JA_70Z08019Q12003B00_redacted.pdf

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SOLE SOURCE JUSTIFICATION

For Certain Commercial Items for Procurements Exceeding the Simplified Acquisition Threshold pursuant to FAR Subpart 13.5, Including Brand Name

RFQ Number: 70Z04019Q12003B00

Pursuant to the requirement of the authority of 10 U.S.C. 1901, as implemented by Federal

Acquisition Regulation (FAR) Part 13.501 and consistent with the content requirements of FAR

6.303-2, the following facts and rationale support this justification:

1. AGENCY AND CONTRACTING ACTIVITY:

The Department of Homeland Security, United States Coast Guard (USCG), Surface Forces

Logistics Center (SFLC), Patrol Boat Product Line (PBPL) and Contracting and Procurement

Division (CPD-1), located at 2401 Hawkins Point Road, Baltimore, Maryland 21226-5000, proposes to enter into a contract on a basis other than through full and open competition.

2. NATURE/DESCRIPTION OF THE ACTION:

(a) The SFLC intends to procure, on a sole source basis, 150 Philadelphia Electrical Equipment

Company (PEECO) Model DSSJDM-65-60MX Ship Service Diesel Generators (SSDG’s) for use onboard the 87’ Coastal Patrol Boat (CPB) class USCG Cutters for one (1) base year and four (4) one (1) year option periods. The generators are designed and manufactured by the Original Equipment Manufacturer (OEM), Philadelphia Electrical Equipment Company

(PEECO). The NAICS code is 335312 and the PSC code is 2815.

(b) Contractor: Philadelphia Electrical Equipment Company (PEECO), 14 Mount Pleasant Road, Aston, PA 19014.

(c) Type of action: Firm Fixed Price Requirements Contract

(d) Type of funding: Annual Operating Expense funds

(e) Year of funding: Beginning in FY 2019, then the particular fiscal year for the order.

3. DESCRIPTION OF SUPPLIES/SERVICES:

This action involves a mission requirement associated with maintaining USCG Patrol Boat availability in support of various Homeland Security missions. The following PEECO Model

DSSJDM-65-60MX-Phase Ship Service Diesel Generators (SSDGs) are designed specifically to integrate and interface with existing auxiliary fuel and cooling water systems as well as space constraints found on the WPB-87 Patrol Boat:

CLIN P/N - DESCRIPTION QTY

0001 Ship Service Diesel Generator

DSSJDM-65-60MX - Port 75

NSN: 2815-01-F13-3325

CLIN P/N - DESCRIPTION QTY

0002 Ship Service Diesel Generator

DSSJDM-65-60MX - STBD 75

NSN: 2815-01-F18-5408

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4. IDENTIFICATION OF STATUTORY AUTHORITY PERMITTING OTHER THAN

FULL AND OPEN COMPETITION:

The statutory authority permitting other than full and open competition is 41 U.S.C. 1901 implemented by FAR Subpart 13.501, Simplified Procedures for Certain Commercial Items.

5. DEMONSTRATION THAT THE NATURE OF THE ACQUISITION REQUIRES USE

OF AUTHORITY CITED:

The design and manufacture of these Ship Service Diesel Generators (SSDGs) was competitively awarded to Philadelphia Electrical Equipment Company (PEECO) under previous contract

HSCG40-13-D-11011. The first prototype was delivered and installed on CGC GANNET in

August 2014. The USCG PBPL has a requirement for the continued manufacturing of PEECO

SSDGs. This SSDG is only available from the OEM and is the only SSDG that the USCG PBPL has approved for replacement on the WPB-87 Patrol Boats per SFLC-PBPL SSDG First Article

Design Acceptance Memo dated January 10, 2018.

The USCG previously spent over $280,000.00 in total to achieve an approved WPB-87 SSDG design. $200k was spent with the USCG Yard to perform the tear out of the existing SSDGs and installation of new SSDGs on CGC GANNET, $65,850.00 was spent with PEECO for design and manufacturing of 2 prototype 1st article SSDGs on CGC GANNET, and $22,515.00 was spent for onsite PEECO technical support during prototype installation.

Substantial duplication of cost and man hours would be incurred should the government choose to solicit industry again, for another vendor to design another SSDG. Not only would this

$288,365.00 in previously expended cost not be recovered through competition, but having another vendor develop a prototype, complete First Article Testing, and then begin production, would require approximately 8 to 12 months from time of award. Based on the previous

$288,515.00 SSDG design contract successfully performed by PEECO, the USCG PBPL would expect to pay at least another $288,515.00 for a new design. In addition, if this hypothetical new design was not successful, the PBPL would be exposed to further delays in upgrading the WPB-

87 fleet which could significantly jeopardize the mission readiness of the WPB-87 fleet in performance of vital National Security, Maritime Law Enforcement, Drug & Migrant

Interdiction and Search and Rescue missions.

The PBPL is now 5 years behind the intended SSDG installation on the WPB-87 fleet, with numerous WPB-87s running with SSDGs well beyond their recommended life cycle while awaiting replacement. In 2013 the WPB-87 Patrol Boat fleet began the process of replacing the currently installed outdated and out of production MAN Diesel Ship Service Diesel Generators

(SSDGs). The PBPL was only able to execute approximately 42 of the 150 required generator purchases during the previous contract and has resulted in a need to solicit PEECO for a follow-on contract in order to fulfill the requirement to purchase the difference in quantity.

SSDG’s not in accordance with OEM specifications, materials, tolerances, etc. could cause engine failure rendering the vessel unable to complete mission requirements. The actual

70Z08019Q12001B00 Page 3 equivalency of any non-OEM SSDG’s are not known, and are not easily determined. The risk of accepting alternative SSDG’s without fully vetting the vendor’s manufacturing procedures is unacceptable and may result in cost to the Government exceeding hundreds of thousands of dollars, reduced reliability, reduced safety, and may hamper the Coast Guard’s mission requirements.

6. DESCRIPTION OF EFFORTS MADE TO ENSURE THAT OFFERS ARE SOLICITED FROM

AS MANY POTENTIAL SOURCES AS IS PRACTICAL:

Pursuant to FAR Subpart 5.2 in an effort to solicit as many potential sources as practical, a

Sources Sought notice was posted on Federal Business Opportunities (FBO) website on 29

November 2017 and closed 15 December 2017 under NAICS code, 335312- Motor and

Generator Manufacturing. To uphold previous findings that PEECO is the OEM with no authorized distributors, a Sources Sought notice was reposted on FBO on 14 August 2018 and closed on 17 August 2018. PEECO is the only vendor who responded stating they are the OEM with no authorized distributors.

7. DETERMINATION BY THE CONTRACTING OFFICER THAT THE ANTICIPATED

COST TO THE GOVERNMENT WILL BE FAIR AND REASONABLE:

The Contracting Officer will determine the anticipated prices to be fair and reasonable based upon the application of the price analysis techniques described in FAR 13.106-6, which may include comparison with the Independent Government Estimate (IGE), historical pricing found fair and reasonable on the previous contract, market research of pricing on similar generators, and, if necessary, analysis of data other than certified cost or pricing data. There is no catalog pricing available for purchase of these items.

8. DESCRIPTION OF MARKET RESEARCH:

Market research was conducted from September 2017 through August 2018 by searching similar companies on the internet and through Federal Supply Schedules. A Sources Sought notice posted on Federal Business Opportunities (FBO) on 29 November 2017 and closed on 15

December yielded two (2) responses. PEECO and Kraft Power responded expressing their interest and intent to quote. Kraft Power proposed an alternate SSDG. However, as stated above, identical configuration of the SSDG is absolutely critical across all WPB-87s for operation and maintainability. Kraft was informed of the COR’s evaluation that their proposed SSDG was not technically acceptable due to the reasons stated above in Section #5. PEECO’s response stated they are the OEM with no authorized dealers. To uphold previous market research findings that

PEECO is the OEM with no authorized distributors, a Sources Sought notice was reposted on

FBO on 14 August 2018 and closed on 17 August 2018. On 15 August 2018, PEECO responded to an email inquiry maintaining they are the OEM with no authorized dealers and do not wish to sell their proprietary data.

9. ANY OTHER FACTS SUPPORTING THE USE OF OTHER THAN FULL AND OPEN

COMPETITION:

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The 87’ WPB SSDG system parts must conform to design, materials and operational requirements. The USCG competitively awarded a contract to PEECO for the original prototype to be installed onboard an 87’ WPB. Proprietary software which is installed on the SSDG and proprietary licensing for the hardware are proprietary to PEECO and were not obtained under the previous contract. The use of parts not manufactured in accordance with OEM specifications, materials, tolerances, etc. could cause equipment failure rendering the vessel unable to complete mission requirements.

10. LISTING OF SOURCES, IF ANY, THAT EXPRESSED, IN WRITING, AN INTEREST

IN THE ACQUISITION:

A Sources Sought notice was posted on Federal Business Opportunities (FBO) on 29 November

- 06 December 2017 and again on 14 August - 17 August 2018 under NAICS code 335312

Motor and Generator Manufacturing.

The following vendor responded:

1. Philadelphia Electrical Equipment Co., Inc. (PEECO) – Original Equipment Manufacturer

*PEECO provided a statement in an email dated 11 December 2017 and 17 August 2018 refusing to sell proprietary data rights to the software they created which operates all functions on the SSDG as well as OEM proprietary rights to the manufacturing. This prevents USCG from utilizing another vendor to manufacture SSDG’s based on this design.

2. Kraft Power

*The Contract Officer’s Representative (COR) technical evaluation concluded that Kraft’s alternative SSGD is not technically acceptable. Kraft was informed that the USCG is not soliciting for an alternate SSGD, the requirement is for the specific model designed by PEECO and does not intend to evaluate alternate sources due to the reasons stated above in Section #5.

They did not respond.

11. STATEMENT OF ACTIONS, IF ANY, THE AGENCY MAY TAKE TO REMOVE OR

OVERCOME ANY BARRIERS TO COMPETITION BEFORE ANY SUBSEQUENT

ACQUISITIONS FOR SUPPLIES OR SERVICES:

PEECO, the OEM, responded to the Sources Sought with a letter outlining their proprietary data rights to the software they created, which operates all functions on the SSDG, as well as OEM proprietary rights to the manufacturing. The Contracting Officer’s Representative contacted

PEECO to investigate the possibility of the Government purchasing their proprietary data rights.

On 11 December 2017 and 17 August 2018, PEECO responded in an email refusing to sell proprietary data and that they are the OEM with no authorized dealers. The USCG will continue to engage PEECO for the release of proprietary data prior to any subsequent acquisition. In the future, if PEECO quotes a price for the proprietary data rights, the USCG will weigh the benefits of purchasing the data rights at that time.