CIWS_FY15_16_JA_54404_FINAL_Redacted.pdf

FOR OFFICIAL USE ONLY

DEPARTMENT OF THE NAVY

NAVAL SEA SYSTEMS COMMAND

1333 ISAAC HULL AVE SE

WASHINGTON NAVY YARD DC 20376-0001

IN REPLY REFER TO

J&A Number: 54,404 Code: SEA 02545 P.R. Number: N00024-14-NR-43652

JUSTIFICATION AND APPROVAL

FOR USE OF OTHER THAN FULL AND OPEN COMPETITION

JUSTIFICATION

1. Contracting Activity

Naval Sea Systems Command Surface Systems Contracts Division (NAVSEA 025).

2. Description of the Action Being Approved

Award of a contract on a sole source basis to Raytheon Company/Raytheon Missile Systems (Raytheon) in Tucson, Arizona for the procurements of MK 15 Close-In Weapon Systems (CIWS), upgrades, conversions, overhauls, and related equipment, as detailed in Section 3.

3. Description of Supplies/Services

The proposed procurements are for the following requirements:

MK 15 CIWS Phalanx to Block 1B Baseline 2 (BL2) upgrades and conversions;

MK 15 Mod 31-32 CIWS SeaRAM upgrades and conversions;

MK 15 CIWS Phalanx Upgrade Kits, Radar Upgrade (RUG) Kits, and Reliability, Maintainability, and Availability (RM&A) Improvement Kits;

MK 15 CIWS Phalanx Class A overhauls;

MK 15 Mod 29 CIWS Land-based Phalanx Weapon Systems (LPWS) Class A overhauls; and, MK 15 CIWS LPWS hardware product improvements and MK 15 CIWS ancillary equipment, and spares.

The planned period of performance is from contract award through 30 June 2019.

The MK 15 CIWS Phalanx is an autonomous or integrated self-defense weapon system that defeats incoming Anti-Ship Missiles (ASMs), rockets, artillery, mortars, and asymmetric threats. The MK 15 CIWS Phalanx Block 1B is an upgrade to the existing MK 15 CIWS Phalanx Block 1.

MK 15 CIWS Phalanx Block 1B provides surface combatants the capability to defeat asymmetric threats via the installation and integration of a Forward Looking Infra-Red (FLIR) sensor. The MK 15 CIWS Phalanx Block 1B maintains its primary capability to defeat ASMs via integrated search and track radars and a 20mm Gatling gun firing 4,500 rounds per minute. The MK 15 CIWS Phalanx is installed on

The Chief of Naval Operations (OPNAV) directed that all existing MK 15 CIWS Phalanx Block 1 configurations in the U.S. Navy Fleet be upgraded to the Block 1B configuration by FY14. The CIWS Program Office expects to complete the upgrades by FY14.

The MK 15 Mod 31-32 CIWS SeaRAM Upgrade Kit is used to convert a MK 15 CIWS Phalanx Block 1B into a MK 15 Mod 31-32 CIWS SeaRAM configuration by replacing the 20mm Gatling gun with an 11-round Rolling Airframe Missile (RAM) guide. The MK 15 CIWS Phalanx Block 1B and MK 15 Mod 31-32 CIWS SeaRAM configurations are . MK 15 Mod 31-32 CIWS SeaRAM is an autonomous combat system capable of searching, detecting, tracking, and engaging threats with the RAM. MK 15 Mod 31-32 CIWS SeaRAM has been

The MK 15 CIWS Phalanx Block 1B Baseline 2 (BL2) upgrade and Radar Upgrade (RUG) kits enhance various capabilities from Block 1B configuration. The Block 1B BL2 upgrade incorporates several digital radar components that address part obsolescence in Block 1B analog components. Additionally, Block 1B BL2 improves search performance sensitivity, increases reliability, and improves maintainability.

The Reliability, Maintainability, and Availability (RM&A) improvements include the following: Coolant Pump with Improved Impeller, Long-life Gyros, Test Mode Control Unit Improvement, Built-In Test Equipment Control Circuit Card Assembly, Waveguide Air Dryer System (WADS) Piston Compressor, WADS Water Separator, Gun Ammunition Handling System Chuting, Gun Cradle Cable Assembly, Main Cable Reliability Improvements, and Resolver Improvements.

These RM&A improvements will be installed during overhauls, standalone shipboard Alteration Installation Team (AIT) installations and by attrition.

These improvements are called-out in the CIWS RM&A roadmap and will allow time between Class "A" overhauls to be extended while still maintaining an acceptable availability.

MK 15 CIWS Phalanx Block 1B Class A overhauls are required to maintain required reliability of the weapon system. Based on operational availability data over the past 20 years, reliability of the CIWS begins to degrade

The Class A overhauls are called out in the CIWS RM&A roadmap.

The MK 15 Mod 29 CIWS LPWS is a MK 15 CIWS Phalanx Block 1B in a land-based configuration for use by the U.S. Army in defense of rocket, artillery, and mortar attacks. The LPWS configuration consists of a Phalanx Block 1B installed on a low-boy trailer with self-contained diesel electric power generators and a cooling system. The LPWS is integrated into the U.S. Army’s Counter-Rocket, Artillery, Mortar (C-RAM) combat system for coordinated defense with multiple LPWS systems and additional U.S. Army sensors. CIWS production contracts awarded under authority of this J&A will procure MK 15 Mod 29 LPWS Class A overhauls and product improvements.

MK 15 CIWS hardware product improvements for all variants include approved Class I Engineering Change Proposals (ECPs) that provide reliability improvements and address Fleet and field issues. Ancillary equipment includes General Purpose Electronic Test Equipment, Peculiar Support Equipment, Common Support Equipment, Special Gun Tools, Connectors and Backshells, outfitting spares, environmental equipment, and flatbed trailers to complete installations. The associated quantities of ancillary equipment, hardware product improvements, and spares are included within the major items listed in Table 1.

Certifying technical and requirements personnel have verified the Government’s minimum needs. Proposed quantities for procurement of major items are listed in Table 1 also.

Table 1 – Projected Quantities of Major Items

ITEM (Quantities include Base plus options)

Requester or Item FY15 FY16 Totals

U.S. Navy (SCN) 5 2 7

FMS 21 50 71

Coast Guard (USN WPN) 2 0 2

Total 28 52 80

U.S. Navy (SCN) 4 4 8

FMS 0 0 0

Total SeaRAMs 4 4 8

Upgrade/RUG (WPN) 38 10 48

RM&A (WPN) 16 48 64

Total Kits 54 58 112

U.S. Navy (OMN) 16 25 41

FMS 0 0 0

Total Class A 16 25 41 U.S. Army (OMA) 8 13 21

FMS 0 0 0

Total LPWS 8 13 21

MK 15 CIWS Phalanx Blk 1B Upgrades & Conversions

MK 15 CIWS Phalanx Blk 1B Upgrade Kits

MK 15 Mod 31 CIWS SeaRAM Upgrades & Conversions

MK 15 CIWS Phalanx Class A Overhauls

MK 15 Mod 29 CIWS LPWS Class A Overhauls

The CIWS Acquisition Strategy is to combine all procurement requirements (WPN, SCN, FMS, Coast Guard, Army, OM&N) into an annual buy and use a common statement of work that provides economy of scale and lower unit price for all users. The CIWS Program makes maximum use of Government Owned Material (GOM) to reduce the cost of upgrade & conversion whereby the highest or most modern configuration available is provided as Government Furnished Property (GFP) to the Overhaul, Upgrade and Conversion CIWS Production process. A higher or more modern configuration equates to lower costs since there is more commonality with the end item under contract and reduces the amount of upgrade and conversion necessary. The estimated total value of the FY15-FY16 CIWS production requirement is approximately $952.3M utilizing the highest starting configuration possible. The available funding profile is shown in Table 2. Options will not be exercised without sufficient funding in the correct appropriation.

Table 2 – Projected Funding for CIWS Production

Utilizing Higher or More Modern Initial Configuration (BLK 1B or greater)

APPN ($M) FY15 FY16 Total

O&M,N

RDT&E

WPN

SCN

U.S. Army

Coast Guard

U.S. Total

FMS

Grand Total $952.3

A lower or less modern configuration equates to higher costs since there is less commonality with the contracted end item and requires more upgrade and conversion. The estimated total value of the FY15-FY16 CIWS production requirement is approximately $978.5M utilizing a lower or less modern configuration if required. The available funding profile is shown in Table

3. Options will not be exercised without sufficient funding in the correct appropriation.

Table 3 – Projected Funding for CIWS Production

Utilizing Lower or Less Modern Initial Configuration (BLK 1)

4. Statutory Authority Permitting Other Than Full and Open Competition

10 U.S.C. 2304 (c) (1). Only one responsible source and no other supplies or services will satisfy agency requirements.

5. Rationale Justifying Use of Cited Statutory Authority

Pursuant to 10 U.S.C. 2304 (c)(1), Raytheon is the only source that can provide the MK 15 CIWS to fulfill U.S. Navy, U.S. Army, U.S. Coast Guard, and Foreign Military Sales (FMS) requirements without unacceptable delays and substantial duplication of costs that cannot be recovered through competition.

The Government estimates that qualifying a new prime and subcontractors would result in a minimum thirty-six month delay, where the Government could not purchase new or upgraded equipment for sea or land-based CIWS Phalanx systems.

Based on actual U.S. Navy experience with the MK 15 CIWS dual sourcing effort of 1986, when the U.S. Navy jointly awarded CIWS contracts to General Dynamics-Pomona (now Raytheon) and General Electric-Pittsfield, the Program Office estimated that a new contractor would require a minimum of thirty-six months from contract award to hire experienced staff, build facilities, purchase equipment, and develop equivalent capabilities. The 1986 joint effort resulted in significant start-up delays for the new contractor, General Electric, which had to build facilities, purchase equipment, and

APPN ($M) FY15 FY16 Total

O&M,N

RDT&E

WPN

SCN

U.S. Army

Coast Guard

U.S. Total

FMS

Grand Total $978.5 train employees. The current situation is similar, and the same problems regarding a second source would have to be addressed.

Currently, Raytheon maintains specialized facilities, sophisticated capabilities, and unique equipment that are qualified and dedicated to the production and overhaul of MK 15 CIWS. This includes specialized final system test equipment, test areas permitting live radar testing, high voltage laboratories, optical labs for Forward Looking Infrared (FLIR) testing and repair, and circuit card test stations. In addition to the equipment and facilities, Raytheon also maintains an experienced, dedicated labor pool, many of whom have over 20 years of experience with the CIWS. No other company has similar capabilities.

The Government needs these systems, ancillary equipment, upgrades, and spares now to fill U.S. and international FMS requirements. An extended timeframe, to develop and qualify another source for production and overhaul, would not meet fielding requirements of the U.S. Navy, U.S. Army, U.S. Coast Guard, or FMS. The requirements are most demanding for the U.S. Army, which uses the LPWS in Forward Operating Bases to protect U.S. and allied warfighters.

A gap in CIWS production would add cost and schedule delays to any deliveries and loss of quantity discounts from Raytheon and its subcontractors.

Based on initial set-up and qualification costs incurred in the dual sourcing effort in 1986, the U.S. Navy estimates a cost of at least $50M to qualify an alternate source for MK 15 CIWS production and overhaul requirements. This $50M amount is a conservative estimate derived using 1986 conditions.

Present-day costs for facility construction, new equipment, environmental licensing, process qualification, and duplication of labor during second-source qualification are greater than those costs in 1986. The 1986 dual sourcing effort also relied heavily on extensive Government depot experience to assist General Electric-Pittsfield in becoming a second source. This inherent Government depot capability was lost in 1995 with closure of the Government depot (via Base Realignment and Closure (BRAC)). Qualifying another source without Government depot assistance would result in more protracted schedule delays and re-starts that would further contribute to increasing costs of qualifying another source.

Raytheon has consistently met cost and schedule requirements and has lowered the unit price of MK 15 CIWS by approximately akansha.anand Typewritten Text

It is unlikely that creating competition at the prime level would reduce the cost of material that Raytheon currently procures competitively. A new prime contractor would likely lead to increased material costs, due to having to find suppliers and placing purchase orders for CIWS materials for the first time. Thus, it is unlikely that competition at the prime level would create benefit regarding the material costs that are currently procured competitively by Raytheon.

Raytheon performs CIWS Class A overhauls at the production facility in Louisville, KY (formerly the U.S. Government’s Ordnance Station Louisville) which results in significant cost savings for the U.S. Government because a second facility is not needed. A competitive negotiation conducted by the Louisville/Jefferson Redevelopment Authority (LRA), established under Public Law 101-510, authorizes Raytheon to lease the CIWS manufacturing facility from the LRA.

A production or Class A overhaul award to an alternate source would require construction of a new facility to manufacture, upgrade, or overhaul CIWS, as the only current facility with these capabilities is leased to Raytheon. The current lease is a 2004 lease with a base period of five years and three options of five years each. Raytheon is in the first five-year option that expires in December 2014 with two five-year options remaining. New facility construction costs, in conjunction with qualification costs, are unlikely to be recovered throughout the life cycle of MK 15 CIWS. Additionally, the time required to establish new production and overhaul facilities would not meet fielding requirements of U.S. Navy, U.S. Army, U.S. Coast Guard, or FMS customers.

Similarly, Raytheon has contracted with NAVSUP Weapons System Support (NAVSUP WSS) to provide Performance Based Logistics (PBL) support to the U.S. Navy and FMS Fleets in support of repair and maintenance of parts for the MK 15 CIWS. NAVSUP WSS contracted CIWS PBL is also provided from the Louisville facility. Award of a MK 15 CIWS production contract to an alternate source would not cancel the PBL 5-year (2011 base plus 4 option years) firm-fixed-price contract between Raytheon and NAVSUP WSS (N00104-11-D-Z-D43). The selection of a new production source would, in essence, create a MK 15 CIWS dual production source and result in increased support costs to NAVSUP WSS and the U.S. Navy Fleet due to the loss of “economy of scale” discounts and consideration Raytheon receives when bundling their purchases of parts for production and PBL.

Consequently, for the reasons stated above, award to a source other than Raytheon would cause unacceptable delays of at least months; would incur at least in redundant costs; introduce significant disruption to Fleet deliveries;

. Raytheon, as the sole source for MK 15 CIWS production requirements, poses a very low risk of failure to achieve CIWS program goals.

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

Previous MK 15 CIWS production contracts were synopsized on the FEDBIZOPPS website. The FY15 and FY16 requirements were synopsized on 17 January 2014 via FEDBIZOPPS. Raytheon was the only company that expressed an interest in the production contracts. Additional market research was not conducted because it is not practical, for the reasons discussed in Section 5 above, for any company other than Raytheon to provide the required critical supplies and services.

7. Determination of Fair and Reasonable Costs

The Contracting Officer will determine that the anticipated cost to the Government for the products and services covered by this J&A will be fair and reasonable. The NAVSEA Contracting Office will use cost and price analysis to determine that the final price is fair and reasonable. Assistance from DCAA and DCMA will be utilized to analyze, evaluate, and negotiate based upon detailed cost or pricing data, which will be certified by RMS at conclusion of negotiations. RMS has produced a significant amount of CIWS systems, which will provide actual production cost data in this future proposal that will allow the Navy to negotiate a fair and reasonable contract value for these procurements.

8. Actions to Remove Barriers to Competition

If another potential source emerges, NAVSEA will assess whether competition for future requirements is feasible. The Government has Government Purpose Rights (GPR) for the MK15 CIWS technical documentation. Regardless, given the rationale provided in paragraph 5 above, competition is not considered a viable option at this time. In order to facilitate potential future competition, the Government will continue to acquire GPR for all future development efforts and/or design revisions.

If future requirements develop, the Contracting Officer will assess whether the circumstances, surrounding the need to obtain the required supplies/services without full and open competition, have changed in a manner that would allow competition for CIWS production contracts.

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SEAN STACKLEY

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