GAO Rejects Raytheon Protest

I did not see this coming, for some reason I kept thinking the GAO would ask the Navy to compete the contracts in order to keep more than one contractor capable of supporting these systems. The GAO says otherwise, and whether I am naive or not, I believe the GAO always gets these things right.

Essentially, Raytheon didn't produce a good case, and lost because of it. The GAO treats each case individually, so did not account for the big picture here nor should they, so faulting the GAO for making a decision that is only one small part of a larger picture that puts Lockheed Martin ahead of Raytheon in every Navy decision for combat systems work would be unfair and counter productive. Reuters has the report.

The Government Accountability Office has denied three protests filed by Raytheon Co after the U.S. Navy decided to pursue a sole source contract for Aegis combat systems with Lockheed Martin Corp.

The GAO, the nonpartisan congressional agency that rules on federal contract disputes, did not issue a statement explaining its decision. The GAO typically issues a redacted version of its decisions several weeks after they are announced.

Raytheon in September protested the award of contracts to Lockheed for modernization of the Aegis combat system, a system Lockheed built, saying the decision was flawed and violated the most basic U.S. competition laws.

The Navy rejected Raytheon's arguments, saying Raytheon did not demonstrate that it could meet the Navy's requirements, and relied instead on a "speculative promise" to team up with Lockheed. Lockheed said at the time that Raytheon had not approached it about any teaming agreement.

Raytheon has said the Navy repeatedly assured industry that it would open the Aegis modernization work to competition, but then suddenly decided to let Lockheed remain the sole source contractor.

The Navy did repeatedly assure the industry that it would open the AEGIS modernization work to competition, that is not untrue. Doesn't matter though.

The problem here is perception, and the perception is not good for the Navy. Every decision, every single one, gives the wrong perception. The Navy truncates the DDG-1000, with the unstated but widely assumed reason of cost, even though the program is hitting cost targets within 1%... then puts out a replacement plan that costs more than the DDG-1000 plan in favor of DDG-51.

In other words, the perception is the Navy has canceled the Raytheon system that is better in every single way than the Lockheed Martin AEGIS system, including being less expensive, and picked the more expensive but less capable AEGIS system. Then instead of putting billions of AEGIS modernization work out to competition, the Navy sole sources to Lockheed Martin. Lockheed Martin could make up to eight billion over the next 6 years in AEGIS work, just to make AEGIS as good as a product Raytheon could upgrade for a little more than half a billion.

And in the end, I still can't find any independent technical folks who will certify that AEGIS will ever be truly OA, which the Raytheon system is. Oh sure, we can get some PAO or Admiral to suggest it, but they know they will not be held accountable for their claims. No one with a technical reputation who doesn't work for Lockheed Martin will say AEGIS will be OA, which tells me a lot. Where from here?

No idea. I just hope nothing improper is taking place, because anyone with even a shred of evidence who suggests corruption is going to give the Navy a nightmare. There is absolutely none, ZERO, public information evidence that counters the perception of favoritism or corruption, and that is a serious perception problem. When the Navy picks the more expensive, less capable system option specific to Lockheed Martin in every decision and prohibits competition at the same time, the perception works against the Navy. The Navy should have held competitions where it could and let people win or lose on the merits, and with AEGIS Lockheed Martin would have already had every advantage to win on those merits, but at least that counters the perception issue. Lockheed Martin doesn't need the perception problem either, they do good work and can win fair competitions, let them.

Five to ten years down the road if AEGIS is the only game in town, if Lockheed Martin has a monopoly and the price of AEGIS is sky high the Navy will have no one to blame for a lack of competition except themselves. I just hope the system being produced at that time is world beater, because it will need to be as weapon systems continue to get more capable with longer range.