Six things to know about Sikorsky’s Air Force protest

On Feb. 12, Sikorsky, a Lockheed Martin company, filed a pre-award protest with the Government Accountability Office (GAO), contending overreach by the U.S. Air Force in the technical data and computer software requirements for its UH-1N Huey replacement program.

Sikorsky contends that its HH-60U is the best choice to replace the U.S. Air Force's aging UH-1N Hueys. However, the company is also pushing back against what it perceives as Air Force
Sikorsky contends that its HH-60U is the best choice to replace the U.S. Air Force’s aging UH-1N Hueys. However, the company is also pushing back against what it perceives as Air Force “overreach” with respect to data rights. Sikorsky Image
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Sikorsky is one of three bidders for the program, which will acquire up to 84 helicopters for use in protecting nuclear missile silos and ensuring the continuity of government operations. Sikorsky has submitted a modified version of the UH-60M Black Hawk for the competition (the HH-60U), while Boeing and Leonardo have teamed up to offer the Air Force the MH-139, a variant of the civil AW139. Sierra Nevada Corporation is also competing with its “Force Hawk,” an upgraded version of the Sikorsky UH-60L. The program is currently in the source selection phase.

The details of Sikorsky’s protest are esoteric, but the case could have important implications for the intellectual property rights of defense contractors. We’ve broken down some of the main questions about the case to help you understand what’s at stake.

1. Why a pre-award protest?

GAO protests are often made by losing bidders who are unhappy with the outcome of a competition. However, they can also be filed before a contract is awarded by bidders who believe that a government solicitation is in some respect unlawful, which is what Sikorsky is contending.

According to a company statement, Sikorsky “has decided to file a pre-award protest concerning the positions taken by the U.S. Air Force during discussions of the Air Force’s UH-1N Huey replacement program on the basis of ambiguous and overreaching technical data and computer software requirements that would require Sikorsky to accept interpretations that are contrary to the language of the request for proposal, and to law and regulation.”

Typically, to be considered timely, a pre-award protest must be filed before the deadline for proposals. That deadline passed in September of last year, which is likely why Sikorsky is emphasizing “interpretations that are contrary to the language of the request for proposal.”

2. So what’s the problem?

Sikorsky’s protest revolves around what intellectual property rights it would give up if its HH-60U were selected by the Air Force. In many defense acquisitions, the government obtains unlimited rights to technical data that is necessary for “operation, maintenance, installation, and training” (OMIT). But in this case, the Air Force may be defining OMIT data too broadly.

W. Jay DeVecchio, a partner in the law firm Morrison & Foerster LLP, recently tackled this subject for an article in The Government Contractor, in which he criticized the Air Force for its “improper assault” on contractor data rights. (DeVecchio has represented Lockheed Martin and Sikorsky in the past, but said he is not involved with the current protest.)

DeVecchio’s focus was on a specific clause, “H001,” which has appeared in multiple Air Force solicitations since 2016. According to DeVecchio, H001 is at odds with U.S. Code (USC) and the Defense Federal Acquisition Regulation Supplement (DFARS) in at least two respects. First, H001 defines OMIT data “for the purposes of this contract” to include computer software. However, the statutory definition of technical data found in 10 USC § 2302(4) specifically excludes computer software.

Second, H001 defines the “operation” in OMIT to include all data necessary to stock, source, acquire, and procure aircraft components, parts, and pieces. But USC 2320(a)(2)(C)(iii) specifies that OMIT data excludes “detailed manufacturing or process data, including such data pertaining to a major system component.” As DeVecchio pointed out in his article, “one cannot ‘stock, source, acquire, or procure’ an item unless it can be produced, and it cannot be produced without ‘detailed manufacturing or process data.'”

Moreover, H001 makes it clear that the Air Force expects “unlimited rights” for everything it defines as OMIT data, including computer software. According to the U.S. military’s Defense Acquisition University (DAU), this means “the right to use, modify, reproduce, display, release, or disclose technical data in whole or in part, in any manner, and for any purpose whatsoever, and to have or authorize others to do so.”

Sikorsky is separately developing the HH-60W as the Air Force's new Combat Rescue Helicopter (CRH). Compared to the UH-1N Huey replacement program, the CRH program has a different contract structure and requirements for delivery of technical data and computer software, Sikorsky said. Sikorsky Image
Sikorsky is separately developing the HH-60W as the Air Force’s new Combat Rescue Helicopter (CRH). Compared to the UH-1N Huey replacement program, the CRH program has a different contract structure and requirements for delivery of technical data and computer software, Sikorsky said. Sikorsky Image

In the case of the UH-1N replacement program, Sikorsky appears to be particularly concerned with the Air Force’s expectation that it will receive unlimited rights to software source code. “Software source code, by statute and DFARS definition, is not technical data required for sustainment activities,” said Sikorsky’s Steve Callaghan, vice president of strategy and business development. “It is therefore improper to include it in the regulatory regime for [OMIT] data with unlimited rights as this only applies to OMIT technical data.”

3. Why would Sikorsky be reluctant to give the Air Force these unlimited rights?

As the DAU itself puts it, “Few issues strike at the core of contractor profitability as much as do those related to rights in technical data and computer software. The competitive advantage represented by technical know-how, trade secrets, or unique designs is translatable directly into profits. Contractors go to great lengths to protect whatever competitive advantage is obtained.”

DeVecchio emphasized to Vertical that companies invest millions of dollars in developing their computer software and manufacturing and process data, which are often among their most valuable assets. If the government had unlimited rights to that software and data, it could conceivably “turn around and give it to their most vicious competitor, and have them duplicate it,” he said. “Why would companies continue to make these investments if the government is going to be in a position to scarf them up?”

The government has certainly recognized the need to preserve contractors’ incentives to invest in intellectual property; that’s why computer software and manufacturing and process data are given special consideration in U.S. Code.

“Congress and DoD specifically set up a different regime for computer software, including source code, in the recognition that this data is very sensitive to contractors and requiring its delivery stifles industry’s incentive to innovate,” said Callaghan.

“By grouping source code in with OMIT technical data, the Air Force is overreaching by demanding it be delivered for sustainment with government purpose rights [GPR]. Besides being contrary to law, this is insufficient protection as submission with GPR would allow the source code to be shared with third-party contractors, including our and our suppliers’ competitors,” he said.

4. So why would the Air Force insist on these expansive rights?

When asked that question, an Air Force spokesperson told Vertical, “The Air Force doesn’t comment on ongoing source selections.”

DeVecchio has identified two possible reasons. As he wrote in The Government Contractor, “The Air Force simply might think there is nothing inappropriate about its expansive elaboration on the data rights clauses.” Alternately, he suggested, the Air Force may be betting on the fact that “contractors can be squeezed.”

“Experienced DoD acquisition professionals recognize that, in any major procurement, most, and sometimes all, major contractors are leery of protesting solicitation provisions for fear of aggravating the customer or risking subsequent adverse evaluations,” he wrote. “We all can say righteously ‘this is not the way the evaluation system really works,’ but contractors believe, rightly or wrongly, that this is exactly the way it works.”

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Either way, DeVecchio told Vertical, DoD solicitations are increasingly leaning on contractors to surrender more of their data rights. “I’m confident we are going to see more challenges against these kinds of terms and conditions,” he said.

Boeing and Leonardo have teamed to offer the Air Force the MH139, a variant of the AW139. The companies declined to comment on Sikorsky's protest. Boeing Photo
Boeing and Leonardo have teamed to offer the Air Force the MH139, a variant of the AW139. The companies declined to comment on Sikorsky’s protest. Boeing Photo

Callaghan echoed DeVecchio’s observation. “Each solicitation is unique . . . however, the Department of Defense has recently been asking for an increasing amount of intellectual property and data rights,” he said.

5. What do the other bidders have to say about the protest?

Nothing, at the moment. Leonardo is certainly no stranger to contract protests, having recently waged a bitter three-year battle against U.S. Army plans to sole-source UH-72A Lakota helicopters from Airbus. However, when contacted by Vertical, Leonardo deferred comment on the protest to its partner in the Air Force competition, Boeing. A Boeing spokesperson told Vertical that the company does not have comment on the matter at this time.

Likewise, a Sierra Nevada Corporation spokesperson also said the company is currently unable to comment. (After this story was initially published, Sierra Nevada sent Vertical a statement from Tim Owings, executive vice president of the Integrated Mission Systems business unit: “Sierra Nevada Corporation supports the USAF and its goal of delivering capabilities to service members quickly and affordably.”)

6. What happens now?

The GAO has until May 23 to issue a decision on the protest. Sikorsky is still eager to work with the Air Force, with Callaghan telling Vertical, “We believe our HH-60U offering is the strongest, most capable, and only technically compliant solution for the UH-1N Huey replacement program.”

If the GAO rules in Sikorsky’s favor, it should be simple enough for the Air Force to exclude software source code from its OMIT data requirements. DeVecchio wrote in The Government Contractor that the more general problems with H001 are “easy to fix” — the Air Force could simply revise the clause to eliminate any requirement for software, or detailed manufacturing or process data.

As to whether Sikorsky will withdraw its bid if the GAO does not uphold its protest, Callaghan said, “We are evaluating potential outcomes.”

Meanwhile, the Air Force remains optimistic that the protest will not significantly delay the UH-1N replacement program. “We’re still on track for contract award in the third quarter of fiscal year 2018,” an Air Force spokesperson told Vertical.

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