Sole-Source Award Was Warranted, But Court Finds that Duration of Sole-Contract Was Too Long; Sierra Nevada Corporation v. United States, COFC No. 21-1186C

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Protest challenging a sole-source award is granted. The Air Force awarded a sole-contract to Sikorsky Aircraft Corporation for the development of helicopters. The Air Force claimed a sole-source award was necessary because it was in a dispute with Sikorsky over a technical data package for the helicopters and could not hold a an open competition while that data package was unavailable. The court reasoned that unavailability of the technical data package justified the sole-source decision. Nonetheless, the court found that the proposed five-year duration of the sole-source contract was unreasonable. The Air Force had indicated that even with the dispute, the technical data package would be available in the near future. Given this, the Air Force had not explained why a five-year sole-source contract was necessary.

In 2014, the Air Force awarded a contract to Sikorsky Aircraft Corporation to develop a Combat Rescue Helicopter. Sikorsky developed the helicopter, but in 2019, the Air Force determined that helicopter’s capabilities required updating. Accordingly, the Air Force conducted market research—including a sources sought synopsis and an industry day—to asses the ability of the industry at large to perform the necessary developments.

After reviewing responses to the sources sought notice and meeting with prospective offerors, the Air Force identified several companies that were capable of performing the required developments assuming the availability of a technical data package (TDP). A TDP includes the design and manufacturing information needed to perform maintenance on equipment. As part of its 2014 contract, Sikorsky had developed and was required to provide a TDP to the Air Force. But at the time the Air Force was conducting market research, the government and Sikorsky were enmeshed in a dispute over data rights for the TDP. Thus, it was unclear when the TDP would be available.

Given the unavailability of the TDP, the Air Force decided to make a sole-source award to Sikorsky for the additional development work. The Air Force issued a Justification & Approval document that stated that a sole-source award was necessary because Sikorsky was the only company with current access to the TDP. The Justification & Approval contemplated award of five-year IDIQ contract to Sikorsky worth $980 million.

Sierra Nevada Corporation, which had responded to the sources sought notice and participated in the Air Force’s Industry Day, filed a protest with the Court of Federal Claims. Sierra Nevada argued that the decision to award a sole-source contract to Sikorsky was arbitrary and capricious. Sikorsky intervened. All the parties moved for judgment on the administrative record.

Under the FAR, when an agency makes a sole-source award, it must certify that the data supporting the sole-source decision is accurate and complete. Sierra Nevada argued that the Air Force violated this FAR provision by not considering a second response the company had submitted to agency’s sources sought notice . Sierra Nevada contended that Justification and Approval was not accurate because it did not take into the account the company’s updated capabilities statement.

The court rejected this argument, finding that the Air Force never committed to reviewing to Sierra Nevada’s submissions. Also, even if the Air Force had committed to review it, the submission was untimely. Sierra Nevada had submitted the response seven months after the deadline for responses. Moreover, the court found that the Air Force had already meaningfully considered Sierra Nevada’s capabilities without the submission. It had recognized as part of its market research that Sierra Nevada, and other offerors, could provide capability upgrades without the TDP.

Next, Sierra Nevada asserted that the sole-source decision was the result of the Air Force’s lack of advanced planning. The Competition in Contracting Act prohibits an agency from justifying a sole-source award on the basis of lack of advanced planning. Sierra Nevada contended that if the Air Force had taken reasonable steps to resolve the TDP with Sikorsky in the last year, it would not have had to make the sole-source award.

But the record showed the Air Force had not failed to engage in advanced planning. The sole-source decision was based on market research and industry feedback. At the time the Air Force published the J&A, it believed that Sikorsky would provide the TDP in accordance the contractually prescribed deadline. Indeed, that deadline had not yet passed. The fact that the Air Force realized that a dispute with Sikorsky over data rights may delay the TDP did not amount to a lack of advanced planning.

The court opined that the record generally supported a sole-source award to Sikorsky for any period in which the TDP remained unavailable. Nevertheless, the court found that the scope of the contact, particularly its five-year duration, was unreasonable. The court noted that the Air Force was arguing that a multi-year award to Sikorsky was justified based on the current unavailability of the TDP. But at the same time, the Air Force expected to the TDP to be delivered in the near future; indeed, the Air Force had indicated that the TDP was perhaps imminently forthcoming. The Air Force had not explained how the current unavailability justified a five-year contract with Sikorsky.

The Air Force argued that sole-source award had a “safety valve.” Iin the J&A, the Air Force had committed to a full competition once the TDP became available. But the court found that this safety valve was illusory. While this promise was designed to provide some comfort to offerors, it was not enforceable. No offeror could challenge delivery orders made to Sikorsky under the sole-source contract. Any commitment to a later competition was a voluntary process by high-level Air Force officials.

The court further opined that outside of this safety valve, the Air Force had failed to consider other contract vehicles that could mitigate the current unavailability of the TDP. The court reasoned that instead of a single IDIQ contract to Sikorsky, the Air Force could have used a multiple award contract that would allow for full and open competition as soon as the TDP become available. In fact, the court noted, the Air Force even failed to consider whether waiting a short period for the TDP issue to resolve would obviate the need for the sole-source award.

Having found that Sierra Nevada had prevailed on the merits, the court analyzed the other injunctive relief factors. The court found that Sierra Nevada had been irreparably harmed by losing the ability to compete for the award. But, in light of the statutory admonition to consider national security in resolving bid protests, the court was less sure of the balance of harms factor. Given the critical role of the Air Force’s helicopter program, the court was reluctant to impose a permanent injunction. For the moment, the court enjoined the agency from proceeding with the sole-source award as contemplated. The court directed the government to propose the terms of a permanent injunction that would adequately address the court’s conclusions.

Sierra Nevada is represented by Marques O. Peterson, J. Matthew Carter, Richard B. Oliver, and Dinesh C. Dharmadasa of Pillsbury Winthrop Shaw Pittman LLP. The intervenor, Sikorsky, is represented by Marcia G. Madsen, David F. Dowd, and Cameron R. Edlefsen of Mayer Brown LLP as well as Heather A. Bloom of Lockheed Martin Corporation. The government is represented by David M. Kerr, Brian M. Boynton, and Martin F. Hockey, Jr. of the Department of Justice as well as Erika L. Whelan Retta of the Air Force.

COFC - Sierra Nevada Corporation