REDACTED APPROVED FINAL TAB 1 JA Arthrex Procedural Packages 10-5-23 Signed_Redacted.pdf

Controlled Unclassified Information (CUI)

JUSTIFICATION FOR OTHER THAN FULL AND OPEN COMPETITION

Arthrex, Inc. “Procedural Packages” Electronic Catalog (ECAT) Manufacturer Direct Program

Source Selection Information – FAR 2.101 and 3.104

1. Defense Logistics Agency (DLA) Troop Support, Medical Supply Chain, is the contracting activity.

2. The action being approved is the ability to solicit for DLA requirements on an Other than Full and Open competition basis in accordance with FAR 6.302-1(a) (2).

3. The goal of the Manufacturer Direct Program is to establish an alternative to manual open market purchase activity and re-engineer the business process with automated e-commerce business solution that allows Military Treatment facilities to order the required brand-name procedure packs based on a number of relevant factors for the particular need. Contractors under the Program will have their product lines loaded in the DLA Troop Support Electronic Catalog (ECAT). Items will be delivered to various Department of Defense (DoD) research centers, hospitals, clinics, and any other federal customer participating in this program. Facilities are not restricted to ordering particular types or brands of products and can order from a variety of brand-name products given the circumstances of the particular requirement, including the training and experiences of physicians which may vary from hospital, procedure, and location.

This justification will allow for the addition of specialized product to this program. Although this J&A pertains to a particular family of brand-name products (Arthrex), it does not rely solely on the authority of FAR 6.302-1(c), application for brand-name descriptions, as it does not preclude consideration of another company’s product. A variety of brand name products responsive to requirements are included in the ECAT as part of the Manufacturer Direct Program.

4. The supplies to be acquired are Arthrex hip, knee and other joints (extremities and trauma, shoulders etc.), imaging and resection Wand biologics orthopedic “procedural packages” that will be delivered Just-in-Time (JIT) for surgery, Direct Vendor Delivery (DVD) or Consignment.

Under the JIT delivery method, the Medical Treatment Facility (MTF) calls the Sales Representative when a surgery is scheduled to discuss the case, make a product selection, and set the surgery date and time. The Sales Representative will transport the procedural set to the designated site at the scheduled time. Under the DVD method, the products are shipped directly to the customer via a transportation carrier. Under the Consignment method, procedural sets are pre-positioned at the MTFs, which pay only for the products that are used during the surgery.

These “procedural packages” includes hip implants, knee implants, upper extremity reconstruction (shoulder and elbows) implants, trauma (pelvis, upper leg, lower leg, hips, hands, feet, shoulder) implants, orthobiological products (if needed), auxiliary products (such as drill bits, saw blades, bone cement, etc.), and instrumentation sets. The product mix that makes up the orthopedic "procedural package" varies based on the individual needs of the patient. The instruments are both "used" during the surgery and returned to the vendor or purchased by the hospital, so they are readily available on the shelves. DLA Troop Support will provide for all of the delivery methods (JIT, DVD and Consignment) for this procurement.

The proposed contract will be a fixed price with economic price adjustment (EPA), Indefinite Delivery/ Indefinite Quantity (IDIQ) five-year contract. The estimated dollar value for DLA’s requirement in support of DoD activities is approximately $269,170,384 over the five (5) year life of the contract, as shown in the table below:

The maximum dollar value of the proposed procurement is $471,048,172.66 and is based on a growth factor to the total estimated sales to cover any unanticipated demand.

5. The statutory 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, as implemented by FAR 6.302-1(a) (2), “When the supplies or services required by the agency are available from only one responsible source, or, for DoD, NASA, and the Coast Guard, from only one or a limited number of responsible sources, and no other type of supplies or services will satisfy agency requirements, full and open competition need not be provided for.”

6. The use of this authority is necessary because the current orthopedic marketplace consists of manufacturers that produce their own unique line of orthopedic products. Unlike many other industries, product selection in the orthopedic industry is not based solely on price and is overshadowed by physician experience and highly specialized training on use of specific surgical items. A physician’s training with a particular manufacturer’s product increases their aptitude and familiarity with the technical characteristics of the implantable products that are expected to produce a higher quality of life for their patients and/or achieve certain therapeutic results.

Arthrex products are unique and proprietary, as is the industry standard, and require highly specialized training on the part of the physician. The standard medical practice is that after a physician is trained and comfortable with a particular manufacturer’s products and the surgical procedure, that physician will typically use that manufacturer’s products consistently thereafter.

The Manufacturer Direct Program allows various manufacturers the ability to offer their products under the Electronic Catalog (ECAT) program. This allows physicians to utilize the appropriate product in accordance with training, experience, and other factors.

In addition, the Arthrex representatives are technical experts on the vendor’s products and are a vital part of helping to ensure that the patient is getting the necessary treatment. At the request of MTFs, Arthrex will have a qualified representative on site at the MTF within the timeframe specified by the facility necessary to meet their requirements. The representative provides technical advice and guidance to the physician before, during, and after implantation.

Furthermore, technical support is available twenty-four (24) hours a day, seven (7) days a week.

Contract Period Knee & Hip Arthroplasty Shoulder Extremities & Trauma Capital Consumables Imaging & Resection Biologics Total Ordering Period 1 $10,072,915 $1,252,720 $16,779,580 $12,639,388 $2,488,512 $1,806,903 $7,734,211 $52,774,229 Ordering Period 2 $10,173,059.61 $1,265,174.83 $16,946,402.48 $12,765,049.27 $2,513,253.03 $1,824,866.81 $7,811,104.74 $53,298,910.76 Ordering Period 3 $10,274,200.17 $1,277,753.19 $17,114,883.62 $12,891,959.39 $2,538,239.79 $1,843,009.63 $7,888,762.74 $53,828,808.53 Ordering Period 4 $10,376,346.26 $1,290,456.62 $17,285,039.79 $13,020,131.25 $2,563,474.97 $1,861,332.83 $7,967,192.82 $54,363,974.54 Ordering Period 5 $10,479,507.90 $1,303,286.34 $17,456,887.66 $13,149,577.40 $2,588,961.04 $1,879,838.20 $8,046,402.65 $54,904,461.18

Est 5 Year $51,376,028.63 $6,389,391.25 $85,582,793.45 $64,466,105.78 $12,692,441.07 $9,215,950.05 $39,447,674.16 $269,170,384

Controlled by: DLA Troop Support Controlled by: FSC CUI Category: Source Selection Distribution/Dissemination Control: FED ONLY POC: matthew.peoples@dla mil

As noted above, Arthrex products are provided in procedural packages that include proprietary Arthrex orthopedic products, instrumentation sets, and ancillary accessories that are essential for the surgical procedures involving the implant products. Like the other products in the Manufacturer Direct Program, these products are only offered manufacturer direct from Arthrex and are not available through a 3rd party distributor. The instruments and ancillary accessories are available individually from sources other than Arthrex, but the overall requirement for a complete surgical package ready for immediate use makes separate competitive buys of these instruments and ancillary accessories impractical and such buys would not satisfy the requirement.

There are no known manufacturers or distributors other than Arthrex that can provide requiring medical facilities with the complete procedural package under all three delivery methods and have the ability to provide the necessary technical support with regard to Arthrex orthopedic products and surgical procedures that are currently being used by the MTFs.

7. A Sources Sought Notice (SSN) was issued to ensure that offers are solicited from as many sources as is practicable. The SSN was issued on February 23, 2023 on SAM.gov, seeking sources capable of providing Arthrex procedural packages and closed on March 24, 2023.

Arthrex was the only company that expressed interest in the proposed acquisition and that could provide all the requested products.

The acquisition will be synopsized on or around August 15, 2023 through SAM.gov. In addition, this justification will be published with the solicitation in accordance with FAR 6.305(c).

8. As the Contracting Officer, I hereby determine that the anticipated prices will be fair and reasonable based on a favorable comparison to commercial pricing. Negotiations will be conducted, as necessary, to obtain fair and reasonable prices and favorable discounts.

9. Market Research was conducted on June 21, 2023 with current DLA Troop Support ECAT customers, Arthrex and other orthopedic manufacturers to inquire about the nature of the orthopedic market. Market research revealed that each manufacturer’s orthopedic implants and the surgical procedures are unique and proprietary to each orthopedic manufacturer.

10. There are no other facts supporting the use of other than full and open competition.

11. Arthrex, Inc. is the only source expressing interest, in writing, in this acquisition and will be solicited for this requirement.

12. The barriers to competition were not imposed by this agency. Unlike many other industries, products selection in the orthopedic industry is not based solely on price and is overshadowed by physician preference/experience and highly specialized training on use of specific surgical items.

There are no other known manufacturers or distributors other than Arthrex who can provide DoD hospitals with the complete “procedural package” under all three delivery methods and has direct control over a sales force that is knowledgeable in Arthrex’ products.

Arthrex, Inc. “Procedural Packages”

Electronic Catalog (ECAT) Manufacturer Direct Program

Controlled Unclassified Information (CUI) Source Selection Information – FAR 2.101 and 3.104

13. As the Contracting Officer, I hereby certify that this justification is accurate and complete to the best of my knowledge and belief.

Date CHARLES REIMER

Contracting Officer

I hereby certify that the requirements which form the basis of this justification are accurate, that these supplies meet the Government’s needs in accordance with applicable specifications, and that this justification is accurate and complete to the best of my knowledge and belief.

Date

Technical/Quality Specialist

I have reviewed this justification and recommend approval.

Date EILEEN MOTTA

Chief, ECAT Division

I have reviewed this justification and recommend approval.

Date DANIEL KEEFE

Director, Supplier Operations Medical Supply Chain

I have reviewed this justification and recommend approval.

Date MACIEJ OKULICZ-KOZARYN

DLA Troop Support Competition Advocate

I have reviewed this justification for legal sufficiency.

Date R. ZEN SCHAPER

Supply Chain Counsel DLA Counsel -Troop Support

I have reviewed this justification and recommend approval.

Date WILLIAM J. KENNY Executive Director DLA Troop Support Contract and Acquisition Management

I have reviewed approve this justification and recommend approval.

Date GEORGE W. ATWOOD, III

DLA Competition Advocate

I have reviewed this justification for legal sufficiency.

Date DLA Office of General Counsel

I have reviewed and hereby approve this justification.

Date MATTHEW R. BEEBE

Senior Procurement Executive

BEEBE.MATTH

EW.RICHARD.1

012725473

Digitally signed by

BEEBE.MATTHEW.RICHA

RD.1012725473

Date: 2023.10.27 13:48:21 -04'00'