LPA Malmstrom Yrs 22-23 PCO Signed.pdf

PROCUREMENT SENSITIVE

SOURCE SELECTION INFORMATION – SEE FAR 2.101 AND 3.104

DLA Energy – FEAAB March 21, 2022

MEMORANDUM FOR RECORD

SUBJECT: Local Purchase Authority / for Bituminous Coal for the period May 1, 2022 through April 30, 2023. Line Item 0009 Malmstrom Air Force Base (AFB), MT

The purpose of this memorandum is to document the DLA Energy approval to have Malmstrom AFB, MT re-use its local purchase authority to meet its coal requirements for performance period May 1, 2022 through April 30, 2023. This approval was previously given for the May 1, 2021 through April 30, 2022 procurement.

Historical Justification: Due to Malmstrom’s stringent specifications and its location, competition has always been extremely limited for this line item. For over ten years, Terror Creek, Inc. (Formerly Oxbow Carbon & Minerals, LLC) has always been the successful offeror of Malmstrom’s one year, Firm Fixed Price Coal Contracts, traveling over 900 miles by rail in order to meet this requirement. On October 24, 2011, DLA Energy received a Force Majeure Notice from Terror Creek, stating that its mine source for Malmstrom, Elk Creek Mine, encountered ground control issues. As time passed, Terror Creek was only able to produce and deliver coal from this mine a few months a year, but still completed all of Malmstrom’s delivery orders. Elk Creek Mine’s dilemma continued to persist as time progressed, with Terror Creek failing to completely remediate the situation. This problem did not have a significant impact on the Installation, as Malmstrom has continued to primarily burn natural gas and less coal, due to the declining natural gas price. The Installation’s last coal order was on August 02, 2012, under Contract SPE600-12-D-0653. Malmstrom’s requirement during this performance period was 10,000 NTs, with no minimum quantity guarantees; the only order that the contractor received during this performance period was for 3,300 NTs. Terror Creek Contract, SPE600-13-D-0653, was for 5,000 NTs, with no minimum quantity guarantees. On September 10, 2013, DLA received the notice, via email, that Malmstrom did not plan to order coal from the current contract. On November 11, 2013, DLA received a message from Terror Creek, via email, that it was planning on closing its operations office on December 4th, in Littleton, Colorado, which is the office that operated the contract with Malmstrom. On January 8, 2015, Terror Creek was sent a copy of the solicitation via email. Terror Creek failed to submit an offer for the SPE600- 15-R-0408 Solicitation. Sources Sought have been issued with no responses received.

Malmstrom has been granted LPA since 2015. On March 18, 2022, the Heat Plant Manager at Malmstrom sent a formal request to DLA Energy to purchase its coal requirement locally again for the performance period of May 1, 2022 through April 30, 2023.

DEFENSE LOGISTICS AGENCY

DLA Energy

8725 JOHN J. KINGMAN ROAD

FORT BELVOIR, VIRGINIA 22060-6222

IN REPLY

REFER TO:

PROCUREMENT SENSITIVE

SOURCE SELECTION INFORMATION – SEE FAR 2.101 AND 3.104

In accordance with DoDI 4140.25M Volume 3 C3.4, DLA Energy serves as the central contracting agency for coal procurement for the Federal Government, and contracts for coal delivery to installations that place purchase order. However, due to:

DLA Energy’s historical lack of competition for this line item, due to Malmstrom’s stringent specifications and location, The continuous decline in Malmstrom’s yearly coal quantity requirement and consumption, The closure of Terror Creek, who has been DLA Energy’s only awardee for Malmstrom’s yearly coal contract for the past ten years, and, The fact that no offers were received for Malmstrom’s yearly coal requirement of 5,000 NTs under last coal solicitation SPE600-15-R-0408, Malmstrom.

The DLA Energy Contracting Officer formerly grants Malmstrom to purchase its coal requirement locally for the performance period of May 1, 2022 through April 30, 2023.

RYAN M. WHALEY

Contracting Officer DLA Energy – FEAAB Installation Energy