The U.S. Court of Federal Claims (COFC), in Sierra Nevada Corporation v. United States, recently held that a contracting agency’s justification of a sole-source contract award ran afoul of the Competition in Contracting Act (CICA) because the duration of the sole-source contract was longer than reasonably necessary. The COFC’s decision in this case is noteworthy because it provides clarity for both procuring agencies and would-be protesters about the limits of an agency’s ability to invoke one of the enumerated statutory exceptions to CICA.

The Facts

In 2014, the Air Force awarded a contract to Sikorsky Aircraft Corporation to develop the Combat Rescue Helicopter (CRH) to replace an aging fleet of Pave Hawk aircraft. Over the past five and a half years of Sikorsky’s work on the CRH development contract “the requirements baseline has continued to evolve, driving the need for planning in support of a new contract vehicle to address a broad spectrum of known and undefined operational capabilities.”

During the summer of 2019, the Air Force determined that the CRH’s capabilities required updating “to ensure it [could] encounter modern threats and perform its critical mission.” In October 2019, the Air Force issued a Sources Sought Synopsis (SSS) indicating that the Air Force was conducting market research to assess the ability of companies to perform “a broad spectrum of capability upgrades.”

In response to the SSS, the Air Force identified “capable vendors,” meaning that each vendor was “evaluated as capable of performing required development contract activities to include development, integration, and verification,” when provided with a Technical Data Package (TDP). The Air Force included Sierra Nevada Corporation (SNC) as one of these “capable vendors.” For the CRH upgrade contract, “the TDP includes information such as interface control documents and wiring diagrams that are specific to the requested modifications.” Thereafter, in March 2020, the Air Force reviewed responses from the industry to the SSS and concluded that “[i]ndustry feedback verified need for full [TDP] to implement candidate [capability upgrade] requirements.”

However, the TDP, which eventually will be delivered to the Air Force by Sikorsky pursuant to its current CRH development contract, was “currently unavailable both because Sikorsky’s [] TDP delivery due date has not yet arrived and because of a nascent dispute between the government and Sikorsky over data rights.”

On January 19, 2021, after considering multiple options, the Air Force signed a Justification and Approval (J&A), representing a decision to move forward with an award to Sikorsky of a five-year sole-source CRH upgrade contract, with a seven-year delivery period. The primary stated reason for the Air Force’s sole-source award to Sikorsky was that Sikorsky was the only company who possessed the necessary TDP.

Thereafter, SNC filed a bid protest with the COFC alleging, among other things, that the duration of the sole-source award to Sikorsky violated CICA.

The Holding

The court agreed with SNC that the Air Force’s “J&A does not justify a long-term, $980 million, sole-source, single award ID/IQ [contract] to Sikorsky.” Specifically, the court noted that, although the record “generally supports a sole-source award to Sikorsky if and when the TDP is not delivered in a timely manner—and during any subsequent period in which the TDP remains unavailable—the Court concludes that the scope of the contemplated contract exceeds the government’s demonstrated need.” The court noted that “while the J&A and the administrative record demonstrate that the timing of the TDP delivery is somewhat uncertain, the TDP may be available in the near future.” The court further stated:

[T]he critical problem for the [Air Force] is that the J&A simply does not explain how the current unavailability of a TDP justifies a sole-source award for the entirety of the CRH upgrade contract, which contemplates a five-year order period and a seven-year delivery period. That omission is particularly glaring in light of the government’s admission that Sikorsky is contractually required to provide a full TDP in the near future, at which time [multiple] other contractors will be capable of performing the CRH upgrades.

The court went on to note that “CICA’s mandate for full and open competition is not excused simply because a sole-source award avoids additional, future effort on the part of the Agency.”

Accordingly, the court concluded that a permanent injunction was warranted to ensure that the Air Force competitively bids the subject work in accordance with CICA when and if the TDP becomes available.

The Takeaway

Most government contractors are aware that CICA requires agencies, when conducting “a procurement for property or services,” to use competitive procedures to obtain “full and open competition” (10 U.S.C. § 2304(a)(1)). Most government contractors are also aware that there are limited exceptions to CICA, such as where the property or services “are available from only one responsible source . . . and no other type of property or services will satisfy the needs of the agency” (10 U.S.C. § 2304(c)(1)).

However, many government contractors may not realize that an agency does not possess unlimited discretion to invoke the sole-source exception to CICA’s competition requirements. More specifically, contractors may not realize that they may challenge the duration of a sole-source award contract in a bid protest when the period of time for the sole-source award is unreasonable or not adequately justified. The Sierra Nevada Corporation case highlights this important limit on an agency’s discretion to invoke CICA’s sole-source exception.

Besides justifying why it needs to depart from statutorily mandated competition requirements, going forward an agency will have to be mindful of the need to explain for how long it will need the sole-sourced good or service, and be prepared to explain in the J&A why the period of time stated is both necessary and reasonable. The Sierra Nevada Corporation decision makes clear that an agency’s failure to do so might give contractors a valid basis to protest the duration of the sole-source award.