AID-514-C-15-00003_(06)_-_J&A.pdf

JUSTIFICATION AND APPROVAL FOR OTHER THAN FULL AND OPEN

COMPETITION (J&A)

TO: Deborah Broderick, Agency Competition Advocate

FROM: Gustavo Vargas, Project Management Specialist - Office of Environment

(ENV)

SUBJECT: JUSTIFICATION AND APPROVAL FOR OTHER THAN FULL AND

OPEN COMPETITION (J&A)

REF: Contract AID-514-C-15-00003 Artisanal Gold Mining - Environmental Impact Reduction Activity, between USAID Colombia and Chemonics.

1. This document sets forth the facts and rationale justifying the use of other than full and open competition, in accordance with AIDAR 706.302-70(b)(5): Continued provision of highly specialized services when award to another resource would result in substantial additional costs to the Government or would result in unacceptable delays. This document was prepared by the Environment office in USAID/Colombia.

2. The nature and/or description of the action being approved:

USAID/Colombia competitively awarded the five-year $19,997,365 million Artisanal Gold Mining contract (Oro Legal) to Chemonics (The Contractor) on September 23, 2015, which is scheduled to conclude on September 22, 2020. This is a request to approve a time and cost extension to the Artisanal Gold Mining contract to extend the end date by six months to March 31, 2021 and increase the Total Estimated Cost (TEC) by $2,125,000 for a new total of $22,122,365. Under this time and cost extension, The Contractor will increase efforts to support the elimination of the use of mercury in gold mining.

3. Description of the supplies or services required, including an estimated value:

The specific services to be covered under the proposed extension include focused activities to demonstrate and scale up the elimination of mercury from gold mining by:

a. Mercury-free processing: Build on the broader formalization efforts and develop 3 to 6 pilots of mercury-free processing plants to demonstrate the technical feasibility and cost-effectiveness of a financial model that includes co-investment. This will help the government meet its commitments under the Mercury-Banning Law, which requires development of financial incentives for alternative technology. More than simply a technology solution, this effort will use a market-based and private-sector led approach and will link clusters of formalized mines using mercury-free processing to higher-value supply chains looking to source traceable, legal gold and willing to pay a price premium. This will harnesses the ongoing formalization work (which is a strong prerequisite for mercury elimination), and helps support small-scale mines to comply with the additional legal requirement to eliminate mercury. Mining clusters with the mercury-free processing will serve as models that other interest groups can visit. These models would showcase not only mercury elimination, but the formalization practices and environmental rehabilitation efforts that are underway.

b. Increased stakeholder engagement and dissemination: To encourage replication and scalability of the mining formalization and mercury reduction work, the cost extension will increase stakeholder engagement and dissemination efforts to share successful practices for responsible artisanal gold mining as a driver of licit regional economies. The Contractor will lead a collaborative approach to develop a communications campaign which includes participation and leverages resources from the conservation community; local and regional community groups; and private sector mining companies; and the diplomatic community.

The purpose of the communications campaign is to encourage mining formalization, including the elimination of mercury, which other communities, municipalities, and miners can replicate. The engagement and dissemination efforts will include facilitating study tours and technical collaboration between Colombian and Peruvian counterparts.

The cost estimate for the provision of the services described above is $2,125,000. Of this amount, an estimated 46% is budgeted for the mercury-free processing equipment, grants/subcontracts for direct implementation, and training. The remaining 54% is for operational expenses (labor, fringe, travel, direct, indirect) and fee.

4. Statutory authority permitting other than full and open competition:

AIDAR 706.302-70(b)(5): Continued provision of highly specialized services when award to another resource would result in substantial additional costs to the Government or would result in unacceptable delays.

5. A demonstration that the proposed contractor’s unique qualifications or the nature of the acquisition that requires use of the authority cited:

In accordance with AIDAR 706.302-70(b)(5), the Artisanal Gold Mining contractor is uniquely qualified to offer highly specialized services as demonstrated by the following points:

a. Timely intervention needed: The cost extension of the Artisanal Gold Mining contract allows the U.S. Government to support the Government of Colombia (GOC) efforts in implementing its Mercury-Banning Law as part of its broader mining formalization efforts. The recently-elected Presidential administration has underscored the importance of legality as an overarching priority of the government, mentioning mining as a specific area of focus. Mercury is a highly toxic and long term environmental challenge and Colombia has taken admirable steps to eliminate mercury from gold mining, but this task is enormously challenging and the country remains one of the world’s top mercury polluters. Now is an opportune time to ramp up USAID support to mercury elimination efforts, building on the established inter-embassy diplomatic and technical collaboration, Colombia's mercury ban fully in effect as of July 2018, and Colombia's has recently ratified the Minamata convention1. It is imperative to take advantage of the current political will and host country interest in mercury elimination efforts and the current contractor is best positioned with installed capacity to immediately commence implementation if a cost extension is approved.

b. Building on existing relationships: The relationships established by the contractor with the host country counterparts as well as technical collaboration between the contractor and the Swiss and Canadian Missions on the issue of mercury have helped to facilitate high-level engagement between the U.S. Ambassador and the Ministers of Mines and Energy and Minister of Environment. In spite of the complexities of the gold mining sector, the Artisanal Gold Mining program has become well-recognized and respected, considered by the outgoing Director of Formalization in the Ministry of Mines and Energy to play a critical role in facilitating formalization of illegal mines, a task that the government is unable to undertake. A new partner brought in at this stage to start what would amount to a new, short-term program would have to start from zero to establish and cultivate the same relationships, community linkages, and trust built over the last two years.

c. Building on existing mining formalization portfolio: The Artisanal Gold Mining program has been successful in achieving the elimination of mercury in supported mines through the use of subcontracts where small miners send their ore to the title owner's mercury free processing plants. Where the arrangement is feasible, it is a good solution, but it does not address the majority of artisanal and small-scale mines. In Colombia, the small-scale mining operations with less than 21 employees, account for 94 percent of the country’s mining operations, of which an estimated 61 percent have no legal title (illegal mining).

An increase in effort to demonstrate the cost-effectiveness and technical feasibility of pilots for mercury-free processing is needed to address this larger group of more challenging small-scale mining operations. To address this challenge, the cost extension will build on the program’s broader formalization efforts and develop pilot mercury-free processing plants linked to the portfolio of formalization projects supported by USAID.

The increased effort on mercury reduction will necessarily work with the cohort of mines being supported under the current activity. Instead of a stand-alone new activity, the cost extension will allow a comprehensive, integrated, and seamless approach where mercury elimination is central of the broader goal of formalization. This will harnesses the USAID ongoing formalization work (which is a strong prerequisite for mercury elimination), and helps support small-scale mines to comply with the additional legal requirement to eliminate mercury. Since the services under this cost extension would directly build on and work with the mining units already being supported under the program, the current contractor is essential to ensuring success of the mercury elimination efforts.

1 The Minamata Convention on Mercury is an international treaty (2013) designed to protect human health and the environment from anthropogenic emissions and releases of mercury and mercury compounds.

d. USAID priority: The USAID Administrator visited the Artisanal Gold Mining project in July 2018. The visit was highly regarded and has led to high-level interest within USAID to expand the Agency’s support towards formalization of small-scale gold mines. This time and cost extension is in response to the Administrator’s request that USAID/Colombia increase support to mining formalization under the current activity.

The Administrator approved the designation of $2,125,000 for this specific purpose to be implemented through the Artisanal Gold Mining Activity (see attached Action Memo).

In summary, the implementer is uniquely qualified to provide the required services because the implementer has built the necessary relationships with national, regional, and local government entities, civil society, miners and their associations, and the private sector. Most importantly, rather than creating a stand-alone mercury-elimination contract, the extension of the existing activity allows for a seamless and comprehensive approach to formalization, in which mercury elimination is a critical component. This builds on the existing relationships and existing mines which as essential building blocks to then implement the services described in Section 3.

There would be substantial additional costs to the Government, both tangible and intangible, and unacceptable delays would occur, should USAID be required to compete a new 18-month contract to provide the services described in Section 3. Specifically, startup costs for a new two-year program are estimated at $300,000 (or 14 percent of the intended contractual action) and include recruiting, international travel for home office personnel, new equipment, and office remodeling costs. Additionally close-out costs would be duplicated, as they would need to be incurred both by the Artisanal Gold Mining program and the new contractor. The Mission has estimated closeout costs for an activity of this size and scope at $250,000 (or 12 percent of the intended contractual action), when considering the required associated labor, fringe, benefits, travel costs necessary for internal close out and returning of expatriate family, allowances and other indirect costs. None of these costs guarantee the economies of scale that the current activity has achieved; finally, the number of personnel required plus training and relationship development time required to be where the existing program is are not achievable with a piecemeal approach.

6. Description of the efforts made to ensure that offers are solicited from as many potential sources as practicable, including whether a notice was publicized as required by Federal Acquisition Regulation (FAR) 5.2 [AIDAR 705.2].

This J&A document is made public through the Federal Business Opportunities (FBO) website (www.fedbizopps.gov). Any potential source that expresses any interest in this contractual action will be given due consideration by the contracting activity.

7. A determination by the Contracting Officer that the anticipated cost to the Government will be fair and reasonable:

Based on the review of historical costs under the Artisanal Gold Mining program, and an Independent Government Cost Estimate, the Contracting Officer has made a determination that the anticipated cost to the government will be fair and reasonable and new deliverables will be accomplished within the proposed extension. Specific/final costs will be negotiated with the implementing partner once and if this J&A is approved.

http://www.fedbizopps.gov/

8. Description of the market research conducted, and the results or a statement of the reasons market research was not conducted:

The Mission’s familiarity and understanding of the market indicates that local entities would lack the required global experience needed to bring in the most cost-effective and technically feasible mercury-free processing technologies from international sources. Furthermore, market research shows that there are limited US organizations capable of doing this type of unique and specialized work and Chemonics is the only organization currently positioned in the gold mining sector in Colombia. Chemonics can quickly and effectively implement this work, building on the existing relationships that it has built over the last four years (including a previous mining component under the BioREDD+ USAID/Colombia contract).

When analyzing the decision to increase the TEC of the contract, the Mission considered the best means to maximize the achievement of the USG’s strategic objectives for Colombia and the overall results expected relative to the existing program versus a new mechanism. A new mechanism would be inefficient and result in duplication of efforts due to the integrated nature of the mercury elimination efforts needing to work with the mines being supported under the current formalization efforts under the Artisanal Gold Mining contract. The decision to pursue a cost extension with the same contractor is based on cost-efficiency and the existence of strategic relationships, partnerships, and trust that have taken time to develop and cannot be easily or quickly replaced. Reestablishing them would cause unacceptable delays in implementation and diminish the potential impact.

9. Other facts supporting the use of other than full and open competition:

None

10. Sources, if any, that expressed an interest, in writing, in the acquisition:

No Expressions of Interest have been received in regards to this contract action. Any potential source that expresses any interest in this contractual action will be given due consideration by the contracting activity.

11. The actions the Agency may take to remove or overcome any barriers to competition before any subsequent acquisition for the supplies or services required:

Any follow-on mechanism after the Artisanal Mining Program concludes will be procured under full and open competition.

12. Technical or requirement personnel certification:

In accordance with FAR 6.303-1(c), I hereby certify that the technical statements included above and which form a basis for the justification are complete and accurate.

Gustavo Vargas, COR Date

13. Contracting Officer Certifications:

I hereby certify that the justification is accurate and complete to the best of my knowledge and belief.

Jonathan Banco, Contracting Officer Date

14. Approved/Disapproved

Approved Disapproved

Approving Official Date Deborah Broderick, Agency Competition Advocate

Clearances

Todd Hamner, Technical Office Director Date

Bryan Tollin, Legal Counsel Date