The Insider

Pentagon Press Secretary George Little today issued a statement regarding published reports that Iran may impede the transit of U.S. naval ships operating in the Persian Gulf region:

The deployment of U.S. military assets in the Persian Gulf region will continue as it has for decades.

These are regularly scheduled movements in accordance with our longstanding commitments to the security and stability of the region and in support of ongoing operations.

These carrier strike group deployments are necessary to maintain the continuity and operational support to ongoing missions in the U.S. Central Command area of responsibility.

The U.S. Navy operates under international maritime conventions to maintain a constant state of high vigilance in order to ensure the continued, safe flow of maritime traffic in waterways critical to global commerce.

Our transits of the Strait of Hormuz continue to be in compliance with international law, which guarantees our vessels the right of transit passage. We are committed to protecting maritime freedoms that are the basis for global prosperity; this is one of the main reasons our military forces operate in the region.

Little also stressed that no one in the U.S. government is seeking a confrontation with Iran over the Strait of Hormuz.

The Government Accountability Office has denied a protest filed by Hawker Beechcraft alleging that the Air Force violated procurement law by excluding the company from a contract competition that would procure 20 light attack aircraft for Afghanistan.

The protest -- and the final decision -- come down in large part to timing and a mailing address:

The Air Force argues that HBDC’s protest should be dismissed because the certified return receipt demonstrates that HBDC received notice of its exclusion from the competition on November 4, and because HBDC did not timely request a debriefing or file a timely protest. HBDC maintains that the timeliness of its debriefing request and protest should be measured from November 15, as opposed to November 4, since the Air Force sent the notice of exclusion to an allegedly “incorrect address.”

More specifically, HBDC asserts that the Air Force erred in sending the notice to HBDC’s physical government business address, rather than to HBDC’s designated mailing address, and due to this error the notice cannot be considered received by HBDC until the time the notice reached HBDC’s contracts manager on November 15. HBDC argues that its separate mailing address was identified on Standard Form (SF) 33 of its most recent proposal revision of September 14, and is accurately listed in HBDC’s Central Contracting Registry (CCR) Database profile, along with its physical government business address.

HBDC also argues that the Defense FAR Supplement (DFARS) and its associated Procedure, Guidance, and Information (PGI), require defense agencies to “use the CCR database as the primary source of contractor information for contract award and administration,” and “shall use the CCR database as the authoritative source” for certain information, including a contractor’s mailing address. DFARS PGI 204.1103. Finally, HBDC notes that the Air Force sent correspondence to HBDC’s “correct” mailing address earlier in the competition.

We fundamentally disagree with HBDC’s premise that the Air Force directed the notice of exclusion to an “incorrect” address. The Air Force notice correctly indicated--i.e., there were no typographical errors--an address HBDC provided to the Air Force throughout the competition--i.e., in its initial proposal, in its revised proposal, on the cover letter of its revised proposal signed by its contracts manager, and in the signature line of email correspondence sent by its contracts manager. AM, Tab 1, at 2; Tab 2, at 1, 2; Tab 5 at 2, 3. It is this address which HBDC now claims to be “incorrect” for the purpose of receiving the agency’s exclusion letter.

To the extent HBDC listed a different address on the SF 33 of its September 14 revised proposal submission, this address was not identified as a “mailing address” or HBDC’s “correct” address, and the record reflects that in various other places in this submission, HBDC identified its address as the address used by the agency to provide this notice.[1] HBDC Response, Tab 3, at 1. We also note that the DFAS PGI provisions that HBDC relies on for establishing its “correct” mailing address do not apply to agency communications during the course of a procurement--by their terms they apply to contract award and contract administration matters. The use of a firm’s CCR information has never been established as a requirement when providing adverse action notices.

More importantly, our timeliness rules do not turn on whether an agency has sent information to a particular designated address; rather, we look to whether the relevant information was in fact received by the offeror. In this regard, our Office has previously held that actual notification to a company’s designated point of contact is not required to constitute notice under our Bid Protest Regulations, where notice is otherwise received by the firm. For example, in Jarrell-Ash Div., Fisher Scientific Co.--Reconsideration, we held that notice of rejection of a proposal was effective on the date it was received at the company’s sales office address, even where the sales office address was not designated in the firm’s proposal, and was not the address of the individuals who prepared the proposal. Jarrell-Ash Div., Fisher Scientific Co.--Reconsideration, B-209236.3, Dec. 21, 1982, 82-2 CPD ¶ 562 at 3.

Here, it is beyond dispute that the Air Force sent the notice of exclusion, via certified mail, to HBDC’s designated contracts manager at an address set forth on numerous proposal documents submitted by HBDC--including a revised proposal cover letter signed by the contracts manager--and that receipt of the notice on November 4 is confirmed by an HBDC employee’s signature on the certified mail return receipt.

Accordingly, there is no basis for HBDC to claim that the Air Force caused the delay here. That it took HBDC 11 days to route the notice of exclusion to the appropriate person does not toll the filing deadline imposed by our regulations, or the statutory deadline to request a required debriefing.[2]

In this regard, Our Bid Protest Regulations contain strict rules for the timely submission of protests. Under these rules, a protest based on alleged improprieties in a solicitation must be filed prior to bid opening or the time established for receipt of proposals, 4 C.F.R. § 21.2(a)(1) (2010), and all other protests must be filed no later than 10 calendar days after the protester knew, or should have known, of the basis for protest, whichever is earlier. 4 C.F.R. § 21.2(a)(2). Where a protester timely requests a required debriefing,a protest filed within 10 days of the debriefing will be considered timely with respect to bases known before or as a result of the debriefing. Id. An offeror excluded from further consideration prior to contract award may request a preaward debriefing, but must submit a written request to the contracting officer within three days after receipt of the agency’s notice of exclusion. Federal Acquisition Regulation (FAR) § 15.505(a)(1). An offeror that fails to submit its request to the contracting officer within three days after receiving notice of exclusion is not entitled to either a preaward, or post-award, debriefing.[3] FAR § 15.505(a)(3).

Accordingly, HBDC was required to request a debriefing within three days of its receipt of the Air Force notice on November 4, or, absent a debriefing, was required to file its protest no later than 10 days after that date.[4] Where HBDC did not timely request a debriefing, and failed to file its protest until 17 days after it was notified that its proposal had been excluded from the competitive range, the protest is untimely and must be dismissed.

The Pentagon recently issued a new instruction laying out its supply chain materiel management policy. According to the Dec. 14 memo:

a. DoD materiel management shall operate as a high-performing and agile supply chain responsive to customer requirements during peacetime and war while balancing risk and total cost. The DoD supply chain shall provide best-value materiel and services in support of rapid power projection and operational sustainment of U.S. forces as required by the National Military Strategy. Potential disruptions within and outside the DoD supply chain shall be identified, monitored, and assessed in order to mitigate risk to supply chain operations. Life-cycle management controls shall be applied to guard against counterfeit materiel in the DoD supply chain. Energy efficient products or services shall have preference in all procurements, except those products or services procured for combat or combat-related missions.

b. Resourcing for all elements of the DoD supply chain shall be optimized through collaboration between support providers and customers. DoD investment shall be sufficient throughout the life cycle of new or existing weapons systems, equipment, and major end items to respond to warfighter needs. Performance and cost evaluations of supply chain operations and inventory shall be conducted periodically with the objective of ensuring that assets are available for use or reuse in the DoD supply chain to satisfy customer requirements.

c. Accountability, control, and DoD-wide visibility of materiel shall be maintained throughout the DoD supply chain, with the required level of physical protection and identification of the materiel at minimal cost. However, the highest levels of accountability, control, visibility, protection, and identification shall apply to the stewardship of controlled inventory items (CII) including nuclear weapons-related materiel (NWRM) commensurate with the risk of materiel release. All materiel recurrently used, bought, stocked, or distributed, including NWRM, shall be cataloged with an accountable record.

Analysts at Wall Street firm Credit Suisse issued their 2012 outlook for the aerospace and defense sector. In it, they predict that commercial aerospace will outperform defense for the fourth consecutive year. Specifically on the defense sector, they write:

Defense Likely to be Dead Money:  While we do not believe that the failure of the Super Committee to reach an agreement will actually result in sequestration, we think Congress will use 2012 as a debating year. Consequently, we see the potential for much of the defense sector to be dead money in 2012, before underperforming from 2013 as cuts in the defense budget begin to come through. We view a falling defense budget as bad for defense prime margins as well as revenues, and consequently remain bearish on defense. We also note that 2012 is an election year. When looking at the previous 5 election years, it is found that the defense sector underperformed the market most in 1996, when a Democrat President was seeking re-election. This is similar to today, but today there is a less healthy economy, making it an even more bearish outlook for defense.

General Dynamics announced today it has completed its tender offer to purchase all outstanding shares of common stock in Force Protection Inc., practically consummating the marriage between the two companies. “Force Protection will become a wholly owned subsidiary of General Dynamics as a result of the merger and will become part of General Dynamics Land Systems,” according to a statement from GD.

GD launched its effort to buy the armored vehicle maker on Nov. 18, following a Nov. 7 announcement that the companies had agreed to a merger. GD will pay $5.62 in cash for each single share of FPI, or $360 million.

“General Dynamics will now exercise a 'top up' option, as described in the Offer to Purchase, which will result in General Dynamics owning at least 90 percent of the outstanding shares of Force Protection,” according to the statement. “Once the top-up option is exercised, General Dynamics intends to complete a 'short form' merger under Nevada law.”

FPI, headquartered in Ladson, SC, was first incorporated in Nevada. As one of the earliest makers of mine-resistant trucks, the company enjoyed lucrative contracts during the Pentagon's rush to field Mine Resistant Ambush Protected vehicles in Iraq.

“The acquisition of Force Protection is expected to be accretive to General Dynamics’ earnings in 2012,” the statement reads. “In the merger, each remaining share of Force Protection common stock that was not validly tendered in the tender offer, other than shares owned by General Dynamics or Force Protection, will be canceled and converted into the right to receive the same $5.52 per share in cash that was paid in the tender offer.”

The companies say they expect the merger to be complete by the end of the year. "Once the merger is completed, General Dynamics intends to cause all shares of Force Protection common stock to be delisted from the NASDAQ Capital Market, and Force Protection will no longer have reporting obligations under the Securities Exchange Act of 1934, as amended,” according to the statement.

Meanwhile, FPI recently received $150 million in contracts for maintenance of its 3,000 Cougar MRAPs, a fleet of vehicles some analysts say made the company an attractive buy for GD.

The full Senate just passed the conference version of the fiscal year 2012 defense authorization bill by an 86-13 vote.

The House approved the conference report yesterday; the legislation now moves to the White House, where President Obama is expected to sign the bill into law by tomorrow.

Sen. John McCain, in a speech prepared for the Senate floor highlighting flaws in the Pentagon's acquisition practices, said today that the Air Force's F-22As -- marquee assets that have yet to see combat -- “may very well become the most expensive corroding hanger queens ever in the history of modern military aviation.”

McCain, ranking member of the Senate Armed Services Committee, did not actually deliver those remarks as he skipped over parts of his prepared text while his allotted time to speak in the chamber expired.

Before offering that pithy summation of the F-22 program, McCain -- a former Navy pilot – walked through through the history of the Raptor program, which he said will eventually cost $67.3 billion and deliver 186 new fighters.

Another example of how flawed the Pentagon’s weapons procurement process is can be found in the F-22 RAPTOR program.  When the Pentagon and the defense industry originally conceived of the F-22 in the mid-1980s, they intended it to serve as a revolutionary solution to the Air Force’s need to maintain air superiority in the face of the Soviet threat during the Cold War. The F-22 obtained “full operational capability” twenty years later -- well after the Soviet Union dissolved.  When it finally emerged from its extended testing and development phase, the F-22 was recognized as a very capable tactical fighter, probably the best in the world for some time to come. But, plagued with developmental and technical issues that caused the cost of buying to go through the roof, not only was the F-22 twenty years in the making, but the process has proved so costly that the Pentagon could ultimately afford only 187 of the planes -- rather than the 750 it originally planned to buy.

Unfortunately, the F-22 also ended up being effectively too expensive to operate compared to the legacy aircraft it was designed to replace.  It also ended up largely irrelevant to the most predominant current threats to national security -- terrorists, insurgencies, and other non-state actors. In fact, if one were to set aside the F-22’s occasional appearances in recent big-budget Hollywood movies where it has been featured fighting aliens and giant robots, the F-22 has to this day not flown a single combat sortie -- despite that we have been at war for 10 years as of this September and recently supported a no-fly zone in Libya.

Politically engineered to draw in over 1,000 suppliers from 44 states represented by key Members of Congress and, by the estimates of prime contractor Lockheed Martin, directly or indirectly supporting 95,000 jobs, there can be little doubt that the program kept being extended far longer than it should have been -- ultimately to the detriment to the taxpayer and the warfighter.  As such, it remains an excellent example of how much our defense procurement process has been in need in reform. We may fight a near-peer military competitor with a fifth-generation fighter capability someday, but we have been at war for 10 years and until a few months ago had been helping NATO with a no-fly zone in Libya.  And, this enormously expensive aircraft sat out both campaigns.

Moreover, as a result of problems with its OBOG (On-Board Oxygen Generating) system, which has caused pilots to get dizzy or, in some cases, lose consciousness from lack of oxygen, on May 3, 2011, the Air Force grounded its entire fleet of F-22s. While this grounding was lifted earlier this year, exactly why F-22 pilots have been experiencing hypoxia remains unknown -- but similar unexplained incidents continue.

And then, there is the issue of the sky-rocketing maintenance costs to the Air Force in trying to sustain a barely adequate “mission capable rate” for the F-22. Its seems that the “plug and play” component maintenance features that were supposed to reduce costs for the Air Force over the life cycle of the aircraft doesn’t really play well. And, each time a panel is opened for maintenance, the costs to repair the “low-observable” surface in order to maintain its stealthiness have made this critical feature of the aircraft cost-prohibitive to sustain over the long-run. Finally, it seems that the engineers and technicians designing the F-22 forgot a basic law of physics during some point of the development phase -- that dissimilar metals in contact with each other have a tendency to corrode. The Air Force is now faced with a huge maintenance headache costing over hundreds of millions of dollars-and-growing to keep all 168 F-22s sitting on the ramp from corroding from the inside out.

One thing is clear: because of a problem directly attributable to how aggressively the F-22 was acquired -- procuring significant quantities of aircraft without having conducted careful developmental testing and reliably estimating how much they will cost to own and operate -- the 168 F-22s, costing over $200 million each, may very well become the most expensive corroding hanger queens ever in the history of modern military aviation.