Justification and Approval for SAEP Contract Modification 12.pdf

Justification and Approval For Other Than Full and Open Competition

TO: Deborah Broderick, Agency Competition Advocate

FROM: Jennifer Baldwin, Contracting Officer’s Representative (COR)

DATE: November 18, 2022

SUBJECT: Justification and Approval for Other than Full and Open Competition (J&A)

1. This document sets forth the facts and rationale justifying the use of other than full and open competition in accordance with the Agency for International Development Acquisition Regulation (“AIDAR”) Part 706—Competition Requirements generally and paragraph (b)(5) of AIDAR 706.302- 70, “Impairment of Foreign Aid Programs” specifically. This J&A was prepared by the Office of the Coordinator for Power Africa.

2. The nature and description of the action:

This is a request to increase the total estimated cost of contract AID-674-C-17-00002, the Southern Africa Energy Program (SAEP), by $5 million dollars, from $69,955,372 to $74,955,372, and extend the period of performance by 12 months from June 14, 2023 to June 14, 2024.

Under this action, Deloitte Consulting will continue to support activities aligned with the Just Energy Transition Partnership (JETP) to help South Africa transition from coal to renewable energy.

Announced in November 2021 at the 26th Conference of the Parties (COP 26) to the United Nations Framework Convention on Climate Change (UNFCCC), the JETP brings together the United States, the United Kingdom, France, Germany, and the European Union, referred to as the International Partners Group, and the Government of South Africa in a landmark partnership to support the transition of South Africa’s economy away from fossil fuels.

In March 2017, USAID/Southern Africa awarded the five-year, cost-plus-fixed-fee $69,955,372 SAEP contract to Deloitte Consulting. Deloitte Consulting provides technical assistance and capacity building support to public and private sector entities such as utilities, government agencies, regulators, project developers and investors on activities designed to increase energy supply capacity and access in the region by 4,000 MW and 3 million new connections. SAEP is Power Africa’s flagship activity and the primary USAID mechanism supporting energy sector development in South Africa.

On November 30, 2021, modification No. 8 extended the contract period of performance by 15 months with no increase to the total estimated cost. The no cost extension was executed at the request of Deloitte and due to COVID 19 related delays in implementation.

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

In support of the South Africa’s Just Energy Transition, the contractor engaged with three well-placed local partners: the South African Local Government Association (SALGA), three Technical and Vocational Education and Training (TVET) colleges in Mpumalanga (South Africa’s coal country), Wits University, and non-profit African Women in Energy and Power (AWEaP). These partners helped them identify immediate, high-value and no-regrets technical assistance needs that the contractor is currently delivering, and has received positive feedback from attendees and partner organizations. The contractor also supports capacity building of municipalities and individuals in South Africa's coal country to prepare for JET. The proposed increase is in alignment with current contractual objectives, and will expand upon current activities toward achievement of the below outcomes:

Outcome 1: Improved Regulation, Planning, and Procurement for Energy – The contractor will provide direct assistance to additional municipalities in developing their Municipal Energy Plans which includes procurement of renewable energy, including implementing needed changes in local laws. This includes incorporation of the JET into their Integrated Municipal Plans.

Outcome 2: Improved Commercial Viability of Utilities – The contractor will continue to support municipalities to improve their delivery of power to their communities. Improving the financial viability of these municipal utilities will have a positive impact on the national energy utility, Eskom, as municipal debt to Eskom stands at close to $3 billion USD.

Outcome 4: Renewable Energy and Energy Efficiency Technologies and Practices Locally Demonstrated and Scaled – The contractor will continue to provide transaction advisory services, including financial modeling, advisory and arrangement services, and legal support to help bring renewable energy projects to financial close.

Outcome 5: Increased Human and Institutional Capacity - The contractor will continue building the institutional capacity of municipalities and their staff to help them prepare for and implement the just energy transition. In addition, the contractor will continue to increase human capacity at every level by facilitating educational opportunities for youth and women in the renewable energy field, including community college students in the coal region.

Given the contractor’s existing agreements with critical local partners, with this proposed modification they could continue to organize more and deeper municipal capacity building on JET and energy planning with SALGA, training for more TVET students, and training for more women with Wits and AWEaP on careers and job skills in renewable energy.

Expected results: An additional $5 million over 12 months would achieve the following estimated additional results:

1. 10-20 more municipalities supported with JET training and energy planning, and deepened support with existing municipalities

2. 3-5 competitive procurements for solar supported with municipalities

3. 200 more TVET students and 100 more women trained on RE with AWEaP/Wits

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

Paragraph (b)(5) of AIDAR 706.302-70, “Impairment of Foreign Aid Programs,” provides that “An award for the continued provision of highly specialized services when award to another resource would result in substantial additional costs to the Government or would result in unacceptable delays.” AIDAR 706.302-70(b)(5) provides the regulatory authority that permits other than full and open competition.

5. Demonstration of the proposed contractor’s unique qualifications or the nature of the acquisition require the use of AIDAR 706.302-70(b)(5)

The proposed contract modification to increase the total estimated cost of this cost-plus-fixed-fee completion-type contract requires the use of the foreign assistance impairment authority for two fundamental reasons: (1) the nature of the acquisition requires the immediate, but accelerated provision of the same services without disruption; and, (2) the contractor possesses well-established relationships with host government and private sector stakeholders to facilitate energy assistance in South Africa.

Their ongoing relationships with multiple local partners is critical to the success of the activity. In light of this, the CO determined that, at this time, direct relationships with local partners would not be in the best interest of the USG. Direct relationships with local entities will be considered in the design of upcoming procurements in support of JETP. This proposed modification will allow the contractor to leverage existing relationships to deliver on the USG’s commitment to JETP immediately as a larger JETP consultation and full and open procurement process is conducted.

Deloitte Consulting, stands in a position to capitalize on the skills and highly specialized experience of existing personnel to carry out and expand energy activities in the country. Deloitte has formed well-established and effective relationships with the stakeholders critical to the initiative's success, including a broad array of government representatives at the ministerial and municipal level, utilities and regulatory stakeholders, educational institutions, development finance institutions and the private sector such as local services providers, associations and renewable energy developers. Contractor performance to date has met and in some areas exceeded contractual requirements.

Failure to leverage existing relationships and significant in-country wide presence, knowledge of the political and regulatory environment, and strong working relationships with private sector partners and government officials will result in unacceptable delays in the U.S. Government’s ability to meet foreign assistance commitments related to JET. Technical assistance to municipalities would abruptly come to an end. The loss of critical specialized advisors currently employed by SAEP, who spent years building relationships on the ground, would be costly to replace and create delays. This unacceptable delay would deal Power Africa, USAID, and the broader USG a major setback in providing committed JET contributions to the GoSA.

Deloitte has the expertise to respond to Mission and Embassy requests for support in priority JET activities under Power Africa that require immediate technical and advisory assistance. Deloitte can also support requests that USAID receives from other cities and municipalities, utilities and regulators for technical assistance and capacity building in order to advance the JET agenda in the areas of independent power producer procurement, revenue management, energy planning, capacity building to women in energy, and needs of vulnerable communities in coal country. In addition, the Government of South Africa’s JET Investment Plan identifies transmission, distribution, and generation capacity investments as their predominant need, an area the contractor has proven leadership in provision of niche advisory services.

Under the best of circumstances, any contractor bidding on a new full and open procurement with such a large breadth of experience and relationships required would need a significant amount of time and financial resources to identify, secure, and mobilize an adequate number of experts with sufficiently strong technical, project development, and finance skills to meet Power Africa’s requirements. Deloitte currently has such staff in place.

Also, once awarded, a new contractor would need significant time to build relationships with every level of the South African government, including building trust with key partners in coal country. Due to the sensitive nature of energy planning assistance, long-term advisors need a significant time investment to establish relationships and trust with municipal level stakeholders and understand the Just Energy Transition framework in South Africa, as well as local power sector idiosyncrasies and processes. The COR estimates that any contractor—regardless of qualification—would need at least twelve months after award to approach the level of trust Deloitte and its partners have achieved to date.

High quality technical assistance, capacity building, and renewable energy project transaction support services are a continued need of the USG in this critical period (2023-2024) of South Africa’s just energy transition. The contractor is already engaged and able to respond quickly to ongoing and anticipated near-term assistance needs throughout this period until a new full and open competition can be conducted and a contractor can realistically mobilize. A programming gap would risk losing key existing relationships and slow, if not entirely stop, the implementation of the JET initiative from the USG’s side, all of which directly impair this foreign aid initiative.

Deloitte has the ability to respond to USG’s JET foreign assistance objectives in South Africa. The additional funding and time will result in uninterrupted development of important clean energy projects and human capacity development to help shift an entire economy from coal to renewable energy in a way that is just for the coal communities that will be most impacted. By avoiding an interruption of these activities, the USG will be able to build credibility and momentum for its support to the South African government. It provides an opportunity for the USG to have time to learn what is needed for a larger full and open procurement to address JET more holistically, in consultation with the other JETP donors and the South African government.

6. Description of efforts made to ensure that offers are solicited from as many potential sources as practicable, including whether a notice was or will be publicized as required by FAR § 5.202:

In accordance with FAR 5.202 a notice was published on www.sam.gov on October 31, 2022.

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

The Contracting Officer will determine the fairness and reasonableness of all costs after performing a cost analysis of proposed contractor costs.

8. Description of the market research conducted, and the results or a statement of the reasons market research was not conducted.

Outside of the publication of the notice of intent (with no meaningful/qualified expressions of interest received), Power Africa deemed the market research conducted for the current award to be sufficient.

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

If the interim ceiling increase is not approved, it will have an unacceptable delay on foreign assistance.

South Africa’s JETP is a first-of-its-kind initiative among developing countries, as such, expert technical advisors in the field are not readily available. The contractor has developed this specialized technical expertise in house over the last year. Should this ceiling increase not be approved, not only will USAID technical assistance abruptly come to a stop but restarting would take considerable time and financial resources to develop during a critical period when the government of South Africa and the International Partners Group is under pressure to show progress on their COP26 commitment.

The United States enjoys a solid bilateral relationship with South Africa, a strategic partnership with a strong network of people-to-people relationships with businesses, non-governmental organizations, universities, cultural institutions, and individual citizens. As a global voice, strong and vibrant democracy, and a country built on its commitment to human rights, South Africa is a strategic partner of the United States, with strong collaboration in shared global and bilateral priorities, including health, climate, trade and investment, education, and digital economy. During this time of political uncertainty and accusations of hypocrisy against western democracies when it comes to climate change due to recent Western efforts to secure additional oil and gas supplies, it is imperative for USAID and the USG to continue to support the JETP commitment. This work not only supports climate cooperation but is also part of larger cooperation with the government of South Africa and international partners.

10. A listing of the sources, if any, that expressed, in writing, an interest in the acquisition:

Only one source e-mailed in response to the notice posted on www.sam.gov and referenced above in Section 6. According to their website, this entity specializes in providing information technology audit, regulatory compliance and assurance services. The CO, in consultation with Power Africa, determined that the technical services required are not of this type or sector.

11. A statement of the actions, if any, the agency may take to remove or overcome any barriers to competition before any subsequent acquisition for the supplies or services required:

Power Africa is developing a long-term plan to respond to commitments for assistance under the Just Energy Transition Partnership. USAID will immediately begin consultations with the other JETP partners to develop a full and open procurement or procurements to deliver on President Biden’s larger commitment of $40 million. However, USAID does not anticipate awarding any new JET procurements until 2024 at the very earliest.

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