1013D00016_Varian_Medical_JA__Jul_1.pdf

U.S. Department of Homeland Security U.S. Customs and Border Protection

Justification for Other than Full and Open Competition (J&A)

Varian Medical Systems, Inc. Non-Intrusive Inspection (NII) X-ray Equipment Maintenance and

Technology Support Services

JUSTIFICATION FOR OTHER THAN FULL AND OPEN COMPETITION

(J&A)

Pursuant to the requirements of the Competition in Contracting Act (CICA) as implemented by FAR Subpart 6.3 and in accordance with the requirements of FAR 6.303-1, the justification for the use of statutory authority under FAR Subpart 6.3 is justified by the following facts and rationale required under FAR 6.303-2 as follows:

1. Agency and Contracting Activity. The U.S. Customs and Border Protection (CBP)/Enforcement Technology Program (ETP) within the Enterprise Networks and Technology Support (ENTS) Division of the Office of Information and Technology (OIT) is requesting approval to enter into a contract on a basis of other than full and open competition.

2. Nature and/or Description of the Action Being Approved. U.S. Customs and Border

Protection (CBP)/Enforcement Technology Program (ETP) within the Enterprise Networks and Technology Support (ENTS) Division of the Office of Information and Technology (OIT) has a requirement on a sole source basis to procure preventive and corrective maintenance services for fielded Varian equipment and on-demand services as needs arise during the course of the contract with Varian Medical Systems, Inc., the original equipment manufacturer (OEM), for Fixed Large and Small Scale Non-Intrusive Inspection (NII) X-ray equipment. Varian shall provide supplies, parts, and services required to maintain the NII equipment identified in Attachment A.

Varian Medical Systems, Inc.

6811 Spencer Street Las Vegas, NV 89119 POC: Miguel Camarillo, 702-938-4843

3. Description of Supplies/Services. Varian provides technically-complex and high-value inspection equipment systems, currently being used by CBP/ETP to assist in securing the land border crossings, airports, seaports, rail crossings, mail handling, and express cargo consignment facilities within the United States and participating countries. The Varian equipment used under the CBP/ETP is comprised of fielded Fixed Large and Small Scale NII X-ray equipment. The services performed by Varian – outlined in detail in the Performance Work Statement – include scheduled, preventive, and corrective maintenance on specific identified equipment, system administration, and on-demand services that may be needed throughout the term of this contract, such as relocations, engineering, installation, disposal, and other activities that are peculiar to the equipment, or may be required on short notice. The manufacturer is the only one that provides the required levels of service to the existing equipment and no other supplies or services will satisfy agency requirements.

The Contractor will provide the necessary supplies, parts, maintenance services, and subject matter expertise to fully maintain and transition NII equipment identified in Attachment A to this J&A for the five-year period of the IDIQ at an estimated total value not to exceed $.

4. Identification of Statutory Authority Permitting Other Than Full and Open

Competition. The statutory authority permitting other than full and open competition is 10 U.S.C. 2304(c)(1)(for USCG) or 41 U.S.C. 253(c)(1) (for other Components) implemented by the Federal Acquisition Regulation (FAR) Subpart 6.302-1 entitled, “Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements.”

5. Demonstration That the Nature of the Acquisition Requires Use of the Authority

Cited. The configuration management of this equipment is solely managed and controlled by Varian. The source code and programming for Varian X-ray integration is owned by Varian and regulated by the Nuclear Regulatory Commission. Varian’s proprietary software provides the true capability of these systems. Varian develops, and is the only company that has access to, the source code and programming information for the Varian X-ray integration. Neither Varian’s proprietary manuals nor their maintenance training on equipment are commercially available to other vendors. Varian has access to unique engineering design data and drawings, proprietary fabrication, and repair processes, as well as special tools and test equipment that make them the only vendor capable of maintaining and repairing this critical and expensive equipment in a manner that meets CBP availability targets. The existence of limited rights in data, patent rights, copyrights, and secret processes, make the supplies and/or services available from only one source. The vendor has openly stated to the Government that the technical data and software for the NII equipment is Varian’s proprietary information and that they will not sell data rights, maintenance training, technical manuals, drawings, schematics, or special tools associated with this equipment. They do not provide spare parts outside a maintenance plan. Only minimal services related to ancillary maintenance services could possibly be performed by another contractor or numerous local service providers at some 350 locations.

In summary, no other vendor has access to the proprietary OEM capabilities of Varian.

These capabilities are necessary to support this equipment and are not commercially available to other vendors. Without Varian’s unique capabilities, this equipment could not be maintained or fixed in the field. Without this equipment deployed and fully functional, the nation's border security could be compromised.

6. Description of Efforts Made to Ensure That Offers Are Solicited from as Many

Potential Sources, as is Practicable. A market survey of potential vendors was sought to ensure Varian was truly a sole source for these equipment services. In accordance with FAR Subparts 5.102(a)(6) and 5.2, an announcement for this procurement was made in FedBizOpps on November 19, 2012 requesting vendors that are able to perform the scope of work on the equipment listed in Appendix A. There were four (4) companies that responded to the notice: Varian Medical Systems, Inc.; CTSC, LLC; All Native Inc.

(ANI); and New Tech Solutions, Inc. In all cases, when asked to respond to the question of whether their company has access to the source code and programming rights, all of the vendors, except for Varian, responded that they would leverage their experience and relationships in subcontracting with Varian to access the latest software, equipment updates, and modifications required to maintain this specialized equipment.

7. Determination by the Contracting Officer that the Anticipated Cost to the

Government will be Fair and Reasonable. The Contracting Officer will determine that the anticipated price is fair and reasonable based on techniques that include the following:

(1) Cost and price analysis of the breakout of the proposed materials and labor costs;

(2) Comparison of the previous contract prices to the proposed price. This will be done by comparing the current CBP Prime Integration Contract with CTSC, where Varian is performing as a subcontractor, to that of the proposed price. A breakout of the cost over the life of the contract will be reviewed to help in the determination that the prices proposed are fair and reasonable;

(3) Comparison of published price lists and any applicable labor categories and labor rates, and;

(4) Comparison of the proposed price with the Independent Government Cost Estimate (IGCE) will be conducted.

In addition, CBP contracts with CTSC to maintain these services using Varian as a subcontractor. Historical costs indicate that the Government has incurred an additional cost in overhead and fees as a result of this subcontracting arrangement. CBP expects to significantly reduce estimated costs to the Government as a result of reduced costs and fees to subcontract these services.

8. Description of Market Research. Market Research was conducted via FedBizOpps on

November 19, 2012, under PR 20072945, requesting vendors able to perform this scope of work. Based on the rationale cited in paragraph (5) above, and the results of the FedBizOpps Market Research, CBP believes there is sufficient justification for a sole source contract with Varian. This market research of potential vendors was to ensure Varian was an appropriate sole source for this equipment. The FedBizOpps announcement asked a number of questions of potential offerors to include company, points of contact, small business size, interest in bidding on this requirement, previous experience, availability of contracts awarded on strategic sourcing vehicles, and a short narrative on approach to meeting the requirements for the maintenance on this equipment.

The four (4) vendors that responded to the FedBizOpps announcement were: Varian Medical Systems, Inc.; CTSC, LLC; All Native Inc. (ANI); and New Tech Solutions, Inc.

In all cases, except for Varian, the vendors responded that they would have to subcontract to Varian for services. Although all of these vendors expressed a genuine interest in this procurement, as documented in their response, it would be neither practicable, nor cost effective, to seek competition based on the reasons cited in paragraph (5). The specific responses from each vendor are included in the Market Research report.

9. Any Other Facts Supporting the Use of Other Than Full and Open Competition.

CBP has invested a tremendous amount of money on the NII X-ray program. CBP’s knowledge of NII equipment, as well as market research and product demonstration of the various systems witnessed by senior contracting and program officials, are conducted prior to procuring any NII system. This analysis has resulted in CBP’s determination that the NII systems are uniquely suited for the CBP mission. All NII systems are Life Cycle Support procurements with a 10-year life cycle requiring nine (9) years of recurring cost (O&M) within the NII Acquisition Plan and OMB 300 Exhibit.

As discussed within this document, Varian is the only vendor that can provide the proprietary maintenance products and services to support this requirement. Additionally, in response to the market survey conducted November 19, 2012, all potential vendors stated that they must utilize Varian to access the latest software, equipment updates, and modifications required to maintain this specialized equipment. Although the Government can include FAR 52.215-23, Limitations on Excessive Pass-Through Charges, into the scope of this work, the clause will not preclude contractors from adding pass-through charges to subcontractor work. In fact, the application of indirect costs or profit/fee on work performed by a subcontractor is common industry practice. Thus, any pass-through charges applied to the work that can only be performed by the OEM will increase the Government’s expense with no competitive rewards thus expending additional funds with no additional value to the program or Government. For example, the current Prime Integration Contract with Chenega Technology Services Corporation (CTSC) uses Varian as one of their directed subcontracts in support of the maintenance of equipment. They charge fixed fees and G&A fees in addition to the cost of Varian’s maintenance services.

This additional cost is estimated to cost the Government nearly $1 million annually in additional overheads. In this case, due to the dollar value of this contract, it would benefit the Government to contract directly with Varian to avoid these additional overheads since they are the only contractor that can perform the majority of this work.

In addition to cost savings/cost avoidance and decreased administrative burden to Government staff, contracting this work with a single source provides additional benefits and reduces potential security risks. Configuration management and maintenance history are vital tools in the life cycle management of this fleet of equipment sets. A single source of reported metrics covering all aspects of equipment management, both proprietary and ancillary, lends efficiency in the Government’s cost effective life cycle management. This also facilitates the elimination of additional administrative lead times prolonging equipment outage periods. CBP goes through great lengths to limit real time equipment outage information as it directly shows specific vulnerabilities at the affected border location. Restricting this knowledge to a single source reinforces CBP’s security posture.

10. A Listing of the Sources, If Any That Expressed, in Writing an Interest in the

Acquisition. The respondents to the FedBizOpps announcement were the only vendors that expressed an interest in writing to this procurement. They are:

a. Varian Medical Systems, Inc.

b. CTSC, LLC

c. All Native Inc. (ANI)

d. New Tech Solutions, Inc.

11. A Statement of the Actions, if Any, the Agency May Take to Remove or Overcome Any Barriers to Competition Before Any Subsequent Acquisition for Supplies or Services Required. The equipment for this requirement is highly technical and CBP strives for the latest technologies to assist them in their mission and goal to protect the borders. In the past, service warranties on NII equipment have been purchased simultaneously by CBP for two-year periods for this high technology equipment to help defray some of the cost of maintenance. CBP will continue to purchase these short term warranties as funds are made available. Rights in data, maintenance technical documentation, and maintenance training for this equipment are not currently available, per Varian. They do not sell the technical data and software for the Large and Small Scale NII X-ray equipment which would allow an alternative vendor to do the preventative and corrective maintenance. Varian has stated to the Government that the information is proprietary information and that they will not sell data rights, maintenance training to technicians on the maintenance of the systems, technical manuals, drawings, schematics, or special tools associated with corrective and preventative maintenance on the equipment. They do not provide spare parts outside a maintenance product plan.

Maintenance is part of Varian’s proprietary commercial product and service line of offerings to the Government and their non-government clients. User’s manuals provided do not address the maintenance of equipment including the software rights and schematic diagrams needed for another vendor technician to perform maintenance per the required specifications of the systems. Copyright laws prevent another vendor from directly copying the software from one piece of equipment to another piece. Vendors treat their new technology as proprietary and can charge a significant price to purchase the data rights. However, CBP continues to monitor the market and considers both the purchase and maintenance costs to determine anticipated expenditures over the life cycle for their current and future equipment needs, provided the cost/benefit is prudent to the Government.

12. Planning and Funding Statement. This acquisition does not result from a lack of planning or the expiration of funds. This sole source is appropriate and essential to sustain ETP's critical operations and to achieve both CBP’s and DHS’s mission goals and priorities.

ATTACHMENT A VARIAN EQUIPMENT LIST

The total quantities of equipment in the table below depict the active service count as of October 2012. These totals will likely change as equipment warranties expire and equipment is decommissioned and disposed of during the life cycle.

OFFICE TYPE EQUIPMENT MODEL CWT

(HOURS)

CURRENT

COUNT

OFO LG NII X-ray INTELLX 24 1

OFO LG NII X-ray INTELLX 2 24 2