ATSP4 Ceiling Increase JA - 2020-06-12_Redacted.pdf

Source Selection Sensitive, FAR 3.104 Applies

Justification for Other than Full and Open Competition

Programmatic Increase to Contract Ceiling Advanced Technology Support Program IV (ATSP4)

Indefinite Delivery / Indefinite Quantity (ID/IQ) Task Order Contracts

I. Agency and Contracting Activity:

Defense Microelectronics Activity (DMEA) Contracting Division/MEEB 4234 54th Street McClellan, CA 95652

II. Nature and/or Description of the Action Being Approved:

The approval of this J&A will provide the required programmatic ceiling increase necessary to sustain current mission capability for the ATSP4 contracts. This J&A is not requesting approval of additional period of performance, rather an increase to the ceiling amount to allow performance under the existing period of performance (with options exercised).

The proposed J&A modification is to increase the programmatic contract ceiling from an aggregate ceiling of $7.20B, by $10.271B, to $17.471B, on the current pool of DMEA Advanced Technology Support Program IV (ATSP4) Engineering Services Indefinite Delivery, Indefinite Quantity (IDIQ) Multiple Award Task Order Contracts (MATOCs).

III.Description of the Supplies/Services Required To Meet the Agency’s Needs (including the total estimated value, including options, if any):

ATSP4 provides a uniform technical and management approach that leverages advanced technologies to meet the requirements of the Department of Defense (DoD) for a quick reaction capability across the entire spectrum of technology development and system acquisition development phases.

The ATSP4 capability through the Defense Microelectronics Activity (DMEA) will provide solutions to satisfy future customers’ requirements. This capability includes the development of appropriate solutions to keep systems operational, elevate sophistication levels, or meet new threats. These efforts include developing components to meet the DoD’s requirements for ultra-low volumes, extending component availability, or ensuring a trusted, assured, and secure supply of microelectronics. Also included is the intelligent and rapid application of advanced technologies to add needed performance enhancements to DoD weapon systems in response to traditional and irregular (asymmetric) threats and to solve problems related to aging weapon systems. Increasing warfighter capabilities and providing solutions to electronics support problems—such as, reliability, maintainability and obsolescence—are accomplished through the development and insertion of applications of advanced microelectronics technologies.

ATSP4 is the latest in the series of successful DMEA ATSP engineering services contracts.

The acquisition strategy for ATSP4 included two acquisitions, a full and open acquisition (known as ATSP4 FO) and a small business set-aside acquisition (known as ATSP4SB). The acquisition strategy requested approval of a 10-year ordering period with a combined programmatic ceiling of both acquisitions set to $19.530 billion ($17.471 billion for the ATSPFO and $2.059B for the ATSP4SB). The combined programmatic ceiling was supported with a programmatic ceiling analysis

On 7 October 2014, the Director of Defense Procurement and Acquisition Policy (DPAP), now known as Defense Pricing and Contracting (DPC), Mr. Richard Ginman, approved the acquisition strategy, but lowered the combined programmatic ceiling from $19.530 billion to $8.0 billion ($7.2 billion for ATSP4FO and $800 million for ATSP4SB). The Acquisition Decision Memorandum did not clarify or state the Director’s rationale for lowering the collective ceiling.

As of 31 January 2020, 318 tasks have been awarded on the vehicle within the first 46 months. These tasks have a combined value of $3.988 billion only leaving $3.211 billion of cumulative ceiling remaining for the remaining 74 months in the ordering period. At this rate, the ceiling is being utilized at a rate of approximate $86.7 million per month ($3.988 billion over 46 months), which far exceeds what the average utilization rate should be over the 10 year period ($60 million per month based on$7.2 billion over 12 months), without adjusting the average monthly spend for inflation (i.e. “then year” dollars) or for any program growth/usage rate . This confirms that the remaining ceiling will not cover the remaining 74 months of the ordering period.

The proposed J&A modification is to increase the programmatic contract ceiling from an aggregate ceiling of $7.20B, by $10.271B, to $17.471B, on the current pool of eight ATSP4FO IDIQ contracts. The ATSP4 program, with all options exercised, has a 10-year ordering period beginning 1 April 2016. The base ordering period is 30 months, options 1 through 3 are 24 months, and option 4 is 18 months. Option ordering period 1was exercised on 30 September 2018 and runs through 30 September 2020. This J&A will not result in any change to the 10-year ordering period.

IV. Authority Cited:

FAR 6.302-1, only one responsible source and no other supplies or services will satisfy agency requirements under the authority of 10 U.S.C. 2304(c)(1) or 41 U.S.C 3304(a)(1).

V. Reason for authority cited:

Ensuring continuity of the ATSP program is paramount to DMEA in its effort to support the warfighter in its advanced microelectronics and engineering needs. As such, an analysis was completed in order to understand what options are available to DMEA on how to best proceed. This analysis was focused on two areas of concern. The first area was to understand what led to the current situation in which the ATSP program finds itself and the second area was to understand the schedule and resource implications of beginning the ATSP5 source selection. .

Regarding the first area, for the ATSP4 acquisition strategy, DMEA performed an analysis of the estimated programmatic ceiling of the vehicle. Initially, DMEA anticipated a need for a ceiling of nearly $21 billion on the high end and $14 billion on the low end over 10 years. An average of the yearly total from the two scenarios were then used to determine the estimated programmatic ceiling, which resulted in the amount of $17.471 billion.

. As noted before, although these values were submitted for higher review at the Defense Procurement and Acquisition Policy (DPAP) office, only a $7.2 billion ceiling, or $10.271 billion less than the requested amount, was approved. Director of DPAP, Mr. Richard Ginman, did not provide a rationale of why only a combined $8 billion ceiling was approved for both the full and open and the small business vehicles. Based on DMEA’s estimates of the expected usage, we estimated that we would utilize the $7.2 billion in ceiling 68 months into the program, or halfway through option ordering period 2.

As stated in Section III, the utilization of the ATSP4 program, at $86.7 million per month, has been much higher than what was projected, $60 million per month. Extrapolated out at $86.7 million per month, the ceiling would be depleted in the next 37 months. However, if one accounts for a 15 to 25 percent growth in the amount of work per year as the data for ATSP3 and ATSP4 has shown, the remaining ceiling will be depleted in about 24 to 28 months. At the current rate, DMEA will utilize the existing ceiling by 70 to 74 months into the program. This indicates that the initial predictions that DMEA had of the ceiling usage for the ATSP4 Acquisition Strategy were accurate.

Regarding the second area (the timeline for the ATSP5 source selection), in order to understand and properly estimate a timeframe to complete the ATSP acquisition, we looked at two recent undertakings of large multiple award IDIQs, the first being the ATSP4 award timeline and the second being a recent venture in pursuing a nearly $2 billion vehicle referred to as Accelerated Delivery Pathways (ADP) which is similar to ATSP. Based on these two experiences, a rough milestone schedule for ATSP5 removing peer reviews by DPC and including the appropriate approval levels required was drafted. The expected total time to award by a non-full time dedicated team is approximated at 682 Days (1 year, 10 months).

However, as will be detailed below in the market research section, DMEA believes the result of this competition would yield the same eight contractors that are already on the ATSP4 vehicle.

With these two areas of information, DMEA then developed and evaluated four options to determine the best path forward for the ATSP program: (1) maintain status quo, (2) process a J&A to increase the ceiling on ATSP4 to the original ceiling requested, (3) begin the ATSP5 source selection, or (4) process a J&A to increase the ceiling while also beginning the ATSP5 source selection. As a result of this evaluation, option #2 to process a J&A to increase the ceiling of ATSP4 to match the programmatic ceiling initially requested of $17.471 billion provides the best solution to the problem as it will be easier to implement, allow for a quicker solution, utilizes the least amount of resources, and reduces the risk to the ATSP program.

VI. Fair and Reasonable Cost Determination

Actions to ensure fair and reasonableness will be accomplished on each task order using the established procedures contained in the ATSP4 ordering procedures and the procedures and criteria contained in FAR Subpart 15.4. Detailed documentation and justification for fair and reasonable determinations will be included in the Price Negotiation Memorandums for each task order. Additionally, for the eight contractors, the majority of their business units are covered by either Forward Pricing Rate Recommendations or Forward Pricing Rate Agreements, which will be followed. Finally, the Government has over 20 years of experience working with these large contractors under the ATSP program, so there is significant historical data to support evaluation of the direct and indirect costs that will be included in any contractor’s proposal.

As a result, I hereby determine that the anticipated cost or price to the Government for the task orders issued under this contract will be fair and reasonable.

Colten Murray Date:

Contracting Officer, ATSP Contracting Branch

VII. Additional Facts Supporting this Justification:

Other factors to consider under this justification are (1) what are the incoming workload projections and how will this affect the ceiling, and (2) what the impact will be on the small business if there is no ATSP program continuity.

Regarding incoming workload and its affect on the ceiling, DMEA keeps track of the current projects that are being worked in Contracting along with expected tasks to be awarded during the current fiscal year, which is updated on a continuous basis as more customers come to DMEA with their projects throughout the fiscal year.

f these four figures are combined (FY20 awarded, FY20 to be awarded, FY20 in process, and FY20 expected additional tasks), DMEA expects to

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DN: c=US, o=U.S. Government, ou=DoD, ou=PKI, ou=OSD, cn=MURRAY.COLTEN.J.1387298041 Date: 2020.02.19 09:42:53 -08'00' 2/19/20 award 91 task orders for an estimated $1.434 billion in fiscal year 2020.

These numbers support the trend analysis DMEA has seen of increasing usage of the ATSP4 program by our government customers.

Regarding the impact to small businesses, DMEA has emphasized and incentivized increased small business participation in the ATSP4 program. In conjunction with the Small Business Administration (SBA), DMEA sets goal percentages for each small business category for the ATSP4FO contractors to meet through subcontracts. As of 31 January 2020, the eight contractors, as a whole, are far exceeding the small business participation goal of 5%.

For context, of the current awarded ceiling of $3.988 billion (as of 31 January 2020), the ATSP4 small business participation goal of 5% would result in a goal amount of $199.4 million. However, the actual small business participation has far surpassed that with a small business participation amount of $375.5 million, equivalent to a 9.414% participation rate.

Based on this data, the structure of ATSP4 has proven to have incentivized a significant amount of work to small business subcontractors, nearly doubling the small business participation goal developed by DMEA and the SBA.

Without a suitable path forward that allows for ATSP program continuity, the small business marketplace could suffer significant work and revenue losses.

VIII. Market Research:

The ATSP4 Market Research Report detailed the different attempts to reach out to industry and gauge interest in the ATSP vehicle. 53 companies showed interest of which 29 were small businesses of various socioeconomic categories. Of the 24 large businesses only 9 submitted proposals.

During proposal evaluation, in accordance with FAR 15.306(d)(5), the contracting officer determined that, one offeror, for the ATSP4FO Competition should be eliminated from the competitive range and was not allowed an opportunity to submit a final proposal revision. had a deficiency in Factor 1:

Technical Capability: Resources and multiple deficiencies in Factor 2: Technical Capability:

Experiences. In the government’s judgment the deficiencies in Factor 1 and Factor 2 were not considered correctable. Although the offeror could have favorable ratings for Factors 3, 4 and 5, these factors were less important than Factor 1 and Factor 2 and did not outweigh the deficiencies. All other contractors that submitted a proposal were ultimately awarded a contract as they were found to be technically acceptable and met the criteria set forth in the

RFP

g g

Since the award of ATSP4 in 2016, through the performance of tasks, DMEA has informally connected with many subcontractors that appear to possess the capabilities needed to be a part of the ATSP4 program. These interactions have happened on a continuous basis since April 2016 between DMEA, the Government customer, the prime contractor, and the subcontractors and occur during technical interchange meetings, program status reviews, and other events during the performance of each task order. Often times during these conversations, DMEA representatives gauges the subcontractors’ interests in being a part of the ATSP4 program. The preponderance of the responses indicate that these subcontractors would have no interest in being a prime contractor on ATSP4 and are content with their role as a subcontractor results are similar to previous ATSP market research attempts. In 2012, DMEA was deciding whether to pursue ATSP4 or increase the programmatic ceiling to ATSP3. To inform that decision, DMEA completed preliminary market research by posting a Sources Sought and conducting an Industry Day to allow interested contractors to understand the ATSP3 and ATSP4 requirements, ask questions, and to meet other contractors for potential teaming opportunities. The result of the Sources Sought posting and the Industry Day yielded nine contractors, eight of which were already ATSP3 prime contractors. The lone non- ATSP3 prime contractor was a small business (Luna Innovations). Discussions with the small business revealed that they had no intention of being a prime contractor on the ATSP3 contract but rather sought a subcontractor relationship with other business representatives present.

Based on the market research information from the ATSP4 Industry Day in 2012, it was apparent to DMEA that a new acquisition would lead to substantial duplication of administrative cost, while not expanding the number of prime contractors on the ATSP program. Based on the aforementioned, it was determined to move forward with completing a Justification and Approval (J&A) requesting an increase to the programmatic contract capacity. The J&A was approved by the Army Corps of Engineers (DMEA’s delegating contracting authority in 2013) on 31 July 2013.

Despite past results, DMEA continues to pursue new potential contractors for the ATSP4 program. One of the key acquisition features of ATSP4 program is that DMEA has the ability to do on-ramps (basic contract Section H supplemental information DMEA# A16-002).

DMEA is open to pursuing a Sources Sought posting with a request for white papers from prospective contractors in order to understand if pursuing an on-ramp source selection would be worthwhile.

p (Luna Innovations) g p

IX. Actions to Remove or Overcome Any Barriers that Led to this Exception to Fair Opportunity

As stated in section 8, market research has been completed in the past and on an ongoing basis since April 2016 with the intent to bring as many new contractors into the ATSP4 program as possible. DMEA has completed numerous surveys, Sources Sought postings, and Industry Days with the hopes of finding new contractors that could compete and succeed on the ATSP4 program. To date, our market research has not yielded any viable contractors that also want to be a part of the program as a prime contractor. However, as was stated in Section 8, DMEA included the ability to do on-ramps on the ATSP4 program and is open to pursuing a Sources Sought posting to better understand if pursuing an on-ramp source selection would be worthwhile.

X. Contracting Officer Certification

I certify that this J&A is accurate and complete to the best of my knowledge and belief.

Colten Murray Date:

Contracting Officer, ATSP Contracting Branch

XI. Technical / Requirements Certification

I certify that the supporting data under my cognizance that are included in the justification are accurate and complete to the best of my knowledge and belief.

Sham Charan Date:

Project Engineer, Accelerated Acquisition Branch

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XII. REVIEW AND APPROVALS

Date:

Date:

Date:

Date:

Chief, Accelerated Acquisition Branch

Colten Murray Chief, ATSP Contracting Branch

Adrienne Strickland Chief, Acquisition Policy and Analysis Branch

Anne Burman General Counsel

Kathleen Griest Date:

Chief, Contracting Division and Competition Advocate

Douglas Casanova Date:

Acting Director, DMEA Head of Contracting Activity

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