24R0020ConsolidationMemo.pdf

CUI

DEFENSE LOGISTICS AGENCY

LAND AND MARITIME

P.O. BOX 3990

COLUMBUS, OHIO 43218-3990

MEMORANDUM FOR FILE

SUBJECT: Consolidation Determination-DLA Land and Maritime for SPE7LX-24-R-0020

Background:

This DLA Land and Maritime acquisition is for an indefinite quantity contract for ten NSNs, managed by the Defense Logistics Agency (DLA), see table below. DLA Land and Maritime intends to enter into a firm-fixed price, long-term contract (LTC) with a maximum contract period of five years, consisting of a one-year base period and four (4) one-year option periods. The contract has an estimated annual value of $1,078,647.33, estimated five-year total of $5,393,236.65, and a total contract maximum of $8,147,141.46. The solicitation will be unrestricted with other than full and open competition. These NSNs are limited to approved manufacturing source, Meritor Heavy Vehicle Systems (78500). This acquisition is being pursued to provide continued supply availability to preclude backorders, maintain reduced administrative and production lead-times (ALT and PLT), decrease potential contract administration actions, and retain reduced and stable unit pricing.

CLIN NSN ITEM UI AMC AMSC ADQ ADV

0001 2520003884197 SPIDER,UNIVERSAL JO EA 3 C 2,897 $101,018.39

0002 2520014980785 DIFFERENTIAL GEAR U EA 3 D 14 $81,266.50

0003 2520015450390 PROPELLER SHAFT WIT EA 3 B 251 $146,862.61

0004 2520015801060 LINING SET,FRICTION EA 3 C 319 $123,255.22

0005 2530010992476 AXLE,VEHICULAR,NOND EA 3 B 8 $104,900.40

0006 2530013605954 BRAKE DRUM EA 3 C 684 $220,131.72

0007 2530015020543 SENSOR,ANTI-LOCK BR EA 3 D 2,359 $88,863.53

0008 2530015153347 ACTUATOR ASSEMBLY,A AY 3 R 167 $85,233.46

0009 2530015957168 CYLINDER,HYDRAULIC EA 3 C 359 $59,378.60

0010 3040015705855 HUB,BODY EA 3 C 19 $67,736.90

The resulting contract will provide spare parts for military customers both in the Continental United States (CONUS) and outside the continental United States (OCONUS). All ten NSNs will be solicited under the First Destination Transportation (FDT) program; therefore, Procurement Notes C16 (52.247-9059 F.O.B. Origin, Government Arranged Transportation) and C17 (52.247-9058, First Destination Transportation (FDT) Program – Shipments Originating Outside the contiguous United States (OCONUS)) are applicable. The acquisition is a routine acquisition of supplies, and the end-items will be delivered to DLA stock at the depots.

The current acquisition will be awarded all or none by National Stock Number (NSN), with each line being awarded to the best value offeror for that line. A separate contract will be awarded to each successful offeror. This provides the same opportunity for contractors to compete for award of an individual NSNs as with multiple individual solicitations, but with a reduced administrative burden.

Controlled by: DLA Land and Maritime Controlled by: SAPD-ZBC CUI Category(ies): General Procurement and Acquisition Limited Dissemination Control: Fed Only POC: Patrick.Laugherty@dla.mil mailto:Patrick.Laugherty@dla.mil

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All NSNs have one approved manufacturer, Meritor Heavy Vehicle Systems (78500); and all the NSNs have an Acquisition Method Code (AMC) of 3, which indicates to acquire, for the second or subsequent time, directly from the manufacturer. This does not preclude offers from dealers; it means the manufacturing sources are restricted to the approved source.

NSNs 2520003884197, 2530010992476, 2530015153347 are currently on a 13.5 LTC SPE7LX-23-D-5039 until they max out or their final expiration on April 23, 2024; whichever occurs first. The contract maximum value for this LTC is $728,352.49. To date, $38,658.24 has been spent. NSNs 2530013605954 and 2530015020543 are currently on LTC SPE7LX-23-D-5038, which has a final expiration of April 23, 2024 or until it maxes out; whichever occurs first. To date, $0.00 of the contract maximum value of $581,458.07 has been spent. NSN 2520015450390 is currently on 13.5 LTC SPE7LX-23-D-5040 until it maxes out or their final expiration date on April 23, 2024, whichever occurs first. To date, $61,954.20 of the contract max value of $145,623.60 has been spent. The remaining NSNS, 2520014980785, 2530015957168, and 3040015705855 have been purchased via small buys and Procurement Automated Contract Evaluation (PACE) awards under the Simplified Acquisition Threshold of $250,000.00. The proposed acquisition constitutes a consolidation of contract requirements as defined in FAR 2.101 and 7.107-2 because the proposed procurement will result in a single contract for items that DLA Land and Maritime previously procured under separate acquisitions, each of which was lower in cost than the total cost of the contract for which offers are solicited.

Market Research

Initial market research was conducted by the Sourcing Strategy Specialist (SSS) in September 2023. They sent a market questionnaire to the approved manufacturing source, Meritor Heavy Vehicle Systems (78500) as well as dealers in the last three years of the procurement history. A sources sought notice was issued on November 15, 2023, with a response date of November 21, 2023, and there were no responses to this notice. The market questionnaire asked companies to provide information such as willingness to quote a three-year base period and priced option years, provide stock delivery, state if the items are quantity sensitive, state if the items are commercial, preference for zones, asked if they could provide packaging requirements, asked information regarding FOB and zones. The following companies responded:

• HDT Vehicle Component Sales (1SER6)-

- Small business distributor for Meritor (78500)

- No preference for a three-year base period with additional two one-year options

- No production limitations

- Checked yes for commerciality

- No quantity price breaks

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• VSE Corporation (31902)-

• Large business distributor for Meritor (78500)

• Preference for a one-year base period with additional option periods

• Checked no for commerciality

Information regarding the commerciality of the items:

The Buyer reviewed the previous acquisitions and six of the ten NSNs were awarded under commercial item procedures (NSNs 2520003884197, 2520015450390, 2530010992476, 2530013605954, 2530015020543, 2530015153347). NSNs 2520014980785, 2520015801060, 2530015957168, 3040015705855 have not been determined commercial on previous acquisitions; however, the Contracting Officer determined they also fall under this part of the commercial item definition. Based on a review of the item description and information available on the Internet, it appears these parts are of-a-type used in the commercial marketplace. A s e a r c h o f t h e i n t e r n e t f o u n d a l l o f t h e s e p a r t s a v a i l a b l e f o r s a l e t o t h e g e n e r a l p u b l i c . It is the Contracting Officer’s determination all ten NSNs are commercial; therefore, this acquisition will be conducted under Federal Acquisition Regulation (FAR) Part 12- Acquisition of Commercial Products.

Impact on Small Business:

As required by FAR 7.107-2(a)(3), the consolidation was coordinated with the DLA Land and Maritime Small Business Office and Small Business Administration. It is reasonable to conclude that the consolidation of these requirements will not negatively impact small business participation. Although all the items will be limited to approved part numbered items, award is not limited to the manufacturer and dealers can also receive the award. The solicitation will be awarded on an all-or-none by NSN basis, so that each item can be awarded to a different vendor, thereby precluding quantities or dollar values that make it difficult for a small business to compete for a contract. In effort to ensure that offers are solicited from as many sources as practicable, the acquisition will be synopsized on SAM.gov and posted on the DLA Internet Bid Board System (DIBBS).

Actions Designed to Ensure Maximum Practicable Participation by Small Business:

To ensure small businesses are provided the maximum practical opportunity to participate in this procurement, the following requirements will be incorporated into the solicitation:

1. Subcontracting Opportunities: In accordance with FAR 19.705-5(b), DLA will require a subcontracting plan for any large business concerns. The approved subcontracting plan will be incorporated into the contract.

2. Small Business Participation: This acquisition will include a small business participation evaluation factor. The purpose of the small business participation evaluation factor is to ensure that if a firm receiving the Government award is an-other-than small business, they will utilize small businesses in performance of the contract.

Benefits of Consolidation:

The details of the proposed approach are discussed in the acquisition plan. The proposed acquisition approach results in the following benefits:

1. Acquisition Cycle: The purchase request process typically includes assembling a technical data package (if applicable), developing an acquisition strategy, soliciting proposals from industry, DEJ0037

Comment on Text Recommend re-wording as this is confusing. Recommendation is as follows:

"The Buyer reviewed the previous acquisitions and six of the ten NSNs were awarded under commercial item procedures (NSNs 2520003884197, 2520015450390, 2530010992476, 2530013605954, 2530015020543, 2530015153347).

Consolidation Determination SPE7LX-24-R-0020 Page | 4 negotiating (if applicable), reviewing, and finally awarding the contract or purchase order. This administrative processing is called administrative lead time (ALT). As of November 2023, for DLA Land and Maritime Supply Chains, the average ALT for delivery orders on LTC is 2 days, for small buys is 99 days, for large buys is 175 days, and for PACE awards is 23 days. Using this data for comparison, there is a minimum savings of 97 days when comparing the proposed LTC approach to small buys, 173 days when compared to large buys, and 21 days when compared to PACE awards.

ALT will be reduced because items will not be individually solicited, competed, evaluated, and awarded each time a requirement arises. Reduced ALT is important to ultimately reduce the time for awards in an effort to get the parts delivered quicker to the Military customer. Requirements will source automatically to the proposed LTC using DLA’s automated procurement system, which will generate delivery orders against the contract.

2. Relationship Management: Orders from a LTC will provide a continuous relationship between the contractors and the contracting activity. After award issuance, the contract(s) will be assigned to a Basic Contract Administrator (BCA). The BCA and an Administrative Contracting Officer (responsible for post award actions on delivery orders) will be responsible for ensuring Purchase Requests are sourced properly to this contract and tracking delivery. The BCA will also be responsible for exercising any options until contract expiration. Having a primary contact within the administration area will ensure that potential quality/delivery issues will be resolved more efficiently and quickly than individual spot buys. Also, contractors are more likely to be proactive in seeking avenues to resolve quality/delivery discrepancies since the items are on contract for an extended period.

3. Cost: The vendor(s) will reduce duplicate efforts and thereby lower administrative costs associated with quoting on multiple solicitations over the same period. Additionally, the vendor(s) may be able to reduce material costs for items on a LTC by using long-term production planning, which allows buying raw material or finished materials in bulk, resulting in quantity discounts. These efficiencies can result in reduction of Government costs. There are also internal Government benefits from using an LTC, such as decreased inventory capital investment requirements as a result of lowered ALT, since quicker and more reliable vendor delivery means that less stock is required to be kept on-hand. Also, the Government’s administrative and operational costs to initiate and manage multiple solicitations, evaluations, award decisions, and contracts is significantly reduced, ordering is automated, and the automated ordering process time is almost instantaneous.

A full BCA was determined to be unnecessary for this initiative since it falls under DLAI 5010.06 Exemption #2: The acquisition is for supplies and the end-item will be delivered to DLA stock at the depots. The BCA Simulator (formerly the Vendor Stock Retention Model (VSRM) estimates a total of $69,045.21 potential cost avoidance over five years using the proposed contract for LTC for Stock versus Spot Buys for Stock; see attachment #1- BCA Simulator. The estimated savings are primarily resulting from cost reductions in the following cost drivers: depot throughput, transportation, asset management, and storage. Since the proposed vendor materiel prices are unknown at this time, this savings assumes the vendor's materiel prices will be the same as the average DLA acquisition prices for each NSN. The actual savings will depend on the final negotiated materiel prices.

The advantages of this project include cost avoidance for the Government, workload reduction, opportunity for continued participation in a supplier partnership, little disruption of the current flow of items to the customer, and minimal level of maintenance. These benefits are interrelated and largely result from elimination of the numerous separate contract actions (with associated lead-time and contracting resource requirements) now required to support DLA Land and Maritime based weapon systems on a worldwide basis.

The quantifiable benefits identified above do not meet the threshold for a substantial benefit atFAR 7.107-

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2(d)(1)(ii) of this subsection; however, enumerated benefits are critical to DLA Land and Maritime’s mission success. DLA Land and Maritime uses LTC methods to offer the best value to our customers. By consolidating these requirements, DLA Land and Maritime will be able to ensure consistent supplies while achieving economies of scale and reducing ALT and PLT. The benefits of this consolidation are critical to the Agency’s mission success. DLA is the military’s premier logistics provider, and it is imperative that DLA structures its contract actions to maximize benefits while minimizing costs. The consolidation does this by reducing administrative costs which, in turn, helps to keep DLA’s cost recovery rate low. Critical benefits include increased material availability, reduction in lead time, and increased warfighter equipment operational readiness.

Alternate Contracting Approaches:

The Contracting Officer has identified the less consolidated alternatives in developing the acquisition strategy for this project. The least beneficial approach would be to procure the items via individual purchase orders (spot buys). This approach would not achieve the efficiencies, cost avoidance, and other benefits when compared to the acquisition strategy proposed

Another less consolidated contracting strategy would be to procure these items using Automated Indefinite Delivery Contracts (IDCs). However, Auto IDCs have a $250,000 threshold per item and are typically shorter than LTCs. NSN 2520015450390 is excluded from the Auto IDC program due to a First Article Testing requirement. Therefore, these NSNs should not be placed on Auto IDCs. The remaining NSNs could be placed on Auto IDCs, but this approach would not achieve the efficiencies and other benefits of the proposed approach.

A third approach that is only slightly less consolidated than that proposed is to separately solicit for and award individual LTCs for each NSN. While this approach seeks to leverage the contract administration advantages of long-term delivery order contracts, it provides very little practical difference from the first alternative above. This approach would require greater resources both to award and administer (even if the contracts were awarded to the same vendor) and would take substantially longer to award than the proposed approach. Therefore, this alternative contracting strategy is substantially less beneficial than the proposed approach because it significantly decreases efficiencies during the pre-award cycle and provides no better benefits associated with competition than the proposed approach, as both approaches allow for the individual evaluation and award of each NSN.

Determination:

In view of the foregoing, I hereby determine:

1. This proposed acquisition constitutes a consolidation of contract requirements.

2. The contract requirements being consolidated exceed $2 million.

3. There are benefits of consolidating the contract requirements, which include both quantifiable and non-quantifiable benefits.

4. The expected benefits do not meet the thresholds for a substantial benefit at FAR 7.107-2(d)(1) but are critical to the Agency’s mission success.

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5. The procurement strategy provides for maximum practicable participation by small business.

6. The consolidation of contract requirements is necessary and justified.

COLEEN MCCORMICK

Chief of the Contracting Office

Attachments:

1. BCA Simulator

BCA Simulator Results

A full BCA was determined to be unnecessary for this initiative, since it falls under one of the exceptions according to the BCA guidance in DLAI 5010.06. A BCA Simulator run was completed with a summary of the results below. There was a total of 13 items used in the simulation.

The Simulator estimates a total of $103,983.75 in potential cost avoidance over five years using the proposed contract for LTC for Stock versus Spot Buys for Stock. Since the proposed vendor materiel prices are unknown at this time, this avoidance assumes the vendor's materiel prices will be the same as the average DLA acquisition prices for each NSN. Any actual cost avoidance will depend on the final negotiated materiel prices, and a new simulation can be performed again when those are determined. This analysis shows a combined Break-Even Percentage (BEP) of 1.84%, so to avoid DLA losing money, there is little room for increases over current prices.

FSC NIIN Supply_Chain AAC Cost ALT OH SchedRcpts UFOs

2520 003884197 LAND Z 34.52 15 510 849 295

2530 010992476 LAND Z 13357.23 40 0 16 13

2530 013605954 LAND Z 320.33 15 218 262 0

2520 014980785 LAND Z 6538.08 77 7 0 0

2530 015020543 LAND Z 37.67 76 495 961 0

2530 015153347 LAND Z 519.69 76 239 0 0

2520 015450390 LAND D 585.76 15 39 155 0

3040 015705855 LAND Z 3597.75 15 20 7 0

2520 015801060 LAND D 386.70 55 194 20 0

2530 015957168 LAND D 166.53 26 0 137 29

Safety_Stock_Lvl MaxOH CovDur Base_TotalOASpend_5Yr Base_PRCount_5Yr Base_ManualSetupCost_5Yr

966.5 968 28 386071.68 60 16637.40

1.1 4 1 868219.95 14 3882.06

722.5 726 28 1238395.78 60 16637.40

2.2 9 31 614579.52 12 3050.19 1567 1569 28 438704.82 60 16637.40

231 232 28 342995.40 33 9150.57

93.83 0 30 602161.28 62 17191.98

27.5 28 28 302211.00 35 9705.15

26.2 1 91 646949.10 20 5268.51

2.28 0 91 209328.21 21 5823.09

5,649,616.74$ 103,983.75$

BEP 1.84%

Base_Del_Order_Cost_5Yr Base_IHC_5Yr Base_Revenue_5Yr Base_Avg_Yr_Inv_5Yr Base_StockOut_Count_5Yr base_EstAnnualQty

1470.00 46.53 576633.60 2.69605538 58 2236.8

343.00 0.00 1262455.09 0 60 13

1470.00 57459.80 1719736.26 358.7537778 0 773.2

269.50 857.03 905096.35 0.262167051 55 17.2

1421.00 5028.46 643398.18 266.9742778 0 2252.4

784.00 47688.65 512392.76 183.527285 0 128

1519.00 22505.99 877964.35 76.84371944 0 205.6

857.50 33661.60 439582.29 18.71258333 0 16.8

465.50 15780.99 962690.64 81.61874444 0 317.4

490.00 2651.11 305965.85 31.83936812 2 239.6 base_EstAnnualVal base_Min_Yrly_KT_Qty base_MinYearlyDollarValue base_Max_Yrly_KT_Qty base_MaxYearlyDollarValue

77214.34 1104 38110.08 3369 116297.88

173643.99 5 66786.15 21 280501.83

247679.16 412 131975.96 1135 363574.55

112454.98 8 52304.64 27 176528.16

84847.91 1106 41663.02 3399 128040.33

66520.32 63 32740.47 193 100300.17

120432.26 96 56232.96 315 184514.40

60442.20 8 28782.00 25 89943.75

122738.58 182 70379.40 453 175175.10

39900.59 108 17985.24 371 61782.63 base_MinOrderQty base_MaxOrderQty base_PRCount_Yr_1 base_PRCount_Yr_2 base_PRCount_Yr_3 base_PRCount_Yr_4

559.2 2236.8 12 12 12 12

3.25 13 3 3 2 3

193.3 773.2 12 12 12 12

4.3 17.2 2 3 2 2

563.1 2252.4 12 12 12 12

32 128 7 6 7 7

51.4 205.6 13 12 13 12

4.2 16.8 7 7 7 7

79.35 317.4 4 4 4 4

59.9 239.6 4 5 4 4 base_PRCount_Yr_5 base_PRQty_Yr_1 base_PRQty_Yr_2 base_PRQty_Yr_3 base_PRQty_Yr_4 base_PRQty_Yr_5 base_PRValue_Yr_1 12 2160 2256 2256 2256 2256 74563.2

3 13 14 10 14 14 173643.99 12 966 725 725 725 725 309438.78

3 16 23 16 16 23 104609.28 12 2420 2306 2307 2306 2307 91161.4

6 140 120 140 140 120 72756.6 12 223 200 213 195 197 130624.48

7 18 16 17 16 17 64759.5 4 306 337 343 343 344 118330.2 4 244 303 237 236 237 40633.32 base_PRValue_Yr_2 base_PRValue_Yr_3 base_PRValue_Yr_4 base_PRValue_Yr_5

77877.12 77877.12 77877.12 77877.12

187001.22 133572.3 187001.22 187001.22

232239.25 232239.25 232239.25 232239.25

150375.84 104609.28 104609.28 150375.84

86867.02 86904.69 86867.02 86904.69

62362.8 72756.6 72756.6 62362.8 117152 124766.88 114223.2 115394.72

57564 61161.75 57564 61161.75

130317.9 132638.1 132638.1 133024.8

50458.59 39467.61 39301.08 39467.61