GAO

United States General Accounting Office

Report to Congressional Committees

May 1999 PUBLIC-PRIVATE 

COMPETITIONS

Reasonable Processes 

Used for San Antonio 

Engine Depot 

Maintenance Award

GAO/NSIAD-99-155

Page 1 GAO/NSIAD-99-155 Public-Private Depot Competitions

United States General Accounting Office

Washington, D.C. 20548 Leter

National Security and

International Affairs Division

B-282343.2 Letter

May 27, 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 April 1, 1999, which 

contained procurement sensitive information. This 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 San Antonio Air Logistics Center, Kelly Air 

Force Base, Texas.2

 Specifically, we assessed whether (1) the Air Force’s 

procedures for conducting the San Antonio competition provided a 

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) the award 

resulted in the lowest total cost to the Department of Defense (DOD) for 

performance of the work.

1

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

2

The engine competition workload included F100 turbine engine (noncore work), TF39 turbine engine, 

T56 turbine engine, fuel accessories, engine electronics, TF39 two-level maintenance, and T56 two-level 

maintenance.

Letr
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Results in Brief The processes used for the San Antonio engine maintenance competition 

award were reasonable. Specifically, (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 

deviate in any material respect from applicable laws and regulations; 

(3) the Air Force 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. 

We also identified several methodological and process issues related to the 

cost evaluations that, while not materially affecting the selection, may be 

useful for the Air Force to consider in future competitions. 

Background As the result of a 1995 Base Realignment and Closure decision, the 

Sacramento and San Antonio Air Logistics Centers, 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. As a result, the 

Air Force announced 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 

centers.

On March 20, 1998, the Air Force issued a solicitation for the purpose of 

conducting a public-private competition for multiple engine depot 

maintenance workloads being performed at the San Antonio Air Logistics 

Center.3

 The Air Force received one private sector proposal from Pratt & 

Whitney San Antonio Engine Services Corporation, which had General 

Electric Company, Allison/Rolls Royce/Standard Aero, Allied Signal, and 

3

A small portion of San Antonio’s workload was transferred to other DOD depots outside the 

competition process. For example, F100 workloads identified as core (this refers to work that is to be 

performed in a DOD facility) were transferred outside the competition process to the Oklahoma City 

depot. Additionally, core workloads from the nuclear weapons directorate were transferred to the 

Ogden Air Logistics Center in Utah. 

Letr
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Caterpillar Logistics as major subcontractors. Also, one public sector 

proposal was received from the Air Force's Oklahoma City Air Logistics 

Center, which was teamed with Lockheed Martin Kelly Aircraft Company. 

Lockheed Martin’s major subcontractors were Standard Aero Limited, 

Chromalloy Gas Turbine, and Woodward Governor. 

The Air Force planned to make an award in October 1998. However, the 

award decision was delayed based on the evaluation team’s concerns 

regarding certain pricing data received from both offerors. Consequently, 

the Air Force issued a solicitation amendment on September 28, 1998, that 

required detailed cost information for high-dollar contract line items. 

Revised best and final offers were submitted by both offerors on 

January 16, 1999. On February 12, 1999, the Air Force selected the 

Oklahoma City Air Logistics Center's proposal as representing the best 

value to the government.

San Antonio Air Force 

Depot Competition 

Placed No Limitation 

on Performance 

Location

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 

be limited to performing the work in place or at any other single location. 

On the basis of our review of the San Antonio engine competition 

evaluation and selection documents, we found no basis to conclude that 

the procedures did not provide a substantially equal opportunity for the 

offerors to compete without regard to performance location. For example, 

in its evaluation the Air Force expressed concern about the risks inherent 

in Oklahoma City’s plan to transition the F100 engine work to its facilities 

at Oklahoma City. This concern was based on legitimate performance 

considerations regarding the availability of trained workers and did not 

reflect a bias toward performing the work at the closing San Antonio 

facility. Appendix III provides the details of our legal analysis.

Competition 

Procedures Complied 

With Applicable Laws 

and Regulations

Overall, the Air Force’s evaluation and selection of Oklahoma City were 

reasonable, fair, and consistent with the solicitation and the depot 

competition procedures. We found no reason to conclude that the 

competition procedures used deviated in a material way from 10 U.S.C. 

2469a and other applicable laws and regulations. (See app. III for our 

detailed legal analysis.) In assessing the Air Force’s compliance with 

applicable laws and regulations relating to the competition for San 

Antonio’s work, we reviewed the Air Force’s evaluation of the proposals 

and the selection in the context of applicable laws and regulations. 
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This review included examining documents, reviewing processes and 

procedures, and discussing the competition with Air Force officials.

Competition Procedures The Air Force materially complied with the required procedures. For 

example, pursuant to 10 U.S.C. 2469a and its depot competition 

procedures, the Air Force issued the solicitation under Federal Acquisition 

Regulation (FAR) part 12, which prescribes the policies and procedures for 

the acquisition of commercial items and FAR part 15, which sets forth the 

source selection procedures for competitively negotiated acquisitions. 

Also, as required by the law, the solicitation called for proposals from 

public and private sector sources for aircraft engine maintenance work 

currently being performed at the closing San Antonio Air Logistics Center. 

Further, consistent with applicable law, the solicitation provided for award 

to the public or private competitor that was responsible and whose 

proposal conformed to the solicitation and represented the best value to 

the government. 

Applicable Laws and 

Regulations

The Air Force materially complied with applicable laws and regulations. 

Several statutes, in particular 10 U.S.C. 2469a, govern the solicitation and 

award process for public-private competitions for depot workloads of the 

closing San Antonio and Sacramento Air Logistics Centers. 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 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 

Factors Other Than 

Cost

While the competitor selected represented the lowest evaluated cost to the 

government, the Air Force considered the relative merits of the technical 

and management approaches of both proposals. For example, the Air Force
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considered Pratt & Whitney’s “reliability centered maintenance”4 approach 

combined with its warranties and guaranties to be a benefit. On the other 

hand, the Air Force concluded that Oklahoma City’s plan to perform 

in-house a number of repair processes currently contracted out was risky, 

largely because of the proposed qualification schedule. Thus, for these and 

other reasons, we found no basis to conclude that factors other than cost 

were not appropriately considered. (See app. III for our detailed legal 

analysis.)

Evaluation Resulted in 

the Lowest Total Cost 

to the Government

Overall, the San Antonio engine competition cost evaluation results were 

reasonable. The Air Force awarded the Oklahoma Air Logistics Center the 

multiple engine depot maintenance workload. Oklahoma City’s total 

evaluated cost of $10,516,225,557 was about 5 percent less than Pratt & 

Whitney’s evaluated cost of $11,066,342,080.

While not affecting the selection, we do question the accuracy and 

completeness of some of the estimates used in the evaluation. The 

cumulative dollar impact of our findings is not significant enough to 

eliminate the $550-million difference between the total evaluated costs of 

the offerors. The areas where we have questions about the accuracy and 

completeness of evaluated costs include (1) overhead, (2) depreciation of 

government-furnished equipment, (3) warehouse services, (4) material, 

(5) fair market value of government-furnished equipment, and

(6) warranties.

Cost Evaluation Was 

Reasonable

The overall San Antonio engine cost evaluation was reasonable. We 

reviewed the accuracy and soundness of the data, assumptions, and 

methodology supporting selected items in the evaluation. To do this, we 

analyzed the key cost elements in each proposal and the final adjustments 

the Air Force made. 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) held 

discussions with the cost evaluation team regarding the methodology used 

in determining the evaluated cost; (2) reviewed the calculations and 

4Reliability centered maintenance was defined in Pratt & Whitney’s proposal as an approach for 

implementing improved maintenance practices and rapidly incorporating design and configuration 

modifications that would improve engine reliability.
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supporting documentation for the various cost elements; (3) on a selective 

basis, independently verified data to corroborate the evaluated cost 

estimates; and (4) discussed competition issues with the public offeror. We 

question several of the cost estimates and present them here as information 

for the Air Force to consider in future competitions. 

Overhead Savings Are 

Understated 

The evaluation team’s calculation of the public offeror’s overhead savings is 

understated.5

 Correcting this understatement would decrease the total 

evaluated cost of the public offeror because the team considered some 

costs as variable when they should have been treated as fixed or partially 

fixed. Oklahoma City’s estimate of overhead savings was reduced by 

65 percent. 

During the early stages of the evaluation process, the evaluation team 

initially reduced Oklahoma City’s overhead savings estimate to 

$210.6 million. The team determined that the averaging technique used by 

Oklahoma City did not accurately estimate overhead savings and 

developed its own methodology. While we agree that the Oklahoma City 

estimate was inaccurate, the approach used by the evaluation team 

understated overhead savings. For example, in the commodity directorate, 

the evaluation team’s calculations assumed that the $15.5 million in annual 

shop equipment depreciation was 100 percent variable and would increase 

on a directly proportional basis as additional workload is added. Using this 

assumption, rates for equipment depreciation expense would remain 

constant, and no overhead savings would result from adding workload. 

However, this assumption is inaccurate. We reviewed shop equipment 

depreciation data to determine the impact that added workload would have 

on Oklahoma City’s cost projections. We found that the estimated shop 

equipment depreciation did not increase as much as the cost evaluation 

team assumed. The data we reviewed showed that equipment depreciation 

was fixed and would result in a reduced overhead cost for each unit 

produced as workload was added. We estimated that overhead savings in 

the commodity and propulsion directorates were understated by about 

$5 million per year, or about $67 million over the performance period.6

 We 

5

Understated means that the evaluated cost would be lower than that estimated by the evaluation team. 

Conversely, overstated means that the evaluated cost would be higher than that estimated by the 

evaluation team.

6

The basic performance period is 7 years, which may be extended up to 15 years.
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did not estimate the total effect of the team’s cost assumptions on the 

remaining expense categories. 

In the final stage of the selection process, the source selection authority 

further reduced Oklahoma City’s overhead savings from $210.6 million to 

$138.6 million to reflect the uncertainty in achieving overhead savings in 

the latter years of the performance period. In this regard, the final 

evaluated overhead savings estimate for the public offeror was understated 

because the evaluation team’s error in the early phase of the final process 

was reflected in the source selection authority’s final decision. 

Government-Furnished 

Equipment Depreciation Cost 

Understated

Government-furnished equipment depreciation is understated for both 

offerors. Correcting this understatement would increase the total evaluated 

cost of both offerors. Our review of the supporting data shows that the Air 

Force’s calculations of depreciation were not consistent with the stated 

methodology and differed between offerors. These errors resulted in a 

$22.7 million understatement of Oklahoma City’s depreciation costs and a 

$9.9 million understatement of Pratt & Whitney’s depreciation costs.

The evaluation team increased Oklahoma’s evaluated cost by $15.7 million 

and Pratt & Whitney’s evaluated cost by $2.3 million to reflect the 

depreciation cost associated with government-furnished equipment. The 

depreciation adjustment was to account for equipment with an acquisition 

cost of $100,000 or greater provided by the government directly to a private 

contractor and depreciated over a period of 12 years with no residual value. 

The Air Force stated that its depreciation adjustment was based on 

applying an average annual equipment depreciation value to account for 

replacing retired equipment with new equipment during the performance 

period. 

The evaluation team’s stated methodology for calculating depreciation for 

government-furnished equipment was to calculate the average annual 

depreciation and apply this average to the performance period. Instead, for 

the public offeror, the team used a different approach. It totaled the 

undepreciated book value of all government-furnished equipment items 

valued at $100,000 or more. We estimated the depreciation adjustment 

using the team’s stated methodology to be $38.4 million versus the 

$15.7 million estimate made by the evaluation team—for a difference of 

$22.7 million. The evaluation team members were uncertain why this error 

occurred.
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The evaluation team used its stated methodology in evaluating the private 

offeror’s government-furnished equipment depreciation. However, the team 

did not include all applicable equipment items in its calculations. 

Additionally, the team made an error in its averaging calculations. We 

determined that the equipment depreciation expense should have been 

$12.2 million instead of the $2.3 million used—an understatement of 

$9.9 million.

Fair Market Value of Equipment 

to Private Offerors Was 

Understated

The evaluation team understated the cost of government-furnished 

equipment for the public offeror’s private partners. Correcting this 

understatement would have increased the total evaluated cost of the public 

offeror. We were unable to estimate the value of this understatement 

because the Air Force is uncertain how much of this equipment will be 

used or its fair market value. The acquisition cost of this equipment is 

reported at about $126.6 million.

The Fiscal Year 1998 Defense Authorization Act provides that the 

evaluators give consideration to the fair market value of land, plant, or 

equipment used by a private offeror to perform competition workloads 

from a closing military installation. While the evaluation team considered 

the fair market value of equipment to be used by the private offeror’s team, 

it did not consider the fair market value of equipment to be used by the 

private sector members of the public offeror’s team. 

Warehousing Adjustment 

Overstated

The evaluation team overstated the warehousing function adjustment for 

the public offeror by about $16.6 million, or about 57 percent. Correcting 

this overstatement would reduce the total evaluated cost of the public 

offeror. The overstatement resulted from (1) using an incorrect amount to 

represent the warehousing services rate charges and (2) assuming 

incorrectly that all warehousing costs are variable.

The Defense Logistics Agency provides the Air Force warehousing 

services, such as storing, issuing, and receiving inventory. The logistics 

agency charges customers standard prices that are computed annually for 

each type of service. The evaluation team concluded that the Oklahoma 

City offer did not include the cost associated with the logistics agency’s 

warehousing function. The team estimated that the warehousing function 

cost should be about $28.7 million. 

However, the team’s estimate was overstated by about $16.6-million for two 

reasons. First, it used incorrect source data, resulting in a $2.5-million 

overstatement. Second, the team incorrectly assumed that all logistics 
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agency warehousing costs are variable, resulting in a $14.1-million 

overstatement. Our prior work shows that no more than 51 percent of costs 

for the warehousing function are variable.7

Material Cost Adjustment Is 

Questionable 

We question one part of the methodology used to compute material cost 

adjustment. It is unclear whether correcting this adjustment would 

increase or decrease the total evaluated cost of the public offeror. 

Specifically, the evaluation team used an inappropriate indicator as a basis 

for computing the adjustment for the public offeror. To compute 

$110.8 million of the $175.8-million material cost adjustment, the evaluation 

team used an overhead management cost factor that is not related to the 

depot’s material costs.8

 This cost factor is not an indicator of historical 

material cost performance, and it was not a reliable basis for the material 

cost adjustment. 

Other Risks Associated With 

Warranties and Guaranties Could 

Have Been Considered

The evaluation team could have considered another factor in evaluating the 

credit provided to both offerors for warranties and guaranties. While 

substantial reductions were made in the evaluation of the private offeror’s 

warranties and guaranties, we noted that the methodology did not account 

for the risk that the government might not realize all estimated warranty 

and guaranty benefits. Our prior work shows that such risks exist. 

Addressing this factor could have increased the total evaluated cost of each 

offeror.

The evaluation team estimated that Pratt & Whitney’s proposed engine 

reliability improvements and the associated warranties and guaranties 

contained in their proposal could be worth as much as $608 million to the 

Air Force. However, the source selection authority determined that most of 

the associated savings were to occur in the latter part of the program. 

Therefore, the source selection authority reduced the warranties and 

guaranties estimate by $359 million to reflect the fact that Pratt & Whitney 

might not qualify for the entire 15-year performance period under the 

award-term provisions.

7

Public-Private Competition: Processes Used for Sacramento Depot Maintenance Award Appear 

Reasonable (GAO/NSIAD-99-42, Nov. 23, 1998). 

8This factor is for overhead costs not directly related to the depot’s operations, such as the charge to 

the depots for the Joint Logistics Systems Center.
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The evaluation team used historic failure rates and projected engine usage 

rates to estimate the value of Pratt & Whitney’s warranties and guaranties. 

However, it did not assess the Air Force’s historic realization of such 

warranties or historic administrative costs. In 1996, we reported9

 that Air 

Force cost-benefit analyses of warranties were inadequate because the 

analyses assumed all potential defects would be identified and claims 

submitted. At that time, the Air Force estimated that 80 to 85 percent of 

failures subject to warranty benefits go unreported. Additionally, in cases 

where claims data were available for our review, we reported that the 

warranty price paid exceeded the value of the claims made against the 

warranty. For example, the combined warranty price was $94 million, the 

value of the warranty claims was $5 million, and the quantified price 

exceeded the quantified benefit by $89 million. 

The warranty credit given to Oklahoma City in the evaluated cost was 

$3.6 million. Therefore, any adjustment to warranty claim risk would be 

limited to this amount.

Conclusions The processes used for the San Antonio engine depot maintenance award 

were reasonable. The Air Force materially complied with the requirements 

of applicable laws and regulations in the competition for depot 

maintenance work at the San Antonio Air Logistics Center. While not 

affecting the selection, some cost estimates used in the evaluation could 

have been more accurate and complete. These cost estimates relate to 

overhead, government-furnished equipment depreciation, warehousing 

services, material, fair market value of government-furnished equipment, 

and warranties. The issues that are related to these cost estimates provide 

information for the Air Force to consider in its future competitions. 

Agency Comments Air Force officials reviewed a draft of this report. They agreed with our 

conclusion that the Air Force followed the criteria announced in the 

solicitation and exercised sound judgment in selecting the successful 

competitor for the San Antonio workloads. They generally disagreed with 

our conclusions that the savings to the government were understated and 

with our observations regarding the accuracy and completeness of costs 

for depreciation of government-furnished equipment, warehouse services, 

9

Weapons Acquisition: Warranty Law Should Be Repealed (GAO/NSIAD-96-88, June 28, 1996.)
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material, fair market value of government-furnished equipment, and 

warranties. Air Force officials said that they recognized the time 

constraints associated with this report, and as such, they could only 

provide general comments at this time. 

We will need further information to comment on the areas where the Air 

Force disagrees with our report. The Air Force said it would provide a 

detailed reply to each of the cost issues at a later date. We will evaluate and 

report, as appropriate, on any additional information provided in response 

to this report. Not having specific information about procurement sensitive 

information, we have marked the report to indicate that the entire report 

must be safeguarded.

Scope and 

Methodology

In conducting our work, we obtained information from and interviewed 

officials at Headquarters, U.S. Air Force, Washington, D.C.; Headquarters, 

Air Force Materiel Command, Wright Patterson Air Force Base, Ohio; the 

San Antonio Air Logistics Center, Kelly Air Force Base, Texas; the 

Oklahoma City Air Logistics Center, Tinker Air Force Base, Oklahoma; and 

the Defense Contract Audit Agency, Ogden, Utah. We offered to discuss the 

San Antonio engine competition and award issues with both the public and 

private competitors; however, the private offeror declined. 

To analyze the Air Force’s decision to award the San Antonio depot 

maintenance workload to the Oklahoma City Air Logistics Center, we 

interviewed officials and collected relevant documents from Headquarters, 

Department of the Air Force; Headquarters, Air Force Materiel Command; 

Air Force source selection team members; representatives from the public 

competitor; the independent advisors to the source selection authority; and 

the Defense Contract Audit Agency. To verify compliance with the San 

Antonio engine competition and selection with applicable laws and 

regulations, our Office of 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 with 

representatives of the public offeror. We also reviewed the evaluation 

team’s calculating methods for the various cost elements 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 
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cost elements in the evaluation and in some cases recalculated cost 

estimates.

We performed our review between September 1998 and March 1999 in 

accordance with generally accepted government auditing standards.

A list of our related reports is provided at the end of this report.

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. 

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
Page 13 GAO/NSIAD-99-155 Public-Private Depot Competitions

Contents

Letter 1

Appendix I

Summary of Depot 

Reporting 

Requirements in the 

National Defense 

Authorization Act for 

Fiscal Year 1998

16

Appendix II

San Antonio and 

Sacramento Air 

Logistic Centers’ 

Closure History

18

Appendix III

Legal Review of 

Competition for San 

Antonio Air Logistics 

Center Workloads

23

Appendix IV

Major Contributors to 

This Report

52

Related GAO Products 53
Contents

Page 14 GAO/NSIAD-99-155 Public-Private Depot Competitions

Abbreviations

ALC Air Logistics Center

BRAC Base Realignment and Closure

DOD Department of Defense

GKDC Greater Kelly Development Corporation

RFP request for proposal

SSA Source Selection Authority

SSAC Source Selection Advisory Council
Contents

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Page 16 GAO/NSIAD-99-155 Public-Private Depot Competitions

Appendix I

Summary of Depot Reporting Requirements in 

the National Defense Authorization Act for 

Fiscal Year 1998 ApIenxdi

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, 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 Air Logistics Centers and report to 

Congress within 45 days of the solicitations’ issuance whether the 
Appendix I

Summary of Depot Reporting Requirements 

in the National Defense Authorization Act 

for Fiscal Year 1998

Page 17 GAO/NSIAD-99-155 Public-Private Depot Competitions

solicitations provided “substantially equal” opportunity to compete without 

regard to performance location and otherwise complied with applicable 

laws and regulations.

Fourth, the act required us to (1) review all DOD awards for the workloads 

at the two closing Centers 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 aircraft 

engine workload at the San Antonio Air Logistics Center.
Page 18 GAO/NSIAD-99-155 Public-Private Depot Competitions

Appendix II

San Antonio and Sacramento Air Logistic 

Centers’ Closure History ApIenxdi

The 1995 Base Realignment and Closure (BRAC) Commission 

recommended closing the Sacramento and San Antonio Air Logistics 

Centers 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 air logistics center; 

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 air logistics center; 

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 air 

logistics centers’ 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 

1The 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.
Appendix II

San Antonio and Sacramento Air Logistic 

Centers’ Closure History

Page 19 GAO/NSIAD-99-155 Public-Private Depot Competitions

communities. 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 Defense Depot Maintenance 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 Sacramento'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 program 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 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. 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 workload, complete a 

cost analysis that considers the savings potential of consolidating the 

2

The BRAC report specified that the Council should determine where depot maintenance workloads 

from closing Air Force depots should be moved.

3

Defense Depot 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).
Appendix II

San Antonio and Sacramento Air Logistic 

Centers’ Closure History

Page 20 GAO/NSIAD-99-155 Public-Private Depot Competitions

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 (RFP) 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’s 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

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 

5Public-Private Competitions: Processes Used for C-5 Aircraft Award Appear Reasonable

(GAO/NSIAD-98-72, Jan. 20, 1998).
Appendix II

San Antonio and Sacramento Air Logistic 

Centers’ Closure History

Page 21 GAO/NSIAD-99-155 Public-Private Depot Competitions

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 determinations 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. 

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 

6

Public-Private Competitions: 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).
Appendix II

San Antonio and Sacramento Air Logistic 

Centers’ Closure History

Page 22 GAO/NSIAD-99-155 Public-Private Depot Competitions

basis(was necessary to satisfy its needs but that otherwise the solicitation 

complied with applicable laws, including 10 U.S.C. 2469a.8

In October 1998, the Air Force awarded the Sacramento workload to the 

Ogden Air Logistics Center. As required by the 1998 Defense Authorization 

Act, we reviewed the Sacramento award, issuing our report on 

November 23, 1998.9

 We concluded that (1) the Air Force met the 

requirements of applicable laws and regulations in awarding the 

Sacramento workload to the Ogden Air Logistics Center; (2) the process 

used for estimating overhead, commodity rate risk, warehousing, base 

operating support, and material surcharge costs provided issues for the Air 

Force to consider in its future competitions; and (3) 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.

8Public-Private Competitions: Review of San Antonio Depot Solicitation (GAO/OGC-98-49, 

May 14, 1998).

9Public-Private Competitions: Processes Used for Sacramento Depot Maintenance Award Appear 

Reasonable (GAO/NSIAD-99-42, Nov. 23, 1998).
Page 23 GAO/NSIAD-99-155 Public-Private Depot Competitions

Appendix III

Legal Review of Competition for San Antonio 

Air Logistics Center Workloads ApeIxndi

On March 30, 1998, the Department of the Air Force, San Antonio Air 

Logistics Center (ALC) at Kelly Air Force Base, Texas, issued request for 

proposals (RFP) No. F41608-98-R-0084 for the purpose of conducting a 

public-private competition for the propulsion business area depot-level 

workloads being performed at the closing San Antonio ALC. The Air Force 

received proposals from one private sector offeror–Pratt & Whitney San 

Antonio Engine Services, Inc. (Pratt & Whitney) and from one public 

offeror--the Air Force’s Oklahoma City ALC. Following technical and cost 

evaluations, the Air Force selected Oklahoma City ALC to perform the San 

Antonio workloads on the basis that its proposal represented the best value 

to the government. The Oklahoma City ALC proposal represented the 

lowest “most probable total evaluated” cost at $10,516,225,557 over the 

15-year performance period.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 San Antonio 

and Sacramento 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 Department of Defense (DOD) for the performance of the workloads.2

Our review was 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 can file a protest with our Office pursuant to 31 U.S.C. 3551-3556, or 

file an action with the courts, or an objection to the award with DOD under 

10 U.S.C. 2469a(h). If a protest is filed with our Office or an action is filed 

in court, factual information, issues, and arguments raised by the interested 

parties would be reviewed in the context of an adversarial process. 

1The “most probable total evaluated cost” represents the offeror’s costs as adjusted by cost 

comparability factors as well as a range of "dollarized" discriminators and projected overhead savings.

2Our analysis of the cost of the award is contained in the body of the report.
Appendix III

Legal Review of Competition for San Antonio 

Air Logistics Center Workloads

Page 24 GAO/NSIAD-99-155 Public-Private Depot Competitions

Thus, the result of a protest or court action may differ from that of our 

current review. Similarly, the result of an objection filed with DOD may 

differ from our review.

Our review of the procedures the Air Force used to conduct the San 

Antonio competition in the context of the concerns that were raised by the 

competitor revealed 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 used in the cost evaluation. These issues are 

discussed in the body of the report.

In our 1998 review of the San Antonio 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 May 29, 1998, the National Airmotive Corporation (National Airmotive) 

filed a protest of the solicitation’s provisions with our Office pursuant to 

31 U.S.C. 3551-3556. National Airmotive objected to the solicitation of the 

workloads on a combined basis. In a decision dated September 4, our 

Office denied the protest, concluding that the Air Force was able to show, 

based, in part, on evidence concerning readiness risks not considered in 

our earlier report, that combining the workloads was reasonably required 

to satisfy its needs.4

 On November 12, National Airmotive filed an action in 

the United States District Court for the Northern District of California, 

Oakland Division, seeking a declaration that the solicitation was illegally 

3

10 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 San Antonio solicitation was the subject of our 

report entitled Public-Private Competitions: Review of San Antonio Air Force Depot Solicitation

(GAO/OGC-98-49, May 14, 1998). 

4

National Airmotive Corp., B-280194, Sept. 4, 1998.
Appendix III

Legal Review of Competition for San Antonio 

Air Logistics Center Workloads

Page 25 GAO/NSIAD-99-155 Public-Private Depot Competitions

issued and void and an injunction preventing the Air Force from going 

forward with the award or performance of a contract awarded pursuant to 

the solicitation. The action was dismissed by decision dated February 25, 

1999.5

 The following describes the legal standards applicable to the San 

Antonio 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 

Standards

The basic authority for the San Antonio workload competition is 

10 U.S.C. 2469a, which provides procedures for public-private competitions 

for the workloads of the closing San Antonio and Sacramento 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 its solicitations and the source selection 

process it uses to make awards for the specified workloads. Particularly, 

the solicitations 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 a private offeror proposes to use in the 

performance of the workload; (3) take into account the total estimated 

direct and indirect costs that DOD will be incur and the total estimated 

direct and indirect savings (including overhead) that DOD will be derive; 

(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 they choose; and (6) ensure that 

5

National Airmotive v. Cohen, Civ. Action No. C 98-4381 SC., DC., ND., and Cal., Feb. 25, 1999. The court 

concluded that the combination of the workloads was required to satisfy the Air Force’s needs.

6

As stated earlier, in the prior review of the San Antonio solicitation in our report, Public-Private 

Competitions: Review of San Antonio Air Force Depot Solicitation, 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 

changed our view, based on new information, in our bid protest decision, National Airmotive Corp. We 

will not again address the issue of the bundled workloads in the solicitation, because the subject of our 

review is the selection, not the solicitation. 
Appendix III

Legal Review of Competition for San Antonio 

Air Logistics Center Workloads

Page 26 GAO/NSIAD-99-155 Public-Private Depot Competitions

no offeror is given any preferential consideration for, or is in any way 

limited to, performing the workload in place or at any other single 

location.7 

In addition to 10 U.S.C. 2469a, a number of other laws 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 from in-house to contractor 

performance of a depot workload valued at $3 million or more. 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

 

Other provisions 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 more than 

7In 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 

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 San Antonio solicitation containing 

multiple workloads on March 30, 1998. 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. 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 San Antonio competition. 

See Posadas v. National City Bank, 296 U.S. 503-504 (1936); 53 Comp. Gen. 853 (1974). 
Appendix III

Legal Review of Competition for San Antonio 

Air Logistics Center Workloads

Page 27 GAO/NSIAD-99-155 Public-Private Depot Competitions

10 civilian employees to contractor performance. The provisions of 

10 U.S.C. 2461 require that when a DOD-performed function, such as the 

workloads involved in this competition, is changed to performance by a 

contractor, DOD must report to Congress and perform an analysis 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 

Depot Competition 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 Depot Competition 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 under the applicable provisions of 

the Federal Acquisition Regulation (FAR). This regulation sets 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.

9Again, these provisions do not conflict with the six 10 U.S.C. 2469a competition requirements listed 

previously and may also apply to the San Antonio competition. See Posadas v. City Bank cited above. 
Appendix III

Legal Review of Competition for San Antonio 

Air Logistics Center Workloads

Page 28 GAO/NSIAD-99-155 Public-Private Depot Competitions

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 

competing offer is to be selected. Dimensions International/QSOFT, Inc., 

B-270966.2, May 28, 1996, 96-1 CPD 257. 

Solicitation The RFP for the San Antonio workloads contains several line items 

representing the transition and performance of various combinations of the 

propulsion workload. For example, (1) line item no. 0001 calls for offers 

for transition, completion of work in process (WIP), and repair of the T56, 

TF39, and F100 engines; (2) line item no. 0002, for transition, WIP, and 

repair of the same three engines, and fuel accessories; (3) line item no. 

0003, for transition, WIP, and repair of the same three engines, the fuel 

accessories and for two-level maintenance on the T56 engine; (4) line item 

0004, for transition, WIP, and repair of the three engines and the fuel 

accessories and for two-level maintenance for the T56 and TF39 engines; 

and (5) for “over and above” work related to each of the four line items.10 

The RFP provides for a transition period, which is to begin at the award 

and to end by July 13, 2001, and a 7-year basic performance period, which 

may be extended up to 15 years based upon the performance of the 

awardee. The fixed-price requirements-type award is to be based on the 

work as represented by line item nos. 0001, 0002, 0003, or 0004.11 The size 

of the workload to be awarded to a private sector source is, according to 

the solicitation, to be determined based on the constraints of 10 U.S.C. 

2466(a). That provision restricts the funds, which can be expended for 

private sector performance of depot-level workloads, to no more than 50 

percent of the funds made available to the Air Force for such work in a 

particular fiscal year. 

10“Over and above” work is not included in the basic work requirements but is within the scope of the 

award and may be ordered on the basis of a fixed hourly rate.

11According to the solicitation, the prices would be subject to economic adjustment based on various 

measurement standards and to prospective redetermination based on revisions in the estimated 

quantities of the work and process improvements.

Lret
Appendix III

Legal Review of Competition for San Antonio 

Air Logistics Center Workloads

Page 29 GAO/NSIAD-99-155 Public-Private Depot Competitions

According to the solicitation, the competition is to be conducted under 

FAR part 12, which prescribes the policies and procedures for the 

acquisition of commercial items; FAR 15.101, which sets forth the source 

selection processes and techniques to be used in competitive negotiated 

acquisitions; and 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—that is deemed responsible under the FAR,12 whose 

proposal conforms with the solicitation, and that 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.13

The evaluation criteria cover transition, repair operations, cost, and 

assessment. Transition covers capability and resources, equipment, 

responsibility transfer milestones, and risk management. The repair 

operations criteria consist of five factors: (1) continuing operations plan, 

(2) risk management, (3) process improvements, (4) additional workloads, 

and (5) small business. The assessment criteria, which will be used to 

measure the extent to which a proposal meets the transition, repair 

operations, and cost criteria, are: (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, each offeror’s total 

12According to FAR subpart 9.1, a responsible prospective contractor is one that meets the FAR 9-104 

standards, 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.

13The solicitation provides that if the award is limited by the constraints of 10 U.S.C. 2466(a), the award 

may consist of the work in line items nos. 0001, 0002, 0003, or 0004. According to the RFP, the award of 

any line item may be made to the offeror whose proposal represents the best value for line item 

nos. 0004 and 0006 (over and above work), considering the risks associated with the awarded line item.

14Under 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. 

Lret
Appendix III

Legal Review of Competition for San Antonio 

Air Logistics Center Workloads

Page 30 GAO/NSIAD-99-155 Public-Private Depot Competitions

alternative cost is to be developed by factoring in the numerous 

adjustments to public and private offerors’ total proposed cost under the 

CCH and the RFP. Finally, each offeror’s 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.”15

Further, the RFP provides for the evaluation of general considerations such 

as the results of pre-award surveys, site visits, and fair market value. In 

addition, two risk assessments are done: one on the proposal and one on 

performance. A proposal risk assessment measures the risk that is 

associated with an offeror's proposed approach to accomplishing the 

solicitation requirements relating to each of the four transition area factors 

and each of the five repair operations area factors. A performance risk 

assessment determines, based on an offeror's present and past 

performance, the probability of the offeror’s successfully accomplishing 

the proposed effort. 

Finally, the solicitation provides that in the SSA's best value assessment, 

the criteria for transition and repair operations areas and cost criteria are 

to be equally important, while the general considerations are to be 

“considered substantially less important than transition, repair operations, 

or cost.” 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 council 

then advised the SSA, who made the final selection.

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.

16The one requirement not listed in section M-902 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 5.f.6 of section L and paragraphs 2.6.b. (7) and (8) of section M-901.

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Evaluation of 

Proposals

Two offerors submitted proposals in response to the solicitation. 

Oklahoma City ALC, the public depot chosen by the Air Force to submit the 

public sector offer, proposed to perform the F100 engine work at its 

facilities in Oklahoma City. The public offeror chose Lockheed Martin 

Kelly Aircraft Company (Lockheed) as its principal partner. Lockheed’s 

major subcontractors are Standard Aero Limited, Chromalloy Gas Turbine, 

and Woodward Governor. Lockheed proposed using the San Antonio 

facilities transferred by the Air Force to the Greater Kelly Development 

Corp. (GKDC) and leased by GKDC to Lockheed. Lockheed, along with 

Standard Aero, would perform most of the T56 work at San Antonio. 

Lockheed would also head the TF39 effort, much of which is to be 

performed at San Antonio along with Woodward Governor and Chromalloy. 

The private sector offeror, Pratt & Whitney, proposed to perform most of 

the work on all three engines and accessories at the San Antonio facilities 

to be leased from GKDC.17 Pratt & Whitney proposed performing most of 

the F100 work itself. The major subcontractors are General Electric Co. for 

the TF39 engine work, Allison/Rolls Royce/Standard Aero for the T56 work, 

and a joint venture of Caterpillar Logistics and Allied Signal for supply 

management and logistics support. 

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.18 On July 10, 1998, the Air Force determined that 

both proposals were within the competitive range. 

Accordingly, the Air Force held discussions with the offerors consisting of 

written evaluation notices raising concerns about each of the proposals 

and face-to-face exchanges about the concerns. As a result, each offeror 

revised its proposal. The Air Force requested final proposal revisions on 

August 31, 1999. Both offerors submitted final revisions by September 14. 

The evaluators found pricing problems in both proposals that caused them 

to question the cost realism of each. According to the evaluators, the 

Oklahoma City ALC proposal contained a significant unsupported drop in 

material prices and instances of unbalanced pricing. The Pratt & Whitney 

proposal contained unexplained variances from the Air Force estimates; 

some prices were significantly higher and some unrealistically low. The Air 

17A significant part of the TF39 engine work will be performed at locations other than San Antonio. 

18FAR 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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Force therefore decided to amend the RFP to provide for the submission of 

detailed pricing information from both offerors on a sample of 50 from the 

694 exhibit line items (ELINS) that represented all of the required work.19 

Both offerors submitted the information requested, which the Air Force 

evaluated and discussed with the offerors. The evaluators were later 

satisfied that the offerors’ amended prices were realistic, and a second 

round of final proposal revisions was submitted by January 16, 1999. 

The Air Force made final cost adjustments and evaluated the January 16 

proposal revisions. Based on the results of the evaluations and cost 

adjustments, the advice of the SSAC, and the SSA’s analysis in the context 

of the RFP evaluation criteria, the SSA decided that the Oklahoma City ALC 

proposal met all of the RFP requirements and represented the best value to 

the Air Force over the life of the requirement. While the SSA recognized 

that Pratt &Whitney submitted a “slightly better technical proposal,” the 

SSA found that the differences between the two proposals had been 

normalized by the “dollarization” adjustments and concluded that the 

Oklahoma City ALC proposal would meet the needs of the Air Force at less 

cost.

Technical Evaluation As noted previously, the solicitation evaluation criteria provided that the 

offerors’ management approaches were to be evaluated in the transition 

and repair operations areas. Under transition, four factors were to be 

evaluated: (1) capability and resources, (2) equipment, (3) responsibility 

transfer milestones, and (4) risk management. Repair operations included 

five factors: (1) continuing operations plan, (2) risk management, 

(3) process improvements, (4) additional workloads, and (5) small 

business. Under each of the factors the proposal risk was to be assessed.

Transition Capability and resources, the first factor under transition, were assessed by 

examining the offerors’ proposed processes to improve the availability of 

engines and its capability to achieve the flow days proposed for the 

estimated quantities. The SSA noted that the SSAC had assigned Oklahoma 

City ALC a green, or acceptable, rating with moderate risk. Pratt & 

Whitney had been given a blue, or exceptional, rating with low risk. The 

SSA stated that Oklahoma City ALC had experience in military engine 

19According to the Air Force the 50 ELINS selected for detailed review represented 85 percent of the 

baseline value of the total requirement.

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repair and provided a low risk approach to transition of the TF39 and T56 

work, which was to be done in place at the San Antonio facility. The SSA 

recognized that Oklahoma City ALC’s proposal to transition the F100 work 

to its Oklahoma City ALC facility met the RFP requirements. Nevertheless, 

the SSA was concerned with the plan to hire 1,251 workers, 81 percent of 

whom would need some training before the public offeror’s assumption of 

full responsibility for the work in January 2000. According to the SSA, only 

60 percent of the workers would be fully trained by that date. While the 

SSA was concerned that this lack of training could cause problems in 

meeting production requirements, she believed that through the 

implementation of the Oklahoma City ALC’s contingency plans, production 

impacts and schedule concerns could be mitigated. The SSA concluded 

that training was a weakness in the ALC’s transition plan for the F100 work 

that justified the moderate risk rating. The SSA further concluded, 

however, that the risk could be offset by an upward “dollarization” cost 

adjustment to cover the cost risks of implementing any needed contingency 

actions.20 The SSA found several strengths in the Pratt & Whitney 

approach, including (1) its plan to conduct a 9-day “stand-down” for 

employee orientation and training and to inventory equipment, material, 

and WIP; (2) its plan for multi-skill training; and (3) its direct access to 

parts purchasing and manufacturing. While recognizing the advantages of 

these and other strengths, the SSA concluded that they were reflected in 

Pratt & Whitney’s prices and plans to reduce flow days and were therefore 

not susceptible to separate “dollarization” credit.

For the equipment factor, an offeror was to set forth its plans for acquiring 

equipment from the Air Force and other sources to support the work. The 

SSA concurred with the SSAC's green rating with low risk for both 

proposals. The SSA concluded that both proposals were essentially equal 

and proposed no “dollarization” adjustment.

For the responsibility transfer milestones factor, the Air Force evaluators 

measured the offerors’ ability to pass from transition to full performance. 

The SSAC gave both offerors green, or acceptable, ratings and assigned 

Oklahoma City ALC’s proposal a moderate risk rating and Pratt & Whitney’s 

proposal a low risk rating. According to the SSA, both proposals met the 

RFP requirements, but the SSA was concerned about Oklahoma City ALC’s 

plan to qualify itself to perform an additional 61 critical F100 repair 

20As discussed later, the SSEB cost evaluators developed proposed “dollarization” cost adjustment 

figures under appropriate factors, which were provided to the SSAC and the SSA.

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processes that are currently contracted out. An independent technical 

team reviewed Oklahoma City ALC’s plan to become qualified in all of the 

repair processes within a 17.5-month schedule. According to the team, 

Oklahoma City ALC could be qualified to perform 43 percent of the repairs 

within the planned 17.5 months, 78 percent of the repairs within 36 months, 

and 98 percent (all but two of the repairs) within 60 months. On the basis 

of this assessment, the SSA concluded that Oklahoma City ALC could meet 

all of the RFP requirements, but to do so on schedule, it might have to use 

outside sources. Therefore, the SSA proposed to offset the risk of having to 

use more costly outside sources by an upward “dollarization” cost 

adjustment. After making the cost adjustment, the SSA concluded that 

both proposals demonstrated the technical capability and resources to 

meet the requirements and were essentially equal under this factor.

For the risk management factor, the Air Force measured the offeror’s 

ability to identify areas of transition risk and to provide a credible approach 

to manage it. The SSA concurred with the SSAC’s rating of each proposal 

as green with low risk. The SSA concluded that both proposals were 

essentially equal and proposed no “dollarization” adjustment.

Repair Operations Under the continuing operations plan factor, an offeror was to provide a 

realistic time-phased production operations plan for achieving its proposed 

flow days, providing the required quantities, and improving the availability 

of all three engines. The SSA concurred with the SSAC’s rating of each 

proposal as blue with low risk. The SSA noted that Oklahoma City ALC 

offered extended warranties on the T56 and TF39 engines that exceeded 

the RFP requirements by a minimum of 500 percent in operational time and 

should result in savings to the Air Force. In addition, the SSA stated that 

the public offeror committed to a significant flow day reduction of 

11 percent from the current baseline across the entire requirement and 

planned to support early induction of T56 and TF39 reparable components 

prior to orders creating a pool of serviceable items. The SSA proposed to 

capture these benefits by a downward “dollarization” evaluation credit. 

Pratt & Whitney proposed to use a single logistics company (formed by 

Allied Signal and Caterpillar Logistics) to provide logistics support, which 

according to the SSA had the potential to expedite material movement, 

centralize material tracking and control, and provide for other efficiencies. 

Further, the SSA noted that the private offeror proposed extended 

warranties for the T56 and TF39 engines and reliability guarantees for the 

F100. Pratt & Whitney exceeded the RFP warranty requirements by 400 to 

500 percent for the T56 and TF39 engines and committed to what the SSA 

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termed as a “significant flowday reduction” of 32.1 percent for the total 

requirement. The private offeror also proposed to support early induction 

of T56 and TF39 reparable components. The SSA proposed to make a 

downward “dollarization” adjustment in her evaluation of the Pratt & 

Whitney proposal for these benefits.

For the risk management factor, which was used to assess an offeror’s 

ability to identify repair operation risk areas and manage them, the SSA 

agreed with the SSAC’s rating of both proposals as green with low risk. The 

SSA stated that both proposals were essentially equal and proposed no 

“dollarization” adjustments. 

For the process improvement factor, the Air Force measured the offerors’ 

approach to systematic improvements of processes and related resources. 

The SSA agreed with the SSAC rating of Pratt & Whitney’s proposal as blue 

with low risk and the public sector proposal as green with low risk. While 

recognizing that Oklahoma City ALC proposed an acceptable approach, the 

SSA noted several strengths in the Pratt & Whitney proposal. The SSA was 

particularly impressed with the private offeror’s approach to “reliability 

centered maintenance” that included depot visit guarantees if reliability 

performance objectives were not met. The SSA found that these benefits, 

though significant, had already resulted in “dollarization” credits for Pratt 

& Whitney under other factors, so no additional adjustments were 

proposed. 

Neither offeror proposed any additional work, and neither was given a 

rating under the additional work factor.

For the small business factor, the SSA adopted the SSAC ratings of green 

with low risk for Oklahoma City ALC and blue with low risk for Pratt & 

Whitney. The SSA considered the private offeror’s approach as a strength 

but did not consider the ratings under this factor “to be a discriminator.” 

Performance Risk 

Assessment

For the performance risk analysis of the transition, repair operations, and 

cost areas, the SSA determined that the Oklahoma City ALC transition area 

represented a low risk, but represented a moderate risk in the repair 

operations and cost areas. Likewise, Pratt & Whitney’s repair operations 

area represented a moderate risk, but the cost and transition areas were 

considered a low risk. The SSA stated that Oklahoma City ALC’s cost could 

be volatile due to factors beyond the public offeror’s control. However, the 

SSA noted that Oklahoma City ALC had been a good cost manager in areas 

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under its control. The SSA concluded that the difference in cost risk 

represented by the two offerors could be accommodated by making 

upward adjustments for cost realism to the Oklahoma City ALC proposal. 

General Considerations Under the general consideration category, the SSA concluded that both 

offerors met the solicitation and responsibility requirements. The SSA 

noted that both offerors proposed to lease facilities from GKDC.21 The SSA 

stated that the Air Force’s sale of the closing San Antonio facilities to 

GKDC for $108 million appeared to be reasonable and represented the fair 

market value of the property. Further, the SSA noted that while she did not 

have insight into the lease arrangements between GKDC and the two 

offerors or their partners, she assumed that neither offeror had received 

preferential treatment, since the leases were competitive agreements.

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 adjusting the total 

alternative cost to reflect the “dollarization” of significant discriminators 

among the proposals. In determining the total evaluated cost, the SSA used 

ranges based on different estimates for overhead savings and risk 

“dollarization.” The results of these analyses are summarized below.22

Realism and 

Reasonableness Evaluation

The cost team evaluators initially reviewed each offeror’s cost proposal to 

determine its completeness, realism, and reasonableness. The evaluators 

were ultimately satisfied that each cost proposal met these standards. 

Under the Depot Competition Procedures, the Defense Contract Audit 

Agency (DCAA) audited the Oklahoma City ALC cost proposal and 

reviewed the public offeror’s disclosure statement23 and accounting and 

21The public offeror’s private partners proposed to perform much of their work at the closing San 

Antonio facilities. The lease was to be between the private firms and GKDC.

22SSEB cost team evaluators calculated the various cost adjustments and ranges for overhead savings 

and “dollarization,” which were approved by the SSAC. As discussed later, the SSA adopted the 

adjustments and considered the proposed ranges for overhead savings and “dollarization” in the 

selection.

23The Depot Competition Procedures require that a public offeror provide a disclosure statement of its 

cost accounting practices under the requirements of the Cost Accounting Standards Board.

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estimating systems. DCAA found that the disclosure statement was 

adequate and the cost proposal was realistic.24 DCAA found the Oklahoma 

City ALC accounting system to be adequate.25

Determination of Total 

Alternative Cost

The cost evaluators determined each offeror's total alternative cost by 

calculating the offeror's “customer cost”—in essence, its proposed price 

for performing the requirement represented by line items 0004 and 0006, 

and making upward and downward adjustments to the cost in accordance 

with the RFP and the CCH. Oklahoma City ALC's customer cost was 

calculated to be $10,164,013,176. Pratt & Whitney’s customer cost was 

$11,559,347,993. At this point, the Oklahoma City ALC proposal was about 

$1.395 billion lower.

Using the customer cost for each offeror as a base, the evaluators made the 

comparability adjustments called for in the CCH and the RFP. The 

evaluators made two sets of adjustments. The first set, required by form 

number 1 of the CCH,26 encompassed adjustments to the public sector 

offer to reflect its full performance cost. The second set, required by form 

number 2 of the CCH, to reflect other cost differences between public and 

private entities, were applicable to the public and private sector proposals. 

The CCH form number 1 adjustments made to the Oklahoma City ALC 

proposal included upward and downward changes in a number of 

24As stated in the Air Force’s February 1998 Competition Cost Procedures, a public offeror is 

considered to have a funding advantage over a 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 Oklahoma City ALC proposal, the SSAC proposed 

upward adjustments from $110,193,523 to $175,752,377 to represent material cost risk and $30,572,635 

to represent labor cost risk. These adjustments seem to have been in lieu of adjustments to the 

Oklahoma City ALC cost proposal during the initial cost realism evaluation. They are different from 

most of the other "dollarization" adjustments as they primarily relate to the method of developing the 

cost estimates rather than a quantification of a technical performance risk. 

25DCAA did not review Oklahoma City ALC’s estimating system because, according to the Air Force, 

such a review is “normally done only when the anticipated number of future cost proposals warrants 

such a review.” 

26Since Oklahoma City ALC proposed that a private firm, Lockheed, be responsible for the T56 and 

TF39 work, the portion of the Oklahoma City ALC cost proposal that represented the work to be 

performed by Lockheed or its subcontractors was not subject to the form number 1 adjustments. The 

Lockheed portion was, however, subject to the form number 2 adjustments applicable to private 

offerors.

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categories.27 The most significant were upward adjustments of $97,919,767 

for base operating support, $27,100,211 for unfunded civilian retirement, 

and $36,334,858 for retiree health benefits. The net result of all of the 

adjustments was an upward adjustment to the public offeror’s proposal of 

$135,038,131 that resulted in a form number 1 adjusted cost of 

$10,299,051,307. The adjusted cost was still lower than Pratt & Whitney’s 

customer cost of $11,559,347,993. 

CCH form number 2 adjustments were made to both proposals. Upward 

adjustments were made to both proposals for contract administration 

costs, reduction-in-force (RIF) costs, personnel carrying costs (that is, 

costs of retaining the current workforce at San Antonio that will be subject 

to a RIF and not be rehired by the new source after the workload is 

transitioned), a transition adjustment for costs of performing the WIP 

during the transition that each offeror elected not to perform, and the 

depreciation of government furnished equipment provided to a private 

source.28 

Some downward adjustments were made to the public offeror. For 

example, an adjustment of $28,731,413 was made for warehousing services 

provided by the Defense Logistics Agency.29 Other downward adjustments 

were $56,793,362 to the Oklahoma City ALC proposal to account for the 

cost in the public offeror’s rates for contract management and oversight 

that would not be needed for in-house performance of the F100 work, and 

$346,780,440 to the Pratt & Whitney proposal for the payment of federal 

income tax on profits and $78,424,733 to the Oklahoma City ALC proposal 

for the payment of tax on profits.30

27Upward adjustments were made for state unemployment payments, unfunded civilian retirement, 

depreciation for military construction program facilities, casualty insurance, F-100 packaging costs, and 

other recurring costs consisting of impact aid, retiree health benefits, and base operating support. 

Downward adjustments were made for mobilization support (cost of mobilization support plans and of 

underused capacity for mobilization requirements), for the Oklahoma Quality Jobs Credit (a special 

state incentive for the creation of local jobs), and for the use of specified sources (surcharges and other 

costs added to the cost of materials by the government supply system). 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 SSEB, the SSAC, and the SSA.

28The SSAC also included an upward adjustment of $12,755,639 to the Oklahoma City ALC proposal 

because of underpricing on T56 material found after the evaluation of the final proposal revision. This 

was to correct an error and was not actually a form 2 adjustment.

29The body of the report contains a detailed discussion of the calculation of the adjustment. 

30Since this adjustment was for private offerors, it applied to the Lockheed portion of the Oklahoma 

City ALC proposal.

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Form number 2 also provided for a downward adjustment for either a 

public or private offeror that proposed and supported overhead savings 

resulting from the addition of work from the competition.31 Pratt & 

Whitney proposed no overhead savings. The evaluators initially determined 

that a downward adjustment of $210,617,658 to $160,119,093 should be 

applied to the Oklahoma City ALC proposal to represent the savings 

applicable to other workloads at the Oklahoma City ALC facility during the 

15-year performance period. Later, the SSAC decided that the savings 

should be applied to only the first 3 years of performance because of the 

RFP provision governing the evaluation of such savings. Accordingly, the 

SSAC recommended that the overhead savings range be adjusted to 

$41,804,513 through $45,440,612.

The net result of the form number 2 comparability analysis for the Pratt & 

Whitney proposal was a downward adjustment of $233,923,488. The form 

number 2 downward adjustments to the Oklahoma City ALC proposal, 

including the high and low ranges for overhead savings, were $13,542,977 

(high overhead savings) and $9,906,878 (low overhead savings). The SSA 

agreed with the SSAC form number 1 and number 2 adjustment 

recommendations, including the recommendation relating to the use of the 

3-year period for the calculation of the overhead savings proposed by 

Oklahoma City ALC. In this regard, the SSA chose the low range of 

$41,804,513.32

The cost adjustments adopted by the SSA resulted in a total alternative cost 

for Pratt & Whitney of $11,325,424,505 and $10,289,144,429 for Oklahoma 

City ALC. No single adjustment accounts for the cost difference at this 

point, and Oklahoma City ALC’s cost is more than $1 billion less than Pratt 

& Whitney’s. 

31The solicitation stated 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." The overhead savings evaluation provision was 

included in the solicitation under the February 21, 1998, SAF/AQ competition cost procedures. 

32While the SSA’s decision document states that the SSAC recommended that the overhead savings be 

considered for the full 15 years, the proposal analysis report approved by the SSAC states that it 

“adjusted the figures to consider only the first three years savings” and proposed a “revised” overhead 

savings of between $41,804,513 and $45,440,612. In any event, the SSA, in the first instance, chose an 

overhead savings figure of $41,804,513 that was based upon the 3-year limit; no matter whose idea it 

was. As discussed later, this figure was increased in the SSA’s best value analysis. A detailed discussion 

of the calculation of the projected overhead savings is contained in the body of the report.

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Determination of Total 

Evaluated Cost

To arrive at the total evaluated cost of each proposal, the evaluators took 

the total alternative cost and applied “dollarization” adjustments. These 

adjustments were reviewed by the SSA and used in the final selection 

decision.

The initial aspect of the Oklahoma City ALC proposal that was considered 

to be suitable for quantification was the moderate risk under the transition 

capability and resources factor. The risk involved Oklahoma City ALC's 

proposal to hire 1,251 new workers to perform the F100 workload. The 

evaluators were concerned that only 60 percent of these workers would be 

fully trained by the time Oklahoma City ALC was to assume the workload 

at its facility. To compensate for the potential labor inefficiencies that 

could result from the need to provide training while meeting production 

requirements, the evaluators calculated an upward adjustment of the 

Oklahoma City ALC proposal between $19,974,001 and $126,816,454.33

The evaluators were also concerned, under the responsibility transfer 

milestones factor, about Oklahoma City ALC’s plan to convert 

61 outsourced repair operations to in-house performance within 

17.5 months. The evaluators concluded, based upon the findings of an 

independent review team, that it would likely take the public offeror longer 

than planned to achieve successful implementation of the repairs. As a 

result, Oklahoma City ALC was assigned a moderate risk rating in the 

technical evaluation under the responsibility transfer milestones factor. 

Since Oklahoma City ALC based its prices on its performance of the 

repairs, the evaluators calculated an upward cost adjustment range 

($26,335,737 to $71,850,386) to represent the risk of incurring the additional 

cost of contractor repairs during delays in implementing the in-house 

repair capability.

The evaluators proposed a downward “dollarization” credit under the 

continuing operations plan factor for flow day improvements and 

warranties and guarantees proposed by both the public and private 

33As we understand it, the SSEB and the SSAC calculated this range as a composite representing the 

labor efficiency risks in the Oklahoma City ALC proposal because of its training weakness under the 

capabilities and resources factor and of concerns about the impact of the training plans on the ability of 

the public offeror to achieve full operations for the F100 work under the responsibility milestones 

factor. It appears that the range calculations also included factors representing the projected efficiency 

of the San Antonio workforce in performing new F100 work under the supervision of Oklahoma City 

ALC during transition and of the workforce at Oklahoma City ALC during startup. As discussed next, 

the SSAC proposed a separate upward “dollarization” adjustment under the responsibility milestones 

factor representing the cost risk of converting contracted repairs to in-house performance. 

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offerors. In the case of Oklahoma City ALC, the SSAC recommended a 

downward adjustment of $10,067,417 based on the public offeror’s proposal 

to reduce the flow days 11 percent from the current baseline for 

accomplishing the repairs. Further, the public offeror proposed warranties 

that exceeded the RFP requirements on the T56 and TF39 work that, 

according to the SSAC, were worth $3,600,000. Thus, the SSAC proposed 

adjusting the public proposal downward by that amount.

Pratt & Whitney proposed larger flow day reductions totaling up to 

32.1 percent. According to the SSAC, this merited a downward evaluation 

credit of $37,665,886. Pratt & Whitney further proposed to implement its 

“reliability centered maintenance” approach to the work through an 

extensive variety of warranties and guarantees that exceeded the RFP 

requirements and impacted most of the repairs. The benefits of this 

approach were to be accrued through reduced engine removal rates, 

guaranteed engine availability, warranted or guaranteed reliability, and 

reduced intermediate maintenance costs. According to the evaluators, the 

benefits, though significant, were often “heavily” weighted towards the 

later portion of the performance period—10 years and later. This aspect of 

the proposal caused concern that changes over time could reduce the 

future value of the warranties and guarantees. Based upon an analysis of 

the benefits, the SSAC, however, concluded that they could extend over the 

entire 15-year potential performance period and proposed a large 

downward credit between $605,500,000 and $505,700,00034 to represent 

the cumulative estimated value of the Pratt & Whitney approach.

In addition to the quantification of the technical aspects of the proposals, 

the evaluators proposed adjustments to the Oklahoma City ALC proposal 

to take into account the risk inherent in the nature of the public depot’s 

funding under the working capital fund and the possibility that the 

government would have to shoulder additional costs if Oklahoma City ALC 

could not perform its portion of the work at its proposed rates. The 

evaluators were concerned that Oklahoma City ALC had underestimated 

the cost of the materials needed to perform the F100 work. After analyzing 

the materials proposed under the 50 ELINS (as discussed earlier, these 

items represent about 85 percent of the baseline value of the requirement) 

34While the table of proposed “dollarization” adjustments in the SSAC’s report lists $605,500,000 as the 

high end of the range. There is a summary graph in the report representing the evaluated warranty and 

guarantee savings using $608.3 million as the high end. An appendix to the report containing a detailed 

analysis of the savings also used $608.3 million. As discussed later, the SSA used $608.3 million in the 

initial evaluation.

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they found that the public offeror proposed fewer materials than had been 

used in the past and had included a 5-percent material price reduction 

without a detailed implementation plan. 

Later, the SSAC considered the impact of past cost growth in materials due 

to factors beyond the control of the public offeror. Accordingly, the SSAC 

proposed an upward cost adjustment, based upon the 50 ELIN and past 

cost growth analyses, ranging from $175,752,377 to $110,193,523 to 

represent the risk that Oklahoma City ALC would not be able to perform 

within its material cost estimate.35 Similarly, the evaluators were 

concerned that the public offeror had underestimated the labor costs of 

performing the F100 work. In this regard, the SSAC concluded, based on 

Oklahoma City ALC’s past performance history and on historical cost 

growth beyond the ALC’s control, that an upward adjustment of 

$30,572,635 was justified to represent the risk of potential labor cost 

growth.

Finally, the SSAC proposed upward adjustments to both the public and 

private proposals to account for the potential decline in the workforce 

efficiency at the closing San Antonio ALC. The adjustments were to 

represent the declining efficiency at San Antonio between the award and 

the offeror’s assumption of the work in process, or WIP.36 The SSAC 

proposed upward adjustments between $21,900,000 and $32,600,000 for 

Oklahoma City ALC and between $27,600,000 and $41,900,000 for Pratt & 

Whitney. 

As a 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 and lowest downward, 

“dollarization” adjustments; and a low range consisting of the highest 

overhead savings, if any, and the lowest upward and largest downward 

adjustments. The high range for Pratt & Whitney was $10,823,958,619, 

while its low range was $10,709,858,619. The high range for Oklahoma City 

ALC was $10,713,068,863, and the low range was $10,480,816,809. Thus, 

according to the SSAC recommendation, while the Oklahoma City ALC 

35See the body of the report for a further discussion of the adjustment.

36Under both proposals, after the award, the San Antonio workforce would perform the WIP for a 

period until assumed by the new source. The difference in the proposed adjustments is due to the 

different period proposed by each offeror between award and assumption of the work; the range in 

each proposed adjustment is due to varying efficiency assumptions. 

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Air Logistics Center Workloads

Page 43 GAO/NSIAD-99-155 Public-Private Depot Competitions

high and low ranges were below the Pratt & Whitney high range, the private 

offeror’s low range was slightly below the public offeror’s high range.

The SSA took a two-step approach in the review of the SSAC cost and 

“dollarization” recommendations. The SSA first considered the SSAC 

recommendations directly and later gave further consideration to certain of 

them in the context of a “best value” analysis.

As mentioned before, the SSA initially adopted the SSAC form number 1 

and number 2 cost adjustments and $41,804,513 in overhead savings for 

other government work performed at the Oklahoma City ALC. The SSA 

chose $37,400,000 (from a range of $19,974,001 to $126,816,454) to 

represent the cost risk to cover potential labor inefficiencies inherent in 

Oklahoma City ALC’s transition plan and $71,850,386 (from a range of 

$26,335,737 to $71,850,386) to represent the risk that the public offeror 

would not be able to perform all of the F100 repair processes on schedule. 

The SSA further agreed with the SSAC’s assessment that Oklahoma City 

ALC offered $10,067,417 worth of flow day improvements and $3,600,000 in 

warranties and guaranties. The SSA agreed with the SSAC that the 

Oklahoma City ALC proposal represented a cost risk in both its material 

and labor cost estimates by making an upward cost adjustment of 

$175,752,377 for material (from a range of $110,193,523 to $175,752,377) 

and $30,572,635 for labor. The SSA also agreed with the low range of the 

upward adjustments ($21,900,000 for the public offeror and $27,600,000 for 

the private offeror) proposed by the SSAC to compensate for likely labor 

inefficiencies in connection with the WIP to be performed by the workforce 

at the closing San Antonio ALC. The SSA agreed with the SSAC that Pratt & 

Whitney offered flow day reductions that would benefit the Air Force and 

adopted a $37,666,886 downward adjustment. Finally, the SSA agreed with 

the SSAC that Pratt & Whitney’s “reliability centered maintenance” 

approach, as implemented by its series of guarantees and warrantees, 

would be a significant benefit to the Air Force. The SSA accordingly 

adopted the SSAC’s high range downward adjustment of $608,300,000 to 

recognize the potential savings.

At this point in the evaluation, the SSA concluded that the total evaluated 

cost was $10,613,000,000 for Oklahoma City ALC and $10,707,100,000 for 

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Air Logistics Center Workloads

Page 44 GAO/NSIAD-99-155 Public-Private Depot Competitions

Pratt &Whitney. The Oklahoma City ALC proposal maintained a cost 

advantage of $94.1 million.37

The SSA conducted a further “best value analysis” of three areas that had 

been considered earlier. The SSA first reconsidered the $41,804,513 

representing the savings to other government workloads performed at the 

Oklahoma City ALC that had been credited to the public proposal. The SSA 

noted that the $41.8 million savings was based on a strict reading of the 

RFP provisions as limiting such overhead savings to only 3 years of 

performance. The SSA stated that there were reasonable savings beyond 

the 3-year limit and added a credit based on a 10-year performance period. 

According to the SSA, the savings were to be allowed in full for the first 

5 years and discounted over the second 5 years at 5 percent per year. The 

SSA explained that for the first 5 years, the Air Force flying hour program 

and force structure as well as workload projections are reasonably certain 

under the DOD’s Future Year Defense Plan. Beyond that, according to the 

SSA, projected savings for the next 5 years should be discounted due to 

uncertainties about the workload. After 10 years, the SSA reasoned that 

the uncertainties in the workloads would be such that savings could not be 

reasonably projected. Based upon this reevaluation, the SSA concluded 

that the overhead savings credit should be increased to $138.6 million. 

Similarly, the SSA revisited the $608.3 million credit given to Pratt & 

Whitney due to the potential savings over the 15-year performance period 

associated with the private offeror’s proposed warranties and guarantees. 

The SSA noted that most of the savings would occur in the later 

performance years. The savings would further depend on Pratt & Whitney 

qualifying under the award term provision for additional performance time 

after the basic 7-year period. Therefore, the SSA concluded that 

recognition of savings beyond 10 years “would not be prudent” and reduced 

the savings adjustment for Pratt & Whitney from $608.3 million to 

$249 million.38

Also, the SSA reconsidered the depreciation adjustments applied to both 

proposals for equipment to be provided to private firms for use in the 

37The SSA’s source selection decision document contains cost figures rounded to the nearest million 

dollars. Where it is clear from supporting documents, such as the SSAC report, what the exact figure is; 

we use the exact amount. Where it is not clear, we use the rounded figure from the SSA decision 

document. 

38See the body of the report for a further discussion of the evaluation of the warranties and guarantees 

offered by both competitors.

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Air Logistics Center Workloads

Page 45 GAO/NSIAD-99-155 Public-Private Depot Competitions

performance of the workloads.39 The SSA concluded that the $2,338,359 

adjustment added to the Pratt & Whitney proposal was appropriate based 

on the small amount of equipment that the firm was to be given. For the 

public offeror, the SSA noted that the depreciation for the F100 equipment 

was in Oklahoma City ALC’s rates and that the $15,707,232 depreciation 

adjustment to the public proposal for government equipment to be 

provided to Lockheed was reasonable. The SSA concluded that 

depreciation was “appropriately considered and each offeror was treated 

equitably.”40

Finally, the SSA acknowledged Pratt & Whitney’s strength under the small 

business factor, but concluded the strength would not be significant 

enough to overcome Oklahoma City ALC’s cost advantage. A summary of 

the final cost adjustments made by the SSA follows.

39One of the requirements for the competition set forth in 10 U.S.C. 2469a is that standards used to 

determine the depreciation of facilities and equipment provide, to the maximum extent practicable, 

identical treatment to public and private offerors. The amounts added to each proposal for 

depreciation were initially made as form number 2 adjustments. 

40See the body of the report for a detailed discussion of the calculation of the depreciation. 

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Air Logistics Center Workloads

Page 46 GAO/NSIAD-99-155 Public-Private Depot Competitions

Award Based on the evaluation results, the SSA concluded that although Pratt & 

Whitney submitted a “slightly better technical proposal,” the “dollarization” 

adjustments “effectively normalized” the differences between them. The 

SSA noted that after “dollarization” of the risks and projected savings, a 

significant difference remained between the projected cost of the 

Oklahoma City ALC proposal and that of Pratt & Whitney. Accordingly, the 

SSA selected Oklahoma City ALC as providing the best value to the Air 

Force because, in the SSA’s view, the public offeror can capably meet the 

needs of the Air Force at a “far greater level of affordability.”

GAO Analysis As discussed previously, several statutes govern the solicitation and award 

process for public-private competitions for the depot workloads of the 

closing San Antonio and Sacramento 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. 

After reviewing the evaluation and selection records and speaking to 

relevant Air Force officials and to the public offeror, 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 

Oklahoma City ALC Pratt & Whitney

Total Customer Cost $10,164,013,176 $11,559,347,993

Cost Adjustments

Form 1 Adjustments 135,038,131 0

Form 2 Adjustments (106,669,239) (233,923,488)

Total “Dollarized” Adjustments 323,843,490 (259,082,225)

Total Evaluated Cost $10,516,225,557 $11,066,342,080

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Air Logistics Center Workloads

Page 47 GAO/NSIAD-99-155 Public-Private Depot Competitions

other applicable laws or relevant provisions of the FAR. The Air Force 

issued a competitive solicitation in accordance with FAR parts 12 and 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 was 

reasonable, fair, and the selection 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 several issues related to the estimates used for 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 San Antonio 

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.41 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 Oklahoma City ALC. 

41Public-Private Competitions: Review of San Antonio Air Force Depot Solicitation, cited above. In this 

review, we also concluded that the solicitation's workload combination did not favor an offeror 

proposing to perform at the San Antonio facility. 

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Air Logistics Center Workloads

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In the selection, the SSA recognized under the transition area that 

Oklahoma City ALC would have to move the F100 workload from the 

closing San Antonio facilities to those at Oklahoma City. While the SSA 

was not concerned about the public offeror’s ability to move the workload 

to its facilities, the SSA did assign Oklahoma City ALC a moderate risk 

because of its plan to hire and train 1,251 new workers; only 240 of which 

would be experienced F100 workers from the closing San Antonio ALC. On 

the other hand, Pratt & Whitney, which planned to perform most of the 

work at the closing San Antonio ALC, using for the most part the workers 

currently performing the workloads, was assigned low risk ratings under 

all of the transition factors. 

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.42 We believe that the SSA’s concerns in the 

evaluation, which centered on Oklahoma City ALC’s likely inability to 

attract more than more than 240 experienced San Antonio workers to 

relocate to Oklahoma City, were based upon legitimate performance 

considerations related to Oklahoma City ALC's transition plan and did not 

reflect bias towards performance at San Antonio. 

Consideration of Noncost 

Factors

In accordance with 10 U.S.C. 2469a(g), our review of the selection process 

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

42The statement of managers accompanying the 1998 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)).

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Air Logistics Center Workloads

Page 49 GAO/NSIAD-99-155 Public-Private Depot Competitions

give “appropriate consideration to noncost factors in the selection 

process.”43

As discussed in our review of the San Antonio solicitation,44 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, repair operations, and risk along with an 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 Oklahoma City ALC was based on the SSA’s assessment 

that the private offeror's “slightly better technical proposal” (a noncost 

consideration) was normalized in the “dollarization” of the respective 

strengths and weaknesses in each proposal. In the SSA’s view, Pratt & 

Whitney’s technical advantage was simply not enough to overcome 

Oklahoma City ALC’s lower costs. The evaluation and selection record 

shows an intensive assessment of the noncost elements of each proposal. 

For example, the SSA considered Pratt & Whitney’s “reliability centered 

maintenance” approach combined with its warranties and guaranties to be 

a benefit. The SSA also was impressed with the private offeror’s plan to use 

a single logistics company to handle material for all of the workloads. On 

the other hand, the SSA concluded that Oklahoma City ALC’s plan to 

perform in-house a number of repair processes currently contracted out 

was risky. The record shows that many of these aspects of the proposals, 

as well as others, were reflected as “dollarization” credits or penalties in 

the evaluation. 

43We consider noncost factors in this competition to include all of the elements that were evaluated 

under the transition and repair 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 repair 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 the 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 Oklahoma City ALC’s labor rates and material cost in its 

proposal was, in fact, the evaluation of a cost factor. 

44Public-Private Competitions: Review of San Antonio Air Force Depot Solicitation, cited above.

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Air Logistics Center Workloads

Page 50 GAO/NSIAD-99-155 Public-Private Depot Competitions

While the competitor 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 

Applicable Provisions of 

10 U.S.C. 2469a

In addition to addressing the section 2469a provisions, including 

performance location and consideration given to factors other than cost, 

we reviewed the San Antonio competition to determine whether it 

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 San Antonio solicitation and selection process.45

In 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. However, we found 

errors in the evaluation conducted in relation to two of the six 

requirements. The first concerned the depreciation calculations for 

government-furnished equipment.46 The second concerned the evaluation 

of the fair market value of the government-furnished equipment provided 

to private entities.47 The errors, which are discussed in the body of the 

report, did not affect the selection. Thus, we have no basis to conclude that 

the selection of Oklahoma City ALC deviated in any material from the 

requirements of 10 U.S.C. 2469a. 

Compliance With Other 

Applicable Provisions of 

Law

As stated earlier, the provisions of 10 U.S.C. 2461 requiring a notice to 

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. 

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 

45As discussed earlier, in our prior review of the solicitation in Public-Private Competitions: Review of 

San Antonio Air Force Depot Solicitation, cited above, we concluded that all of the 10 U.S.C. 2469a 

requirements were specifically acknowledged in the solicitation.

46Section 2469a requires that the Air Force use cost standards for depreciation that provide, to the 

maximum extent practicable, identical treatment to public and private offerors.

47Section 2469a requires that the Air Force take into account the fair market value of any land, plant or 

equipment from a military installation that is to be used by a private offeror.
Appendix III

Legal Review of Competition for San Antonio 

Air Logistics Center Workloads

Page 51 GAO/NSIAD-99-155 Public-Private Depot Competitions

conversions of DOD functions such as these workloads. Whether the Air 

Force must comply with either statute in a particular competition depends 

upon whether a public or private offeror is selected. In this case, the Air 

Force selected the proposal of the public-sector offeror, Oklahoma City 

ALC, which represented the lowest total evaluated cost for the 

performance of the workloads. While the public offeror will use private 

firms to perform the T56 and TF39 workloads and other portions of the 

workload, Oklahoma City ALC submitted the proposal in its name and 

retains the overall responsibility for the performance of all workloads. 

Since the public offeror representing the lowest total evaluated cost was 

selected, the award was consistent with 10 U.S.C. 2462 and did not trigger 

the notice requirements of 10 U.S.C. 2461.48

Other Matters We conclude that the evaluation and selection process did not deviate in 

any material respect from the provisions of 10 U.S.C. 2469a and other 

applicable provisions of law. While the overall selection was reasonable, 

we identified several issues related to the estimates used in the cost 

evaluation. These issues are discussed in the body of the report.

48Similarly, we think 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 were inconsistent with section 8039 of 

the act regarding the use of “comparable estimates” for public and private offers.
Page 52 GAO/NSIAD-99-155 Public-Private Depot Competitions

Appendix IV

Major Contributors to This Report ApVIenxdi

National Security and 

International Affairs 

Division, Washington, 

D.C.

Barry Holman, Associate Director

Julia Denman, Assistant Director

Office of the General 

Counsel

John Brosnan, Assistant General Counsel

Dallas Field Office Larry Junek, Evaluator-in-Charge

John Strong, Evaluator 

Pam Valentine, Evaluator
Page 53 GAO/NSIAD-99-155 Public-Private Depot Competitions

Related GAO Products

Navy Ship Maintenance: Allocation of Ship Maintenance Work in the 

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Army Industrial Facilities: Workforce Requirements and Related Issues 

Affecting Depots and Arsenals (GAO/NSIAD-99-31, Nov. 30, 1999).

Public-Private Competitions: Processes Used for Sacramento Depot 

Maintenance Award Appear Reasonable (GAO/NSIAD-99-42, Nov. 23, 1998).

Navy Depot Maintenance: Weaknesses in the T406 Engine Logistics 

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Defense Depot Maintenance: Public and Private Sector Workload 

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Defense Depot Maintenance: Contracting Approaches Should Address 

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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 

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Navy Ship Maintenance: Temporary Duty Assignments of Temporarily 

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Public-Private Competitions: DOD's Additional Support for Combining 

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Defense Depot Maintenance: DOD Shifting More Workload for New 

Weapon Systems to the Private Sector (GAO/NSIAD-98-8, Mar. 31, 1998).

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Public-Private Competitions: Access to Records Is Inhibiting Work on 

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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 

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Navy Regional Maintenance: Substantial Opportunities Exist to Build on 

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Air Force Depot Maintenance: Information on the Cost-Effectiveness of B-1 

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Navy Depot Maintenance: Privatizing Louisville Operations in Place Is Not 

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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 

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May 1, 1997) and (GAO/T-NSIAD-97-111, Mar. 18, 1997). 

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

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-inPlace at the Louisville, Kentucky, Depot (GAO/NSIAD-96-202, Sept. 18, 

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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 

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Depot Maintenance: Opportunities to Privatize Repair of Military Engines

(GAO/NSIAD-96-33, Mar. 5, 1996).

Closing Maintenance Depots: Savings, Workload, and Redistribution Issues

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Military Bases: Case Studies on Selected Bases Closed in 1988 and 1991

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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 

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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).

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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 

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(709420) Letr
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