07-22-3417 Horizontal Machining Center JA FINAL_Redacted.pdf

CMO Control #: 2023-003 WVA Control #: IPE00165

Justification and Approval for Other than Full and Open Competition

1. Contracting Activity: Army Contracting Command – Watervliet (ACC-WVA).

2. Description of Action: This action is for a new Firm Fixed Price (FFP) contract with DMG MORI Erie, 2400 Huntington Blvd. Hoffman Estates IL 60192, for the purchase of one DMG Mori Horizontal Machining Center with an option for a second machine. Award is projected for the second quarter of FY23 and PM ABRAMS Army Working Capital Funds (AWCF) will be used for this procurement.

3. Description of Supplies/Services: This requirement is for the procurement of one DMG Mori Horizontal Machining Center, Model NHX-8000, that includes all features and accessories per Equipment Engineering Specification #07-22-3417, and an option for a second machine. If the option machine is purchased, it shall come equipped with an optional pallet pool system to allow exchange of parts between the two machining centers. The pallet pool system will not be needed for a single machine installation. This DMG Mori Horizontal Machining Center will be used in the production of 155mm cannon tube components at Watervliet Arsenal (WVA). The estimated value of this machine is , and the estimated value of the option is . The total estimated value of this action is with the option.

4. Authority Cited: 10 U.S.C. 3204(a)(1), as authorized FAR 6.302-1, Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements. Per FAR 6.302- 1(a)(2)(ii)(A), (B), Supplies may be deemed to be available only from the original source in the case of a follow-on contract for the continued development or production of a major system or highly specialized equipment, including major components thereof, when it is likely that award to any other source would result in:

(A) Substantial duplication of cost to the Government that is not expected to be recovered through competition; or

(B) Unacceptable delays in fulfilling the agency’s requirements.

5. Reason for Authority Cited: As described in FAR 6.302-1, procurement by other than full and open competition is necessary because there are no other sources for the equipment meeting the requirements of the specification and Government’s needs. DMG Mori is the Original Equipment Manufacturer (OEM) of this Horizontal Machining Center. DMG Mori has exclusive territorial distributors for various regions of the United States. DMG MORI Erie, 2400 Huntington Blvd., Hoffman Estates, IL 60192 is the only authorized distributor to sell DMG Mori machinery in New York territories.

The purpose of limiting competition is two-fold, financial benefits in the form of cost savings to the Government and compatibility of machines within the WVA, which provides workload flexibility from portability of programs and interoperability of equipment.

BACKGROUND: In FY13, WVA procured three DMG Mori Seiki NHX-5000 machines. This FY13 procurement was conducted using full and open competition, as WVA did not possess any Horizontal Machining Centers. The previous procurement included the contractor developing five component processes and programs, and one proved out post-processor. WVA invested $20,000 per component for the development of processes and programs and the proved out post-processor estimated to cost $5,000. In sum, WVA invested $105,000 in process development and programming as part of the FY13 purchase.

FINANCIAL SAVINGS: The DMG Mori NHX-8000 is the only machine compatible with the existing component programs and post-processor that WVA purchased in FY13. While other machines offer similar machining capability, the software, post-processor, and programs of the other machines are not compatible with the currently owned software, post-processor, and programs at WVA and, therefore, do not meet the Government’s requirement. The cost breakdown of these items is below.

(A) DUPLICATION OF COSTS:

POST PROCESSOR SOFTWARE: A new Horizontal Machining Center other than the DMG Mori NHX-8000 would require the purchase of a new post-processor. This is expected to be a one-time cost of $5,000.

TRAINING COSTS:

a. OPERATOR: WVA will train additional operators regardless of the type of machine that is purchased. There will be no savings for operator training.

b. PROGRAMMING: The total cost of vendor supplied programming training is expected to be $2,000 for the first day and then $1,500 for each additional day. WVA has four programmers that will need to train for five days for a new machine. This training has already been provided for the existing equipment at WVA and would not have to be duplicated. The cost of the training class is calculated as ($2,000 x 1 day) + ($1,500 x 4 days) = $8,000. The cost of the programmer’s time is calculated as $54.30/hour x 5 days x 8 hours/day x 4 programmers = $8,688. This results in a total savings of $16,688.

c. MAINTENANCE: The cost of vendor supplied maintenance training is expected to be $2,000 for the first day and then $1,500 for each additional day. WVA will require the training of three maintenance personnel for three days for a new machine. This training has already been provided for the existing equipment at WVA and would not have to be duplicated. The cost of the training class is calculated as ($2,000 x 1 day) + ($1,500 x 2 days) = $5,000. The cost of the maintenance personnel’s time is calculated as $46.18/hour x 3 days x 8 hours/day x 3 people = $3,325. This results in a total savings of $8,325.

d. TOTAL TRAINING SAVINGS: $16,688 + $8,325 = $25,013

PROGRAMMING INTEROPERABILITY COST: Due to the nature of production at WVA, parts are routinely moved from one machine to another. To transfer the workload from one DMG Mori NHX-8000 to another takes approximately 30-minutes because the programs, tools, and fixtures are transferrable without modification. If this transfer would require moving a production run to a different manufacturer’s machine, the floor supervisor would need to request a programmer to write a new program for the specific control. The programmer must spend time writing a new program and delivering the new program to the production system. There would be a delay in production until the new program is produced. On average, it requires 40-hrs to reprogram/reprocess a part at $54.30 per hour for labor. At an average of one-change every three months (very conservative), across the 20-yr expected life of the equipment, limiting competition to the existing equipment controls represents $173,760 per machine in programming savings.

PROGRAM MAINTENANCE: It is often necessary to make updates to existing programs as drawing revisions change, new tools may be adopted, and processes may be revised. If multiple programs have to be maintained to accommodate for different makes and models of machines, programmers must spend time updating redundant programs. It is estimated that a typical program update will take four hours. Assuming a minimum of one program is written every three months and every program is updated at least once during the machine’s 20-yr expected life, then there are 80 programs that will be maintained. The cost saving of not having to update multiple programs is calculated as $54.30 x 4 hours/programs x 80 program = $17,376.

EXISTING PROGRAMS: As stated in the Background section above, WVA already invested in component programs in the FY13 purchase of DMG Mori machines. If a different “make” machine is purchased, these five programs will have to be re-written for transferability among machines. It is also assumed that these programs will have to be updated at least once during the 20-yr expected life of the machine. The cost savings for not having to re-write and maintain programs the Government has already purchased is calculated as ($54.30 x 5 programs x 40 hours) + ($54.30 x 5 programs x 4 hours) = $11,946.

TOTAL SAVINGS:

a. Post Processor Software $ 5,000

b. Training $ 25,013

c. Programming Interoperability $173,760

d. Program Maintenance $ 17,367

e. Existing Programs $ 11,946

f. Total $233,086

The cost savings of $233,086 or 12.27% of the expected price of the machine is not expected to be recovered through open competition, based on market research of alternative vendors and knowledge of the industry.

(B) UNACCEPTABLE DELAY:

ADDITIONAL BENEFITS:

In addition to the financial savings, the procurement of the DMG Mori Horizontal Machining Center will allow WVA to gain flexibility of the workload. Limiting this procurement to the same DMG Mori machining centers currently at WVA will allow WVA to significantly increase portability of programs and interoperability of the equipment. Operators, programs, tools, fixtures, and workload could be transferred from one DMG Mori machining center to the next without incurring transfer costs and production delays, which would occur if a different manufacturer of machining centers were introduced to the manufacturing process. A delay of 2-3 weeks would occur for each of the manufacturing, maintenance, and planning departments if a different machine was procured to allow for additional training and familiarization of the new system, delaying normal operations by 6-9 weeks. This additional time spent would detract from their other job functions. In addition, WVA programmers would not have to divert their efforts away from other projects to develop/maintain duplicate part programs; an opportunity for error would be eliminated (i.e. updating one program and not the second program); machine tool operators would not have to be trained on two separate machines; and all tools, toolholders, collets, bushing, fixtures, and all other accessories would be 100% compatible with the other multi-tasking machines allowing for greater manufacturing flexibility. WVA currently has three smaller DMG Mori Horizontal Machining Centers (Model NHX-5000). Failure to procure the same machining center will result in higher costs to the Government and potential 6-9 week production delays of various weapons components due to the above mentioned facts. These delays will impact WVA’s ability to supply the required cannon components and systems directly to the warfighter. Such a delay could prevent warfighters from maintaining operational readiness rates and may cause serious injuries and/or loss of life to them or their supported personnel.

TOTAL DELAY:

a. Manufacturing Department 2-3 Weeks

b. Maintenance Department 2-3 Weeks

c. Planning Department 2-3 Weeks

d. Operation/Production Delay Total 6-9 Weeks

The DMG Mori NHX-8000 is the only machine compatible with the existing component programs and post-processor that WVA purchased in FY13.

While other machines offer similar machining capability, the software, post-processor, and programs are not compatible with the currently owned software, post processor, and programs at WVA. Going to another machine manufacturer for a Horizontal Machining Center would result in an estimated $233,086 duplication of cost and a potential 6-9 week delay; therefore, the Government intends to award a new contract to DMG MORI Erie on a sole source basis to avoid the duplication of cost and unacceptable delay.

6. Efforts to Obtain Competition:

a. Effective Competition: The Government will not seek competition for this action based on the information provided in Paragraph 5 above; however, this procurement action will be synopsized on SAM.gov and any proposals received will be considered.

b. Subcontracting Competition: The new contract will contain clauses FAR 52.204-10, Utilization of Small Business Concerns, FAR 52.219-16 Liquidated Damages – Subcontracting Plan, FAR 52.244-5 Competition in Subcontracting, and FAR 52.244-2 Subcontracts.

7. Actions to Increase Competition: Although no further action to increase competition is contemplated at this time, the Government will continue to survey the marketplace and review our acquisition strategy should additional information be received. Any information received will be considered to determine if a competitive acquisition should be conducted or to determine potential future requirements.

8. Market Research: Per FAR 6.302-1, In September 2022, the Contract Specialist from the Detroit Arsenal (DTA), posted a Sources Sought Request for Information (RFI) to www.SAM.gov from 28 September 2022 to 03 October 2022 along with a Market Survey Questionnaire. Two companies responded to the market questionnaire. Responses were received from DMG MORI Federal Services, Inc. and QMP dba Syracuse Supply Machine Tools. Though two responses were received, the OEM has indicated that there is only one authorized reseller for the WVA region and that is DMG MORI USA Inc. Award to Syracuse Supply Machine Tools is not possible due to DMG MORI USA Inc being the only authorized reseller from the OEM.

Additionally, An Equipment Specialist at WVA conducted market research in July 2022 that resulted in the determination that a DMG Mori NHX-8000 is the only machine compatible with the existing component programs and post-processor that WVA purchased in FY13. Alternative machine companies cannot use the same information in their machines. The market research was accomplished by communicating with the Program Engineers at WVA who are responsible for writing the software programs for all machines at WVA. DMG MORI Erie is the only authorized distributor to sell DMG Mori machinery in New York territories. Further market research was gained by the Equipment Specialist’s personal knowledge in his involvement with the last procurement of similar model machines. This market research identifies that this procurement would be almost identical, except for the size of the machines, to the existing Horizontal Machining Centers allowing for a seamless transfer of programs, parts, fixtures, and tooling for the operators at the floor shop level. The market research also confirmed that the ability to transfer work from one OEM’s equipment to another OEM’s equipment would not be possible.

Product literature published by the manufacturer “Doosan” (available online) about the NHM- 8000 machine was reviewed and compared in July 2022. While this machine offers similar machining capability, the software, post-processor, and programs are not compatible with the currently owned software, post-processor, and programs at WVA. This would result in a duplication of cost and unacceptable delay as outlined in paragraph 5 above.

9. Interested Sources: To date, no other sources other than those listed above in section 8 have written to express interest in this procurement.

10. Other Facts:

a) Procurement History:

1. Contract Number: W911PT-14-P-0141

Award Date: April 2014 Nomenclature: Horizontal Machining Center Deliverable: DMG Mori NHX-5000 Horizontal Machining Center Price: $2,324,350 Contractor: BOLDT Machinery, INC.

Competitive Status: Full and Open Competition

While this procurement was handled utilizing full and open competition, due to this initial investment and the facts detailed in the FY21 J&A and stated above, there would be substantial savings in terms of cost and duplication of effort to proceed with a sole source award for future procurements.

2. Contract Number: W911PT-21-C-0011, CLIN 0001 Award Date: 30 September 2021 Nomenclature: Horizontal Machining Center & Multi task milling Deliverable: DMG Mori NHX-8000 Horizontal Machining Center Price: $1,659,031 Contractor: DMG Mori USA, Inc.

Competitive Status: Sole Source Authority Cited: FAR 6.302-1, “Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements”, FAR 6.302-1(a)(2)(ii), Supplies may be deemed to be available only from the original source in the case of a follow-on contract. Specifically, FAR 6.302-1(a)(2)(ii)(A) Substantial duplication of cost to the Government that is not expected to be recovered through competition.

Although the previous procurement was handled utilizing full and open competition, this purchase provided substantial savings in terms of cost and duplication of effort in proceeding with a sole source award. Market research was conducted and is detailed in the FY21 J&A and above, which provides the basis for the duplication of costs. This purchase stated that the Government will conduct market research to determine whether increasing competition will provide a cost savings for future machine purchases. There have been no significant changes.

b) Other facts:

1. DMG Mori is the OEM for the NHX-8000 Horizontal Machining Center. This procurement will not require a new post-processer because WVA has already purchased the post-processor through the historical contracts. DMG MORI Erie is the sole authorized distributor for DMG Mori machine tools in New York territories.

2. In FY21 the procurement of the NHX-8000 Horizontal Machining Center was purchased per FAR 6.302-1(a)(2)(ii)(A) Substantial duplication of cost to the Government that is not expected to be recovered through competition. FAR 6.302- 1(a)(2)(ii)(B) Unacceptable delays in fulfilling the agency’s requirements was not used to procure this machine.

11 / 12. Technical/Requirements Certification: I certify that the supporting data under my cognizance which are included in the justification are accurate and complete to the best of my knowledge and belief.

Typed Name: Date: 13 Sept. 2022 Title: Manufacturing Engineering Manager Signature: //GM//

13. Fair and Reasonable Cost Determination: I hereby determine that the anticipated cost or price to the Government for this contract action will be fair and reasonable based on price analysis. Certified cost or pricing data will not be obtained IAW FAR 15.403-1(c)(3).

Typed Name: Patrick Brown Date: 15 Sept 2022 Title: Contracting Officer Signature: //PB//

14. Contracting Officer Certification: I certify that this justification is accurate and complete to the best of my knowledge and belief.

Typed Name: Patrick Brown Date: 15 Sept 2022 Title: Contracting Officer Signature: //PB//