This is a case of "damned if you do and damned if you don't."
Which rule is more important:
The direction to be more cost effective, to retire expensive to operate, aging systems, or the rule to compete contracts? Two different sets of directions, more or less mandates from Congress via different Acts of Congress.
Since the Army had already purchased a substantial number of these aircraft, it is within the Army's remit, subject to DoD (Executive Branch) approval and Congressional (Legislative Branch) oversight, to repurpose the aircraft. THis has been done before.
Example: The F-8 (Fighter/interceptor) was repurposed as a recce aircraft. So was the A-5 (bomber/attack) repurpoased as a recon aircraft. Likewise the F-111 ... a mod turned at bomber/attack aircraft into the EF - 111. Also Phantoms became Wild Weasels.
Navy repurpoed the CH-60S (logistics/cargo replacement for CH-46, Navy bersion) into Combat SAR and Minesweeping. (The latter still being a work in progress). It is now the MH-60S. No, they didn't have to ask AW permission.
I predict the Army will win ... but I've been wrong before.