Redacted West JA.pdf

Procurement Sensitive – See FAR 2.101 and 3.104

JUSTIFICATION FOR OTHER THAN FULL AND OPEN COMPETITION

1. Defense Logistics Agency (DLA) Troop Support, Construction and Equipment 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.

3. The proposed acquisition is for a bridge contract for a period of 527 days to provide for the purchasing of commercial Metals including but not limited to, aluminum, stainless steel, carbon steel, copper, brass, titanium, nickel and nickel alloys, and other industrial metals such as wire, plate, sheet, strip, bar, angle, extrusions, pipe, tube, and any other shape required by the ordering activities in Federal Supply Classes 4710, 9505, 9510, 9515, 9520, 9525, 9530, 9535, and 9540 needed by the warfighter in the West Region of the United States. The current contract for this region, SPE8E5-15-D-0024, was effective June 30, 2015 and expires on June 29, 2020.

The proposed action will result in the award of the first bridge contract for this region. The maximum dollar value based on current sales is $34 million for a period of 527 days, with an effective period of June 30, 2020 through December 8, 2021. The milestones show full implementation of the follow-on contract will take through December 8, 2021, demonstrating a need for a 527-day bridge contract. If a competitively awarded contract is issued ahead of the projected timeframe and the contract guaranteed minimum of $50,000.00 is satisfied, orders will no longer be placed under the bridge contract.

4. The applicable statutory authority permitting other than full and open competition is

10 U.S.C. 2304(c)(1), as implemented by FAR 6.302-1, Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements.

5. The use of this authority is necessary because the required items are available only from the current contractor, I-Solutions Direct in the timeframe required. Award to any other source would result in unacceptable delays in fulfilling the Agency’s requirements. I- Solutions Direct has customer support representatives and supplier and transportation agreements in place, an understanding of customer requirements and the ordering process, and established systems interfacing with DLA Troop Support. The contract for the West Region, SPE8E5-15-D-0024, expires on June 29, 2020. At that point all resources will be exhausted, and award of the follow-on contract has been unexpectedly delayed.

In order to award the renewal contract for the West Region prior to June 29, 2020, acquisition planning would have had to begin in January 2019 in order to issue the solicitation in March 2019; however, acquisition planning was unexpectedly delayed as key acquisition personnel were diverted from the renewal effort to respond to humanitarian assistance and disaster response requirements resulting from Typhoon Yutu, which caused catastrophic damage in the Northern Mariana Islands in October 2018.

Acquisition personnel were detailed to support urgent requirements for construction materials until December 2018. During this same timeframe, key acquisition personnel were also tasked with responding to unanticipated requirements from the Department of Homeland Security at the Southern border of the United States for barrier and force protection items. Support for this initiative peaked in early March 2019, shortly after the President’s declaration of a national emergency at the Southern Border on February 15, 2019 (Proclamation 9844). When acquisition planning resumed in March 2019, DLA Troop Support determined that the pricing construct of the existing, single-award Metals Prime Vendor contracts did not appropriately account for the extreme volatility in the metals industry that resulted from the enactment of tariffs on aluminum and steel through Presidential Proclamations 9704 and 9705 under Section 232 of the Trade Expansion Act of 1962 in March 2018. These tariffs resulted in rapid price increases in these commodities, in some cases upwards of 100% above historical pricing. Two significant disruptions in the metals market resulted from the establishment of the referenced tariffs.

First, domestic mills shifted their production to compensate for the shift in production, incentivized by the fact that foreign-produced aluminum and steel increased significantly in price. The domestic production increase impacted availability of raw materials, as mill runs for other commodities were delayed. Because of the unique pricing terms implemented by some domestic mills, resellers were forced to pay higher prices than originally agreed upon. These significant price increases resulted in the second market disruption, which was that intermediate suppliers were forced to shift their business models to account for the strategic decisions of domestic mills. It was no longer a viable business practice for suppliers to carry as much stock in light of the increased risk brought on by higher and more volatile pricing, both because of the need for higher cash flow as well as the possibility of prices falling at the time of sale. This resulted in a market-wide trend toward just-in-time delivery, which made intermediate suppliers even more susceptible to the effects of mill delays. While the extreme market instability had generally tapered off in September 2018, the changes in mill production and supplier positioning have had a prolonged and ongoing impact on the market, leaving it more vulnerable to supply chain disruption.

In the aftermath of the tariffs, military customers were paying significantly higher prices for the same material and experiencing delivery delays as imports slowed and domestic mills changed production. Since the existing Metals contracts are Firm-Fixed Price contracts with economic price adjustments (EPAs) only performed on a quarterly basis, existing vendors were unable to honor contract pricing without endangering the viability of their businesses. Because pricing for each individual National Stock Number (NSN) was fluctuating so drastically on a daily basis, the typical remedies that acquisition personnel have available to them (for example, modifying the EPA ceilings) would not have been effective for the estimated 600 delivery orders processed monthly for the 1,000 items on LTC under the Metals Integrated Supply Team. Acquisition personnel spent considerable time ameliorating price concerns on an order-by-order basis until the scheduled economic price adjustments caught up with market realities. Due to the sudden unavailability of raw materials, a significant number of purchase orders for items not on long-term contract were terminated, requiring additional resources to be dedicated to re-procurement on a spot buy basis. Because this dramatic market shift required such a labor-intensive response on hundreds of delivery orders, acquisition resources were forced to prioritize the most urgent requirements. As the mills altered their production schedules and suppliers reduced their inventories, deliveries under the existing contracts were frequently delayed, if not outright cancelled, further diverting resources to contract modifications and re-procurement. Numerous items were removed from long-term contract as a result, which necessitated acquisition personnel to ensure those items were properly supported by issuing individual purchase orders for items that were no longer viably supported on long-term contract. Even after market conditions began to settle in September 2018, orders that were originally determined to be of lower priority required contractual delivery extensions and terminations and reprocurement. Furthermore, from 2018 through 2019, approximately 100 additional items were newly designated as Nuclear Enterprise Support Office (NESO) items, which necessitated a higher level of monitoring to ensure weapon system readiness, which is briefed to the Director of DLA on a weekly basis.

The significant disruption in the metals industry that occurred in mid-late 2018 as a direct result of the tariffs necessitated a change in the pricing model of the Metals Prime Vendor Program. The Agency determined that the most effective strategy to address these issues was to convert the Regional single-award program into a multiple-award Tailored Logistics Support Program (TLSP), whereby the Government would be able to obtain the lowest possible pricing based on current market conditions and would maximize competition throughout the next generation of contracts.

During this period, there were numerous, unanticipated major projects for the new customers within the United States Army Corps of Engineers (USACE) that necessitated the reallocation of personnel dedicated to the Metals Prime Vendor renewal. In both cases, regional USACE offices that were not existing customers under the Metals Prime Vendor Program decided to utilize the program at the later stages of their project planning initiatives, leaving DLA Troop Support little time or opportunity to reasonably anticipate and plan for these major requirements. Coordination for the first major project, the production and delivery of $1.2 million of metal sheeting in support of flood control at the Chena River in Alaska began in February 2019. The logistics of coordinating the delivery schedule for the significant quantities of steel required by USACE, in addition to negotiating USACE-specific terms and conditions into the Metals Prime Vendor delivery order, required key acquisition personnel to be dedicated to the project until delivery order award in April 2019. The coordination for the second major project, the purchase and delivery of $2.2 million in stop logs for Little Rock, Arkansas began in September 2019, and required dedicated acquisition resources until delivery order award in October 2019.

While DLA is now better able to project future requirements from the Little Rock regional office, the initial stop log project were not communicated to the Agency until the customer was ready to proceed with the order. Both projects delayed the renewal timeframe by several months.

The acquisition plan is to issue a single solicitation for a multiple award tailored logistics support program that will replace the existing four (4) Metals Prime Vendor Regions. It is essential that DLA Troop Support maintain the ability to purchase Metals for the West Region, in the period from June 30, 2020 through December 8, 2021. This proposed bridge contract will ensure continuous contract coverage, providing for an uninterrupted supply of vitally needed Metals supplies throughout the West Region. If this bridge contract is not awarded and coverage lapses, DLA’s ability to provide much-needed supplies will be significantly impaired, as the traditional DLA supply system could not support the volume of individual orders that are processed through the Metals program. I- Solutions Direct is the only established firm capable of providing continued support for these vital Metals items in the West Region while the follow-on competitive acquisition is being completed. There is no other company that would be capable of assuming support without a ramp up period of at least thirty (30) days. During that time period, customer support would be severely impacted. I-Solutions Direct’s sufficient performance on the existing contract indicates that it has the necessary capabilities to provide material and support throughout the region without delay. A new contractor would require at least a thirty (30) day ramp-up period to form relationships with local suppliers and manufacturers located in the West Region, identify potential delivery service and transportation requirements, establish adequate purchasing, distribution and quality control systems, hire local customer support representatives, and implement systems that would interface with DLA Troop Support.

6. This requirement will be published to Contract Opportunities as required by FAR Subpart

5.2. In addition, this justification will be made available for public inspection after award, in accordance with FAR 6.305.

7. As the Contracting Officer, I hereby determine that the anticipated cost to the Government will be fair and reasonable based on price analysis, including comparison to available commercial pricing, General Services Administration (GSA) pricing, and other Government contracts.

8. With the exception of synopsizing this requirement, no additional market research will be conducted and no other firms will be solicited since the required supplies and services are only available from the incumbent contractor in the required timeframe.

9. There are no other facts supporting the use of other than full and open competition. The current contract with I-Solutions Direct is required to support customer requirements until a follow-on initiative is competitively awarded.

10. I-Solutions Direct is the only source expected to express an interest in this bridge contract.

11. The proposed bridge contract covers the West Region. The solicitation for the follow-on contract will be issued on a full and open competition basis by October 5, 2020 to allow for sufficient time to account for the change in acquisition strategy of the renewal initiative. The award of the follow-on contract is expected by November 2021, after which there is a 30-day implementation period.

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

DATE LAUREN VENDETTI

Contracting Officer

I have reviewed this justification and recommend approval.

DATE HOWARD T. PAGE III

Director of Supplier Operations Construction & Equipment

I have reviewed this justification and do not recommend approval.

DATE ROBERT J. PANICHELLE

DLA Troop Support Competition Advocate

I have reviewed this justification for legal sufficiency.

DATE MICHAEL P. WILSON

Supply Chain Counsel DLA Counsel – Troop Support

I have reviewed and hereby approve this justification.

DATE WILLIAM J. KENNY

Executive Director DLA Troop Support Contracting and Acquisition Management