Final_IJKS_JA_KGL_Redacted.pdf

Justification for Other than Full and Open Competition Under Authority of 10 U.S.C. 2304(c)(1)

Full Foodservice Prime Vendor for Customers In Iraq, Jordan, Kuwait, Syria

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

2. Nature of Action being Approved: Authorize performance for DLA requirements on an Other than Full and Open Competition basis.

3. Description of Supplies: The proposed contract action will be an indefinite-delivery, indefinite-quantity (IDIQ), fixed price with economic price adjustment contract to provide perishable and semi-perishable subsistence supplies to authorized customers in the Iraq, Jordan, Kuwait, Syria Areas of Responsibility (AORs). The proposed contract action will have a four (4)-month base period of performance and include two (2) three (3)-month option periods. The estimated contract value of the proposed bridge contract is $170,000,000.

4. Statutory Authority: The 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. Required Use of the Authority: The use of this authority is necessary because the required foodservice supplies are available in the AOR from only KGL Food Services WLL (KGL) in the timeframe required.

On December 21, 2018, following a nearly three-year competition under solicitation SPE300-15-R- 0042 which involved seven offerors and various bid protests before the Government Accountability Office (GAO) and United States Court of Federal Claims (COFC), DLA decided that KGL’s proposal in response to that solicitation offered the best value to the Government. Based on the results of the competitive procurement, DLA awarded KGL a 60-month IDIQ Subsistence Prime Vendor (SPV) contract to provide full-line food distribution of subsistence items to authorized DLA customers located throughout Iraq, Jordan, Kuwait, and Syria. KGL’s contract had an estimated value of approximately $690 million, with a guaranteed minimum dollar value of approximately $69 million and a contract maximum value of approximately $1.38 billion over the 60-month performance period. KGL’s contract also included an initial 6-month period that allowed for transition efforts with the incumbent SPV contractor, ANHAM FZCO (ANHAM). ANHAM’s SPV contract supporting the region expires on September 12, 2019.1

On December 27, 2018, ANHAM was suspended from Government contracting. ANHAM’s suspension related to the federal indictment of several individuals for alleged conduct associated with ANHAM’s SPV Afghanistan contract and an Army National Afghan Trucking contract. The charges against those individuals included Major Fraud Against the United States, Violation of the

1 The original SPV Iraq, Jordan, and Kuwait contract with ANHAM, Contract No. SPM300-10-D-3373, was awarded on April 14, 2010, and expired on September 12, 2016. Since that time, three bridge contracts were awarded to ANHAM. The first bridge was for a 365-day performance period, effective September 11, 2016, through September 12, 2017. The second bridge was for an additional 365-day performance period, effective September 11, 2017, through September 12, 2018. The third, and current, bridge contract is for an additional 365-day performance period, effective September 11, 2018, through September 12, 2019.

International Emergency Economic Powers Act, and Conspiracy to Launder Money. Despite its suspension from Government contracting, DLA made a compelling reasons determination that allowed ANHAM to continue uninterrupted SPV service in the Iraq, Jordan, and Kuwait region because ANHAM was the only contractor that could perform in the AOR during that time.

In January 2019, two unsuccessful offerors, ANHAM and Intermarkets Alliance & USFI, Inc., J.V.

(IMG), filed post-award bid protests with COFC challenging DLA’s decision to award the SPV Iraq, Jordan, Kuwait, and Syria contract to KGL. DLA advised the COFC and the parties to the litigation that the Government would voluntarily stay performance under KGL’s contract as the litigation proceeded, and continued to use ANHAM’s SPV contract, which continued until September 12, 2019, to satisfy the requirement, as authorized by the DLA compelling reasons determination.

By March 2019, with only six months remaining on ANHAM’s contract, DLA notified the COFC of its decision that it was in the best interest of the Government to begin transitioning contract support for the requirement to KGL in order to ensure SPV support could continue in the region after the conclusion of the contract held by ANHAM, which at the time remained excluded from Government contracting.2 On March 12, 2019, consistent with DLA’s notification to the COFC, DLA issued a modification to KGL’s contract that authorized KGL to perform implementation and transition efforts with the exception of (1) sourcing product, (2) stock transfers from ANHAM to KGL, (3) receipt of customer orders, and (4) delivery to customer locations.

In April 2019, while ANHAM remained excluded from Government contracting and consistent with prior orders of the COFC, DLA notified the parties to the litigation of its intent to lift the voluntary stay of performance and proceed with full transition efforts with KGL. At that time, ANHAM did not object to DLA’s plans to proceed with a full transition nor did it directly respond to DLA’s notice. On April 22, 2019, KGL was authorized to begin a full contract transition, with the exception of receiving customer orders and performing deliveries. Through the summer of 2019, KGL and DLA expended significant resources to implement KGL’s contract in order to avoid a break in food distribution support in the AOR at the end of ANHAM’s contract. These efforts included the process of reviewing and approving KGL’s full catalog of items, a process that alone took over 30 days to complete. During this process, DLA was required to review each of KGL’s items to ensure consistency with contract requirements and to determine whether the prices are fair and reasonable.

Additionally, electronic Subsistence Total Order and Receipt Electronic System

(STORES) catalogs were established. This included the creation of various administrative catalog numbers that each customer order is sourced against, linking more than fifty (50) customer locations to the correct catalogs, processing the appropriate electronic data interchange (EDI) transaction to add each of the items to these catalogs, and performing an additional price verification to ensure the initial fair and reasonable prices were reflected on the live catalogs. KGL also requested and

2 ANHAM had filed a complaint challenging its suspension in the United States District Court for the District of Columbia on April 26, 2019. On May 21, 2019, ANHAM entered into an administrative agreement with DLA which resulted in a lifting of its suspension from Government contracting.

obtained Army Public Health Command approval of its facilities. KGL began sourcing its full catalog of items, as well as negotiating with and procuring from ANHAM much of ANHAM’s residual stock. As part of these transition efforts, ANHAM also began ramping down its performance, including ceasing procurement of replenishment items from the Continental United States (CONUS). On August 3, 2019, DLA issued a modification to KGL’s contract authorizing KGL to begin accepting customer orders and performing deliveries.

On August 29, 2019, the COFC issued a decision ruling in favor of ANHAM

Consequently, the COFC issued an order enjoining the Government from obtaining further performance from KGL under its SPV contract except to the extent that such activities are required under a bridge contract or other solution designed to ensure the continuous availability of the supplies or services provided for under the contract. Given the transition activities that have occurred to date, only KGL currently has the necessary capability to immediately perform as an SPV in the Iraq, Jordan, and Kuwait AOR and to continue complete performance required to ensure the availability of SPV support.

Immediately ramping KGL down and transitioning back to ANHAM would result in unacceptable delays in fulfilling the Government's immediate subsistence requirements. With the ramp down of ANHAM’s supply chain and transition of SPV stock, KGL is the only food supplier that has a current pipeline of items in place (on order, in-transit, and on hand) that is needed to fulfill all customer requirements. KGL’s current pipeline consists of days of supply (DoS). This includes

DoS on order, DoS in-transit, and DoS on hand. KGL also has the necessary warehouse space required to perform under this contract to receive and download inbound containers, store inventory, and perform picking and packing to load outbound containers for deliveries to customer locations. KGL has continued to maintain and have access to all of its offered facilities throughout the entire transition process and continues to represent that it will have access to those assets for SPV performance. DLA has confirmed stock has transferred to the facilities; DLA’s Contracting Officer Representative has moved offices to these facilities; and DLA has sent various other personnel to these facilities to confirm and witness ongoing operations. DLA has continued to reach out to other government officials administering contracts with KGL and has found that KGL has continued to perform in Kuwait. In addition to these facilities, KGL has the personnel needed, in all disciplines, to perform its contractual responsibilities under its SPV Iraq, Jordan, Kuwait, and Syria contract. Since the transition has commenced, KGL’s personnel strength for its SPV operations is at

. KGL also possesses the other necessary resources, including material handling equipment and trucking assets, to perform the requirements of the contract.

While ANHAM is still obligated to perform under its SPV Iraq, Jordan, Kuwait contract through September 12, 2019, ANHAM is not in a position to perform SPV requirements beyond the end of its bridge contract. Based on ANHAM’s most recent management reports, its total stock on hand equates to approximately DoS when compared to its contractual requirement of 45 DoS.

ANHAM also has only DoS in-transit, and DoS on order. The supply chain required for full

SPV support for this requirement would have at least 120 DoS, which encompasses product on order, in-transit, and on hand. For example, at the time that ANHAM submitted its first draw-down plan to DLA, ANHAM represented DoS in its supply chain for that time period, which was inclusive of product on order, in transit, and on hand. For the IJKS region, overseas transportation from CONUS, without considering the time necessary to source and consolidate material, can take an average of sixty-five (65) days alone, depending on the point of embarkation. Delivery timeframes can range from eighty (80) to ninety-five (95) days when taking into consideration the fact that the item must be sourced, ordered and then shipped. Given ANHAM’s current DoS, there is a significantly large gap, , in its supply chain which confirms ANHAM’s inability to support immediate customer requirements under this contract. Conversely, KGL currently has DoS, therefore, demonstrating its ability to support immediate customer requirements under this contract.

Since ramping down its pipeline, ANHAM is also reporting a significantly high number of Not in Stock (NIS) items, which would result in unacceptable customer support levels for this requirement. To date, more than of ANHAM’s inventory have been transferred to KGL. ANHAM does not have the stock to perform the requirements of the contract. While ANHAM asserts given DLA’s experience in this transition to date, that is not the case. Initially, KGL has purchased, and taken ownership of, the stock transferred from ANHAM. The material cannot simply be given back to ANHAM for its performance. Additionally, ANHAM has continuously refused to deliver its products to KGL’s warehouse in support of transition efforts based on KGL’s ongoing litigation with the Kuwait Ports Authority (“KPA”). In communications with DLA, ANHAM claimed . It was the transportation activities conducted by KGL, not ANHAM, that ultimately resulted in product being moved from the facilities of ANHAM to KGL. Based on ANHAM’s earlier representations, and the additional work KGL was required to perform to effectuate stock transfers, KGL, and not ANHAM, is the only firm that could successfully transfer stock. In order to transfer product back to ANHAM, both ANHAM and KGL must agree to the terms of that transfer, in a separate commercial agreement negotiated between the two parties, which would have to address both payment, title transfer, and transportation. The prior agreement on the transfer of stock between KGL and ANHAM took

Thus, even if stock could be transferred back to ANHAM, such a transfer could not occur in sufficient time to allow ANHAM to perform the immediate requirements of a bridge contract.

In terms of its warehouse capacity, in addition to

Throughout the life of ANHAM’s contract, ANHAM has represented that the

Instead, KGL undertook the responsibility of transferring this material to its facilities.

As a result, there is risk associated with ANHAM’s ability to support

Lastly, personnel shortages and ongoing issues with the Kuwaiti documentation necessary for ANHAM employees to remain in country for employment, commonly known as the Kuwaiti labor file, continue to impact and restrict ANHAM’s ability to conduct current operations.

ANHAM has not demonstrated that it has the personnel strength available to support immediate customer requirements

ANHAM also represented

Previous transitions in this AOR and surrounding AORs have demonstrated that employees may leave an incumbent Prime Vendor and seek continued employment at the new Prime Vendor.

While ANHAM asserts that it has maintained its readiness to continue performance under its current SPV Iraq, Jordan, and Kuwait contract, the reasons above demonstrate how transitioning back to ANHAM as the primary food supplier for this AOR would cause an unacceptable break in supply and have a direct, negative impact to overall military readiness and morale. KGL is currently the only food supplier in the Iraq, Jordan, Kuwait, Syria AOR with the required stock of items available and that has an active, fully implemented STORES electronic catalog. Customers are no longer linked to ANHAM’s STORES catalogs to place new orders. It can take 30 days or more to establish new STORES catalogs for ANHAM and at least 90-100 days for ANHAM to begin stocking those products from CONUS in its Kuwaiti warehouses. As previously mentioned, DLA would be required to perform a new review of each of ANHAM’s items to ensure consistency with contract requirements and to determine whether the prices are fair and reasonable. Additionally, while

ANHAM’s catalogs can be reinstated in STORES, each catalog would need to be relinked to each customer location, the appropriate EDI transaction to add each of the items to these catalogs would need to be processed, and the additional price verification would need to be performed prior to the catalogs going live for customer ordering.

ANHAM’s inability to meet the requirement will continue throughout the period of the bridge contract authorized by this justification. In particular, KGL is expected to begin deliveries to customers time. Attempting to transition from performance by

KGL to performance by ANHAM therefore poses a high risk that the requirement will not be met both immediately and during the entire period covered by the bridge contract.

The period of KGL’s continued performance will provide necessary SPV coverage and afford DLA adequate time to take corrective action in response to the recent COFC decision, which may include the ramp down of KGL and transition to another offeror should another offeror receive the award.

The proposed action will result in the award of a bridge contract to KGL with a four (4)-month base period of performance and include two (2) three (3)-month option periods. The inclusion of option periods to this proposed contract action is to account for any transition that may need to occur after the corrective reevaluation is complete and any other contingencies that arise delaying award and implementation of the full follow-on contract. DLA Troop Support generally expects that OCONUS SPV contract transitions take up to six months to complete before a new contractor is in a position to fully perform, and provides for this in the OCONUS SPV contracts. This implementation period takes into account critical milestones such as establishing logistical infrastructure in the region and conducting fair and reasonable pricing determinations in order to build a Prime Vendor’s supply chain pipeline of all required cataloged subsistence items (ranging from 600-800 items) from the United States to OCONUS warehouse locations where performance occurs. These milestones also include establishing fully functional catalogs in STORES, EDI testing, ordering point establishment/validation, PHC inspections of the Prime Vendor’s facilities, hiring of additional personnel and stock transfers from the incumbent Prime Vendor to the new Prime Vendor. The proposed bridge is necessary to ensure uninterrupted service to the customers in the Iraq, Jordan, Kuwait, and Syria AOR and to avoid mission failure. KGL is able to immediately meet DLA requirements. As of August 4, 2019, KGL began receiving orders for all Kuwait customers and began deliveries on August 7, 2019. As of August 11, 2019, KGL began receiving orders for all Jordan customers and began deliveries on August 19, 2019. As of August 25, 2019, KGL began receiving orders for Iraq customers with anticipated deliveries to begin on September 8, 2019. As mentioned above, KGL will achieve FOC by the expiration of ANHAM’s contract.

The United States military, Department of Defense, Department of State, and coalition forces rely on this DLA prime vendor contract for all of their foodservice needs in this combat area of operation.

Failure to efficiently feed our military service members would constitute mission failure and overall impact to warfighter readiness and morale. Only KGL has the supply chain, warehousing and personnel in place to support the high volume demand of our customers in this AOR. Failure to award a bridge contract to KGL will result in a break in Prime Vendor support for our customers.

6. Publication: A notice will be published in FedBizOpps. All information pertinent to the special notice will be available to the general public at website www.troopsupport.dla.mil. In addition, this justification will be made available for public inspection, after award, in accordance with FAR 6.305.

7. Fair and Reasonable Price Determination: As the Contracting Officer, I hereby determine that the anticipated cost to the Government will be fair and reasonable based on price analysis, which will include an overall assessment of market conditions and a comparison of the offered distribution price and item prices with recent competitively awarded OCONUS Prime Vendor contracts

8. Market Research: The information supporting this action is based primarily on the Government’s knowledge of the foodservice market in the region. With the exception of synopsizing the requirement, no additional market research will be conducted, and no other firms will be solicited since the Government is unaware of any other firm in the region with the existing capability, including electronic STORES cataloging, to perform in the timeframe required. Although ANHAM has claimed that it has the ability to perform, as explained above, only KGL maintains current capability.

9. Other Supporting Facts: There are no additional facts supporting the use of other than full and open competition.

10. Potential Sources: KGL and ANHAM are the only sources expected to express an interest in this proposed bridge contract.

Although ANHAM asserts it has the capability to continue performance, KGL remains the only source capable of providing the customers with uninterrupted SPV support in the immediate timeframe required. KGL is the only Prime Vendor with the existing supply chain, infrastructure and personnel in place to ensure the continuous availability of the supplies and services provided for under this contract.

11. Removing/Overcoming Barriers to Competition: A competitive solicitation was issued on

December 18, 2015, and an award was made to KGL on December 21, 2018. After the COFC decision, dated August 29, 2019, DLA is taking additional corrective action on this acquisition. It is anticipated that all future acquisitions for these requirements will be competed on a full and open competition basis.

I have reviewed this justification and recommend approval.

DLA Competition Advocate Date

I have reviewed this justification for legal sufficiency.

DLA Office of General Counsel Date

I have reviewed and hereby approve this justification.

MATTHEW R. BEEBE Date Senior Procurement Executive

BEEBE.MATTHEW.RI

CHARD.

Digitally signed by

BEEBE.MATTHEW.RICHARD.

Date: 2019.09.06 12:45:00 -04'00'