United States Government Accountability Office

Washington, DC 20548

Comptroller General

of the United States

 

Decision

Matter of: Northrop Grumman Technical Services, Inc.

File: B-406523

Date: June 22, 2012

Richard P. Rector, Esq., and Dionis M. Gauvin, Esq., DLA Piper US LLP, and Linda 

T. Maramba, Esq., and Valerie Caproni, Esq., Northrop Grumman Corporation, for 

the protester.

Kevin P. Mullen, Esq., Charles L. Capito, Esq., and Ethan E. Marsh, Esq., Jenner & 

Block LLP, for Gulfstream Aerospace Corporation, the intervenor.

Col. Mark S. Teskey, Lt. Col. Paul E. Cronin, Amanda M. Willis, Esq., and Italia A. 

Carson, Esq., Department of the Air Force, for the agency.

Paula J. Haurilesko, Esq., and Guy R. Pietrovito, Esq., Office of the General 

Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Consolidation of requirements for contractor logistics support for the C-20 and 

C-37 aircraft requiring 5 years of fixed-price flying hour rates is reasonable, where 

the agency determined that consolidation will result in significant cost savings and 

operational efficiencies.

2. A solicitation for aircraft logistics support is not unduly restrictive of competition 

or inconsistent with customary commercial practices, where the record supports the 

agency’s market research identifying its requirements and mitigating risk to offerors.

DECISION

Northrop Grumman Technical Services, Inc., of Herndon, Virginia, protests the 

terms of request for proposals (RFP) No. FA8106-11-R-0001 issued by the 

Department of the Air Force for contractor logistics support for the C-20 and C-37 

aircraft. Northrop Grumman contends that the solicitation unduly restricts 

competition and deviates from customary commercial practices.

We deny the protest.

DOCUMENT FOR PUBLIC RELEASE

The decision issued on the date below was subject to 

a GAO Protective Order. This redacted version has 

been approved for public release.
Page 2 B-406523 

BACKGROUND

The C-20 and C-37 aircraft are militarized versions of commercial business jets 

manufactured by Gulfstream Aerospace Corporation. The C-20 aircraft is a variant 

of Gulfstream’s GIII and GIV business jets, which have been in use since 1980. 

See Agency Report (AR), Tab 5.2, Performance Work Statement (PWS), at 4-7; 

www.gulfstream.com/news/history. The newer C-37 aircraft is a variant of 

Gulfstream’s GV and G550 business jets, which have been in use since 1995.1

 Id. 

The C-20 and C-37 aircraft, for which the RFP seeks logistics support, are primarily 

used by the military services to provide worldwide airlift support for the Vice 

President, Cabinet-level dignitaries, senior military leaders, and other government 

executive officials.2

 AR, Tab 5.2, PWS, at 4. Northrop Grumman is the incumbent 

contractor providing logistics support to the Air Force for the C-20 aircraft, and 

Gulfstream is the incumbent contractor for the C-37 aircraft. AR at 59.

Pre-Solicitation Planning

Between December 2006 and November 2010, the Air Force issued four requests 

for information (RFI), soliciting industry’s views with regard to consolidating the 

contractor logistics support for the C-20 and C-37 aircraft and related issues.3 See,

e.g., www.fbo.gov, Special Notice, Dec. 20, 2006; Sources Sought Notice, Nov. 9, 

2010. As relevant here, the Air Force asked potential offerors for their views 

regarding the consolidation of the C-20 and C-37 logistics support requirements, the 

length of the contract, the time required to phase in the new contractor at the 

beginning of the contract, and the type of contract that should be awarded. Id.

The Air Force received 44 responses from 26 companies, 14 of which claimed to 

have experience with Gulfstream aircraft. See generally

 

1 The C-20 aircraft was first deployed by the Department of the Navy in 1983; the 

C-37 aircraft was first deployed by the Air Force in 1998. Naval Air Systems 

Command C-20 Gulfstream Fact Sheet, www.navair.navy.mil; U.S. Air Force Fact 

Sheet: C-37A, www.af.mil/information/factsheets.

AR, Tabs 6.1a-6.5h. For 

example, one contractor, which stated that it had experience with Gulfstream 

aircraft, noted in 2007 that the GV and G550 aircraft (upon which the C-37 aircraft 

are based) were “so new that the aircraft are mostly still under warranty and so 

therefore there is little field experience. However, between now and 2012, we 

2 The RFP will also support C-20 aircraft used by the U.S. Marine Corps and the 

Navy. AR, Tab 5.2, PWS, at 4.

3 An additional RFI containing questions specifically for small businesses was 

posted in June 2010. See www.fbo.gov, Modification/Amendment Notice, June 24, 

2010.
Page 3 B-406523 

anticipate seeing GV aircraft start to arrive in our facilities” and further stated that 

the company saw no disadvantages to combining the logistics support for the C-20 

and C-37 aircraft. See AR, Tab 6.1c, [Deleted] Response, at 3, 4. Northrop 

Grumman informed the agency in January 2010 that because of the similarity of the 

airframes, the aircraft have “very nearly the same” supplier base and would result in 

savings from economic order quantities and reduced turnaround times for repairs. 

See AR, Tab 6.2e, Northrop Grumman Response, at 3.

With regard to the anticipated length of the contract, some contractors stated they 

could accurately estimate prices for 7 years; others suggested including an 

economic price adjustment clause for periods beyond 5 years. See, e.g., AR, 

Tab 6.1s, [Deleted] Response, at 3; Tab 6.1c, [Deleted] Response, at 4; Tab 6.2b, 

[Deleted] Response, at 6.

The Air Force conducted an economic analysis to examine the costs and benefits of 

consolidating the C-20 and C-37 logistics support requirements based in part on 

industry responses to the RFI. AR, Tab 8.1, Economic Analysis. In January 2011, 

the Air Force concluded that, based on the information provided by industry 

responses to the RFIs and the Air Force’s economic analysis, consolidation of the 

two requirements would result in cost efficiencies resulting in an average of 

[Deleted] percent cost savings.4

 The Air Force also identified increased efficiencies

in the areas of contract management and field maintenance capabilities, as well as 

efficiencies and savings from combined or co-managed contractor operated and 

maintained base supply. See AR, Tab 8, Consolidation Determination and Findings 

(D&F), at 4-7.

In March 2011, the Air Force conducted an industry day, which was attended by 

16 potential offerors. AR, Tab 12, Market Research Report, at 8. The Air Force 

provided a draft PWS and informed potential offerors of the agency’s intended 

acquisition strategy for the procurement. Contracting Officer’s (CO) Statement at 5. 

Attendees were informed, among other things that the Air Force planned to provide 

a 90-day phase-in period at the beginning of the contract. The agency also stated 

that the $39 million inventory of C-37 spare parts was owned by the incumbent and 

would not be transferred to the next contractor. AR, Tab 9, Industry Day Slides, 

at 13, 16. Attendees were given the opportunity to ask the Air Force questions 

concerning the planned acquisition, which the Air Force subsequently addressed. 

See AR, Tab 17.1, Industry Day Questions/Answers.

In August and September 2011, the Air Force provided draft versions of the 

solicitation and further responded to questions from industry regarding this 

procurement. As a result of industry’s input, the Air Force made a number of 

 

4 The Air Force estimates that the consolidated requirement will cost roughly 

$[Deleted] million. AR, Tab 78, Independent Government Estimate.
Page 4 B-406523 

revisions to the solicitation. CO’s Statement at 5. Although the Air Force initially 

provided 24 months of C-37 parts usage data, it later obtained an additional 

10 months of usage data from Gulfstream, which the agency provided to assist 

offerors in estimating their costs. See id. at 14-15. The Air Force also obtained 

Gulfstream’s agreement to allow offerors access to Gulfstream’s computerized 

maintenance program (CMP) database, which contains maintenance data on each 

aircraft by tail number for all maintenance actions, including part removals and 

installations that have been completed since the aircraft were placed in service.5 Id.

at 36-37. In addition, the Air Force purchased over $10 million in C-37 parts 

(1,241 different part numbers) that the agency intended to provide to the logistics 

support contractor as government furnished property. Id. at 18, 34.

As relevant here, the draft PWS required an agreement with the original equipment 

manufacturers (OEM) to obtain the approved data and technical support needed to 

maintain the C-20 and C-37 airframes, engines, accessories, and systems at a level 

that would ensure that Federal Aviation Administration (FAA) airworthiness 

certification is retained.6

 See Draft PWS, Aug. 1, 2011, ¶ 1.3.10. In September 

2011, Gulfstream informed all prospective offerors that, although Gulfstream would 

not establish exclusive agreements with any offeror, Gulfstream would continue its 

“existing policy of providing aircraft [OEM] technical support, over-the-counter sales 

of parts and supplies, engineering support and aircraft maintenance services in 

accordance with our standard commercial terms and conditions, established 

policies and commercial prices.” AR, Tab 19, Gulfstream Letter of Intent. 

Issuance of the RFP

The Air Force issued the RFP on December 13, 2011, under the commercial item 

acquisition procedures of Federal Acquisition Regulation (FAR) Part 12. The 

solicitation provides for the award of an indefinite-delivery/indefinite-quantity 

contract for full and partial logistics support for the C-20 and C-37 aircraft for a base 

period and four option years.7

 

5 The CMP database is a tool created by Gulfstream to allow commercial customers 

to obtain data needed to plan, forecast, track and manage scheduled and 

unscheduled maintenance requirements. This tool allows customers to determine, 

manage, and track part usage and cost. See Intervenor’s Comments, exhib. 1, 

Decl. of Gulfstream Government Contracts and Trade Compliance Director, at 3.

 RFP at 5, 6. The aircraft are assigned to main 

6 This section of the PWS is unchanged in the final PWS. See AR, Tab 5.2, PWS, 

¶ 1.3.10.

7 Full contractor logistics support includes all aircraft maintenance and personnel, 

materials and inspections, launch and recovery of aircraft, management of all 

government-owned spares and support equipment through a contractor operated 

and maintained base supply system; repair and overhaul of all repairable spares at 

(continued...)
Page 5 B-406523 

operating bases at Andrews AFB, Maryland; Hickam AFB, Hawaii; Marine Corps 

Base Kaneohe Bay, Hawaii; MacDill AFB, Florida; Ramstein Air Base, Germany; 

and Naval Air Station Sigonella, Italy. See AR, Tab.5.2, PWS, at 5-7.

As relevant here, the base period includes a 90-day phase-in period, during which 

the awardee, the incumbent contractor, and the agency would complete a joint 

inventory of the contractor operated and maintained base supply system/main 

operating bases and depot facility, to include all parts, support equipment, and 

furniture. AR, Tab.5.2, PWS, ¶ 1.2.2.5. Additionally, the contractor is required to 

“insure the method of supply support for C-20 and C-37 is in place” prior to the end 

of the phase-in period. Id., ¶ 1.2.2.8.

The solicitation identifies three evaluation factors: technical, past performance, and 

price. The RFP provides that proposals would first be evaluated as acceptable or 

unacceptable under the technical factor. Offers that were determined to be 

technically acceptable would then be the subject of a best value tradeoff on the 

basis of past performance and price. RFP amend. 6, append. K, Instructions to 

Offerors, at 7.

With regard to price, the RFP provides 268 contract line items (CLIN), for which 

offerors are required to provide fixed prices or fixed labor rates.8

 As relevant here 

with respect to the CLINs seeking flying hour rates by aircraft tail number, offerors 

were instructed to provide a fixed price for all materials, parts, components, 

subscriptions, and manual/publications updates to provide maintenance and supply

support at each aircraft site to meet mission capability and dispatch reliability 

requirements, unless specifically excluded.9 See, e.g.

 

(...continued)

FAA certified repair stations; maintenance and repair of all support equipment; 

aircraft paint; engine/auxiliary power unit repair and overhaul. AR, Tab.5.2, PWS, 

at 4. Partial contractor logistics support will be provided only at Andrews Air Force 

Base (AFB), Maryland, and does not include organizational level maintenance, 

inspections, and personnel; or launch and recovery of aircraft. Id. at 5.

, RFP at 31. 

8 The RFP provides CLINs for each service’s phase-in period, main operating base 

maintenance, contractor operated and maintained base supply system, depot 

inspections, C-37 engine maintenance, C-37 engine maintenance over and above 

work, flying hour rates by aircraft tail number, and fixed hourly labor rates for over 

and above work. See RFP at 7-169.

9 Supply support requires the contractor to identify, procure, stock, store, and issue 

common and peculiar spare parts, components, consumables, and bench stock for 

the aircraft, aircraft systems, engines/auxiliary power units, and peculiar test/support 

equipment. AR, Tab 5.2, PWS, at 4.
Page 6 B-406523 

To meet the mission capability requirements for the C-20 and C-37 aircraft, the 

PWS requires the contractor to maintain sufficient range and quantity of inventory at 

each location. AR, Tab 5.2, PWS, at 4-5, 9. However, the RFP does not specify 

the quantity or types of parts required for the inventory.

Prior to the RFP’s closing time for receipt of proposals, Northrop Grumman 

protested to our Office.

DISCUSSION

Northrop Grumman complains that the RFP is unduly restrictive of competition 

because it requires a “sufficient inventory” of C-37 parts, fixed-price flying hour 

rates, and a 90-day phase-in period. At the heart of this complaint is that the Air 

Force should not consolidate the logistics support for the C-20 and C-37 aircraft, 

based upon the protester’s apparent belief that only Gulfstream can reasonably 

perform the C-37 aircraft logistics support. Northrop Grumman also complains that 

the pricing and phase-in requirements deviate from customary commercial 

practices, and asserts that Gulfstream’s position as original equipment 

manufacturer and incumbent on the C-37 logistics support contract create an 

impermissible organizational conflict of interest. 

We have considered all of the protester’s arguments and, although we address only 

the more significant ones, find that the agency’s consolidation of the C-20 and C-37 

logistics support is supported by the record, and that the solicitation is not unduly 

restrictive of competition or inconsistent with commercial practices. We also find 

that Northrop Grumman’s complaint of an organizational conflict of interest has no 

merit.

Consolidation of Requirements

As noted above, between December 2006 and November 2010, the Air Force 

investigated the consolidation of logistics support requirements for the C-20 and 

C-37 aircraft. See, e.g., www.fbo.gov, Special Notice, Dec. 20, 2006; Sources 

Sought Notice, Nov. 9, 2010. The agency sent RFIs to potential contractors asking 

their views as to possible cost savings or operational efficiencies that could be 

achieved by consolidating. The agency also conducted its own economic analysis 

to consider possible benefits of consolidating the requirements. See AR, Tab 8.1, 

Economic Analysis. From the RFI responses it received and its own analysis, the 

Air Force found that consolidation of these requirements would achieve significant 

cost savings and operational efficiencies. For example, the Air Force found that it 

would save more than $[Deleted] million by consolidating the requirements. See

AR, Tab 8, Consolidation D&F, at 5. The agency also found that consolidation 

would result in significant operational efficiencies through a streamlined and 

centrally controlled inventory system, centralized depot scheduling, and increased 
Page 7 B-406523 

field maintenance capabilities. Id. at 5-6; see also AR at 65-66. The Air Force also 

considered whether comparable benefits could be achieved under other alternative 

contracting approaches, including the approach advocated by Northrop Grumman in 

its protest (that is, award separate contracts for the aircraft). The Air Force 

concluded that none of these other approaches would provide the same level of 

cost savings or operational efficiencies. See AR, Tab 8.1, Economic Analysis, 

at 14.

The Competition in Contracting Act of 1984 (CICA) requires that solicitations 

generally permit full and open competition and contain restrictive provisions only to 

the extent necessary to satisfy the needs of the agency. 10 U.S.C. 

§ 2305(a)(1)(B)(ii) (2006). Because bundled or consolidated procurements combine 

separate and multiple requirements into one contract, they have the potential for 

restricting competition by excluding firms that furnish only a portion of the 

requirement; we therefore review challenges to such solicitations to determine 

whether the approach is reasonably required to satisfy the agency’s needs. See 2B 

Brokers et al., B-298651, Nov. 27, 2006, 2006 CPD ¶ 178 at 9; Pemco Aeroplex, 

Inc., B-280397, Sept. 25, 1998, 98-2 CPD ¶ 79 at 8-9. An agency may consolidate 

or bundle requirements where the agency reasonably determines that consolidation 

will result in significant cost savings or efficiencies. B.H. Aircraft Co., Inc., 

B-295399.2, July 25, 2005, 2005 CPD ¶ 138 at 7.

Here, the record supports the agency’s determination that consolidation of the 

logistics support requirements for the C-20 and C-37 aircraft will result in significant 

cost savings and operational efficiencies. Although Northrop Grumman believes 

that these requirements should not be consolidated, it does not show, or even 

argue, that the Air Force will not achieve the substantial cost savings and significant 

operational efficiencies identified by the agency in its market research and 

economic analysis. As a result, we see no basis for concluding that the Air Force’s 

approach unreasonably consolidated these requirements.

Restriction on Competition

Northrop Grumman also challenges a number of the RFP’s terms as being unduly 

restrictive of competition. Specifically, Northrop Grumman contends that spare 

parts for the C-37 aircraft are generally not available from sources other than 

Gulfstream, unlike for the older C-20 aircraft. Protester’s Comments at 3. The 

protester contends that, as a result, the solicitation’s requirements to establish a 

spare parts inventory “of sufficient range and quantity” to meet the required mission 

capability requirements, to provide fixed-price flying hour pricing for 5 years, and to 

transition within 90 days unduly restricts competition, where only Gulfstream can 

provide required quantities of C-37 parts and has refused to provide adequate 

pricing for the parts. Id. at 3.
Page 8 B-406523 

The Air Force disputes that the RFP’s requirements are unduly restrictive of 

competition. Specifically, the agency disagrees that Gulfstream is the only source 

for C-37 parts and that potential offerors have not been provided with sufficient 

information to provide fixed-price flying hour pricing. AR at 19. With respect to the 

90-day phase-in period, the Air Force notes that it conducted extensive market 

research to determine an appropriate transition period for this contract. AR at 32. 

The agency reports that most respondents to the October 2010 RFI stated that 

90 days would be sufficient.10 Id.

Where a protester challenges a specification or requirement as unduly restrictive of 

competition, the procuring agency has the responsibility of establishing that the 

specification or requirement is reasonably necessary to meet the agency’s needs. 

See Total Health Resources, B-403209, Oct. 4, 2010, 2010 CPD ¶ 226 at 3. We 

will examine the adequacy of the agency’s justification for a restrictive solicitation 

provision to ensure that it is rational and can withstand logical scrutiny. SMARTnet, 

Inc., B-400651.2, Jan. 27, 2009, 2009 CPD ¶ 34 at 7. A protester’s mere 

disagreement with the agency’s judgment concerning the agency’s needs and how 

to accommodate them does not show that the agency’s judgment is unreasonable. 

Exec Plaza, LLC, B-400107, B-400107.2, Aug. 1, 2008, 2008 CPD ¶ 143 at 5.

Sufficient Inventory

Northrop Grumman’s contention that the RFP’s requirement for “a sufficient 

inventory” of C-37 parts unduly restricts competition is based upon its view that only 

Gulfstream can provide the required quantities of C-37 parts and that Gulfstream 

“has refused to provide adequate pricing.” Protester’s Comments at 4. In this 

regard, Northrop Grumman maintains that [Deleted] percent of the parts of the C-37 

aircraft (based on value of the parts) are controlled by Gulfstream and must be 

procured from Gulfstream. Id. at 12. 

As an initial matter, the Air Force argues that, although the solicitation requires the 

contactor to provide a sufficient quantity of parts to meet mission capability 

requirements, the solicitation leaves it to the discretion of each offeror to determine 

according to its supply strategy what constitutes a “sufficient quantity.” Supp. AR 

at 3. The Air Force states in this regard that an inventory of parts would generally 

be built up over time as there is no requirement in the solicitation to have a 

complete inventory on hand by the end of the phase-in period, as the protester 

apparently believes. Id.

 

10 Although the Air Force did not expressly raise the point that a 90-day overlap of 

incumbent and awardee contractors would be less expensive than a 180-day 

overlap, we note that some of the RFI respondents cited that rationale for 

recommending a 90-day phase-in period. See e.g., AR at 32-33.
Page 9 B-406523 

The Air Force also disagrees with Northrop Grumman’s contention that the RFP 

required the contractor to acquire C-37 parts from Gulfstream or that Gulfstream is 

the only source for these parts.11 AR at 17, 19. The Air Force states that the only 

requirement pertaining to Gulfstream was for the awardee to establish agreements 

with the OEMs (e.g., Gulfstream) to obtain approved data and technical support, 

and to ensure that mission capability requirements are not impacted by an inability 

to obtain data or support from the OEMs. AR at 18-19 citing Tab 5.2, PWS 

¶ 1.3.10. In this regard, the Air Force notes that Gulfstream has issued a letter of 

intent stating that Gulfstream will continue its existing policy of providing technical 

support, over-the-counter sales of parts and supplies, engineering support, and 

aircraft maintenance services in accordance with its standard commercial terms and 

conditions. AR at 25.

Here, the Air Force explained that the mission of the C-20 and C-37 aircraft--to 

provide “safe, comfortable, reliable, worldwide air transportation with robust 

communications capabilities for the Vice President, Cabinet members, [various 

combatant commands], and other high-ranking U.S. and foreign government 

officials”--is a “no-fail mission” that requires aircraft to maintain a high mission 

capable status at each location. AR at 12, 13. To satisfy this mission capability 

rate, the RFP requires that the contractor maintain sufficient inventory. Although 

Northrop Grumman asserts that the requirement for sufficient inventory unduly 

restricts competition, the protester has not shown that the requirement is not 

reasonably necessary to meet mission capability rates. Moreover, we think the Air 

Force’s claimed need for these requirements is reasonably apparent from the 

record.

We also agree with the Air Force that the solicitation does not require contractors to 

stock a specific amount of inventory of C-37 parts, but rather leaves it to the 

discretion of the offerors to determine the appropriate amount and variety of parts to 

 

11 The Air Force found that C-37 parts were available from multiple vendors and 

resellers. AR at 25. In this regard, the agency notes that Northrop Grumman’s own 

research indicated that some smaller vendors have access to C-37 parts, even if 

not in large quantities. Supp. AR at 7. Furthermore, the Air Force states that 

certain high risk parts, such as the engines, are not included in the flying hour 

CLINs and that the agency had purchased 5,737 parts (1,241 different part 

numbers) for the C-37 valued at over $10 million to mitigate some of the risks. Id.

at 8; CO’s Statement at 18. With regard to Northrop Grumman’s insistence that 

[Deleted] percent of the value of C-37 parts are controlled by Gulfstream, the 

agency states that while Gulfstream may be the only supplier of some large dollar 

value parts, those parts are not replaced with great frequency. In addition, the 

agency explained that its review of usage data showed that [Deleted] percent of the 

most commonly used parts on the C-37 are not proprietary to Gulfstream. Supp. 

AR at 9; Supp. CO Statement at 12.
Page 10 B-406523 

meet the mission capability requirements. With regard to Northrop Grumman’s 

contention that C-37 parts must be purchased from Gulfstream and therefore the 

requirement is unduly restrictive, the record does not support the protester’s 

position. That is, the record indicates that suppliers other than Gulfstream can 

supply some of the C-37 parts. The Air Force and Gulfstream identified third-party 

sources for C-37 parts, see CO’s Statement at 25; Intervenor’s Comments, exhib. 1, 

Decl. of Gulfstream Government Contracts and Trade Compliance Director, at 6, 

and Northrop Grumman acknowledged that some parts are available, albeit not in 

the quantities it wants to establish its inventory. Protester’s Comments at 1, 8, 

attach. A, exhib. 5, [Deleted] Response, at 18 (“[Deleted] currently owns and stocks 

nearly $40 million in aircraft spare parts, including items applicable to the 

Gulfstream G-V/G-VSP/G550 aircraft.”). Moreover, the Air Force purchased over 

$10 million in C-37 parts (1,241 different part numbers) which the agency intends to 

furnish the logistics support contractor as government furnished property to reduce 

risk. 

We conclude that the fact that other suppliers cannot provide parts in the quantities 

that Northrop Grumman would like does not render the requirement unduly 

restrictive. In any event, even if all of the C-37 parts must be purchased from 

Gulfstream, that alone does not support the protester’s position. Northrop 

Grumman has not demonstrated that Gulfstream will not sell it C-37 parts if 

Northrop Grumman wins the contract, nor has Northrop Grumman demonstrated 

that in its past and current dealings with Gulfstream with respect to the C-20 that it 

has been unable to obtain the parts needed.12 In this regard, Gulfstream expressly 

stated that it would provide technical support, over-the-counter sales of parts and 

supplies, engineering support and aircraft maintenance services in accordance with 

its standard commercial terms, conditions, prices and established policies. AR, 

Tab 19, Gulfstream Letter of Intent. Moreover, one of Northrop Grumman’s 

potential suppliers praised Gulfstream’s ability to expeditiously provide parts, stating 

the Gulfstream has the “very best service and support record in the industry,” and 

was willing to ship parts overnight anywhere in the world. Protester’s Comments, 

attach. A, exhib. 16, [Deleted] Response to Northrop Grumman, at 1-2.

Fixed-Price Flying Hour Rates

Northrop Grumman also contends that the requirement that offerors provide fixedprice flying hour rates for 5 years is unduly restrictive of competition. Northrop 

Grumman argues that the Air Force provided insufficient data to permit offerors to 

 

12 Although Northrop Grumman argues that Gulfstream has been unwilling to 

provide fixed prices for parts for the length of the contract, we do not find 

Gulfstream’s reluctance to relieve Northrop Grumman of all risk to be evidence of 

Gulfstream’s unwillingness to sell parts to support the contractor logistics support 

program.
Page 11 B-406523 

estimate fixed-price flying hours for 5 years. Protest at 26. Northrop Grumman 

asserts that 5 years of data repair turnaround times, acquisition lead times, mean 

time between repairs in addition to pricing are needed to develop a fixed-price flying 

hour rate. Id. 

The Air Force argues that Northrop Grumman is incorrect in its assertion that 

offerors were provided insufficient information to develop pricing for the fixed-price 

CLINs. The Air Force obtained from Gulfstream and provided to offerors 34 months 

of usage data by total quantity, date, location, and aircraft tail number. CO’s 

Statement at 9. The Air Force further disputes Northrop Grumman’s complaint that 

34 months of data is insufficient to develop flying hour pricing. The Air Force states 

that the Air Force Materiel Command Manual 23-1, Requirements for Secondary 

Items, requires 24 months of data to develop flying hour prices. AR at 21. 

Moreover, Gulfstream gave offerors access to its proprietary CMP database, which 

provided maintenance data on each aircraft by tail number for all maintenance 

actions, including part removals and installations, that were completed since the 

aircraft were placed in service. The Air Force also argues that Northrop Grumman 

did not access the technical library at Tinker AFB, which contained the minimum 

equipment lists,13 floor plans, paint drawings, and other unique manuals, and thus

did not avail itself of all of the data available to develop its fixed-price flying hour 

rate. AR at 23; CO’s Statement at 10.

As Northrop Grumman acknowledges, a fixed-price contract is suitable for acquiring 

commercial items when the contracting officer can establish fair and reasonable 

prices at the outset, such as when there is adequate price competition; available 

cost or pricing information permits realistic estimates of the probable costs of 

performance; or performance uncertainties can be identified and reasonable 

estimates of their cost impact can be made, and the contractor is willing to accept a 

fixed price representing assumption of the risks involved. FAR § 16.202-2. 

Moreover, as discussed above, FAR Part 12 specifically directs agencies to use 

fixed-price contracts, or fixed-price contracts with economic price adjustment, for 

the acquisition of commercial items. FAR § 12.207. A fixed-price contract places 

upon the contractor maximum risk and full responsibility for all costs and resulting 

profit or loss. It provides maximum incentive for the contractor to control costs and 

perform effectively. FAR § 16.202-1.

The agency has determined that it can obtain fair and reasonable prices through 

adequate price competition. Moreover, although Northrop Grumman disagrees that 

the probable costs of performance can be realistically estimated, the record shows 

otherwise. As the Air Force noted above, the Air Force Materiel Command Manual 

 

13 The minimum equipment list explains what systems are required for mission 

capability and establishes dispatch and return to service requirements when 

onboard equipment is inoperative. CO’s Statement at 10.
Page 12 B-406523 

23-1 prescribes 24 months of data to develop flying hour rates; here, offerors were 

provided 34 months of data. See AR, Tab 31.2, C-37 Contractor Logistics Support 

Usage Report, Jan. 1, 2009 - Oct. 31, 2011. Offerors were also able to review 

complete maintenance data for each aircraft by tail number in Gulfstream’s CMP 

database. CO’s Statement at 10. Gulfstream also provided budgetary pricing for 

many parts, and parts resellers have some parts, even if they cannot provide them 

in the quantities that Northrop Grumman would like. Although Northrop Grumman 

argues that budgetary pricing is insufficient for its needs, given Northrop 

Grumman’s experience in the industry and with Gulfstream in particular, we find that 

Northrop Grumman has not adequately explained why this level of data is 

insufficient. 

Underpinning the protester’s arguments is its complaint that the solicitation 

provisions are rendered restrictive of competition or inconsistent with commercial 

practices because of the actions of Gulfstream, the OEM for both the C-20 and the 

C-37 aircraft. In this regard, Northrop Grumman argues in various ways that 

Gulfstream’s status as OEM and its unwillingness to provide fixed price quotations 

on C-37 parts has unduly restricted competition. However, we note that an agency 

is not required to equalize a competitive advantage that a firm may enjoy--or a 

disadvantage it may experience--because of the firm’s particular business 

circumstances, where that advantage or disadvantage does not result from a 

preference or unfair action by the government. RMI, B-405409, Oct. 20, 2011, 2011 

CPD ¶ 224 at 4. Moreover, here, the Air Force attempted to mitigate some of 

Gulfstream’s advantage by obtaining 34 months of usage information from 

Gulfstream, increasing the supply of government furnished C-37 parts, and 

obtaining access to Gulfstream’s CMP database for offerors to determine 

maintenance needs. Additionally, to the extent that Northrop Grumman argues that 

Gulfstream refuses to provide it with discounted prices or fixed prices, we note that 

this is a matter between private parties and is not for consideration under our bid 

protest function. See Electro-Methods, Inc., B-215841, Mar. 11, 1985, 85-1 CPD 

¶ 293 at 5. 

Contrary to Northrop Grumman’s contentions, there is no legal requirement that a 

solicitation be drafted so as to eliminate all performance uncertainties; the mere 

presence of risk does not render a solicitation improper. Aalco Forwarding, Inc., et 

al., B-277241.8, B-277241.9, Oct. 21, 1997, 97-2 CPD ¶ 110 at 22-23. Offerors 

have the responsibility, in offering on a fixed-price contract, to project costs and to 

include in their proposed fixed prices a factor covering any projected costs increase; 

risk is inherent in most types of contracts and offerors are expected to allow for that 

risk in computing their offers. Master Sec., Inc., B-232263, Nov. 7, 1988, 88-2 CPD 

¶ 449 at 3; Kings Point Mfg. Co., Inc., B-220224, Dec. 17, 1985, 85-2 CPD ¶ 680 

at 4. Any uncertainty as to the ultimate availability of spare parts amounts to a 

business risk that, under the circumstances, all offerors must accept. Starr Sys., 

B-237955.2, Apr. 24, 1990, 90-1 CPD ¶ 412 at 4.
Page 13 B-406523 

90-Day Phase-in Period

Northrop Grumman’s argument that the RFP’s 90-day phase-in period is insufficient 

and restrictive of competition is based upon the protester’s contention that 

Gulfstream will not provide the firm with fixed prices, or a guaranteed specific 

delivery time, for the parts. Protest at 31. Specifically, Northrop Grumman states 

that Gulfstream informed the protester that Gulfstream would require 30 days to 

provide a fixed price for any large list of parts. Northrop Grumman also states that 

Gulfstream refused to provide guarantees for a specific delivery time for the parts. 

Id. Northrop Grumman argues that, given Gulfstream’s refusal to cooperate, 

Northrop Grumman would have to wait 30 days to obtain a fixed price before 

ordering C-37 parts and would have no assurance of obtaining the parts within the 

90-day phase-in period to establish the required spare parts inventory. Id. Northrop 

Grumman asserts that a 180-day phase-in period is “customary and appropriate” for 

contractor logistic support contracts of this size and complexity. Id. 

The Air Force responds that Northrop Grumman’s arguments are based upon the 

erroneous assumption that the RFP requires the contractor to fully stock an 

inventory of parts by the end of the 90-day phase-in period. AR at 34. The agency 

states that the RFP in fact requires the awardee, the incumbent, and the 

government to complete a joint inventory and ensure the method of supply support 

is in place by the end of the 90-day phase-in period, but does not require the 

awardee to completely stock a full inventory at that time.14 Id. The Air Force also 

explains that the RFP provides a performance-based work statement, which allows 

offerors to determine the appropriate method of meeting the C-20 and C-37 aircraft 

mission capability requirements. The agency states that although establishing a 

complete inventory of parts by the end of the phase-in period is an option, offerors 

were free to propose other methods of meeting the mission capability requirement. 

Id. at 34-35. In this regard, the Air Force points out that one of the suppliers (that 

Northrop Grumman had contacted) proposed a phased approach to providing the 

inventory. Supp. AR at 4. Moreover, the Air Force points out that Northrop 

Grumman’s response to an RFI stated that “for a fleet of this size and distribution, a 

90-day Phase-in is sufficient.”15 AR at 32 citing

 

14 The Air Force explains that the “method of supply support” refers to the way a 

particular contractor, based on the level of risk it is willing to assume, decides to 

ensure parts are supplied as necessary. For example, the method of supply 

support can include decisions on how many parts to keep in stock, where to buy 

parts, and how to move parts. Supp. CO Statement at 14.

AR, Tab 6.4h, Northrop Grumman

Response, at 7.

15 We find unpersuasive Northrop Grumman’s explanation that in October 2010 it 

believed that a 90-day phase-in period was reasonable because Northrop 

Grumman was unaware that Gulfstream would not provide fixed pricing or a 

(continued...)
Page 14 B-406523 

We find that Northrop Grumman has not demonstrated that the Air Force’s 

requirement for a 90-day phase-in period was unreasonable. We agree with the 

agency that the solicitation requires the awardee, together with the government and 

the incumbent contractor, to complete the joint inventory of the contractor operated 

and maintained base supply system, main operating bases, and depot facilities. We 

also agree that the RFP requires the awardee to ensure the method of supply 

support for C-20 and C-37 aircraft is in place by the end of the phase-in period. See

AR, Tab 5.2, PWS §§ 1.2.2.5, 1.2.2.8. While the PWS generally requires the 

contractor’s inventory to be “of sufficient range and quantity to meet the 

performance measurements defined in this PWS,” it also makes clear that it is the 

responsibility of the contractor to determine the spares inventory necessary to meet 

C-20 and C-37 mission capability requirements. See id., PWS at 4-5, 9. Moreover, 

the Air Force made clear to potential offerors that the government was not requiring 

a specific inventory investment, but would evaluate the method proposed to meet 

the RFP’s performance based objectives. AR, Tab 17.10, Q&A No. 10, Dec. 13, 

2012, at 2. Although Northrop Grumman argues that, as a practical matter, the 

requirement to have inventory “of sufficient range and quantity” implicitly requires a 

full or substantial inventory of spare parts, Protester’s Comments at 4-5, we agree 

with the agency that such a strategy is not the only strategy available to offerors. 

We also note that, although Northrop Grumman and its consultant contend that 

180 days is more appropriate and less restrictive of competition than 90 days, 

neither have provided any data to support this contention.16

Commercial Practices

Northrop Grumman also contends that the requirements for a 90-day phase-in 

period, fixed-price flying hour pricing, and the lack of an economic price adjustment 

clause are inconsistent with customary commercial practice. See Protester’s 

Comments at 11-12. 

In procurements involving the acquisition of commercial items, such as here, FAR 

§ 12.301(a)(2) requires that contracts “shall, to the maximum extent practicable, 

include only those clauses . . . [d]etermined to be consistent with customary 

commercial practice.” Market research should address, among other things, 

 

(...continued)

guaranteed delivery time for parts. As the incumbent on the C-20 aircraft, Northrop 

Grumman has had to purchase parts from Gulfstream in support of that program 

and would be familiar with Gulfstream’s general pricing and delivery policies.

16 Although Northrop Grumman’s consultant supports Northrop Grumman’s 

argument for a transition period of 180 days, he also expresses doubt that 180 days 

would be sufficient. See Protester’s Comments, attach. B, Decl. of Consultant, at 2.
Page 15 B-406523 

customary practices, and should include publishing formal requests for information, 

conducting pre-solicitation meetings with potential offerors, and reviewing prior 

contracts. See FAR § 10.002(b). Here, we find from our review of the record that 

the protested requirements are not inconsistent with customary commercial 

practices. 

With respect to the 90-day phase-in period, the record shows that the agency 

issued RFIs and obtained the input of industry, including Northrop Grumman, and 

none objected to a 90-day phase-in period.17 AR at 51-53. The Air Force also 

reviewed six other Air Force contractor logistics support contracts for a variety of 

aircraft awarded between 2005 and 2011, and all six included a phase-in period of 

90 days or less.18 AR at 53. Northrop Grumman contends, however, that the RFI 

responses are invalid because they occurred two years before the RFP was issued 

and speculates that the respondents were unaware of the “closed supply chain” and 

Gulfstream’s refusal to provide “meaningful support.” Protester’s Comments at 19. 

Northrop Grumman also argues that the other contractor logistics support contracts 

were not relevant because the individual circumstances of those aircraft differ from 

that of the C-37, where the original equipment manufacturer is the primary source of 

parts. Id. Northrop Grumman’s consultant states that the aircraft to which the Air 

Force looked to determine the appropriateness of requiring a 90-day phase-in 

period were older aircraft with a robust and established aftermarket for parts and 

therefore are not suitable examples for comparison. Protester’s Comments, 

attach. B, Decl. of Consultant, at 3.

We find that Northrop Grumman has not demonstrated that the 90-day phase-in 

period is not consistent with customary commercial practice. Although the protester 

speculates that the industry respondents to the Air Force’s RFI were unaware of 

Gulfstream’s position in the market vis-à-vis the C-37 aircraft contractor logistics 

support, the record does not support this speculation.19

 

17 One respondent stated that 90-120 days would be optimal. AR, Tab 6.4f, 

[Deleted] Response, at 5. Another respondent, experienced in supporting 

Gulfstream aircraft, indicated that a program of this size should not require more 

than 120 days “in any scenario” but that the government could likely require 90 days 

without significantly increased costs. AR, Tab 6.4d, [Deleted] Response, at 13.

 We also find unpersuasive 

18 As the intervenor points out, four of these contracts were awarded under FAR 

Part 12 commercial item procedures. Intervenor’s Comments at 18. 

19 Of the 8 respondents, 6 (including Gulfstream) had experience supporting 

Gulfstream aircraft, and therefore arguably were aware of the resources available to 

support the C-37. For example, one respondent that has 10 years of depot 

experience on the commercial variants of the C-20 and C-37 indicated that 90 days 

would be sufficient. AR, Tab 6.4e, [Deleted] Response, at 3-4. Another respondent 

with extensive experience on C-20 contractor logistics support recognized 

(continued...)
Page 16 B-406523 

the opinion of Northrop Grumman’s consultant that the prior contracts that the Air 

Force reviewed in determining customary commercial practice do not represent the 

same circumstances as present with respect to supporting the C-37 aircraft.

With respect to the fixed-price flying hour CLINs, Northrop Grumman presents 

multiple arguments for why the RFP requirement for 5 years of fixed-price flying 

hour rates is inconsistent with customary commercial practice. Protest at 37. We 

have considered all of the protester’s arguments and conclude that they have no 

merit. Northrop Grumman challenges the agency’s responses from industry with 

regard to CLIN type, arguing that the industry responses suggesting the use of timeand-materials CLINs is dispositive that the use of a fixed-price flying hour CLIN is 

not customary commercial practice. Protester’s Comments at 14. Additionally, the 

protester’s consultant stated that, although fixed-price flying hour rates are used in 

the commercial aviation sector, they would not be used under the circumstances 

envisioned by the RFP because the OEM controls the parts market. Id., attach. B, 

Decl. of Consultant, at 4. 

FAR Part 12 directs agencies to use fixed-price contracts, or fixed-price contracts 

with economic price adjustments, for the acquisition of commercial items. FAR 

§ 12.207. While Northrop Grumman points out that some of the RFI respondents 

suggested using time-and-materials CLINs, government policy disfavors the use of 

time-and-materials contracts. Time-and-materials contracts are to be used when no 

other contract type is suitable.20 Id. Northrop Grumman has not demonstrated that 

use of a fixed-price CLIN under these circumstances is unsuitable.

Northrop Grumman also argues that under customary commercial practice, prices 

are fixed for one year, and an economic price adjustment is included for the later 

years. Protest at 41. We will only question a decision regarding the use of an 

economic price adjustment clause where it is shown to be arbitrary or capricious. 

Kings Point Mfg. Co., Inc., B-220224, Dec. 17, 1985, 85-2 CPD ¶ 680 at 4. We note 

that, although FAR Part 12 favors the use of fixed-price contracts, or fixed-price 

contracts with economic price adjustments, economic price adjustment clauses are 

not mandatory. See

 

(...continued)

Gulfstream’s advantages with respect to the C-37 as early as 2007, but nonetheless 

in October 2010 stated that 90 days would minimize the risk associated with 

combining two contracts and transitioning multiple sites. See AR, Tab 6.1n, 

[Deleted] Response, at 3; Tab 6.4b, [Deleted] Response, at 4. 

FAR § 12.207. Moreover, the Air Force relied on the results of 

20 In this regard, the GAO report, DEFENSE CONTRACTING: Improved Insight and 

Controls Needed over DoD’s Time-and-Materials Contracts, GAO-07-273, June 29, 

2007, highlighted some of the risks of time-and-materials contracts, such as the lack 

of incentive to control costs.
Page 17 B-406523 

its market research to conclude that inclusion of an economic price adjustment 

would not be necessary to be consistent with customary commercial practices. In 

this regard, some of the RFI responses to Air Force questions concerning the ability 

to forecast prices for 7-10 years suggested that an economic price adjustment 

clause would be appropriate beyond the 5th year. See e.g., AR, Tab 6.2b, [Deleted]

Response, at 6; Tab 6.1m, [Deleted] Response, at 3, 9; Tab 6.1c, [Deleted]

Response, at 4. Here, the total contract period, including options, is 5 years. 

Additionally, the six contractor logistics support contracts awarded between 2005 

and 2011 that the Air Force reviewed had a minimum 5 year period of performance 

and did not contain an economic price adjustment clause. AR at 56. 

In sum, Northrop Grumman has not demonstrated that the Air Force deviated from 

customary commercial practices with regard to this procurement.

Organizational Conflict of Interest

During the course of this protest, Northrop Grumman raised numerous arguments 

which the Air Force addressed but the protester did not rebut. Instead, in several 

instances, the protester chose to “incorporate by reference and reiterate” its original 

protest grounds. See Protester’s Comments at 2. We have considered the 

protester’s and agency’s arguments and, in the absence of any rebuttal by the 

protester, find the agency’s arguments persuasive. One example of this involves 

Northrop Grumman’s argument that Gulfstream’s position as original equipment 

manufacturer on the C-37 and its performance of the incumbent C-37 contractor 

logistics support contract creates an organizational conflict of interest (OCI) based 

on unequal access to information. Protest at 31-32.

As relevant here, an unequal access to information OCI exists where a firm has 

access to nonpublic information as part of its performance of a government contract 

and where that information may provide the firm a competitive advantage in a later 

competition for a government contract. FAR §§ 9.505(b); CapRock Gov’t Solutions, 

Inc.; ARTEL, Inc.; Segovia, Inc., B-402490 et al., May 11, 2010, 2010 CPD ¶ 124 

at 25. It is well settled that an offeror may possess unique information, advantages, 

and capabilities due to its prior experience under a government contract--either as 

an incumbent contractor or otherwise; further, the government is not necessarily 

required to equalize competition to compensate for such an advantage, unless there 

is evidence of preferential treatment or other improper action. CACI, Inc.--Fed., 

B-403064.2, Jan. 28, 2011, 2011 CPD ¶ 31 at 10; MASAI Techs. Corp., 

B-298880.3, B-298880.4, Sept. 10, 2007, 2007 CPD ¶ 179 at 8. The existence of 

an advantage, in and of itself, does not constitute preferential treatment by the 

agency, nor is such a normally occurring advantage necessarily unfair. Council for 

Adult & Experiential Learning, B-299798.2, Aug. 28, 2007, 2007 CPD ¶ 151 at 6; 

Government Bus. Servs. Group, B-287052 et al., Mar. 27, 2001, 2001 CPD ¶ 58 

at 10. Likewise, the advantage of an original equipment manufacturer is one that 
Page 18 B-406523 

the government is not required to mitigate. See Halifax Eng’g, Inc., B-219178.2, 

Sept. 30, 1985, 85-2 CPD ¶ 559 at 3.

Here, Northrop Grumman in essence complains that Gulfstream gained a 

competitive advantage as a result of its experience as the incumbent on the prior 

C-37 logistics support contract and as the original equipment manufacturer. It, 

however, has not identified any evidence of preferential treatment or other improper 

action on the part of the Air Force that would create an OCI under such 

circumstances.21 Moreover, the Air Force has sought to mitigate Gulfstream’s 

competitive advantage by obtaining from Gulfstream, and providing to offerors, 

34 months of usage data by total quantity, date, location, and aircraft tail number. 

The Air Force also obtained access for offerors to Gulfstream’s CMP database of 

maintenance data, including part removals and installations that have been 

completed since the aircraft were placed in service. CO’s Statement at 9, 36-37. In 

addition, the Air Force purchased a quantity of C-37 parts which it will furnish to the 

logistics support contractor as government furnished property. Id. at 18, 34. On 

this record, we see no basis to accept Northrop Grumman’s ultimately undefended 

assertion that the Air Force improperly ignored an unequal access to information 

OCI.

The protest is denied.

Lynn H. Gibson

General Counsel

 

21 We note that Northrop Grumman arguably obtained its own competitive 

advantage based on its experience as the incumbent contractor for C-20 logistics 

support.