Summary

A review of the contract for AN/PRC-77 mobile radio sets awarded by the Army to E-Systems, Inc., showed that, although the Army accepted a GAO recommendation that the option for additional radios in the basic contract with E-Systems not be exercised because of defects in the way the basic contract was awarded, the Army subsequently modified the contract several times, significantly increasing the number of radios procured. The additional radios added to the basic contract were for delivery under foreign military sales. For each of these sales, the foreign government had directed sole-source procurement from E-Systems. No U.S. Government financing or aid was directly or indirectly involved in any of these foreign sales.

The basic contract with E-Systems was modified nine times under Department of Defense regulations which provide that foreign governments may designate commercially available items to be procured as foreign military sales under certain circumstances. Under this provision, a foreign government can insist on procurement from a sole-source producer for reasons other than price. The sole source directives from the foreign governments to procure the radios from E-Systems were received both before and after award of the basic contract. The Army had the option of either modifying the existing contract or issuing a new sole-source contract to E-Systems. In several of the cases, the Army had provided the foreign countries with a list of potential suppliers, although in one instance it requested the foreign country to designate E-Systems as the sole-source producer for the radios in order to meet an urgent delivery schedule.