F119_Sustainment_JA_for_Approval_5Nov15_Redacted.pdf

JUSTIFICATION FOR OTHER THAN

FULL AND OPEN COMPETITION

I. CONTRACTING ACTIVITY

Air Force Materiel Command (AFMC) Air Force Life Cycle Management Center (AFLCMC) F-22 System Program Office (SPO) Wright-Patterson AFB OH 45433 AFLCMC/WWUK, Contracting Officer, Shonda Allen, 937-713-7474 Contract number is FA8611-18-D-2850

II. NATURE AND/OR DESCRIPTION OF THE ACTION BEING PROCESSED

The purpose of this Class Justification and Approval (J&A) is to authorize the use of other than full and open competition to procure engine sustainment services for the F119 engine which powers the F-22A Raptor.

Current F119 engine support is obtained through a contract known as Sustainment Program for the Raptor Engine (SPaRE), FA8611-08-C-2896, which has a period of performance from 1 January 2008 through 31 December 2017. As an artifact of an earlier combined acquisition strategy including airframe and engine sustainment, the SPaRE J&A is shared with the aircraft sustainment program, even though the two efforts have been contractually independent since 2008.

While the previous J&A forecasted the possibility of future breakouts and competition, operational and financial considerations made this infeasible. The previous J&A anticipated greater weapon system usage than actually occurred. Between 2008-2013, the F-22 consistently under flew planned aircraft flight hours by an average of 40% per year. Flight hours are determined by operational users, but are also influenced by factors such as sequestration, which limited flying across the Air Force, and an oxygen supply issue that grounded the F-22 fleet for four months in 2011. The number of flight hours increased sharply in 2014, and Air Combat Command (ACC) expressed confidence of higher flight hours for the foreseeable future. From an engine sustainment perspective, multiple under flight years pushed back engine overhaul timeline, while the recent increase compresses the overhaul schedule. Overhauls are a major cost and schedule driver for the program. With the initially projected flying hours, a small, but significant number of engines would have come due for overhaul midway through the contract, thereby enabling sufficient build-up time to gain proficiency at performing engine overhauls.

The actual flying hours resulted in a situation where a bulk of the overhauls will occur at the transition years between contracts.

This acquisition, known as SPaRE 2, will succeed SPaRE, with a new Performance Based Logistics (PBL) business arrangement with an award date of not later than 31 December 2017.

A sole source, ten-year, indefinite delivery, indefinite quantity (IDIQ) contract consisting of a five (5)-year base ordering period and a five (5)-year ordering period option will be pursued to meet this requirement. The base ordering period will cover from 1 January 2018 to 31 December 2022, while the option will cover 1 January 2023 to 31 December 2027. The total possible period of performance ends on 31 December 2030, with the additional three (3) years accounting for delivery of long lead parts and retrofit completion.

FOR OFFICIAL USE ONLY

As with SPaRE, the contractor for this effort will be United Technology Corporation, Pratt & Whitney (P&W) Large Military Engines, East Hartford, CT (CAGE 52261), the original equipment manufacturer (OEM) and incumbent support provider.

The contract will include cost plus fixed fee (CPFF), cost plus incentive fee (CPIF), and fixed price incentive firm (FPIF) contract types, with specific assignments based on the risk and historical performance data associated with particular requirement areas. FPIF will be applied on basic sustainment and management activities (e.g. field service, logistics support, program management) which were widely performed during the initial SPaRE contract, and for which the program has historical cost data. These areas were examined previously for transition to fixed price, but were rejected due to the assessed performance uncertainty at the time. Since overhauls did not begin until 2013, and cost data is limited, overhauls will be covered by CPIF until sufficient experience and cost data is obtained to support transition to FPIF. For the first overhaul cycle, this should occur by the third year of the new contract. CPFF will be applied to less predictable requirements such as unscheduled maintenance.

III. DESCRIPTION OF THE SUPPLIES/SERVICES REQUIRED TO MEET THE

AGENCY’S NEEDS

The PBL effort will provide complete F119 support and will be comprised of key logistics areas including, but not limited to, fleet management services, maintenance services, material procurement & management, support equipment parts forecasting, depot management, supply chain management, technical data management, customer technical services, sustaining engineering, and engine overhauls. Additional services will include F119 Combined Test Force Operations and Support. The F119 metrics focus on the system user priorities of war ready engines (WRE) standards, cost accountability, mean time between removal (MTBR), and safety.

Assuming award of all options, services will be ordered from 1 January 2018 to 31 December 2027.

. The estimate is based on the current 32.5K annual aircraft flight hour (AFH) requirement and prospective program sustainment requirements over the ten (10) year period. Note that the yearly amounts should not be construed as individual yearly ceilings, but rather as rough order of magnitude estimates. The total ceiling is a ceiling only and not a guaranteed amount to be expended under this contract action. The final total amount ceiling will be subject to change based on the budget planning process, exercising of all options, and competition or breakout opportunities pursued instead of contracting directly to P&W under this J&A authority.

Ordering Period

Calendar Year of Obligation

Projected Costs (rounded for clarity)

Base Ordering Period

Option Ordering Period

Total

IV. STATUTORY AUTHORITY PERMITTING OTHER THAN FULL AND OPEN

COMPETITION

The statutory authority permitting other than full and open competition is 10 U.S.C. 2304(c)(1) as implemented by FAR 6.302-1(a)(2)(iii), Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements.

V. DEMONSTRATION THAT THE CONTRACTOR’S UNIQUE

QUALIFICATIONS OR NATURE OF THE ACQUISITION REQUIRES THE USE OF

THE AUTHORITY CITED ABOVE (APPLICABILITY OF AUTHORITY)

As the OEM and incumbent sustainer of the engine, P&W is the only contractor with the highly specialized knowledge and experience necessary to sustain the F119 engine and accomplish overhauls. In April 1991, the F119 was selected as the engine for the F-22. Design and test continued through the 1990s, with the first production F119 delivered in December 2000. The final production F119 was delivered to the Government in January 2013. P&W has provided F119 support throughout that time and continuing to the present. Prior to the current contract, P&W provided F119 support as part of a total weapon system support arrangement with Lockheed-Martin. In January 2008 the Government began contracting directly with P&W for engine support using the SPaRE contract. SPaRE, FA8611-08-C-2896, began on 1 January 2008, and its efforts are expected to continue through 31 December 2017.

Through the program office’s research, P&W is the only responsible source, and no other suppliers would satisfy the Air Force’s requirements. Further, any efforts to mature a new source to basic competence would result in unacceptable delays.

This J&A will allow for continued expert F119 support, completion of the critical first overhaul cycle, and time to both collect necessary performance data (particularly related to overhauls) and assess competing all or part of a follow-on contract. As will be discussed in section VI, market research revealed no other source capable or interested in providing F119 support. As will be discussed in the following paragraphs, any future transition would require, at minimum, completion of the first overhaul cycle, collection and analysis of data from that overhaul cycle, new strategy and contract development, and a significant overlap period justifying a 10-year J&A period.

The period covered by this J&A is particularly sensitive, as according to current usage projections, the bulk of F119 engines will require their first overhaul during this time. F119 engine overhauls are costly and complicated events. P&W is rapidly growing its proficiency at overhauls by leveraging its experience managing engine sustainment and from the early “lead the fleet” overhauls. Their proficiency should near its peak at the end of the current contract and start of SPaRE 2. Therefore transition would sacrifice a proven performer for a novice newcomer just as the workload reaches its zenith.

While at this time no other responsible sources are available, should a competitive scenario develop, the program would require at least a ten year J&A period to reasonably handle a transition. Elements involved in a transition include completing the first overhaul cycle, collecting performance information, assessing the market, developing the strategy, executing a competition, and training a new supplier. The full period would also allow time to initiate early work on the second overhaul cycle. Operational requirements are an additional variable that can easily extend the process. These factors exist both for attempting to transition total engine support and for breaking out specific engine modules or components.

Overhaul performance and cost data will be collected throughout the first overhaul cycle. This data not only enables evaluation of P&W’s performance, but will also provide the F119 program office with significant information with which to evaluate future support. This process should reach a critical mass of data three to four years into the new J&A, when a significant portion of the overhauls are completed, and their technical and financial information are collected and delivered. Currently overhaul data is sparse as few overhauls have been completed.

Once this performance data is collected, anticipate at least a year for market research and strategy development. While recent market research indicates no other vendor has interest in pursuing an F119 contract, the market may evolve in subsequent years. Further, the collected overhaul data will give the Government the resolution required to determine if portions of the engine (i.e. engine modules) should be broken out and competed, rather than competing support for the entire engine. A subsequent competitive contract award could take two (2) years.

Following contract award, the F119 program office assesses at least a year of transition time for a new contractor to establish a partnership agreement with the Oklahoma City Air Logistics Complex (OC-ALC), establish suppliers, arrange support equipment within the depot, and hire and train new personnel. Since the F119 is an operational engine, the Government would still require a significant degree of P&W support during this time.

While the above lays out an optimal timeline for potential transition, the history of the F119, as described in section II, implies that operational changes have significant impacts on support timelines. Schedules for data collection, contracting, and transition can easily expand by multiple years. The uncertainty led to the IDIQ structure with optional out years that enable flexibility to adapt to operational requirements. The requested 10 years for this J&A enables this strategy.

Continuity of service is pivotal to the operation and safety of the F-22 weapon system. Without an arrangement in place no later than 1 January 2018, there would be no resource to respond to any emerging F119 engineering support needs--the F-22 fleet would be grounded. Further, lack of support would cause the expected large overhaul queue to accumulate to a point that availability may fall below the required WRE standard, and eventually result in aircraft without engines. P&W’s experience provides firm confidence that they could easily provide continuity into a new contractual period.

Thus, P&W is the only source available. An F119 Program Office objective is to lay out an appropriate timeline to support significant impacts on schedules for data collection, contracting, and transition, which experience shows can expand by multiple years. Therefore, a ten (10) year J&A is requested to posture for any unforeseen changes in requirements and allow the F119 Program Office, at a later date, to determine competition or breakout support opportunities.

Accordingly, P&W is the only firm capable of providing the supplies and services described in Section III above without the U.S. Air Force experiencing unacceptable delays in fulfilling its requirements.

VI. DESCRIPTION OF EFFORTS MADE TO ENSURE THAT OFFERS ARE

SOLICITED FROM AS MANY POTENTIAL SOURCES AS DEEMED PRACTICABLE

As part of market research, a Sources Sought Synopsis (synopsis number: F22WSPBLSUST3) for the F119 engine sustainment requirement was published in Federal Business Opportunities (FedBizOpps) on 29 July 2014. This announcement solicited interest for competition for future work pertaining to F119 engine sustainment starting 1 January 2018. The synopsis stated the requirements for a potential contractor and surveyed the market to determine if any sources are qualified to perform any or all of the aforementioned requirements. Foreign sources were not solicited due to the Special Access Required (SAR) nature of the program. P&W was the only company that sent a response to the synopsis.

Six (6) other sources expressed interest in performing F119 support requirements but did not submit a response. Some of the six (6) possessed limited capability and others had no current capability. None were deemed capable of supporting this requirement. Included below are the names of the sources:

1. armor.com Contractor Capital

2. Life Cycle Services LLC

3. San Francisco Fiber Fab

4. Herber Aircraft Services, Inc.

5. Frank V. Reilly

6. Davenport Aviation Inc.

Pursuant to FAR 10.002(b)(2)(i) – “Procedures”, the Government team did additional market research on 5 September 2014 by contacting two (2) other known and knowledgeable engine manufacturing and support contractors regarding market capabilities. The Government sent emails to General Electric (GE) and Rolls-Royce. GE and Rolls-Royce were specifically selected due to their work on other Department of Defense (DoD) engine programs. The email sought GE and/or Rolls-Royce’s interest in supporting either all or a portion of the F119 requirements. Neither company expressed interest in supporting the F119 program.

In accordance with FAR 5.2, this requirement will be synopsized 15 days prior to the issuance of the Request for Proposal (RFP) for subcontracting purposes.

VII. DETERMINATION BY THE CONTRACTING OFFICER THAT THE

ANTICIPATED COST TO THE GOVERNMENT WILL BE FAIR AND REASONABLE

The Contracting Officer anticipates the final price to the Government for the requirements covered by this J&A will be fair and reasonable. The qualitative and quantitative aspects of the contractor’s proposal will be technically evaluated by the program office functional experts and the Defense Contract Management Agency (DCMA). Field pricing and technical support will be obtained and used along with a cost analysis in preparation for negotiating the price of this acquisition. In addition, on-site fact-finding and a Defense Contract Audit Agency (DCAA) audit will be performed, as necessary. The assistance of cost analysts and other appropriate AFLCMC personnel will be used to provide guidance and assistance, as necessary, to allow the Contracting Officer to conclude negotiations at a fair and reasonable price. The contractors will be required to submit certified cost or pricing data, as applicable, in accordance with FAR 15.403 for efforts under this J&A.

VIII. DESCRIPTION OF THE MARKET RESEARCH CONDUCTED AND THE

RESULTS, OR A STATEMENT OF THE REASONS MARKET RESEARCH WAS NOT

CONDUCTED

As described in Section VI above, market research, in accordance with FAR Part 10, was conducted by synopsis of the proposed acquisition, advising industry of the pending acquisition and soliciting inquiries from interested parties and from other experienced engine contractors.

The results reaffirmed previous research conducted in 2005 and 2012 showing P&W is the only reliably capable source for F119 sustainment. Three (3) driving factors were assessed. First was P&W’s knowledge and experience. With their history as the F119 designer, producer, and incumbent sustainment contractor, P&W is the most knowledgeable source. Second was lack of interest from other sources. Sources Sought requests and direct correspondence yielded no interest from other sources. Finally, the F119 market is limited since the F119 is a strictly military engine with no civilian applications, and there are no plans to produce more F119 engines or offer any for foreign military sales.

IX. ANY OTHER FACTS SUPPORTING THE USE OF OTHER THAN FULL AND

OPEN COMPETITION

Sustaining a weapon system in any stage of its life-cycle is a complex matter requiring integration of resources from the OEM, depots, subcontractors, and suppliers. No other sources have performed the extensive risk reduction tasks, testing and integration necessary to provide the support capability for the F119. The experience P&W gained through design, development, production, and support of the engine over the past 20 years cannot be duplicated at this time.

Market research has shown that interested sources do not possess the supply chain management data if this workload were competed. Competition for supply chain management is limited until the development of usage rates and the procurement of long lead parts can be accomplished.

Depot operations are another area where a new supplier is unlikely to find cost savings due to the F119’s Core Logistics Capabilities requirement. A Depot Source of Repair (DSOR) decision memo, dated 4 January 2005, established that all F119 engine module disassembly and assembly, as well as cleaning, inspection and selected item repair services will be a Core Logistics Capabilities requirement to be provided under 10 U.S.C. 2464. These requirements led to the Public Private Partnership (PPP) between the Government and P&W to operate the F119 Heavy Maintenance Center (HMC) at the Oklahoma City-Air Logistics Complex (OC-ALC) under 10 U.S.C. 2474. The PPP establishes that while a contractor can provide technical management of F119 depot work, that work must be accomplished at OC-ALC using a predominately civil service workforce. A new contractor would not be able to use its own facilities, or compete depot work among sub-contractors, so the costs (though not technical performance) of depot operations are not likely to be reduced by changing vendors.

P&W maintains specialized tools that other sources would need to duplicate. One example is a proprietary and highly specialized forecasting model that is specific to the program and has been improved over the years through data gathering. This supply chain management (SCM) data reduces performance risks and produces a better knowledge base for establishing and forecasting requirements for future sustainment actions. This allows P&W to more adequately forecast historical parts to accomplish quantity buys, long lead part procurement, and weapon system logistics. Lack of forecasting data and long lead parts projections would limit the ability of another source to provide cost effective supply chain management services. According to the 2009 F-22/F119 Business Case Analysis (BCA), for the Government to perform such services would require 25 full time equivalents, not including the cost, manpower, and time requirements to initially standup the services within its systems. Alternative contractors would, at minimum, have at least the cost similar to the projected Government costs. Such additional duplicative costs most likely would not be recovered in competition.

Since approximately 90% of F119 parts are produced by P&W, no matter what source is used P&W will continue to have a significant sustainment role in the F119. A new support provider would continue to rely on P&W for parts procurement. In this situation, the Government would incur markup costs from both P&W and the new support provider acting as a middleman.

F119 engines require the most current configuration upgraded through a continuous development concept (Continuous Improvement Process-CIP). The F119 modernization plan utilizes an improvement process to incorporate Engineering Change Proposal (ECP)/Contract Change Proposal (CCP) activities that will extend beyond 2017. Development and integration of modernization activities requires additional time to integrate with existing systems. P&W is implementing engineering changes and is the only source able to integrate the design complexities and provide continued sustainment.

Rights to the technical data package (TDP) are corollary to competition prospects. With the exception of some external controls and accessories (e.g. the fuel throttle valve, oil pump, and full authority digital electronics control (FADEC)), the Government has unlimited rights to the F119 TDP. However the Government did not pay for validation, verification, and delivery of the TDP; a necessary step in order to bring in a new provider. Market research asked potential bidders about their technical data requirements, but no respondent identified technical data as their principle barrier to entry. While the program office is examining contract action to purchase validation, verification, and delivery, it assesses that the TDP is a necessary, but insufficient condition for fostering future competition. The driving factors preventing future competition, as described in section V, are P&W’s unique capabilities and the overall transition timeline. Receipt of the TDP now would not change those factors.

Given the dynamic nature of the requirements for this effort, the situation could change substantially during the PoP. To ensure that the effort continues to be in the best interests of the Government, the Program Office will hold an annual meeting to identify and consider any opportunities for cost savings and/or competition that arise during contract performance. A memorandum for record capturing the results of each meeting, to include specific actions taken to identify opportunities for cost savings and/or competition during the year, will be signed by both the Program Manager and Contracting Officer and added to the contract file.

X. LIST OF SOURCES, IF ANY, THAT EXPRESSED INTEREST IN THE

ACQUISITION

See Section VI above.

XI. A STATEMENT OF THE ACTIONS, IF ANY, THE AGENCY MAY TAKE TO

REMOVE OR OVERCOME ANY BARRIERS TO COMPETITION BEFORE MAKING

SUBSEQUENT ACQUISITIONS FOR THE SUPPLIES OR SERVICES REQUIRED

The F119 Program Office continually monitors the engine support market for new opportunities.

The structure of the IDIQ provides flexibility for any future competitive opportunities. Prior to exercise of the ordering period option, an assessment will be done to evaluate the possibility of a full competition. This assessment will be briefed to the Program Executive Officer (PEO) and a determination made whether to continue in a sole source environment. Furthermore, during the IDIQ ordering period, any subcomponent that can be competitively broken out will not be included in a task order requirement.

The F119 Program Office is currently participating in an F-22 Weapon System business case analysis (BCA). The engine portion of the BCA focuses on supply chain management. Options under consideration involve various levels of contractor and organic workload sharing. Results of the BCA will be released by the end of October 2015. All engine Courses of Action (COAs) under consideration involve contracting with P&W. Potential COAs involving vendors other than P&W were rejected due to lack of interest from other vendors and limited probability of cost savings. Among the COAs under consideration, one considers Government management of a portion of supply chain management, but the COA does not identify specific components, and still recommends P&W management of approximately 90% of parts. Due to timelines examined in section V, even in the unlikely event that the CY15 BCA recommends a radical strategy departure, major changes would not be implementable in time for the 1 January 2018 need date.

The future strategy involves tracking engine overhaul performance at the modular level.

Tracking at this level not only matches the contractual structure with the level in which overhauls are managed within the depot, it also enables module metric collections to identify the lowest risk modules for potential breakout to other sources or organic support. Currently, insufficient data exists to support a breakout decision, but the base ordering period should provide time to gain sufficient experience and data to support a decision, and followed by time to implement a breakout plan.

P&W participates in the DoD Comprehensive Subcontracting Plan program and submits a company-wide Small Business (SB) and Small Disadvantaged Subcontracting (SDB) Plan annually. The plan contains the prime contractor company-wide subcontracting goals for SB, SDB, Women-Owned Small Businesses (WOSB), Service Disabled Veteran-Owned Small Business (SDVOSB) and Historically Underutilized Business Zone Small Business (HUB Zone SB). In addition, P&W provides Small Business Subcontracting Activity Reports on a yearly basis showing progress toward their subcontracting goals. This effort helps support the Government’s objective for long-term relationships with small business subcontractors based on quality and performances.

XII. CONTRACTING OFFICER’S CERTIFICATION

The Contracting Officer’s signature on the Coordination and Approval Document evidences that she has determined this document to be both accurate and complete to the best of her knowledge and belief (FAR 6.303-2(b)(12)).

XIII. TECHNICAL/REQUIREMENTS PERSONNEL’S CERTIFICATION

As evidenced by their signatures on the Coordination and Approval Document, the technical and/or requirements personnel have certified that any supporting data contained herein, which is their responsibility, is both accurate and complete (FAR 6.303-2(c)).