Final_Version_for_Public_Release_USG_J_and_A_190401p.pdf

Contract No: HQ0147-17-C-0032 J&A No:

JUSTIFICATION AND APPROVAL (J&A)

FOR OTHER THAN FULL AND OPEN COMPETITION

MISSILE DEFENSE AGENCY (MDA)

TERMINAL HIGH ALTITUDE AREA DEFENSE

(THAAD)

1. Introductory Paragraph.

Upon the basis of the following 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 Part 6.303-2(b)(1)).

This Justification and Approval (J&A) for Other Than Full and Open Competition is for the MDA THAAD Project Office. The contracting activity is THAAD Contracts (MDA/DACD), 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 Part 6.303-2(b)(2)).

The action being approved is for the modification to sole source contract HQ0147-17-C- 0032 to Lockheed Martin Missiles and Fire Control (LMMFC) for the production of United States Government (USG) Lots 11 and 12 Interceptors, associated one-shot devices and interceptor unique support items of the THAAD Weapon System.

(FOUO) On 24 May 2018, the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD (AT&L)) Production Decision Authority Acquisition Decision Memorandum (ADM) was approved increasing the previous USG Interceptor Production Decision Authority by 155 from 399 to 554 Interceptors with authority to buy to budget without returning for approval if the negotiated cost per Interceptor allows procurement of additional Interceptors, subject to available funding. The THAAD Project Office will award Lot 11, with an option for 12 as an option, in December 2018. The option will be exercised 1QFY2020 when funds become available. The THAAD Project Office will negotiate and utilize range pricing to procure additional Interceptor quantities in the event of a Congressional appropriation in FY2019 and/or FY2020 for additional THAAD Interceptors.

In accordance with Department of Defense Financial Management Regulation, Volume 2A, Paragraph 010204, any USG “savings” realized during contract negotiations may result in the acquisition of a higher quantity of Interceptors than the quantity specified in the applicable Appropriations Acts. Notice to the Congressional Defense Committees will be provided no later than 30 days after the decision to buy a higher quantity.

FOR OFFICIAL USE ONLY

4. Description of Supplies and/or Services Required to Meet the Agency's Needs (Including the Estimated Value) (FAR Part 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 THAAD Project Office intends to procure at least 133 Interceptors, associated one-shot devices and unique support items for the Lots 11/12 procurement at an estimated value of $1.274B. Additional Interceptor quantities will be procured utilizing negotiated range pricing if Congressional Appropriations occur in FY2019 and FY2020 and is no more than 10% of the approved Production Decision Authority ADM. This effort will be funded with Procurement, Defense Wide appropriation funds, or other funds as authorized and appropriated by Congress.

(FOUO) Interceptor production Period of Performance (PoP) is based on an approximate 30-month production lead-time to first Interceptor delivery. The delivery period for each USG Lot-buy will change based on the negotiated quantity per Lot and the production rate capability (4, 8 or 12 Interceptors/month) which will change the overall PoP for each Lot, and will be represented in Section F of the contract. Acceptance and Inspection requirements are outlined in Section E of the current contract for LMMFC to deliver each unit of hardware to the Government with an Acceptance Data Package to be coordinated and approved with the Government.

The Acquisition Plan, “Terminal High Altitude Area Defense Acquisition Plan for United States Government Lots 11 and 12 Interceptor Procurement”, addresses the USG Lots 11 and 12 procurement and Production Decision Authority ADM, 24 May 2018.

5. Statutory Authority Permitting Other than Full and Open Competition (FAR Part 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 Part 6.303-2(b)(5)).

LMMFC is the prime contractor (provider and integrator) for the THAAD Weapon System. LMMFC was under contract initially for system development, and is currently under contract for manufacturing and production. No other source possesses the extensive knowledge, experience, facilities and/or equipment to meet the Government 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.

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 Part 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:

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.

(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 Lockheed Martin (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, 3 small businesses and 5 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 Part 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 necessary 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 pricing model to negotiate a fair and reasonable price IAW FAR Part 15.402. This pricing 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 Part 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 Part 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 Part 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 Part 6.303-1(c)). “I certify that this 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 Part 6.303(b)(12)). “I have determined that the anticipated cost to the Government will be fair and reasonable and certify that the justification is accurate and complete to the best of my knowledge and ability.”

BRADLEY CHASSEE

Procuring Contracting Officer (DACD)

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

MICHELE D. WILLIAMS

Director of Contracts (DACD)

14. Legal Counsel: “I have reviewed the 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 justification.”

MICHAEL N. O’NEILL

Competition Advocate (DA)

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

KARLA SMITH JACKSON

Director of Contracts (DAC)

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

LAURA M. DESIMONE

Director for Acquisition (DA)

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

SAMUEL A. GREAVES

Lieutenant General, USAF Director