Justification Diesel Engine Ceiling Increase_0002_21D4105_4106.pdf

DEPARTMENT OF THE NAVY

MILITARY SEALIFT COMMAND

471 EAST C STREET

NORFOLK VA 23511-2419

J&A No.

N3220520R4105-0002

JUSTIFICATION AND APPROVAL (J&A)

FOR USE OF OTHER THAN FULL AND OPEN COMPETITION

1. Contracting Activity.

Military Sealift Command (MSC), Services and Ship Support (N102).

2. Description of the Action Being Approved.

This Justification and Approval (J&A) will increase the joint ceiling on Multiple Award (MAC) Indefinite Delivery, Indefinite Quantity (IDIQ) contract numbers N3220521D4105 and N3220521D4106 to both IDIQ MAC holders - MAN Energy Solutions Middle East, LLC (MAN) and Fairbanks Morse, LLC (FMD). This MSC MAC IDIQ is used by both MSC and Naval Supply Systems Command, Fleet Logistics Centers (NAVSUP). This modification will increase the MAC IDIQ maximum ceiling amount over the remaining five-year ordering period (07 May 2021 06 May 2026) from $333M by $137M to $470M. All other MAC IDIQ terms and conditions will remain the same.

3. Description of the Supplies/Services.

The MAC IDIQ contract is for repair or maintenance services and parts for a broad range of diesel engine systems/items for the following MSC class vessels: AS (Submarine Tender); T- AH (Hospital); T-AKE (Dry Cargo/Ammunition); T-AO 187 (Fleet Replenishment Oiler); T- AO 205 (Fleet Replenishment Oiler); T-ESB (Expeditionary Mobile Base); T-ESD (Expeditionary Transfer Dock); T-AKR (Bob Hope Class, Gordon Class, Shughart Class);

and T-AK (Kocak Class). The diesel engine systems are considered critical ship safety items in accordance with MSC Instruction (COMSCINST) 4490.1C and MSC Quality Management System (QMS) N0750-100.00-AQ Revision 2.1, which jointly describe the policy for maintenance, repair, parts procurement, and related technical services for such items. The MAC IDIQ provides several ship classes a broad range of Original Equipment Manufacturer (OEM) systems, items, and/or exclusively-authorized OEM parts and services to maintain and repair as critical ship safety items.

In addition to the increase in required engine repairs to aging ships (such as the T-AO 187 class, nearly all of which have exceeded their engine maintenance schedule (i.e. greater than 72,000 running hours)), MSC performs major overhauls on the T-AKE class engines (48/60A) at 48,000 hours in accordance with the NAVSEA technical manual, which is 12,000 hours later than MAN recommends in their technical documentation. Prolonging this major overhaul has led to unexpected repairs and has factored in the higher-than-expected expenditures on this contract. Additionally, MSC is moving toward an underway maintenance-based overhaul schedule, which has necessitated replenishment of special tooling on multiple ships to facilitate this work. Finally, unexpected work has contributed to the erasure of the current ceiling; 14 instances of CASREPs and other emergent repairs have occurred over the past 6 months alone requiring extensive engine work, including multiple fuel hose ruptures causing fire damage and leading to urgent Class-wide replacement.

Maintenance or repair may include appraisals, groom, inspections, life cycle management, overhauls, refurbishment, repairs, reports, tests, and upgrades. Each issued order will utilize corresponding Fiscal Year (FY) United States Navy Working Capital Funds (NWCF) and/or Operation & Maintenance, Navy (O&M,N) General Funds (GF).

The total ceiling increase for services and parts is shown in the below table:

Appropriation Original Amount (From)

Est. Amount of Increase (FY26)

(By)

Requested Amount for Approval

(To) GF (O&M,N) and NWCF $333M $137M $470M

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

The statutory acquisition authority permitting other than full-and-open competition is 10 U.S.C. 3204(a)(1), only one responsible source and no other supplies or services will satisfy agency requirements.

5. Rationale Justifying Use of Cited Statutory Authority.

MAN is the Original Equipment Manufacturer (OEM) and maintains the intellectual property rights on all its engines and components and its licensed U.S.- based builder, distributor, and servicer, FMD, are the only known sources with access to the design information to engineer, manufacture, and service this equipment, as they have the proprietary drawings, technical manuals, and design information for this equipment. Only OEM parts, technical data, and drawings satisfy the ship inspection and certification requirements. These requirements are mandated by the United States Coast Guard (USCG) and American Bureau of Shipping (ABS) regulations. Specifically, the OEM parts and services preserve all OEM warranties, ensure equipment reliability, and ensure crew safety, therefore precluding consideration of non- OEM parts and non-OEM authorized technical representative services. Additionally, FMD/MAN engines onboard MSC vessels are critical equipment for operations as outlined by the International Safety Management Code (ISM)/Safety Management System (SMS) regulations. No other company is authorized to provide parts with services for FMD or MAN built engines because all engines covered under this requirement are mission critical ship safety items in accordance with COMSCINST 4490.1C and QMS N0750-100.00-AQ Revision 2.1.

Since the engineering, construction drawings, and technical characteristics for the manufactured parts for these engines are proprietary to FMD and MAN, the Government does not own rights for this data. Notwithstanding USCG and ABS regulatory mandates, the analysis per RFO 6.103-1(c)(2)(i) shows that award to any other source would result in both substantial duplication of cost to the Government that is not expected to be recovered through competition and unacceptable delays in fulfilling the requirements. The cost for the Government to procure a Diesel Engine system that allows for a vendor outside of FMD and MAN to service and provide parts for this equipment is estimated in FY20 dollars at $36M per ship, resulting in a total duplication of cost of $2,570M that is not expected to be recovered through competition.

6. Description of Efforts Made to Solicit Offers from as Many Offerors as Practicable.

Recent market research for the re-compete for the requirement of diesel engine parts and services revealed two non-OEM companies, Motor Services Hugo Stamp (MSHS) and Goltens Service Company (GCS), who are MSC approved non-OEM service providers on FMD/MAN diesel engines. However, neither company has the authorization or license to procure and provide parts for these engines because FMD and MAN have an exclusive license agreement with each other, which prohibits any other company from being able to purchase the regulatory-required parts. For the re-compete, MSC approved non-OEM service providers will be eligible for award. The current IDIQ expires in less than 90 days and does not presently have an on-ramp process for additional vendors. The time needed to modify the IDIQ and permit on-ramping additional vendors would exceed the time remaining for the final ordering period. Therefore, a ceiling increase is necessary to continue utilizing the current MAC IDIQ awarded to MAN and FMD, with the final ordering period expiring on 20 MAY 2026, to ensure the continuation of mission essential ship maintenance.

7. Determination of Fair and Reasonable Cost.

The Contracting Officer has determined the anticipated cost to the Government of parts and services covered by this J&A will be fair and reasonable.

8. Actions to Remove Barriers to Future Competition.

As stated in Section 6 above, MSC is currently re-competing this requirement, which will include MSC approved non-OEM service providers in addition to the OEMs. As this is a follow-on for supplies and services previously awarded on a non-competitive basis, in accordance with Class Deviation 2026-O0017, RFO DFARS 206.104-71 the prior J&A was provided to the approval authority for review. Approval of this J&A signifies the approval authority has made the determination required by Class Deviation 2026-O0017, RFO DFARS 206.104-72.