Previous JA:00186

JUSTIFICATION AND APPROVAL

FOR OTHER THAN FULL AND OPEN COMPETITION

JA-00680

1. Contracting Agency: The Army Contracting Command-Detroit Arsenal (ACC-DTA) is the contracting activity.

2. Description of Action: ACC-DTA proposes to award a new, Firm-Fixed-Price contract to Pearson Engineering Limited (Pearson), Commercial and Government Entity (CAGE) K0824, or the companies authorized to sell on behalf of Pearson for the production and repair of the Electronic Component Assembly, National Stock Number (NSN) 5998-99-732-2533, part number CS2026, using Army Working Capital Funds

(AWCF).

3. Description of Supplies/Services: The Electronic Component Assembly, commonly called the Multipurpose Control Unit (MCU), is used on the Assault Breacher Vehicle (ABV). The supply Product Request Order Number (PRON) EH3C0350EH will include a base quantity of 34 each and a 100% option for an additional 34 each, for a total quantity of 68 each. This is a total estimated value of $571,356.40. The service repair PRON EH3C0544EH is for 18 units for a total estimated value of $151,241.40. The total estimated procurement value is $722,597.80.

4. Authority Cited: The statutory authority permitting other than full and open competition for this effort is 10 United States Code (U.S.C.) 3204(a)(1) as implemented by Federal Acquisition Regulation (FAR) 6.302-1, “Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements.” Specifically, FAR 6.302-1(a)(2)(ii) states “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.”

Moreover, FAR 6.302-1(a)(2)(iii) states for “DoD, NASA, and the Coast Guard, services may be deemed to be available only from the original source in the case of follow-on contracts for the continued provision of highly specialized services 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.”

5. Reason for Authority Cited: The Electronic Component Assembly, commonly called the Multipurpose Control Unit (MCU), is mounted inside the driver’s compartment.

Pearson is the Original Equipment Manufacturer (OEM) for the FEE, HLA, and their

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Equipment capabilities, limitations, and vulnerabilities.

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supporting systems, as well as the MCU. Pearson has demonstrated the ability to establish and maintain the processing required to successfully supply and repair a finished item. This approved source has produced and qualified this part and associated assemblies to U.S. Government specifications for the ABV.

The Government does not own the necessary intellectual property data rights to the pertinent technical data to enable competitive re-procurement the of supply or repair services.

The engineering estimate to reverse engineer the supply units is purely an engineering estimate based on engineering experience with similar parts for the cost of developing an alternative source which includes Technical Data Package (TDP) development, product tooling, manufacturing tooling, and testing and qualification, as detailed below:

Task Estimated Amount Estimated Duration (months) TDP Development $600,000 9 Product Tooling $250,000 6 Manufacturing Tooling $200,000 12 Testing & Qualification $450,000 12 - 18

TOTAL $1,500,000 39 – 45

The engineering estimate for the repair portion of the contract is based on engineering experience.

Task Estimated Amount Estimated Duration Identify faults, replace parts $151,241.40 2 to 3 months per repaired unit on 18 units with parts and labor available

The Combat Capabilities Development Command (DEVCOM) Ground Vehicle Systems Center (GVSC) Bridging Life Cycle Engineer estimated that the cost of qualifying another source for the MCU would be approximately $1.5M and the cost of repairing would be $151,241.40 for a total cost of $1,651,241.40, as detailed in the tables above.

This estimate is based on historical costs of comparable component redesign efforts.

TDP Development: The estimated cost of TDP development for this item is $600K.

This includes developing the TDP data and compiling the qualification checks necessary to ensure that the new manufacturer can produce a quality part that is dependable and reliable. The TDP would also require documentation of production and manufacturing processes that could affect the reliability and dependability of the control unit, as required. The total estimated time to complete this phase could be nine months in duration.

Product Tooling: The estimated cost of Product Tooling is $250K and includes making or buying durable tooling to make the components requiring welding, attaching, fabricating, and any Additive Manufacturing (AM), as required. The estimated time for this phase could be six months.

Manufacturing Tooling: The estimated cost of manufacturing tooling is $200K, and includes processing and assembly equipment, assembly fixtures and gauges, and installation attachments and tools when needed. The estimated time to complete this phase would be approximately 12 months.

Testing and Qualification: The estimated cost of Testing and Qualification is $450K and includes a combination of bench test and/or vehicle test with adjudication. The bench test includes sub-system integration, operation within test parameters, and evaluation.

The vehicle test requires obtaining a vehicle and test location with operators. It could include fit, function, and performance of the MCU for both moving and stationary durations. Testing would include such areas as Environmental, Electromagnetic Interference, Electromagnetic Compatibility, Vibration, and Reliability, Availability, and Maintainability (RAM). Qualification involves analyzing the test results compared to the requirements with standards and providing a sufficient report. The estimated time for this phase could be as little as 12 or as long as 18 months.

The dollar value of the part being procured, currently at $8,402.30 compared to the cost of developing a new reversed engineered part of $1,500,000, does not justify the expense associated with a full and open competition. The expense of testing, evaluation, and qualification would be avoided by utilizing the current supplier since all this activity has been previously completed with the current source. The cost of this process would not be recoverable given the expected volume of subsequent replacement orders.

The price of the MCU is $8,402.30 each; a total quantity of 68 is required for a cost of $571,356.40, and the cost to repair of 18 is $151,241.40 for a total cost of $722,597.80.

The total estimated cost for reverse engineering the item if this item was to be competitively procured is $1,500,000. This is 2.08 times the cost to continue with the current single source contract with Pearson. Additionally, it would be almost 2 years before any product would be available or repaired from the second source, assuming all went according to plan.

Even if a 25% savings in total price could be achieved in the first year by qualifying and certifying a second source, the savings of $142,839.10 would take 11.6 years to offset the estimated $1.7M cost to develop and qualify that source with the ability to supply and repair the parts.

Total cost to produce 68 units now: $571,356.40 Savings: x 25% Total Savings: $142,839.10

Payback:

Total Spent: $1,651,241.40 Total Savings: $142,839.10 Payback in Years: 11.6

Given the relatively low demand quantity for this requirement, this payback time could be extended even longer.

The duration to complete reverse engineering plus enable a new supplier to produce 34 units would exceed the time required to complete the J&A and have the Original Equipment Manufacturer (OEM) produce the units. This would result in an unacceptable delay of 39-45 months

6. Efforts to Obtain Competition:

a. Effective competition: Due to the reasons cited in section 5 above we are not pursuing competition for this item. The notices required by FAR 5.201 shall be published, and that any bids or proposals received shall be considered.

b. Subcontracting competition: Unless the contract is awarded to a small business, the solicitation and resulting contract will include FAR clauses 52.219-8, "Utilization of Small Business Concerns"; 52.244-5, "Competition in Subcontracting"; 52.219-16, "Liquidated Damages--Subcontracting Plan";" and Defense Federal Acquisition Regulation Supplement (DFARS) 252.219-7003, "Small Business Subcontracting Plan (DoD Contracts)," to maximize small business opportunities and utilization.

7. Actions to Increase Competition: There are no plans to increase competition for future procurements due to the reasons cited above. On 28 August 2023, Pearson was asked by the Government to purchase their technical data package on the products they supply to the Government. Pearson has continually declined to sell any of their intellectual property to the Government.

8. Market Research: A Sources Sought Notice was posted to SAM.gov from 28 August 2023 to 06 September 2023. One response received, other than Pearson Engineering, from Allied Defense Industries (ADI) (CAGE:0GD25), an approved supplier of Pearson. ADI identified their ability to support the supply portion of the requirement. On 30 January 2024, Pearson stated only they can perform the service repairs on the Electronic Component Assembly. Any award made to an approved supplier will require the service repair to be handled by Pearson.

DEVCOM GVSC Engineering performed Internet searches for suitable competition, described below: Keywords: 5998-99-732-2533; control panel; control box; control panel manufacturers.

Findings: Results did not yield a control panel that could perform the operations needed to replace the MCU.

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Ground Vehicle Systems Center engineers attended the National Defense Industrial Association (NDIA) Ground Vehicle Systems Engineering and Technology Symposium (GVSETS) with Industry Conference in August 2023 to determine available contractors for needed products. There were no possible contractors present that met the requirements for this item.

9. Interested Sources: To date, no additional sources aside from Pearson and ADI have expressed interest in this item.

10. Other Facts:

a. Procurement History:

(1) Contract Number: W56HZV-23-D-0083 Award Date: 05 September 2023 Contractor: Allied Defense Industries, LLC Contract Value: $2,832,280.

(2) Competitive Status: FAR 6.302-1(a)(2)(ii)(A)

(3) Authority: 10 United States Code (U.S.C.) 3204(a)(1)as implemented by Federal Acquisition Regulation (FAR) 6.302-1(a)(2)(ii).

(4) No plans to increase competition; procurement remains restricted to Pearson Engineering and its authorized suppliers.

(5) No prior contract for this requirement was accomplished using full and open competition.

(6) This contract was a 15-day Requirements contract which expired on 20 September 2023 and due to the awardee agreeing to honor their price for only 15 days after award. Intent of this contract was to fill highly demanded backorders.

(7) No significant changes

(1) Contract Number: SPRAL1-12-M-0064 Award Date: 07 June 2012 Contractor: SIT Corporation (Authorized distributor of Pearson Engineering) Contract Value: $25,866.06

(2) Competitive Status: FAR 6.302-1, “Only one responsible source and no other supplies or services will satisfy agency requirements.”

(3) Authority: 10 United States Code (U.S.C.) 2304(c)(1), as implemented by

FAR 6.302-1.

(4) No plans to increase competition

(5) No prior contract for this requirement was accomplished using full and open competition.

(6) No unusual patterns were revealed by the history.

(7) No significant changes

b. Other Facts: Not Applicable

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