Final_Version_for_Public_Release_KSA_Class_J_and_A_190401p.pdf

J&A No: 19-0008

CLASS JUSTIFICATION AND APPROVAL

FOR OTHER THAN FULL AND OPEN COMPETITION

MISSILE DEFENSE AGENCY

TERMINAL HIGH ALTITUDE AREA DEFENSE FOR

KINGDOM OF SAUDI ARABIA

1. Introductory Paragraph.

Upon the basis of the following class justification, I, as Director of the Missile Defense Agency (MDA), hereby approve the issuance of the contractual actions discussed below using other than full and open competition pursuant to the authority cited herein.

2. Agencies and Contracting Activity (FAR 6.303-2(b)(1)).

This Class Justification and Approval (J&A) for Other Than Full and Open Competition is for the MDA Terminal High Altitude Area Defense (THAAD) Project Office. The contracting activity is THAAD Contracts (MDA/CTD), Building 5222 Martin Road, Redstone Arsenal, Alabama 35898. The point of contact for this action is Bradley Chassee, Contracting Officer, at (256) 450-2888.

3. Nature and Description of the Action being Approved (FAR 6.303-2(b)(2)).

(FOUO) The procurement of the THAAD Interceptors, associated one-shot devices, and unique support items in support of a Foreign Military Sales (FMS) case to the Kingdom of Saudi Arabia (KSA). In addition, this procurement will include a direct FMS KSA offset agreement to ensure support of Saudi Vision 2030 (Localization), which is a condition of sale. The Letter of Offer and Acceptance (LOA) was signed by KSA, 26 November 2018, for 7 THAAD Batteries, which includes 360 Interceptors, with an Initial Operating Capability (IOC) estimate of 2QFY2025. The KSA THAAD FMS Program consists of two (2) cases (SR-I-WIB and SR-I-WIC). The KSA FMS case SR-I-WIC is the focus of this J&A.

(FOUO) The THAAD Project Office intends to split the KSA procurement into two separate buys:

The first buy is for KSA Interceptors (KSA Lot 1), associated one-shot devices and Interceptor-unique support items (rate capacity, localization, and KSA delivery incentive) through a Combined Buy with the USG Lots 11/12 Interceptor procurement in 3QFY2019. Rate capacity will increase monthly production capacity from 8 to 12 Interceptors. Rate capacity will be available for KSA Lot 2 and future USG Lots.

The second buy is for KSA Interceptors (KSA Lot 2) and associated one-shot devices with the USG Lots 13/14 Interceptor procurement in 1QFY2022. The KSA Lot 2 Interceptor and associated one-shot devices procurement will be procured as a modification to the current contract, or as a new sole-source contract to LM.

FOR OFFICIAL USE ONLY

4. Description of Supplies and/or Services Required to Meet the Agency's Needs (Including the Estimated Value) (FAR 6.303-2(b)(3)).

The THAAD Weapon System provides the Ballistic Missile Defense System with a globally-transportable, rapidly-deployable capability to intercept and destroy ballistic missiles inside or outside the atmosphere during their final, or terminal, phase of flight.

(FOUO) The total estimated costs for this effort is $4.874B for the procurement of 360 Interceptors, associated one-shot devices, and Interceptor unique support items, such as the rate capacity, and the funds needed to support the offset agreement. The funds required for execution will be provided by KSA through FMS case SR-I-WIC.

(FOUO) Per the KSA FMS LOA signed 26 November 2018, the first IOC is 2QFY2025 for the first KSA THAAD Battery, which assumes approximately 48 Interceptors to be required for 6 Launchers. The first eight (8) KSA Lot 1 Interceptors will complete the acceptance test procedures, DD250 process and delivery to the USG for transportation to the Anniston Army Depot in 2QFY2023; 2 years in advance of the first IOC. The 2QFY2023 delivery date assumes LM and suppliers are manufacturing at an 8-rate until the 12-rate capability is operational in FY 2023. In addition, the 2QFY2023 delivery assumes all USG Lots 11/12 Interceptors have been delivered. The delivery of the USG Interceptors before KSA Interceptors will allow a shorter time for delivery to the Warfighter. The KSA Interceptors need to be delivered after the USG Lots 11/12 Interceptor deliveries because the KSA customer wants to receive the last Interceptors off the production line, “just in time” to them being delivered in-country for IOC. The Periods of Performance for KSA Lots 1 and 2 are approximately 70 months, depending on rate-capacity increase implementation and USG priorities and allocations.

Interceptors will be procured as Fixed-Priced Incentive Firm Target (FPIF) Contract Line Item Numbers (CLINs), associated one-shot devices as FPIF CLINs, and the unique support items will be FFP CLINs.

The Acquisition Plan, “Terminal High Altitude Area Defense Acquisition Plan for Kingdom of Saudi Arabia Foreign Military Sales Interceptor Procurement,” addresses the KSA Interceptor procurement action and the signed LOA, 26 November 2018.

5. Statutory Authority Permitting Other than Full and Open Competition (FAR 6.303-

2(b)(4)).

The statutory authority permitting other than full and open competition is 10 USC 2304(c)(1) as implemented by FAR 6.302-1(a)(2)(ii), “Only one responsible source and no other supplies or services will satisfy agency requirements,” which states:

“(ii) Supplies may be deemed to be available only from the original source in the case of a follow-on contract for the continued development or production of a major system or highly-specialized equipment, including major components thereof, when it is likely that award to any other source would result in—

a) Substantial duplication of cost to the Government that is not expected to be recovered through competition; or,

b) Unacceptable delays in fulfilling the agency’s requirements.”

6. Demonstration of Contractor's Unique Qualifications or the Nature of the Acquisition Requires use of the Authority Cited (FAR 6.303-2(b)(5)).

Lockheed Martin (LM) is the prime Contractor (provider and integrator) for the THAAD Weapon System. LM was under contract initially for system development, and is currently under contract for manufacturing and production with Lockheed Martin Missiles and Fire Control (LMMFC). No other source possesses the extensive knowledge, experience, facilities and/or equipment to meet the Government’s need at this time. The THAAD Weapon System consists of highly-complex technical data requiring special knowledge and engineering expertise to ensure and maintain stringent performance requirements and extremely tight tolerances. The current THAAD Weapon System technical data package does not include special and/or critical processes required to manufacture a first-time quality product. In addition, the procurement and qualification of tooling and test equipment at a new prime Contractor and supplier facilities would incur significant costs above the assumed budget estimates which would also result in unacceptable delays in fulfilling the Agency's needs should the requirement be competed. In addition, by utilizing the current Contractor, the THAAD Project Office will not be impacted by potential costly redesigns necessary to mitigate obsolete parts if the Contractor is required to furnish new tooling and test equipment to produce the THAAD Interceptor. It would take an excess of 24 months for another prime Contractor to duplicate the knowledge base, proficiency level, unique processes, and manufacturing equipment and facilities required to produce THAAD Interceptors. Such a duplication of effort would result in failure to meet the milestone delivery dates stated in the Letter of Offer and Acceptance (LOA) signed 26 November 2018.

See classified Annex to “Justification and Approval (J&A), For Other Than Full and Open Competition, Missile Defense Agency (MDA), Terminal High Altitude Area Defense (THAAD), 9 April 2014.”

7. Description of Market Research Conducted (FAR 6.303-2(b)(6), (8) and (10)).

The MDA THAAD market research report, 5 June 2018, determined that there is no other Contractor who possesses the insight, experience, and expertise on the THAAD Program to meet the needs of this effort. Details of market research include:

The Classified Annex to “Justification and Approval (J&A), For Other Than Full and Open Competition, Missile Defense Agency (MDA), Terminal High Altitude

Area Defense (THAAD), 9 April 2014.”

(FOUO) In January 2013, a sources sought was issued seeking sources capable of producing the THAAD Weapon System Battery Number 6. The requirement for Battery 6 included the production of THAAD Interceptors. The result of this survey were responses from LM and Natel Engineering Company. Natel Engineering Company (a small business) expressed interest and capability to produce only the THAAD Active Leak Sensor System. No company, other than LM, expressed interest and/or the capability to produce all components of a THAAD Battery, to include the Interceptors.

Between October 2016 and March 2017, market research was conducted for Development, Product Support, and Sustaining and Engineering Services. For this market research, three small businesses and five large businesses responded. The results of this research showed an emerging, developing market space within the Product Support arena. The competitive environment was not as robust in the Development and Production arena and there is high risk and cost associated with transitioning to another prime.

The requirement to post a request for information or sources sought notice was waived based on the market research report which determined that there is no other contractor who possesses the insight, experience, and expertise on the THAAD Program to meet the needs of this effort.

8. Determination of Fair and Reasonable Cost (FAR 6.303-2(b)(7)).

In accordance with FAR 15.402, the Contracting Officer shall ensure that all supplies and services ordered under this contract are procured at a fair and reasonable price. The Contractor will submit a formal price proposal with Certified Cost or Pricing Data (CCPD) and sufficient information to support the accuracy and reliability of the estimate. The Contractor’s proposed cost will be reviewed by experienced technical analysts, contract specialists, and price analysts with the aid of field pricing support.

Analysis will be based on historical cost data, current market data, rate information and assist audit reports provided by Government field pricing support agencies. The Contracting Officer will use the cost and price analysis as the basis for negotiating a fair and reasonable price. The THAAD Project Office will employ the Office of the Secretary of Defense/Defense Pricing and Contracts approved THAAD cost model to negotiate a fair and reasonable price IAW FAR 15.402. This THAAD cost model is based on CCPD and other than CCPD, with all impacts captured/itemized within a CCPD disclosure log. The pricing model is founded on Government technical evaluations, cost and price analyses, field support audits, historical actuals, and evaluation of cost, technical/performance, and schedule risks.

9. Any Other Facts Supporting the Use of Other Than Full and Open Competition (FAR 6.303-2(b)(9).

FAR clause 52.244-5, Competition in Subcontracting, is included in the contract.

LMMFC is required to select subcontractors on a competitive basis to the maximum extent practicable. LMMFC submits a Comprehensive Small Business Subcontracting Plan annually that is evaluated and approved by the Defense Contract Management Agency. LMMFC is also required to submit a “Small Business Subcontract Report” semiannually to the THAAD Project Office and the MDA’s Small Business Office for evaluation and approval.

10. Actions Taken to Remove Barriers to Competition (FAR 6.303-2(b)(11).

For the reasons stated in paragraph 6 above, LMMFC is currently the only source for the continued production of the THAAD Interceptor. The Deferred Ordering of Technical Data or Computer Software clause resident in the THAAD contracts will be used, as practicable, to acquire data or software needed to develop second sourcing opportunities for parts and services procured in the coming years.

In addition to FAR 52.244-5, Competition in Subcontracting, the THAAD Project Office will carefully consider requirements for competition, to the maximum extent practicable, as emerging needs become known to the Government.

The Acquisition Strategy Decision Memorandum, 27 April 2018, authorized the THAAD Project Manager and the Sensors Program Director to proceed within defined acquisition strategies, to include release of request for proposals for contractor’s preplanning and proposal development to support acquisition timelines.

11. Technical/Requirements Official Certification (FAR 6.303-1(c)). “I certify that this class justification for other than full and open competition is made in good faith and that the supporting data and information are accurate and complete to the best of my knowledge and belief. I further certify that this request is not the result of a lack of advance planning.”

CAMILLA A. WHITE

Colonel, USA Project Manager, THAAD

12. Contracting Officer (FAR 6.303(b)(12)). “I have determined that the anticipated cost to the Government will be fair and reasonable and certify that the class justification is accurate and complete to the best of my knowledge and ability.”

BRADLEY CHASSEE

Procuring Contracting Officer (CTD)

13. Contracting Director (Program Level): “I have reviewed the class justification and recommend it be approved.”

KRISTINA L. PARMENTER

Director of Contracts, Acting (CTD)

14. Legal Counsel: “I have reviewed the class justification and determined it to be legally sufficient.”

WILLIAM A. GROVES

General Counsel (GC)

15. Recommendation of Competition Advocate: “I recommend approval of the above class justification.”

MICHAEL N. O’NEILL

Competition Advocate (DA)

16. Director of Contracts: “I have reviewed the class justification and recommend it be approved.”

KARLA SMITH JACKSON

Director of Contracts (CT)

17. Director for Acquisition: “I have reviewed the class justification and recommend it be approved.”

LAURA M. DESIMONE

Director for Acquisition (DA)

18. Approval (FAR 6.304). “In accordance with FAR 6.304, the above class justification for other than full and open competition is hereby approved.”

SAMUEL A. GREAVES

Lieutenant General, USAF Director