NACF LTV Award Protest - Commonality

The third most important evaluation criterion was listed as "the proposal which demonstrates the highest degree of commonality with, and makes the maximum use of Air Lightweight Fighter and Air Combat Fighter technology and hardware." It was LTV's position that this criterion implements the statement in H.R. Report No. 93-1363 that the NACF be a carrier-suitable adaptation of the selected Air Force ACF and must therefore be read to require commonality with the F-16. In support of its position, LTV focused on the relationship between the RFQ/RFP commonality criterion and the Air Force's October 12, 1974, letter which accompanied the RFQ. That letter provided in pertinent part as follows:

"1. The Navy is initiating a program for the development and production of a new carrier based fighter/attack aircraft weapon system to be a derivative of Air Force Lightweight Fighter program. In the House of Representatives Report No. 93.1363 of 18 September 1974, it was directed that the development of this aircraft make maximum use of the Air Force Lightweight Fighter (USAF LWF) and Air Combat Fighter (ACF) technology and hardware.

"2. Enclosure (2) [the RFQ] reflects performance characteristics and other parameters of the aircraft as described in the Navy's operational requirement. Achievement of these characteristics and parameters is an important goal. Contractors should provide at least one point design of an aircraft which responds to the operational requirements as defined by the requirements specification and the desired maximum use of the USAF LWF and ACF technology and hardware. Trades should be performed which analyze the gains and penalties associated with achieving this goal. Gains may include cost and scheduled savings during development, and acquisition and lower overall life cycle costs based on commonality with the ACF Aircraft. Penalties may include failure to meet performance and specification goals, thereby reducing the potential effectiveness of the Navy aircraft. The trade studies should quantify derived benefits and identify any penalties so that the Navy can determine an acceptable balance between the two. In order to assure that all opportunities for commonality are explored, the contractors must provide a design including the same engine which they propose for use with the USAF ACF. In addition, the contractors also are requested to provide a variant which has only provisions in place of the full all weather air-to-air missile capability and identify gains and penalties associated therewith.

"3. It is the Navy's intent to consider reliability, maintainability, survivability, schedule and cost along with performance and capability in accordance with the solicitation evaluation criteria in judging designs. Flexibility and tradeoffs are eiicountered where significant Cost savings call be realized or reliability and maintainability can be enhanced. These trade-offs should be documented to the Navy. It may not be possible in the time allowed to submit a fully documented engineering development proposal.

"4. The new Navy aircraft is intended to replace F-4 aircraft in both the Navy and Marine Corps and eventually the A-i in the Navy. Accordingly, the aircraft should have a capability to effectively perform long range fighter escort and strike missions into high threat areas. The aircraft must possess good carrier suitability features and be fully compatible with that environment. It must also provide a significant improvenient in reliability, maintainability, and survivability over current Navy tactical aircraft. Furthermore, it must offer affordable acquisition and life cycle costs. Initial Fleet deliveries are required no later than calendar year 1981.

"The letter also encouraged the ACF contractors to prepare their proposals so as to achieve "lower costs and increased conimonality between the ACF and the Navy derivative" and stated that if a Navy derivative of the LWF program could be developed, it was anticipated that full-scale development of the NACF would be initiated by the Navy. Attached to the Air Force's cover letter was a document captioned "CRITERIA FOR EVALUATION ANI) SOURCE SELECTION." That dociunent provided that "Proposals for Full Scale Development received in response to this solicitation will be evaluated by the Naval Air Systems Command pursuant to a formal source selection procedure. The following evaluation criteria apply, in the context of the considerations outlined in the covering letter." The document then set out criteria that were essentially the same as those contained in the attached RFQ.

LTV pointed out that this letter indicated that: 1) an important goal to the Navy was inaxilnuni reasonable commonality between the ACF and "the Navy derivative"; 2) at least one point design was desired which represented the maximum use of LWF and ACF technology and hardware; 3) contractors were encouraged to use imaginative approaches in achieving lower costs and increased conunonality between the ACF and the Navy derivative.; and 4) that full-scale development was anticipated if a derivative of the LWF program could satisfy Navy needs. LTV placed considerable weight on the references to a Navy derivative of the ACF as establishing the type of aircraft desired by the Navy. It also found significance in the statement that the evaluation, criteria were to be applied "in the context of the considerations of the covering letter." LTV argued that the only reasonable reading of these documents is that the commonality criterion required that the NACF be a derivative of the ACF, and that commonality could be maximized only if measured against the F-16. In addition, LTV asserted that its interpretation was buttressed on several occasions when it was told by DOD officials that the NACF would be a derivative of the ACF. While LTV recognized that the F-16 was not chosen as the ACF until January 13, 1975, it argued that after that date the Navy was required to consider the F-16 as the basic NACF design.

The Navy conceded that the F-18 is not a derivative of the F-16. However, it was the Navy's position that the RFQ/RFP did not contain a requirement that the ACF be adapted for Navy use. Rather, the Navy stated that the RFQ/RFP was designed to solicit the optimum lightweight fighter for the Navy that would, within the performance and cost parameters established for the NACF, maximize commonality of both technology and hardware of the LWF and ACF programs. The Navy contended that its selection of the F-18 was entirely consistent with that interpretation.

GAO concluded that the Navy was correct. The language of the third criterion left little doubt that commonality was to be sought with both the LWF and ACF programs and, more specifically, with both the technology and hardware associated with the two programs. As noted, however, LTV argued that the criterion must be interpreted in light of the Air Force letter accompanying the RFQ which, LTV believes, would establish that commonality in this instance meant only a derivative of the F-16. GAO agreed with LTV that the evaluation criteria should be read in connection with the accompanying Air Force letter. GAO did not agree, however, that the letter can be reasonably read as LTV argues.

GAO believed that it was clear that the language of the letter was directed toward the overall LWF program, of which the YF-17 was a significant part, and not merely the selected F-16. For example, the initial paragraph of the letter stated that the NACF was to be a derivative o:f the "Air Force Lightweight Fighter Program," and characterizes the Conference Report as desiring maximum use of both LWF and ACF technology and hardware. Furthermore, the letter advised that NACF development would be initiated if a derivative of the Air Force Lightweight Fighter program was satisfactory. In addition, many of the references to "ACF" appear to refer not to the selected Air Force design (the Air Force ACF had not yet been chosen), but to the entries of each of the offerors competing for the Air Force ACF award. The second paragraph of that letter advised "contractors * * * [to] provide a design including the same engine whicli they propose for use with the USAF ACF."

It was also clear from the letter that while maximum commonality was desired (and GAO agreed that the maximum possible commonality would result in a close derivative of the Air Force selection), contractors were expected to make tradeoffs in order to satisfy cost and performance requirements. Thus, the letter specifically referred to commonality as a goal rather than a mandatory feature. In this connection, GAO pointed out that commonality in fact was not a requirement, but rather an evaluation factor, pursuant to which proposals would be rated on the degree to which commonality (with the totality of the LWF and ACF programs) was attained. No minimum level of conmnionahty was ever established by the RFQ/RFI or associated documents.

LTV argued that such an interpretation would not permit realization of the significant cost savings which was the very goal of the commonality objective. GAO thought the record suggested otherwise. The Navy pointed out that the LWF program, which ultimately resulted in the ACF program, involved "a considerable investment * * * toward studying advanced teclmological developments, with particular emphasis on * * * mandates for smiplification and the elimination of frills. This extensive study, including testing, was reflected in the surviving F-16 and F-17 designs * * * "

How this LWF technology was utilized in the F-17 is explained by MDC as follows: "The MD/[Northropj teaming agreement assured that LWF prototype technology and cost saving would be incorporated in an NACF * * . Cost benefits of $125 million flowed from the use of prior YF-17/J1O1 development effort and inured to the benefit of the Model 267. Moreover, because the Model 267 drew heavily from the extensive YF-17 and J1O1 design, development and test efforts, the F-18 NACF was able to incorporate the excellent high-lift aerodynamics of the unswept wing with leading edge extension; the outstanding handling qualities made possible through the aerodynamic configuration and the closed-loop electronic control augmentation system with mechanical backup; a new ejection seat which had already been subjected to sled tests; and the J1O1 (now the F404) engine with its solid development background. Consequently, the F-18 has a demonstrated technological base which substantially reduces the risks otherwise inherent in developing a new aircraft. * * * "

Furthermore, the savings available through achieving commonality with technology was also indicated in the following statement in the Navy's report filed in response to the protest: ""Commonality of hardware" between two aircraft designs would naturally be greatest if each and every component of the two models was identical - its engines, landing gear, armament, electronics, flight control systems and even rivets. "Commonality of technology," on the other hand, could be achieved even though the individual components of the two aircrafts were different. For example, their communications equipments could be different in size, operate at different frequencies and use different antennae, but their internal designs could share a "commonality of technology" because they both employed sub-miniaturized components. "Commonality of technology" could also be manifested in the use of metal parts with different shapes and sizes, but whose metallurgical properties were similar in the common technology employed in their smelting, milling, and forming operations. "Commonality of technology" produced the greatest savings in time and money in the early research and development phases of a program, whereas "commonality of hardware" has the greatest beneficial effect in reducing later production and support costs."

In addition, GAO noted that approximately $114 million was devoted to the demonstration phase of the LWF program, with about 60 percent of that amount being spent on the YF-17. GAO thought the Navy acted properly in attempting to utilize in its own program the technology and hardware that resulted from that expenditure. With regard to the assertion that DOD officials led LTV to believe that its interpretation of the RFQ was correct, LTV stated that it was told by the Deputy Secretary of Defense that "commonality with the Air Force plane and cost would determine the Navy's selection." LTV also claimed that it was told by the Deputy Chief of Naval Operations that, in view of H.R. Report No. 93-1363, "the Navy was limited to selecting a derivative of the aircraft selected by the Air Force."

The Navy strongly denied these allegations. The Navy also advised that the meeting between the Deputy Secretary and the NACF contractors was held on October 16, 1974, inter alia, to answer any questions regarding the competition. It further advised that a summary of the notes of the meeting revealed that at "no time did the Deputy Secretary state or imply that the NACF must be a derivative of the selected ACF, or that performance was of lesser importance that commonality and cost, or that the evaluation criteria were other than those clearly set forth in the solicitation."

While both the Navy and LTV have submitted differing statements as to what they believe occurred at these meetings, GAO's record did not indicate which version was correct. GAO did note, however, that LTV's proposals reflected an awareness that offerors were not restricted to achieving, commonality only with the F-16. For example, LTV's proposed model 1602 was so different from the F-16 that the Navy suggested that it "might more accurately be described as an entirely new aircraft design both as to airframe and engine."

Also, the LTV 1600/1601 proposal contained the following statement: " * * * One of the keys of the feasibility of a Navy derivative of the ACF is the preservation of "technological and hardware coinnionality" in transitioning from ACF to NFA. A successful transition process is more directly related to "technology commonality" than to "hardware commonality." The single ingredient that most directly determines the ultimate degree of program success is the validity of the technology base. If the technology base is not sound and thoroughly established early in the program, no amount of "hardware commonality" can make up for this deficiency."

It was GAO's conclusion that the concept of "commonality" as that term was used in the RFQ/RFP clearly referred to the technology and hardware of the LWF and ACF programs and not soley to the F-16 design. With respect to the evaluation of commonality itself, GAO's review indicated that it took into account these three aspects: (1) the extent of commonality of the offeror's model with the F-16; (2) commonality of the offeror's model with LWF hardware and technology; and (3) commonality with regard to the use of Government Furnished Equipment and Navy Ground Support Equipment. In conducting this evaluation, the Navy requested, and the offerors provided, individual commonality estimates of the respective NACF designs with their prior ACF designs. The MDC design obviously had little hardware commonality with the F-16, and the Navy reports that this was taken into consideration when it evaluated LTV far higher than MDC on this criterion. This was consistent with the provisions of the RFQ, and it thus appeared that both offerors were treated equally and fairly in this regard.

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