As a result of a 1995 Base Realignment and Closure (BRAC) Act decision, the San Antonio and Sacramento Air Logistics Centers, including their maintenance depots, are to close by the year 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 depots’ workloads in place. The Air Force followed by announcing a strategy to privatize-in-place five prototype depot maintenance workloads at the two closing centers. Since then, there has been a continuing debate between Congress and DOD over where and by whom the workloads at the closing depots would be performed. Central to this debate are concerns about the excess facility capacity that exists at the Air Force’s three remaining depots and the legislative requirement that workloads exceeding $3 million dollars in value be subject to a public-private competition before being moved to the private sector. Appendix II provides a more detailed description of the closure history for the two logistics centers. In response to congressional concerns regarding the appropriateness of its privatization-in-place plans, the Air Force revised its strategy to allow the public depots to participate in public-private competitions for the closing depot workloads. Congress included provisions in the fiscal year 1998 Authorization Act that require us to review and report on the process, procedures, and results of these competitions. The C-5 aircraft depot maintenance workload was the first of such competitions. On February 11, 1997, the Air Force, Aircraft Directorate at Kelly Air Force Base issued a request for proposals for the purpose of conducting a public-private competition for the C-5 aircraft business area workload being performed at the closing San Antonio Air Logistics Center. The Air Force received proposals from private sector offerors and from one public offeror—the Air Force’s Warner Robins Air Logistics Center. Following technical and cost evaluations, the Air Force selected Warner Robins to perform the C-5 workload on the basis that its proposal represented the lowest total evaluated cost to the government. The Air Force’s procedures provided an equal opportunity for public and private offerors to compete for the C-5 workload without regard to where the work could be performed. Both public and private offerors acknowledged that the solicitation contained no limitations on location of performance. Since the San Antonio facilities were designed to support C-5 depot maintenance, the private offerors stated that the site had a natural advantage that they found attractive in competing for the workload. Therefore, the private offerors stated they proposed performing the C-5 workload at San Antonio. Because the competition placed no limitation on the location, the Warner Robins depot—the public offeror—was able to propose the use of its facilities. In assessing the C-5 competition’s compliance with applicable laws and regulations, we reviewed the solicitation, proposal evaluation, and award in the context of applicable laws and regulations. This review included examining documents, reviewing processes and procedures, and conducting discussions with cognizant Air Force and DOD officials. We also assessed several specific concerns raised by the participants. We found no reason to conclude that the procedures used in selecting the successful offeror deviated in a material way from applicable laws or relevant provisions of the FAR. The Air Force issued a competitive solicitation that provided for the participation of a public sector depot. Pursuant to its Depot Competition Procedures, the Air Force issued the solicitation in accordance with 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. The solicitation called for proposals from public and private sector sources for the C-5 business area workload currently being performed at the closing San Antonio Air Logistics Center at Kelly Air Force Base. The solicitation provided for award to the public sector source if its proposal conformed to the solicitation requirements, showed it had the necessary technical capabilities, and represented the lowest total evaluated cost over the life of the requirement. Proposals were evaluated in accordance with management criteria, a risk assessment, cost criteria, and other general considerations. Several statutes govern the use of public-private competitions for the performance of depot workloads. In particular, 10 U.S.C. 2469 provides for the use of “competitive procedures for competitions among private and public sector entities” whenever DOD contemplates changing the performance of public depot workloads of $3 million or more to contractor performance. Neither 10 U.S.C. 2469 nor the other statutes governing public-private competitions for depot workloads prescribe the specific elements that constitute a competition. Because the Air Force’s Depot Competition Procedures use the competitive acquisition system, the standards in chapter 137 of title 10 of the United States Code (governing DOD acquisitions) and the FAR apply to the extent they are consistent with the basic public-private competition statutes. Among other things, these standards require that the requirements in a solicitation be stated clearly and unambiguously and that restrictive provisions be included only to the extent necessary to satisfy an agency’s needs. Further, under these standards, an agency must follow the criteria announced in the solicitation and exercise its judgment in a reasonable manner in determining which of the competing offers is to be selected. Based on our review of the C-5 competition, we found no basis to conclude that procedures used in selecting the successful offeror deviated in any material respect from the applicable laws or relevant provisions of the FAR. The Air Force issued a solicitation providing for the participation of a public sector depot consistent with the requirement for public-private competition, and the solicitation was issued competitively in accordance with the FAR. Overall, the evaluation appeared to be reasonable, fair, and consistent with the solicitation and the Air Force’s Depot Competition Procedures. The private sector offerors raised several concerns about the conduct of the C-5 competition. A summary of their concerns and our conclusions follows. Private sector sources believe there is an inherent inequity in public-private depot competitions that is created by the solicitation of offers on a fixed-price basis because the government often pays for any cost overruns incurred by a public sector source from public funds. Because public and private sector entities are fundamentally different in this regard, agencies conducting public-private competitions are required to make a reasoned judgment as to the actual cost the government will incur if work is to be performed by a public depot. We believe that the procedures used in the C-5 competition reasonably addressed the issue of public sector cost accountability. Among other things, the solicitation required the public depot to certify that its offer represented the full costs of performance, and the Air Force conducted an extensive realism analysis of Warner Robins’ cost proposal. The Defense Contract Audit Agency reviewed Warner Robins’ cost proposal and its accounting and estimating systems, as required by the Air Force’s Depot Competition Procedures. Private sector participants in the C-5 competition believe that Warner Robins was unfairly advantaged when it was given a $153-million cost credit to reflect expected savings in overhead costs. We found that, although the amount was large and became the primary determining factor in the selection of Warner Robins, it was properly used in the Air Force evaluation. The overhead savings evaluation was provided for in the solicitation and the Depot Competition Procedures, and we found that the Air Force followed the evaluation scheme in calculating the savings proposed by Warner Robins. Private sector participants were concerned that the selection did not account for, or put a dollar value on, certain identified risks or weaknesses, in the respective proposals. The solicitation provided that the calculation of an offeror’s total evaluated cost would include the dollar impact of significant discriminators based on identified proposal strengths, weaknesses, and risks. The evaluation record shows that, for the highest priority management factors, transition and production operations, the lowest cost private sector offeror received a low-risk rating while the public offeror approach was rated as a moderate risk. Overall, the private sector offeror was credited with more strengths under the management factors than was the public sector offeror. In the final selection decision, the source selection authority did not quantify the risk differences or all the strengths or weaknesses but only included adjustments representing discriminators based on reduction of flow days and a lack of capacity at one of Warner Robins’ proposed facilities. Under the applicable legal standards, a procuring agency has broad discretion to decide whether it will include any particular feature of a proposal in its cost calculations. In our view, the dollar valuation approach the Air Force adopted represented a reasonable exercise of its discretion under the solicitation. The solicitation did not explain in any detail how dollar values were to be assigned, but left it to the Air Force to determine an appropriate approach. Further, our review of the evaluation record did not disclose that the Air Force’s approach was uneven or unfair. Warner Robins officials stated that they were not permitted to include private sector firms as part of their proposed effort to perform the workload. Although Warner Robins won the competition, depot officials believe that the use of private sector support would have enhanced their competitiveness by providing a better way to perform the paint and depaint operations on the C-5 aircraft. According to Air Force officials, significant use of private sector support as part of the public offeror’s proposal would have been inherently inconsistent with a public-private competition. Consequently, Warner Robins developed an alternative approach to perform the C-5 aircraft paint and depaint workload at its depot facilities. This matter had no impact on the outcome of the C-5 competition, and it has been resolved for any future public-private competitions for workloads at the closing San Antonio and Sacramento depots by the 1998 Defense Authorization Act.