Justification and Approval-SIX ADDITIONAL FRCs Final CPO signed 6-11-2020 - REDACTED.pdf

JUSTIFICATION FOR OTHER THAN FULL AND OPEN COMPETITION

10 U.S.C. 2304

Pursuant to the requirements of the Competition in Contracting Act (CICA), as implemented by the Federal Acquisition Regulation (FAR) Subpart 6.3 and in accordance with the requirements of FAR 6.303-1, the justification for the use of the statutory authority under FAR Subpart 6.3 is justified by the following facts and rationale required under FAR 6.303-2 as follows:

1. Agency and Contracting Activity. The Department of Homeland Security, United States

Coast Guard (USCG), Assistant Commandant for Acquisition, Office of Contract Operations, Formal Contracts Division V (CG-9125), proposes to enter into a contract on a basis other than full and open competition.

2. Nature and/or Description of the Action being Approved. Approval of this justification and approval (J&A) is requested to procure, on a sole source basis, six additional Fast Response Cutters, a major system, and associated spares, materials and services (hereafter referred to as FRCs) to support the President’s National Drug Control Strategy goals and Ports, Waterways, and Coastal and Maritime Security missions. The USCG proposes to increase the current twenty-six (26) FRC ceiling under the FRC Phase II contract (HSCG23-16-C-AFR625), by six (6) FRCs, to thirty-two (32) FRCs. This action will be Firm Fixed-Priced with Economic Price Adjustment, consistent with the current contract structure. The government plans to use the pre-established (evaluated at award of the Phase II contract) pricing in option periods four and five of the current contract. Upon approval of this action, a bilateral modification to the contract will be executed. The action will be executed utilizing PC&I funding for fiscal years 2020 and 2021 under contract HSCG23-16-C-AFR 625. The proposed contractor is Bollinger Shipyards Lockport, L.L.C. at 8365 Highway 308, Lockport, LA 70374-3954.

3. Description of Supplies/Services Required: The intended FRC POR will change by six

(6) FRCs, from fifty-eight (58) to sixty-four (64) FRCs; thirty-two (32) FRCs were purchased and delivered under the Phase I FRC contract. To date, twenty-four (24) FRCs have been purchased under the Phase II contract, of which six (06) have been delivered and accepted. In order to meet the Commandant’s mission requirements, an additional six

(6) FRCs will have to be purchased under the Phase II contract. The existing FRC contract was competed and awarded on 04 May 2016. The contract includes options that allow for the USCG to order a maximum of twenty-six (26) FRCs at an efficient production rate of four (4) or six (6) FRCs within any specified option year. A total of three (3) single pre-priced options may also be exercised within each option period, provided a four (4) or six (6) FRC quantity has been ordered previously within the same option period. This proposed action requests approval to procure the six additional FRCs utilizing already established pricing under the aforementioned option periods. If all options are exercised as intended, the total FRCs procured under the Phase II contract would be thirty-two (32). The estimated price of the proposed contract action for the additional six (6) FRCs, inclusive of ancillary items and exclusive of any potential equitable adjustments, is $316.5M. This action will allow the USCG to meet its critical

AKHarker Highlight operational need for FRCs as reflected by the intended change of the Commandant’s POR from fifty-eight (58) FRCs to sixty-four (64) FRCs, utilizing the existing contract vehicle/pricing, terms and conditions as well as the current Phase II configuration baseline.

Table 1: Planned Award of Sole-Source Action by Fiscal Year

Fiscal Year

Contract Option Period

Unit Price

Quantity

Total

FY-20

Option Period Four

$53,154,983.78

$106,309,967.56

FY-21

Option Period Five

$52,552,613.81

$210,210,455.22

Total $316,520,422.78

The FRCs under the justification were previously awarded under other contracts as provided in Table 2.

Table 2: FRCs Under This Justification Previously Awarded Under Other Contracts

Contract Award Date Current Contract Value End Date # FRCs Ordered # FRCs Delivered HSCG23-08-C-2FR125 9/26/2008 $1,538,175,196.39 Ongoing 32 32 HSCG23-16-C-AFR625 5/4/2016 $1,238,702,916.00 Ongoing 24 6

4. Identification of Statutory Authority Permitting Other Than Full and Open Competition.

10 U.S.C. §§ 2304(c)(1), as implemented by FAR § 6.302-1(a)(2)(ii)(A) & (B); Only one responsible source and no other supplies or services will satisfy agency requirements.

5. Identification of Exception to the Buy American Statute. No exceptions to the Buy

American Act are requested by incumbent contractor or applied by the Coast Guard (a) in competition or (b) during performance, and (c) no exception is anticipated in negotiation of this contract modification.

6. Demonstration that the Proposed Contractor’s Unique Qualifications or the Nature of the Acquisition Require Use of the Authority Cited. The FRC is a major system. The USCG competitively awarded the current FRC Phase II contract to Bollinger Shipyards Lockport on 04 May 2016. Under this contract, the USCG previously procured twenty-four

(24) FRCs and may order a maximum of two (2) more. As the designer, developer and producer of the FRC, Bollinger is the only contractor with the requisite knowledge, experience, capability and licensing rights needed to meet the Government’s requirements, without substantial duplication of cost that cannot be recovered through competition and would result in unacceptable delays. Any vendor other than the incumbent would have a ramp up time of approximately three years and substantially higher costs estimated at $71M, even if provided with the FRC design, due to the significant production learning curves and other production efficiencies already attained by the incumbent contractor. Additionally, and more importantly, the Government does not possess, or otherwise hold title to, the licensing needed to duplicate and compete the current FRC design. The aforementioned cost increase and

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AKHarker Highlight schedule delays would occur based on, (1) the time and cost to conduct a competitive procurement to select the shipbuilder for the six additional FRCs, (2) increased labor costs due to either a break in production if Bollinger was selected or due to start-up of a new production line at a second source, (3) increased costs associated with escalation of labor and material costs due to the delay in construction, (4) time and cost for a second shipbuilder to familiarize itself with the design and complete production planning and (5) time and cost to procure and/or develop tooling required to construct the FRC. The operational impacts and schedule delays would be significant and reduce FRC patrol hours by an estimated 45,000 patrol hours over a three-year period. The combination of increased costs and schedule delays represent an unacceptable operational impact to the USCG. Finally, if the USCG were to compete this effort to procure six Patrol Craft similar to the FRCs, it is unlikely that another shipyard could effectively compete given the relatively small number of hulls over which to allocate its initial non-recurring start-up costs and the higher costs/risks associated with the lack of established learning curves.

Due to the contractor’s exclusive Licensing and Royalty data rights, and other agreements with subcontractors and suppliers, no portion of the work can be segregated and competed.

Furthermore, the government does not possess, own or maintain any licensing rights that would allow it to independently solicit for any of the FRC work, construction or supplies covered by the J&A.

The Commandant’s revised POR, clearly states that sixty-four Fast Response Cutters are needed to perform critical missions, including those domestically, internationally and in the United States territories. If the J&A is disapproved, the adverse effects would be financially injurious and significantly impactful to the law enforcement missions on the high seas in the missional areas of counterterrorism, drug trafficking enforcement and migratory interdiction. Specifically, disapproval of the J&A would result in a short-fall of 15,000 patrol hours annually to the Commandant’s POR, specific to the missions as aforementioned.

7. Description of Efforts Made to Ensure that Offers are Solicited from as Many Potential Sources as is Practicable. As required by FAR 5.201, the proposed requirements and procurement intent was synopsized in the Federal Business Contracting Opportunities during the period from 16 January 2020 through 31 January 2020. The results are described in paragraph 11 below.

8. Determination by the Contracting Officer that the Anticipated Cost to the Government will be Fair and Reasonable. The contracting officer has determined that the anticipated price will be fair and reasonable based on prior acquisition history with the FRC Phase I and Phase II contracts. The Contracting Officer determination is based on the fact that the current contract will be utilized, with established pricing for the additional FRCs, that was competed and awarded in May 2016. (Re: FAR 15-404.1(b)(2)(ii)).

9. Description of Market Research. In preparation for the follow-on re-procurement action, market research utilizing web based media methods, was performed during December 2019, identifying that no other source that can produce six (6) FRCs utilizing the current FRC design, or otherwise, at the cost stated above or within the Government’s required delivery schedule.

While other vendors could possibly provide a vessel vaguely similar to that of the FRC, the cost and delay of doing so would be prohibitive. Bollinger Shipyards Lockport, L.L.C. is the only vendor that has an existing production facility for the FRC and more importantly possesses the exclusive licensing agreements, allowing them to produce the FRCs at a fair and reasonable price and without a gap in the current FRC production schedule.

10. Any Other Facts Supporting the Use of Other Than Full and Open Competition. The current Phase II FRC contract is structured with seven (7) option periods. Three of the option periods have been utilized to date. It is planned that the budget for FY20 supports the procurement of four (4) FRCs, which will be the 25th through the 28th FRC purchased under the Phase II contract. The procurement of six (6) additional FRCs under the existing contract is a feasible low-cost solution to meet the Government’s needs, particularly if the option is negotiated in time to allow the contractor to revise the delivery schedule to level load the yard for maximum efficiency. This planned course of action cannot be accomplished with any other source.

The current government Limited Data Rights do not allow the government the exclusivity and title rights in licensing, intellectual property, royalties and design data needed to re-compete the requirement for the additional six FRCs. If the government were to compete the requirement in a new solicitation, there would be significant additional costs that would be duplicated and therefore would not be recovered through competition. Pursuant to FAR 6.32(a)(2)(iii), a detailed cost estimate for recompeting the need for six additional FRC type craft was performed.

If a new solicitation were issued for a vessel that would substantially meet the current FRC requirements, the cost is estimated at $387,764,911.60. The calculations utilized actuals from previous historical detailed learning curves for labor and other hours and for all of the necessary components needed to produce and construct six FRCs as a new procurement. As a new requirement, and if re-competed, a complete re-design, re-provisioning and other costs would need to be duplicated to match that of the current set of requirements. Since all of the design, provisioning, attainment of construction learning curves and other work needed to produce an FRC, is already provided under the current contract, the cost of purchasing the additional six FRCs utilizing the pricing in the current contract is $316,520,422.78. Therefore, the substantial duplication of cost estimate that cannot be recovered through competition is $71,244,488.83; the summary is provided in Table 3 below.

Table 3: Substantial Duplication of Cost Summary; Six Additional FRCs Quantity Avg Unit Price Total New Procurement 6 $64,627,485.27 $387,764,911.60 Sole Source-Existing Contract 6 $52,753,403.80 $316,520,422.78 Substantial Duplication of Costs $71,244,488.83

11. A Listing of the Sources, if Any, that Expressed, in Writing, an Interest in the Acquisition. One party, the Fincantieri® Marine Group, expressed an interest in writing and stated that it could perform and meet the requirement, if provided with the Re-procurement Data & Licensing Package (RDLP) [Re: Fincantieri Marine Group, letter dated 30Jan2020]. No

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AKHarker Highlight additional responses were received from the Fincantieri® Marine Group or any other interested potential offerors.

12. A Statement of the Actions, if Any, the Agency May Take to Remove or Overcome Any Barriers to Competition Before Any Subsequent Acquisition for Supplies or Services Required. This intended action is a follow-on contract modification for the continued production of a major system. It is highly unlikely that the economic benefit to other sources is sufficient to entice competition for a six (6) cutter buy. The FRC team continuously conducts market research to identify companies interested in doing business with the USCG are given every opportunity to compete for our requirements.

13. Contracting Officer’s Certification: I certify that the data supporting the recommended use of other than full and open competition is accurate and complete to the best of my knowledge and belief.

Digitally signed by Allen K. Harker DN: cn=Allen K. Harker, o=USCG PRO LOCKPORT, ou=US COAST GUARD, email=Allen.K.Harker@uscg.mil, c=US Date: 2020.04.15 15:25:36 -05'00'

Mr. Allen K. Harker, CG-9125, USCG Date Administrative Contracting Officer

14. Technical/Requirements Personnel Certification: I certify that this requirement meets the Government’s minimum need and that the supporting data, which forms a basis for the justification, is accurate and complete.

STUKUS.PAUL.D.102294 Digitally signed by

STUKUS.PAUL.D.1022947318

Date: 2020.04.16 08:52:29 -04'00'

Paul D. Stukus, CAPT, USCG Date CG-9324, FRC Project Manager

15. Legal Review and Concurrence: I have reviewed this justification and deemed it legally sufficient.

Digitally signed by

NICHOLAS.TALBOT.JACQUES.II.10447465

CQUES.II.1044746596 96

_ Date: 2020.04.16 09:04:26 -04'00'

Mr. Talbot J. Nicholas II, CG-0949 Date Office of Procurement Law

16. COCO Concurrence:

PETERSON.JENNIFER.L.1 Digitally signed by

186231674

PETERSON.JENNIFER.L.1186231674

Date: 2020.04.16 14:11:23 -04'00'

Ms. Jennie L. Peterson, CG-912 Date Chief of the Contracting Office

17. HCA Concurrence:

DERRIOS.MICHAEL.W.10

49414990

Digitally signed by

DERRIOS.MICHAEL.W.1049414990

Date: 2020.05.04 13:15:06 -04'00'

Mr. Michael Derrios Date Head of Contracting Activity

USCG

18. Competition Advocate Concurrence:

KNIGHT.JAMES.LYNN.1 Digitally signed by

097377746

KNIGHT.JAMES.LYNN.1097377746

Date: 2020.05.28 11:30:50 -04'00'

Mr. James L. Knight, CG-9D Date Competition Advocate

USCG

19. Approval:

Ms. Soraya Correa Date Chief Procurement Officer Department of Homeland Security

Allen K. Harker

NICHOLAS.TALBOT.JA