Chillers JA FAR 2-Part6-JA-Template 4_Redacted.pdf

Control No:Hood-2021-10 Program: Fort Hood HVAC Chiller Standardization

Version – September 2018 FOR OFFICIAL USE ONLY

Program Manager:

Date:

Signature:

MICC Legal Counsel:

a. Background.

(1) On 16 April 2018, the Secretary of the Army issued a memorandum directing the implementation of Category Management to improve Army services contract processes and supporting data analytics to enable the Army to save time, money and manpower for higher priorities.

(2) On 8 April 2019, the Under Secretary of the Army issued a memorandum, Subject:

Directive for Implementation of Category Management, establishing the implementation date of 30 September 2019 for specific categories, including category management for facilities and construction. The Commanding General for Army Materiel Command (AMC) and the Assistant Secretary of the Army for Installations, Environment, and Energy were identified as Co-managers of the Facilities and Construction categories.

(3) On 5 July 2019, U.S. Army Material Command, released Operation Order (OPORD) 19-

190 providing guidance to AMC organizations on implementing category management. In this OPORD, AMC Facilities Category Co-manager responsibility was delegated to

IMCOM.

(4) IMCOM, as a Category Lead, is responsible for establishing the priority effort for contract spend within their assigned services based on those with the highest spend and greatest projected overall return on investment.

(5) In early fiscal year 2020, IMCOM initiated a pilot category management study at Fort

Hood to determine if the establishment of a single manufacturer of a range of chiller sizes would result in efficiencies and dollar savings and thus meet the goals of category management. IMCOM completed this study and issued a Category Intelligence Report (CIR) for a HVAC Chiller Pilot that was approved on 14 August 2020 by both Facilities Category Co-Managers, Headquarters Department of the Army Assistant Deputy Chief of Staff G9, and IMCOM G4. In the CIR, analysis supported selecting a single manufacturer to procure HVAC Chiller systems from. By doing so, Fort Hood would realize measurable savings from efficiency during the sustainment of these chiller systems, by transitioning over time to a single manufacturer. The CIR identified McQuay Chillers of Daikin Applied as the manufacturer comprising the largest percentage of chillers on Fort Hood.

On 11 September 2020, IMCOM G4 serving as the Army’s category lead for facilities, issued a memorandum mandating a selection of a single manufacturer of chiller systems for Fort Hood. This memorandum also directed the implementation of the CIR findings by identifying McQuay Chillers of Daikin Applied as the single manufacture of chiller systems for Fort Hood. By selecting this manufacturer as the single manufacturer to acquire chillers from for the next five years, Fort Hood expedites their means to realizing standardization of chillers and the cost savings and efficiencies realized during sustainment of these items.

b. Alternatives: The alternative to HVAC chiller standardization is to continue purchasing chillers based on Lowest Price Technically Acceptable criteria. This approach continues the present drawback of expending unnecessary financial resources and manpower due to the redundant costs and duplication of effort encountered by using multiple chiller manufacturers.

Manufacturer supplied training is expensive, and training with more than one manufacturer is not cost feasible. Training and maintenance activities will continue to be inadequate, and new equipment integration increasingly burdensome with this strategy, until it ultimately becomes unsustainable.

c. Impact if this justification request is not approved. If this stand alone J&A is not approved, the Fort Hood chiller replacement contracts cannot be executed in accordance with the IMCOM’s Category Management decision. Failure to initiate this standardization effort will prevent IMCOM, and the Army, from realizing the efficiencies and reductions in costs that have been identified through category management efforts. The Fort Hood DPW will continue to contend with significant duplication of manpower and financial costs due to the variety of existing chiller equipment across Fort Hood; the IMCOM CIR shows that limiting new chiller acquisitions to one manufacturer will substantially reduce these expenditures by reducing:

training requirements; need for contract repairs that are beyond in-house capability; software engineering, documentation and procurement requirements; and lost mission man-hours due to equipment reliability issues and the resultant downtime. Failure to implement this Category Management initiative will result in forfeiture of the opportunity to use the DPW workforce more efficiently by increasing working knowledge of the chiller inventory while increasing HVAC system maintenance reliability, and enhancing DPW mission capability.

6. Efforts to Obtain Competition: It is contemplated that solicitations shall be issued to Small Business entities to install the selected brand on a competitive basis on individual FAR Part 14 Invitations for Bids and FAR Part 36 Construction Type contracts for the brand identified. The Contracting Officer shall publish the notices required by FAR 5.201 and any bids or proposals received shall be considered.

a. The cost and efficiency benefits to Fort Hood through standardization and interoperability by exclusively using McQuay Chillers of Daikin Applied greatly outweigh the expected benefits of competing amongst different chiller manufactures. Effective competition is not applicable at the manufacturer level, as this is a sole source requirement. Competition will be achieved at the authorized distributor level.

b. Subcontracting Competition: Subcontracting the installations of the contemplated Brand Name products will be achieved by utilizing Small Businesses during the solicitation phase of follow-requirement listed in the table in paragraph 3.

7. Actions to Increase Competition: In accordance with FAR Part 5.2 Synopses of Proposed Contract Actions, a Sources Sought Notice (SSN) was issued under NAICS333415, Commercial and Institutional Building Construction was posted on 25 May 2021 to 8 June 2021. The pre-solicitation has been posted on 24 June 2021, now to include the brand name stand alone J&A for McQuay Chillers of Daikin Applied will be posted in SAM with the solicitation on 27 July 2021.

a. As a result of SSN notice, ten (10) responses were received to include eight (8) Small

Business and two (2) Large Businesses. One of the Large Businesses was Mc-Quay-Daikin Applied. The cited brand name source noted that they had products available under Federal Supply Schedule (FSS), FAR Part 8.

b. The Directorate of Public Works (DPW) did provide a technical review of the Technical data provided by the Brand Name Source cited. The technical review team concluded the findings of the Technical Data provided by the Brand Name Contractor / Source were favorable to the Government and that the specifications met the contemplated requirements.

8. Market Research: This J&A is based on published research by IBIS World, and the IMCOMCIR. Both sources indicated there will be continued flexibility with different types of acquisition vehicles and that the current industrial base allows for competition and continued support of small businesses even with one manufacturer. Procurement IQ Procurement Report 28834333,“Chillers” published by IBIS World in December 2019, identifies the chiller price environment, supply chain, and vendors. The report states that the market for chillers has a shared negotiation power for buyers and suppliers, and also indicates that Fort Hood’s plan to switch out chillers at the end of their life cycle with a replacement of McQuay Chillers of Daikin Applied will have low switching costs. Buying a reported “top”brand chiller, such as McQuay Chillers of Daikin Applied, although more expensive, results in lower maintenance/sustainment costs over the life cycle of the chiller. In summary, limiting acquisition to McQuay chillers, although potentially more expensive to the Government initially, will result in an overall estimated 'life cycle" cost savings of up to $12 million over the period of this J&A. In addition to the aforementioned Procurement IQ Chiller report, IBIS World has also published the “HVAC System Construction & Maintenance” report, also referred to as the “HVAC Report.” This report, first published in October 2019 and updated in March 2020, states that there is a low level of market share concentration. Although the top HVAC manufacturers are diversified contracting businesses, the majority of vendors installing are small-scale (Small Businesses) contractors that provide services on a local

Research conducted in April 2020 by Fort Hood subject matter experts in the DPW and MICC- Fort Hood, indicated vendors’ training costs vary greatly. Some train only their own employees, which may render those vendors unable to compete. Fort Hood DPW states that most of the top chiller manufacturers train personnel off-site, usually in a city that would require employees of the Fort Hood DPW to travel to. McQuay Chillers of Daikin Applied is an exception and provides onsite training which greatly increases their marketability at Fort Hood.

The MICC-Fort Hood Construction Branch Chief researched Federal Supply Schedule providers under GSA Advantage and found two primary contracts that included 60 plus contractors. The Fort Hood local vendor demographics of HVAC service providers are:

O 69 Small Businesses O 35 Other than Small Business

O 29 SBA Certified Disadvantages Small Business O 23 Woman Owned Small Businesses O 15 SBA Certified Section 8 (a) Small Business O 12 Woman owned Small Business O 6 Service Disabled Vet Owned Small Business O 6 Woman Owned (EDWOSB) Small Businesses O 4 Veteran Owned SB O 1 SBA Certified HUB Zone Firms

FAR Part 8, Required Sources of Supply may be a viable option; however having to issue multiple Request for Quotes (RFQs) in GSA Administration’s E-buy Procurement System will prove difficult. This is due to the fact that without factoring in the installation, a storage location for any procurement will have associated costs.

9. Interested Sources: Sources that expressed interest in IMCOM’s market research were Carrier, and Trane who responded to Fort Hood’s request for training costs and were included as attachments to the CIR. Preliminary information provided by the three manufacturers consisted primarily of estimates of the cost of training Fort Hood personnel to maintain the respective manufacturer’s chillers. The Government processed Sources Sought Notice to determine if other brand name manufacturers can satisfy the training requirements of McQuay Chillers of Daikin Applied in J&A approved by Mr. Kukes MICC-Fort Hood 2020-81 on 9 April 2021, which has the intend to have this building 5764 as part of this J&A but it was a typo; therefore, Construction team processed this stand alone J&A per Mr. Kuke’s guidance.

10. Other Facts:

a. Procurement History: Procurement History. Prior to this standardization effort, there is no known history of sole source procurements of chillers at Fort Hood from McQuay Chillers of Daikin Applied.

b. This J&A will cover the requirements for heating, ventilation, and air conditioning (HVAC) chillers for lifecycle replacement for the United States Army Garrison (USAG) at Fort Hood, Texas not mentioned in the class Justification and Approval (J&A).

11. 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. This determination will be made using cost analysis, price analysis, training should cost, construction contract repair IGCE, DPW HVAC maintenance technician expertise at Fort Hood, and consultation with MCFA contractor under an HQ IMCOM HVAC contract. As a part of this basis, certified cost or pricing data are not anticipated to be required due to the anticipated competition and low dollar amounts expected on each individual acquisition.

This determination will be made using the following: ☒ cost analysis ☐ price analysis ☐ should cost ☐ IGCE ☐ audit: ☐ other:

Typed Name: Date:

Title:

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

Approval Based on the foregoing justification, I hereby approve the procurement of McQuay Chillers of Daiken Applied for the United States Army Garrison Fort Hood on an other than full and open competition basis pursuant to the authority of Title 10 United States Code Section 2304(c)(1) -- Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements..