RBC Bearings Inc. (USA; NYSE: ROLL; 5251R9N7) has scored a major breakthrough in its decade-long battle to become a second supplier of swashplate bearings for the U.S. military's UH-60 Black Hawk Helicopter.

RBC protested the "sole source" contract for the bearings, which was initially awarded based on urgency. RBC argued that the contract is improper and unnecessary.

The U.S. General Accounting Office has ruled that the sole source contract is improper because there has been a continuous and predictable demand for the bearings. Awarding the contract in a way that limited competition was simply due to the government's ability to plan ahead and anticipate demand.

The sole-source contracts were awarded to both Sikorsky Aircraft and Kaydon Corporation; the swashplate bearings themselves are manufactured for Sikorsky by Kaydon.

Swashplate bearings are duplex ball bearings which connect the helicopter's main rotor to the top main fuselage; the lower one is stationary, while the upper one turns.

The government's defense purchasing arm, Defense Logistics Agency (DLA), showed RBC's efforts dated back to early 2000. Early on, RBC's approval efforts appeared to be thwarted by Sikorsky continuously updating the bearing specifications. By the time the government had reviewed RBC's "Revision E" bearing bid, for example, Sikorsky had issued a new specification, "Revision F," and RBC had to start the process again.

A year later, the DLA awarded Kaydon a contract for 85 "Revision E" bearings anyway, which RBC immediately protested to the GAO. The DLA agreed to not pursue its overage purchase option with Kaydon, and also agreed to appoint an internal champion to seek new sourcing for RBC.

Shortly after that, when RBC submitted its "Revision F" bearings for approval, Sikorsky changed the specification to "Revision G," obsoleting "Revision F" bearings. As a result, the government arm reviewing RBC's "Revision F" bearings dropped the review, citing "Revision G."

Once again, RBC appealed, and the government agreed to keep the type approval request open so that RBC could update its bid specification to "Revision G."

A few months later, in mid-2002, the government awarded a sole-source 5-year contract to Sikorsky for Black Hawk overhauls, including all of the parts necessary. Swashplate bearings were included, but not specifically spelled out.

In late 2002, RBC was informed it could go ahead and pursue "Revision G" approval.

In mid-2003, RBC learned about the sole-source 5-year contract awarded to Sikorsky, and that it included swashplate bearings, essentially blocking out RBC. RBC then protested the sole-source contract, but the GAO dismissed it as untimely, and because RBC was unable to supply the other parts laid out in the all-inclusive parts contract.

Also in mid-2003, RBC was told it needed to pass additional testing and inspection validation procedures. In mid-2004, another agency took over managing the swashplate bearing requirements.

In early 2005, RBC received conditional approval for the swashplate bearing, but added several additional tests, an updated source approval process, and new changes to RBC's inspection validation process.

By late 2005, RBC had been advised of several other changes and requirements for the swashplate bearings, and RBC responded a month later. A few months later, in mid-2006, the testing and inspection processes were changed again, and RBC was asked to respond. When RBC responded, the government made even more changes to the testing and certification.

Over a year later, in September 2007, RBC finally sold three swashplate bearings to the Defense Logistics Agency for testing. These were delivered by RBC in mid-2008, and RBC was told testing would begin shortly.

Before testing could begin, the government issued another sole-source solicitation for 75 bearings, from Kaydon. RBC successfully objected, and the solicitation was dropped. Shortly after that, sourcing management for the swashplate bearing was transferred back to the original government agency responsible for it.

In late 2008, the DLA made another sole-source contract award to Kaydon for 20 swashplate bearings, base on "unusual and compelling urgency." The award was not publicized because, the DLA said, any delay in procurement would seriously injure the government.

In early 2009, the DLA issued yet another sole-source solicitation to Kaydon for 86 swashplate bearings. RBC protested, and it was withdrawn.

Later in May 2009, the DLA began its process of testing RBC's swashplate bearing, which required scheduling time on Sikorsky's test stand. At the same time, however, DLA issued another sole-source buy of swashplate bearings, this time from Sikorsky. In June, the DLA issued a sole-source solicitation for 33 swashplate bearings, worth $452,000. This time it was for a new "Revision H" version, listing Sikorsky and Kaydon as the only known sources.

RBC protested again to the GAO, and the procurement was adjusted down to 6 bearings, once again sole-source based on "unusual and compelling urgency." The GAO said it is unclear when "Revision H" came into being.

RBC protested the 6 bearing purchase, arguing the urgency was false and was simply caused by DLA's failure to adequately plan for competitive procurement, despite nine years of effort by RBC. RBC said that failure to plan is not a valid basis for issuing sole-source emergency purchases.

Responding, the DLA said the six bearing purchase would go forward, based on urgent and compelling circumstances, and that it could not wait for a decision on RBC's protest. Kaydon received the contract for six bearings at $107,000.

A month later, the DLA informed RBC that RBC would have to bear the estimated $250,000 cost to test the swashplate bearings, even though in the past it had said the agency would pay. The DLA also said that, because projected annual demand was only 33 pieces, the cost of testing RBC's bearings could never be recouped by any potential savings from buying RBC's bearings.

RBC's subsequent protest filings contend the DLA has underestimated demand for the bearings. In fact, based on units in service and operational hours, RBC projects annual demand is closer to 879, not 33. The company argues that demand for swashplate bearings is predictable, and should have been anticipated with better planning.

The GAO has now reviewed RBC's latest complaints, issued its decisions and recommendations going forward.

First, the GAO said the government has, "unreasonably deprived RBC of an opportunity to compete for a contract to provide these bearings." Furthermore, "DLA has failed to adequately plan for a requirement that was foreseeable and therefore the agency has failed in its statutory duty to perform adequate advance planning and to promote competition." The GAO found the continuous stream of sole-source solicitations backs up RBC's claim, "confirming the foreseeability of a continuing requirement for significantly larger quantities of swashplate bearings than are covered by this procurement ... we think these facts amply establish a failure to conduct adequate and reasonable advance planning ... thus we conclude that the sole-source procurement here is not properly justified."

The GAO recommendations run the gamut that DLA, "make an expeditious and good faith effort to complete any further reviews needed to ascertain whether RBC can be permitted to compete for future efforts to procure these bearings." The GAO also recommended that the DLA perform a proper determination as to how many swashplate bearings are actually needed per year, and to make a determination whether to bear the costs of testing RBC's bearings. Finally, the GAO recommended that the government wait until there has been a complete review of RBC's source approval request, and until then, order only the minimum number needed to ensure maintenance of the Black Hawk fleet.