compete without regard to performance
location, (2) the procedures were in compliance with all applicable
laws and regulations, (3) appropriate consideration was given to
factors other than cost in the selection, and (4) the award resulted
in the lowest total cost to DOD for the performance of the workload. 


   APPLICABLE LEGAL STANDARDS
--------------------------------------------------------- Appendix I:1

The basic authority for the Sacramento workload competition is
10 U.S.C.  2469a, which provides procedures for public-private
competitions for the workloads of the closing Sacramento and San
Antonio Air Logistics Centers that are proposed to be outsourced
after the November 18, 1997, enactment of the 1998 Authorization
Act.\2 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 (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.\3

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
requirements is in 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 of the act 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.\4

There are other provisions that apply, generally, to conversions of
DOD functions to private-sector performance.  For example, 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 more than 10 civilian employees to contractor
performance; the provisions of 10 U.S.C.  2461 require that whenever
a DOD-performed function 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.\5

The Air Force implements these outsourcing authorities through the
Air Force Materiel Command, 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.  Among other things, the procedures
provide for issuing a solicitation calling for offers from public and
private sector sources.  They establish the criteria, including those
listed in 10 U.S.C.  2469a, for deciding how the Air Force will
select a source for the performance of depot workloads from the
private or public sector.  According to these procedures, a
competitive solicitation is to be issued in accordance with the
applicable provisions of the Federal Acquisition Regulation (FAR). 
The FAR sets forth uniform policies and procedures for the
competitive acquisition system used by all executive agencies 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 above.  (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 Air Logistics Centers, are
governed by 10 U.S.C.  2469a and the other statutes applicable to
public-private depot competitions as implemented by the Air Force. 

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.  Further, under these standards, an agency
must follow the criteria announced in the solicitation 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.)


--------------------
\2 The workload for the C-5 aircraft that had been performed at the
San Antonio Air Logistics Center was awarded in September 1997 to the
Warner Robins Air Logistics Center as a result of a public-private
competition.  That competition, which was the subject our report
entitled Public-Private Competitions:  Processes Used for C-5
Aircraft Appear Reasonable (GAO/NSIAD-98-72, Jan.  20, 1998), was not
conducted under 10 U.S.C.  2469a as it was completed before the
enactment of the provision. 

\3 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 GAO to
review and provide its 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 determination.  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. 
Subsequent to our January 20 report, the Air Force provided
additional supporting rationale for the combined workloads.  As
discussed in more detail later, we reported that the additional
rationale was not well supported.  Public-Private Competitions: 
DOD's Additional Support for Combining Workloads Contains Weaknesses
(GAO/NSIAD-98-143, Apr.  17, 1998). 

\4 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). 

\5 Again, these provisions do not conflict with the six 10 U.S.C. 
2469a competition requirements listed above and are also applicable
to the Sacramento competition.  See Posadas v.  National City Bank,
cited above. 


   SOLICITATION
--------------------------------------------------------- Appendix I:2

The RFP for the Sacramento workloads provides for the award of eight
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
basis\6 for the transition period for the KC-135 aircraft, the A-10
aircraft, and for commodities, including hydraulics,
instruments/electronics, electrical accessories, and non-routed
backshop/manufacturing.  Other line items provide for firm-fixed
priced offers for the performance of these various workloads,
including "over and above" work,\7

once the transition to the awardee is completed, and for several
miscellaneous work requirements.  The RFP 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 multiyear
basis, with guaranteed minimum quantities, while the other workloads
are to be awarded on a requirements-type basis with no minimum
quantity guaranteed.\8

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,\9 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 criteria listed in the solicitation to arrive at
a best-value selection. 

The evaluation criteria consist of criteria for transition and
operations, cost, and assessment.  Transition is made up of three
factors:  (1) integrated master plan, (2) personnel plan, and (3)
integrated master schedule.  Operations consists 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, is 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.\10 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 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."\11

Further, the RFP evaluation scheme provides for the consideration of
general matters such as the results of pre-award surveys, site
visits, and "fair market value." In addition, the proposals are to be
the subject of two risk assessments:  proposal risk and performance
risk.  Proposal risk is to measure the risk 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.  Performance risk is to
assess, based on an offeror's present and past performance, the
probability of the offeror successfully accomplishing the proposed
effort. 

Finally, the RFP provides that an "integrated assessment of best
value" is to be conducted by the SSA in order to select the
successful proposal.  In this 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.\12


--------------------
\6 Public sector offers are to be on a cost reimbursement basis. 
Public offerors will not be paid an award fee. 

\7 "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. 

\8 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 quantity provided
in the solicitation is for information only; it does 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 which 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. 

\9 According 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 possession of the necessary facilities and
equipment or the ability to obtain them. 

\10 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 of
the overall price. 

\11 "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 the aspects of an offeror's
technical proposal in the calculation of an offeror's total evaluated
cost. 

\12 The one requirement not listed in section M-903 of the RFP is the
requirement 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. 


   ANALYSIS OF SOLICITATION
--------------------------------------------------------- Appendix I:3

As noted previously, subsection (g) of 10 U.S.C.  2469a requires us
to review the solicitation issued by the Air Force for the Sacramento
workloads and to report to Congress on whether (1) it is in
compliance with the requirements of 10 U.S.C.  2469a and other
applicable laws and regulations and (2) it provides a substantially
equal opportunity for all offerors to compete without regard to the
performance location.  The following are the results of our review. 


      COMPLIANCE WITH APPLICABLE
      LAWS AND REGULATIONS
------------------------------------------------------- Appendix I:3.1

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 Air Logistics Centers.  In
particular, 10 U.S.C.  2469a sets forth the elements that must be
considered in making the selection of the public or private source
for the performance of the workloads.  Further, because the Air Force
will use 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 solicitation, we have spoken to
potential competitors who have informally raised several specific
concerns.  The major concerns,\13 analyzed below, are that (1) the
combination in the solicitation of diverse workloads into one
requirement may eliminate sources that are capable of performing
some, but not all of the individual workloads, and thus, is unduly
restrictive of competition; (2) the use of a best-value selection
process, which can result in the selection of a public or private
source that does not represent the lowest total evaluated cost, is
contrary to the laws applicable to the conversion of DOD functions to
private-sector performance; and (3) the solicitation evaluation
scheme for measuring the credit to be given for an offeror's
projected overhead savings on its other government work as a result
of adding the Sacramento workloads will not reflect the impact of the
savings for the entire performance period. 


--------------------
\13 A number of other questions have been raised concerning various
aspects of the solicitation, such as the absence of an economic price
adjustment clause and the lack of detail on how fair market value of
the closing Sacramento facility and equipment will be evaluated. 
While we have carefully considered all of the matters raised during
our review, these matters did not raise questions that, in our view,
impacted the solicitation's compliance with 10 U.S.C.  2469a or other
applicable laws and regulations so we have not treated them as
separate issues in our report. 


      SOLICITATION OF COMBINED
      WORKLOADS
------------------------------------------------------- Appendix I:3.2

One potential competitor has expressed concern to us about the
inclusion in the Sacramento solicitation of diverse workloads as a
single requirement.  The potential competitor argues that the
consolidation of dissimilar workloads such as the commodity and the
aircraft work will limit the number of offerors capable of competing,
without achieving a corresponding reduction in cost or efficiency,
except possibly, in the case of an offeror proposing to perform at
the closing Sacramento location. 

Since the Air Force issued an RFP combining multi-aircraft (KC-135
and A-10) and multi-commodity workloads (hydraulics,
instruments/electronics, and electrical accessories), DOD was
required to issue a determination that the workloads could not as
logically and economically be performed without combination by
potentially qualified sources, accompanied by a supporting report. 
(See 10 U.S.C.  2469a(e).) On December 19, 1997, DOD issued the
required determination.  In accordance with 10 U.S.C.  2469a(e), we
reviewed the DOD report and informed Congress on January 20, 1998,
that we found that it did not provide adequate information to support
the determination.\14

Subsequently, the Air Force provided additional rationale supporting
the determination to combine the workloads.  Essentially, the Air
Force maintained that combining the Sacramento aircraft and commodity
workloads would create a large, relatively stable workload that would
enable potential competitors to take advantage of efficiencies from
shared personnel and facilities for all of the workloads and to
achieve overhead savings.  In addition, the Air Force pointed out
that a single award for aircraft and commodities workloads would
reduce the performance and readiness risks inherent in managing
multiple workload transitions and the resulting sequential personnel
reductions at the closing Sacramento depot.  According to the agency,
the delay and administrative burden as well as the additional costs
of awarding and managing multiple contracts for each of the
workloads, in combination with the other factors mentioned above,
necessitated the solicitation of the combined workloads. 

We also reported our views on the additional supporting rationale to
the Subcommittee on Readiness, Senate Committee on Armed Services and
the Subcommittee on Military Readiness, House Committee on National
Security.\15 While we recognized that the Air Force had submitted
considerable additional information relevant to the determination to
solicit combined workloads and that the use of a solicitation for
combined workloads represented a management judgment based upon
various qualitative and quantitative factors that may well be
appropriate, we concluded that, for the purpose of the determination
required by
10 U.S.C.  2469a(e), the supporting information had significant
weaknesses in logic, assumptions, and data. 

For the purpose of the current review, the issue is whether the
combination of the workloads in the Sacramento solicitation complies
with the laws governing the competitive acquisition system and
applicable provisions of 10 U.S.C.  2469a.  The applicable statute
governing DOD acquisitions is 10 U.S.C.  2305(a)(1), which generally
requires that solicitations permit full and open competition, and
contain restrictive provisions and conditions only to the extent
necessary to satisfy the agency's needs.  Since consolidated
acquisitions combine separate, multiple requirements into one award,
they have the potential for restricting competition by excluding
potential competitors that can only furnish a portion of the
requirement.  Consequently, the combination of requirements must be
reasonably required to satisfy the agency's needs, and not simply an
outgrowth of the agency's desire for administrative convenience or an
unsupported claim that economies will be achieved.  (See National
Customer Eng'g, 72 Comp.  Gen.  132 (1993), 93-1 CPD 225; The Sequoia
Group, Inc., B-252016, May 24, 1993, 93-1 CPD 405.)

Normally, we review the solicitation of combined requirements in the
context of a bid protest based upon the argument that the combination
unduly restricts competition.  (See 31 U.S.C.  3551-3556.) In
response to the protest, the agency will usually attempt to justify
the combined requirements by showing that the combination is
reasonably related to its needs or that the combination may actually
enhance, rather than inhibit, competition.  The Air Force's rationale
for the structure of the Sacramento solicitation was prepared in a
different context, in order to establish that it was more logical and
economical, than not, to combine the workloads, and if a protest is
filed the Air Force will have an opportunity to provide a more
detailed justification.  As explained below, our assessment is that
although the rationale contains some elements that could be used to
support a combined requirement under the acquisition laws, it is not
at this point sufficient to justify the workload combination. 

Several of the reasons cited by the Air Force for the combination of
the commodity and aircraft workloads pertain to matters related to
hoped for efficiencies.  For example, the agency says that a single
contractor will be able to share personnel skills, fixed
overhead-type functions (planning, scheduling, materiel support,
etc.) and backshops among the various workloads.\16 To the extent
these projected efficiencies are based on the assumption that all of
the workloads will be performed at the closing Sacramento location or
some other single location that can accommodate them, these
efficiencies cannot be used to justify the workload combination.  The
solicitation does not, and by law it cannot, require that the
workloads be performed in place at the Sacramento facility or at any
other location.  In fact, 10 U.S.C.  2469a(d) provides that any
offeror may propose to perform at any location or locations it
chooses and that no offeror may be given preferential consideration,
or be limited to, performing the workloads in place or at any other
single location.  So, the perceived benefits from the performance of
the combined workloads at a single location cannot serve as a
justification for combining the workloads in the solicitation. 

On the other hand, the Air Force has cited factors such as the risk
to readiness and workload stability as reasons for combining the
workloads into a single award.  According to the agency, the
readiness risk is associated with the management of separate
transitions of the multiple workloads and with the decreased
efficiency of the workforce at the closing depot due to multiple
reduction-in force actions.  Moreover, the Air Force states these
factors would be exacerbated by the Base Closure and Realignment
Commission (BRAC) decision requiring that the depot be closed and the
workloads transferred by July 2001.  Elements such as these do relate
to the Air Force's needs.  A statement that identifies and fully
explains these concerns may support the solicitation of combined
requirements.\17

In addition, the Air Force maintains that the workload combination
will promote competition by enhancing the workload's overall
stability.  In this regard, the combination mixes the stable aircraft
work, that can be competed with a guaranteed minimum quantity, with
the less stable commodity workloads that cannot be competed using a
guaranteed minimum.  While the Air Force cited workload stability
primarily as a factor supporting greater efficiency, it also points
out that the more stable combined requirement will foster competition
as it combines unattractive workloads with more desirable work.  In
fact, Air Force officials expressed doubts as to whether some of the
workloads solicited separately would generate any competition.  In
this context, the impact of workload stability on competition, if
backed by sufficient evidence, could also be a factor in support of
the workload combination.  (See Canon U.S.A., Inc., B-232262, Nov. 
30, 1998, 88-2 CPD 538.)

Our bid protest decisions have held that in order to determine
whether the solicitation of combined requirements is unduly
restrictive of competition in a particular instance, the agency's
justifications must be balanced against the possible restriction of
competition represented by potential competitors who maintain that
they can perform only a portion of the requirement.  (See, for
example, Phoenix Technical Services Corp., B-274694.2, Mar.  12,
1997, 97-2 CPD 142.) Here, there is a solicitation that contains
combined requirements, a potential competitor who says it can perform
only part of the requirements and some Air Force justifications for
the workload combination, including readiness concerns and potential
competition enhancements, which, if supported, may establish the
reasonableness of combined requirements.  Based on what is available
at this time, however, we cannot say that the Air Force has
sufficiently justified the solicitation of combined workloads as
being reasonably related to its needs as opposed to the desire to
avoid management difficulties that may accompany the movement of
workloads at different times to different locations.  Nor has the
agency sufficiently supported its view that the workload combination
will likely enhance competition.  If a protest is filed, the Air
Force will have an opportunity to supply further support to show that
the Sacramento solicitation is not unduly restrictive of competition. 
(See National Customer Eng'g, cited above.)\18


--------------------
\14 Public-Private Competitions:  DOD's Determination to Combine
Depot Workloads Is Not Adequately Supported (GAO/NSIAD-98-76, Jan. 
20, 1998). 

\15 Public-Private Competitions:DOD's Additional Support for
Combining Depot Workloads Contains Weaknesses (GAO/NSIAD-98-143, Apr. 
17, 1998). 

\16 While these factors may indeed represent potential efficiencies,
the Air Force has not maintained that they are related to technical
requirements or risks inherent in performing these workloads or
represent performance methods that are needed to successfully
accomplish the work. 

\17 We have previously reported that there is no inherent reason that
workload transfers should result in readiness problems.  However,
they do need to be carefully managed.  Depot Maintenance:  Lessons
Learned From Transferring Alameda Naval Aviation Depot Engine
Workloads (GAO/NSIAD-98-10BR, Mar.  25, 1998). 

\18 As discussed later, we do not find, however, that the workload
combination in the Sacramento solicitation is necessarily
inconsistent with the 10 U.S.C.  2469a(d) requirement that
competitors be permitted to perform at their chosen locations and not
be given preferential treatment for performing at any single
location.  While many of the factors cited by the Air Force in favor
of combining the workloads are related to projected efficiencies of
performance at the closing Sacramento location, they could well apply
to other locations that can accommodate all of the workloads. 
Moreover, there is no restriction as to performance location in the
solicitation. 


      BEST-VALUE SELECTION
      CRITERIA
------------------------------------------------------- Appendix I:3.3

As discussed previously, the Sacramento solicitation provides that
the award will be made to the responsible offeror whose conforming
proposal represents "the best value to the Government." According to
the solicitation, the Air Force is to determine best value by
integrating the evaluations of the proposals under the specific
criteria, including transition and operations, cost criteria,
assessment criteria, and general considerations.  Transition,
operations, and cost are to be accorded equal weight, while general
considerations are to be substantially less important than cost,
transition, or operations.  Under the RFP evaluation scheme, it is
possible that the entity selected--whether public or private--may not
be the competitor whose proposal is determined to represent the
lowest total evaluated cost. 

A potential competitor has questioned the Air Force's authority to
select a source that does not represent the lowest total evaluated
cost for performing the workloads.  In this regard, the potential
competitor has suggested that 10 U.S.C.  2469a, the basic authority
governing the Sacramento competition, limits the Air Force to a
selection based on low evaluated cost.  We find nothing in 10 U.S.C. 
2469a that prescribes the use of any particular evaluation method or
requires that cost be the determining factor in the selection of the
successful offeror.
Subsection (d) of 10 U.S.C.  2469a sets forth requirements the Air
Force must satisfy in the selection process.  While they include a
number of cost elements that must be considered in the selection,
such as depreciation, noncost factors such as performance location
are also specified.\19 In view of the mixture of cost and noncost
elements and the lack of any specific reference to a particular
evaluation method, in our view the subsection (d) requirements do not
dictate that cost be the deciding factor in the selection of a source
for the Sacramento and San Antonio workloads.\20

While the Air Force is not required to use any particular source
selection method, it still must comply with provisions that apply
generally to the conversion of functions to private-sector
performance, particularly
10 U.S.C.  2461.  Section 2461(a)(2) requires that whenever a
DOD-performed function, such as the Sacramento workloads, are
converted to performance by a contractor, DOD must provide to
Congress a cost comparison which shows that savings will result. 
This provision would apply if the Sacramento competition resulted in
the selection of a private-sector source.  Similarly, the Air Force's
selection would have to comply with 10 U.S.C.  2462, which requires
that DOD procure the services it needs from the private sector if a
private source can provide that service at a lower cost.\21


--------------------
\19 The fact that a number of the requirements in subsection (d)
concern elements of cost that must be considered in the evaluation
does not mean that the selection must be based only on cost.  It does
mean, we think, that cost must be a significant factor in any
selection.  This would be the case under the Sacramento RFP, as cost
is weighted the same as each of the two major noncost or technical
areas. 

\20 This interpretation is consistent with subsection (g) of 10
U.S.C.  2469a, which provides for GAO review of the awards made under
the San Antonio and Sacramento competitions.  In the reviews, we are
to consider whether "appropriate consideration was given to factors
other than cost" in the selection and, on the other hand, to report
on whether the award "resulted in the lowest total cost to the
Department of Defense for the performance of the workload."

\21 In addition, the Air Force would be required to certify to
congressional committees the various cost estimates in accordance
with section 8039 of the 1998 Defense Appropriations Act and, if a
private sector source is selected, the Air Force would have to
certify to congressional committees its "in-house estimate" in
accordance with section 8014 of the act. 


      EVALUATION OF OVERHEAD
      SAVINGS FOR OTHER WORKLOADS
------------------------------------------------------- Appendix I:3.4

A potential competitor has raised concerns to us about the method
provided in the RFP for evaluating the overhead savings that may be
attributed to an offeror's existing government work resulting from
the addition of the competed workloads.  The concerns center on
whether the projected savings will be applied to the entire
performance period for the Sacramento workloads.  For the following
reasons, we conclude that the RFP establishes a reasonable method for
measuring the estimated overhead savings that can be attributed to
the addition of the competed workloads to existing government work
and that it complies with the relevant provisions of 10 U.S.C. 
2469a. 

The solicitation states that an adjustment will be made to a public
or private offeror's proposal for overhead savings to be realized for
other workloads.  At the outset of the applicable provision, the
solicitation warns:  "Due to uncertainty in forecasting long term
overhead rates by both public and private offerors, the ability to
forecast associated out-year savings significantly diminishes with
time." The RFP further explains that the evaluation will emphasize an
offeror's analysis and documentation of proposed management
initiatives to ensure that the projected savings, particularly those
predicted for more than 24 months after award, will occur.  The
evaluation formula provides that the proposed first year savings, if
determined to be reasonable "will be allowed,"\22 while second year
savings if supportable will also be allowed, but "discounted for
risk." The RFP goes on to explain 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."\23

To help ensure that the proposed savings that are evaluated are
realized by the agency, the solicitation further provides that
private offerors must agree, after award, to negotiate appropriate
government contract and forward pricing rate reductions.  A winning
public offeror would similarly be required to adjust the rates
charged for the workloads that were the subject of the evaluation
credit. 

We have no reason to question the Air Force's method for evaluating
overhead savings.  It seems reasonable for the agency to carefully
evaluate an offeror's projected savings in terms of the information
and analysis provided to the agency during the evaluation process and
to factor into that evaluation the possibility that conditions could
change over time so that what may be achievable savings in the short
term may be less so in the longer term.  Similarly, we have no basis
to conclude that the RFP evaluation process for the projected
overhead savings on other workloads is other than a reasonable
implementation of the 10 U.S.C.  2469a(d)(2)(B) requirement that the
source selection process take into account "the total estimated
direct and indirect savings (including overhead) that will be derived
by the Department of Defense." This provision is sufficiently general
to permit the agency broad discretion to decide exactly how to
measure "estimated" overhead savings as those savings apply to a
successful offeror's other government work.  Considering that the
performance period for the Sacramento workloads could extend for as
long as 8 years, we believe it is a legitimate exercise of the
agency's discretion to require strong support for projected future
savings and to consider that such projections may well be less
accurate for the later portion of the performance period. 


--------------------
\22 As we understand it, the term "allowed" means that the amount of
the projected savings that the agency considers to be reasonable will
be credited to the offeror in the determination of the offeror's
total alternative cost. 

\23 This part of the evaluation scheme provides for the consideration
of out-year savings that are not clearly supported by backup data,
but which otherwise seem to be achievable, at least in part, as a
positive element in the noncost portion of the SSA's integrated
assessment of best value. 


      PERFORMANCE LOCATION
------------------------------------------------------- Appendix I:3.5

Subsection (g) of 10 U.S.C.  2469a provides that our report on a
solicitation for workloads from the closing depots is to include our
view as to whether the solicitation under review provides a
"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 source
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. 

We have found no provisions in the solicitation that designate a
particular location, such as the closing Sacramento depot, at which
performance is required or preferred.  Nor do any of the solicitation
evaluation criteria evidence a bias towards any particular
performance location. 

Nonetheless, as discussed earlier, a potential competitor has
expressed the concern that the consolidation of workloads in a single
solicitation, in effect, would favor an offeror proposing to perform
the work at the closing Sacramento facility.  The basis of this
concern is that the commodity and aircraft workloads have little
technical relationship to each other and were arguably combined only
because they had been performed together at the Sacramento depot. 

As we understand the 10 U.S.C.  2469a provisions concerning
performance location, they are to prevent the Air Force from
specifying a performance location or from creating an advantage for a
particular location for reasons that are not reasonably related to
performance or cost.  In this regard, the legislative history of 10
U.S.C.  2469a makes clear that the provision does not prohibit
offerors from selecting the best performance location and receiving
an evaluation credit for that location based upon legitimate
performance considerations.  In fact, the statement of managers
accompanying the 1998 Authorization Act states that the agency "would
be expected to consider real differences among 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).) While it may be that the closing
Sacramento depot would be an advantageous performance location for
the combined workloads, as stated earlier, other locations or
combinations may also be suitable.  Thus, we cannot say that the
workload combination, without a corresponding location restriction in
the solicitation, directly interferes with an offeror's right under
10 U.S.C.  2469a(d) to compete without regard to performance
location. 


      COMPLIANCE WITH OTHER
      APPLICABLE PROVISIONS OF
      10 U.S.C.  2469A
------------------------------------------------------- Appendix I:3.6

In addition to reviewing specific compliance issues arising under
10 U.S.C.  2469a, such as the treatment of overhead savings, and
addressing the section 2469a provisions concerning performance
location, we reviewed the Sacramento solicitation to determine
whether it otherwise complies with the requirements of section 2469a. 

As noted previously, 10 U.S.C.  2469a sets forth a number of
requirements that must be satisfied in the Sacramento solicitation
and selection process.  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 (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 single
location.  Section 2469a requires that all six of these conditions be
stated in the solicitation. 

Reviewing the solicitation in the context of the 10 U.S.C.  2469a
requirements, we found that all of the requirements are specifically
acknowledged in the solicitation.\24 Further, we are unaware of other
provisions of the solicitation that are inconsistent with the 10
U.S.C.  2469a requirements.  Thus, we find no basis to conclude that
the Sacramento solicitation deviates in any material respect from the
requirements of
10 U.S.C.  2469a. 


--------------------
\24 Five of the six requirements are listed in section M-903 of the
solicitation.  The one requirement not listed in this section is the
requirement that 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 solicitation at paragraph 6.1.5.6 of section L
and paragraph 1.2b(6) of section M-109, as well as in the SAF/AQ
Public-Private Competition Cost Procedures of Feb.  21, 1998. 


AGENCY COMMENTS AND OUR EVALUATION
========================================================== Appendix II

We informally obtained comments on our review from Air Force
officials.  While they did not disagree with most of our conclusions,
they had several concerns with our conclusion that the Air Force had
not, as of April 22, 1998, provided a sufficient basis to show that
soliciting the various workloads on a combined basis is necessary to
satisfy the agency's needs.  The Air Force's concerns and our
responses follow. 

First, the Air Force requested that we make it clear that all of our
conclusions concerning the workload combination in the Sacramento
solicitation were based on the agency's rationale in support of its
determination that it was more logical and economical, than not, to
combine the workloads.  The Air Force states that it has not had the
opportunity to explain how the combination meets its needs and
requests that we remove any indications that the agency has not
sufficiently analyzed or justified the workload combination. 

Our report indicates that the Air Force's rationale for the workload
combination was prepared in the context of its mandated determination
that the combination was logical and economical, rather than in the
context of explaining how the combination is reasonably related to
its needs.  Further, we say our review of the solicitation was
conducted in a different context than would be the case if a protest
were filed and that the result of a protest may be different.  As far
as the Air Force's opportunity to explain how the workload
combination meets its needs, we had numerous informal discussions
with Air Force officials about the workload combination in the
context of this review of the solicitation.  The Air Force has
provided explanations regarding the workload combination since
December 1997.  While those explanations have been in a different
context, as we point out in our review, the explanations in a number
of respects discuss the workload combination in terms of the agency's
needs. 

Second, the Air Force states that we are concerned that some of the
potential efficiencies cited by the Air Force in support of the
workload combination could arguably be realized only if the workload
is performed at a single location.  The Air Force points out that the
solicitation does not require a particular performance location.  We
recognize this in our report.  Nevertheless, our point is that, in
view of the statutory prohibition against any location restriction in
the solicitation, it is not appropriate to justify the workload
combination based upon performance at a single, as opposed to
multiple locations. 

Third, the Air Force says that it is not clear from our report
whether the concern raised by a potential competitor regarding the
workload combination was a general one based upon a possible
restriction on competition or was based upon the argument that the
combination, in effect, mandated performance at the closing
Sacramento depot.  The concerns were based upon both points and we
discuss each point in the context it was raised. 

Finally, the Air Force requests two specfic changes.  First, the Air
Force requests that we recognize in this report, as we did in our
report on the agency's additional rationale for the workload
combination, that decisions to combine requirements in a solicitation
are a matter of agency judgment and may prove to be appropriate.  We
have clarified our report to make this point.  Second, the Air Force
requests that we state that its workload combination is not well
supported in terms of logic and economies rather than not sufficient
to show a reasonable relationship to its needs.  We do not agree. 
While we recognize that the Air Force's rationale was prepared in the
context of its mandated determination, we conclude for the purpose of
this review that, as of April 22, the available information does
provide a sufficient basis to show that the combined workloads are
necessary to meet the agency's needs. 

We have incorporated additional changes suggested by the Air Force
where appropriate. 

*** End of document. ***