ESP 2024 Mod 17_JA_Redacted.pdf

JUSTIFICATION AND APPROVAL FOR EXPEDITED PROCEDURES PACKAGE

TO:

CC:

FROM:

DATE: May 25, 2024

RE: Modifica�on of Contract No. 72012118C00003, Energy Security Project (ESP)

SUBJECT: Jus�fica�on and Approval (J&A) for Other than Full and Open Compe��on under the Expedited Acquisi�on and Assistance Procedures (EPP) for Ukraine, Belarus, and Moldova.

1. This document sets forth the facts and ra�onale jus�fying the use of other than full and open compe��on.

Approval is requested for the jus�fica�on for use of other than full and open compe��on pursuant to the authori�es under the Expedited Acquisi�on and Assistance Procedures (EPP) for Ukraine, Belarus, and Moldova, approved on December 4, 2023. Your approval of this J&A cons�tutes the jus�fica�on for other than full and open compe��on as required by the EPP’s Determina�on and Findings (D&F) - Authoriza�on for Use of Other than Full and Open Compe��on in the Award or Modifica�on of Contracts (Tab 1).

RECOMMENDATION

It is recommended that you approve this jus�fica�on for use of other than full and open compe��on pursuant to the Ac�on Memorandum for Expedited Acquisi�on and Assistance Procedures (EPP) for Ukraine, Belarus, and Moldova, approved on December 4, 2023. Your approval of this J&A cons�tutes the jus�fica�on for other than full and open compe��on as required by the EPP’s Determina�on and Findings (D&F) - Authoriza�on for Use of Other than Full and Open Compe��on in the Award or Modifica�on of Contracts (Tab 1).

2. The nature and/or descrip�on of the ac�on being approved:

This is a request to approve а contract modifica�on to increase the Total Es�mated Cost (TEC) of Contract No.72012118C00003, the USAID/Ukraine Energy Security Project (ESP). The proposed modifica�on will increase the TEC by $220,000,000 from $700,000,000 to $920,000,000. The contract period of performance and the tasks expected to be implemented by Tetra Tech, Inc. would remain unchanged.

The original purpose of ESP was to enhance Ukraine’s energy security by improving the legal and regulatory environment, increasing the resilience of Ukraine’s energy supply, and integrating into European energy markets. Following Russia’s invasion of Ukraine in February 2022, the contract was amended so that sustainment of Ukraine’s gas, electricity, and heating sectors also became a priority of ESP.

This contract modification will allow ESP to continue addressing the increasing number of critical requests from the Government of Ukraine (GOU) during this time of war. The proposed TEC increase will be specifically allocated to the immediate procurement of essential, long lead-time energy infrastructure equipment and associated technical assistance that will ensure that the gas, electricity, and heating networks can continue operating during the 2024/2025 winter season. By modifying this contract, USAID can support the GOU in preparing for potential further attacks on critical infrastructure as an essential part of USAID’s winterization strategy.

3. Description of the supplies or services required, including an estimated value:

The first months of 2024 marked a notable increase in Russian attacks on critical energy sector infrastructure in Ukraine. In March 2024, a series of air strikes hit power plants across Ukraine, leaving a thermal plant in Kharkiv completely inoperable and power plants in Ladyzhyn and Burshtyn operating at just 50 percent capacity. This was the worst energy attack in Ukraine since the start of the war. In April 2024, Russia destroyed the Trypilska Thermal Power Plant - the largest plant in the Kyiv region. In May 2024, Russian attacks continued, hitting energy facilities in the Lviv, Vinnytsia, Kyiv, Poltava, Kirovohrad, Zaporizhzhia, and Ivano-Frankivsk regions. The natural gas and heating sector has also been impacted. The national utility Ukrenergo estimated the country would be facing a roughly six‐gigawatt power deficit by the 2024/2025 winter - and Russian attacks continue. The estimated need to restore generation and transmission capacity from the attacks on March 22nd alone is at least $1.14 billion according to the Ukrainian Prime Minister’s Office, which illustrates the size of the problem.

A $220,000,000 increase to the ESP contract TEC would allow the current implementer, Tetra Tech, to procure further emergency energy sector equipment and associated technical assistance that has been requested by the GOU to ensure operations of the gas, electricity, and heating networks during the upcoming winter season. In consultation with the GOU, USAID/Ukraine has identified the following emergency energy sector needs that need to be addressed over the next 12 months through equipment procurement and associated technical assistance, for which it is critical to begin procurement immediately and with an immediate focus on winter preparedness:

All of these donor assistance requests are closely coordinated with the Prime Minister’s office, approved by USAID through the COR, who works together with ESP on collating and prioritizing requests from energy stakeholders across Ukraine. The Mission has identified approximately $300 million in assistance that could restore in the next months. This is not including damage from recent attacks in May, including those on May 8 during which Russia launched more than 50 missiles and 20 Shahed drones at Ukrainian energy sites.

Additionally, in order to process these procurements expeditiously, the TEC increase will allow Tetra Tech to hire necessary additional full-time staff on ESP to serve as procurement managers, contract managers, logisticians, and technical experts qualified to prepare solicitation packages for the heat and electricity sectors.

4. Statutory authority permitting other than full and open competition:

AIDAR 706.302-70(b)(3) and 40 U.S.C. §113; see Action Memorandum entitled “Expedited Procedures Package for Ukraine, Belarus, and Moldova” approved December 4, 2023. The Determination and Findings (D&F) - Authorization for Use of Other than Full and Open Competition in the Award or Modification of Contracts is included as Tab 1 to this document.

5. A discussion of the proposed contractor’s unique qualifications or the nature of the acquisition that requires use of the authority cited.

Tetra Tech is the current implementer of the ESP activity, and an increase in funding will allow Tetra Tech to seamlessly build upon ongoing energy equipment procurement efforts already supported through this activity. Tetra Tech already has a large team of mostly Ukrainian experts with the capacity and the relationships with Ukrainian stakeholders to advance technical assistance goals.

Tetra Tech’s approximately energy experts have been working with Ukrainian stakeholders since 2018. Tetra Tech has procured equipment for the energy sector in Ukraine for more than four years and has the appropriate expertise and processes in place. Since the war started, Tetra Tech has procured nearly $400 million in emergency equipment, materials, and associated technical services for Ukraine. The project team has scaled-up to deliver technically sound, efficient procurements that are based on on-the-ground consultations with GOU counterparts, while ensuring USAID procurement and environmental regulations are followed.

6. A description of efforts made to ensure that offers are solicited from as many potential sources as is practicable.

Publication of a notice is not required per the determination at AIDAR §705.202(b). As described above, due to the immediate need for assistance to respond to the economic disruption from Russia’s invasion and the recent identification of the need for this equipment, it is not practicable to solicit offers from potential sources.

7. A determination by the Contracting Officer that the anticipated cost to the Government will be fair and reasonable.

By signing below, the CO determines that the anticipated costs will be fair and reasonable, in accordance with FAR 15, and in accordance with FAR Part 44 in the case of subcontracts, and in the best interest of the USG. The CO will review Tetra Tech’s detailed proposed costs associated with the increase in funding and conduct a thorough cost analysis of the proposal, with the same level of rigor as for a competitive procurement, to ensure that the actual cost to the U.S. Government is fair and reasonable. The CO will make the determination of cost realism and reasonableness, per FAR 15.404-1, based on the analysis of actual historical financial data assembled from the previous two years of ESP’s wartime implementation and other cost analysis methods such as parametric estimating and trend analysis.

8. A description of the market research conducted (see FAR Part 10) and the results or a statement of the reason(s) market research was not conducted.

In April 2023, USAID/Ukraine released a Request for Information (RFI) for Potential Partners for Procurement Support Services: Energy Equipment for Ukraine. This RFI served as market research to inform the Mission of qualified international vendors that were capable of procuring equipment to support the Ukraine energy sector stabilization and restoration effort. USAID/Ukraine received 50 responses from vendors. Upon review of the submissions by OEG and RCO, it was determined that 28 of the vendors appeared to be potentially technically capable of meeting USAID/Ukraine procurement needs for energy-related equipment. This initial determination was primarily based on the vendors’ self-assessment of (i) their ability to procure a wide variety of equipment/materials listed as illustrative in the RFI; and (ii) their demonstrated experience operating in and/or procuring equipment/materials and delivering to Ukraine. In consideration of the costs proposed in their responses, RCO determined at that time that at a minimum Tetra Tech was cost competitive with the other vendors of similar capabilities for the procurement and delivery of equipment to Ukraine and that modifying the ESP contract would be a suitable approach to acquiring, distributing, and supporting the specific equipment being acquired through this modification. Given the circumstances of performing in Ukraine and the progress of the war, USAID believes that the same circumstances apply regarding the availability of alternative service providers and that ESP remains at minimum cost competitive, and certainly faster, than other options on the market.

In October 2023, USAID/Ukraine released the solicitation for the Securing Power, Advancing Resilience & Connectivity (SPARC) Activity - which is intended to be a follow-on activity to ESP, and is scheduled to run concurrently with ESP over the last 14 months of ESP’s implementation. In designing the SPARC procurement package, the Mission conducted thorough market research, exploring different procurement models and acquisition/assistance mechanisms. Informed by this research, RCO determined it would conduct the procurement as a full and open competition under which any type of organization may submit a proposal. In April 2024, USAID/Ukraine awarded the five-year $438,701,812 SPARC activity to Tetra Tech, the same implementer as ESP.

9. Other facts supporting the use of other than full and open competition.

As GOU requests for equipment procurement, transport, installation and associated technical assistance have exceeded the current ceiling of the ESP contract and are expected to grow going into the winter months and given the continued urgent need for materials and equipment, allowing the Tetra Tech ESP to build on its previous success outweighs the benefits of a competitive process, has a higher likelihood of quality assurance, and creates a lower risk than the alternative approach of USAID/Ukraine sourcing new/different procurement mechanisms.

It is expected that Russia’s targeted attacks on Ukraine’s critical energy infrastructure may further intensify throughout 2024, which could have cascading impacts across other critical infrastructure sectors if the Ukrainian power system is vulnerable. In accordance with the USG 2023-24 Energy