New_GE_COI_JA_(SPE_signed_4Nov16)_Redacted.pdf

DEFENSE LOGISTICS AGENCY

HEADQUARTERS

8725 JOHN J. KINGMAN ROAD

FORT BELVOIR, VIRGINIA 22060-6221

Source Selection Information – See FAR 2.101 & 3.104

CLASS JUSTIFICATION FOR OTHER THAN

FULL AND OPEN COMPETITION

I. CONTRACTING ACTIVITY

This Class Justification and Approval (J&A) is submitted to request authority for Other Than Full and Open Competition to support requirements generated by the Air Force, Army, Navy, the Defense Logistics Agency (DLA), and Foreign Military Sales (FMS) via a Captains of Industry (COI) DLA formal solicitation. The contracting authority for this requirement is DLA Aviation, Strategic Acquisition and Programs Directorate in Richmond, VA.

II. NATURE AND/OR DESCRIPTION OF THE ACTION BEING PROCESSED

Due to the circumstances described herein, this activity requests authority for the negotiation and award of multiple contracts on a sole-source basis for performance based supply chain management and logistics support of engines manufactured by General Electric Aircraft Engines (GE) including, but not limited to, the F101, F110, F118, F138, F404, F414, T64, T408, T700, TF34 and J-85 families of Engines. As explained in more detail herein, the support includes wholesale supply and logistics support, inventory management, maintenance planning, configuration management, and repair of repairables for Service customers and sustainment engineering associated with these end items. The all-encompassing goal will be to improve engine availability for these platforms. The acquisition will be conducted using Other Than Full and Open Competition as prescribed by FAR 6.302-1, Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements. This action will result in the award of multiple contracts consisting of one five (5) year base period and one five (5) year option period. In accordance with FAR Part 10, additional market research will be conducted prior to the exercise of the five-year option period. In no event will the total contract period exceed the ten-year period authorized by 10 U.S.C. 2304a(f), unless appropriate approval is obtained. This sole source requirement will be negotiated with the following company:

General Electric Aircraft Engines General Electric Aircraft Engines One Neumann Way 1000 Western Avenue Cincinnati, OH 45215 Lynn, MA 01905-2655

The Government anticipates purchasing material and services under these contracts from, but not limited to, the following GE CAGE codes: 07482 (Cincinnati) and 99207 (Lynn). Additional GE CAGE codes that may provide support under these contracts are provided below:

General Electric Captains of Industry (COI)

The length of the base period and term of the contracts is considered optimal for the following reasons:

It affords the contractor sufficient time to recoup initial investments associated with facilities, parts, obsolescence issues, and reliability management.

It affords the contractor opportunities to enter into long term commitments with subcontractors (including organic depots) in order to provide sustained efficiencies/economies of scale to the military service user.

The U.S. Marine Corp CH-53E helicopter, which is powered by the GE T64 Engine, is planned to be retired from Service in 2028 and is the first contract projected for award under this Class J&A. Anticipating a 2017 award, this contract term enables support for the majority of the sunset plan. If at the end of the period covered by this Class J&A additional support for the T64 sunset is required, this Class J&A may be amended to support that specific requirement. Additionally, this effort will enable DLA to establish support for the GE T408 Engine, the new engine for the CH-53K replacing the CH-53E. The ability to maintain support from a single contractor during parallel sunset and ramp-up cycles will improve support and protect DLA from over-investing in inventory.

It enables the contractor to implement logistical and technical changes required to realize reliability improvements.

It allows for the elimination of duplicative contract and program administration costs for like and similar items.

It affords GE the opportunity to leverage investment in support processes across similar items, thereby saving additional costs.

This support strategy unifies support for components across engines and Service boundaries, defining performance objectives that must be delivered by GE.

The estimated value of is based on the 10-year value of all GE consumables, DLRs and possible Depot Support initiatives tied to the GE Engines established at paragraph II above.

The estimated award date for the first Depot Support initiative is FY2017.

The contracts will primarily be funded by the Defense Working Capital Fund. Provisions will be incorporated to include service provided funding to enable the Services to leverage these contracts to increase savings for depot maintenance, repair or remanufacturing of repairables, engine modifications and service life extension programs. It is anticipated these contracts will be awarded as individual engine family contracts over the 10-year period. Various contract types

07639 K5294 35012 4N727 19623 01289 59501 97953 97415 058R3 60029 05624 1R0N6 81039 35351 1R9D8 052B7 may be considered for each engine family, as applicable, including Firm Fixed Price, Firm Fixed Price Incentive, and Fixed Price with Prospective Price Redetermination.

Four (4) different support strategies will be considered and may vary across the engine family requirements, as appropriate. The support strategies for these contracts are discussed in Section III below.

III. DESCRIPTION OF THE SUPPLIES/SERVICES REQUIRED TO MEET THE

AGENCY’S NEEDS

This Class J&A covers multiple acquisitions of repairable and consumable material end items and support to engine maintenance to include both material and services, including potential repair or remanufacturing of repairables. This Class J&A covers all material associated with GE Engines identified at paragraph II above. Accordingly, the total maximum dollar value of this Class J&A is , which was calculated utilizing the estimated 10-year dollar value of GE sole source consumable and DLR NSNs subject to performance based support, stock support and transactional support, as described herein, along with an estimated 10-year dollar value for the holistic, engine-family depot services support.

The estimated 10-year total dollar value for consumables was calculated by applying the material acquisition unit cost (MAUC) or estimated unit price to the average annual demand quantity for a 10-year contract duration. The estimated DLR value was calculated based on average DLR spend with GE for the past three years. The Depot services estimated value was calculated based on current experience with the holistic, GE F Series Depot support contract.

The acquisitions will be comprised of four support strategies: Depot Support, Performance Based Support, Stock Support, and Transactional Support. Continuous spare parts support is required to avoid impacting the mission requirements of the various weapon systems utilizing these parts.

Delivery requirements to be solicited for spare parts will be developed using standard DLA forecasting systems and processes, additional tools developed with GE, or a combination of both.

The Depot Support strategy(ies) is envisioned as an iterative, holistic, engine family-by-engine family support contract. A unique contract will be developed for each engine family with the intent that all, holistic support requirements for that family (during the 5-year base period and potential 5-year option period) will be part of that unique engine family contract. With Depot Support, GE will be required to support all material requirements for the repair of repairables and engine maintenance in Government repair sites for GE Engines. GE will be required to fill all material requirements emanating from individual component repair bill of materials (RBOMs) at DoD repair sites for GE Engines. In addition to filling the RBOM requirements, GE is expected to reduce overall component Repair Turn Around Time (RTAT), improve component reliability, improve maintenance planning and make recommendations for Engineering Change Proposals (ECPs). Additionally, GE will be required to aggregate all material requirements - i.e.

production, repair, and allowances - in order to leverage the best value for material support. The Depot Support requirement represents a comprehensive and holistic performance based supply chain management program to support GE Engines serviced at

Government repair sites. The T-64 Engine, which powers the Marine Corps CH-53E Heavy Lift Helicopter, is the initial candidate for this Depot Support strategy. The T-64 Depot and Marine Aviation Logistics Squadron support improvement project will include approximately 1,600 NSNs with annual demand value of approximately per year.

The following three support strategies - Performance Based Support, Stock Support and Transactional Support - will be developed under one contract action as these support strategies encompass all GE sole source parts similar to a traditional, original equipment manufacturer (OEM) corporate contract acquisition and are not specific to a family of Engine parts. The vision is this contract will eventually replace the current GE Joint Opportunities Contract and provide support for sole source GE Consumables and Depot Level Repairables not associated with the aforementioned, ongoing Engine family focused projects.

o Performance Based support will consist of logistics management, which includes wholesale supply planning and support, depot-level consumable support, material management, engineering support and sustainment elements, packaging, storage, transportation, reliability improvements, and field engineering support for a too be determined population of items with frequent demand. GE will be required to meet supply chain performance based metrics for material availability and backorder age for this population. The performance metrics will be based on the level of demand for the individual NSN and will be measured against DLA’s current performance baseline. Examples of potential contract metrics include:

improvement in production lead time (PLT), production capacity, forecasting and material availability (MA), reduction of administrative lead time (ALT), unfilled orders (UFOs), on time delivery (OTD), and backorder age.

o Stock support will include items that are unit priced and ordered at lead time similar to current long term contracts.

o Transactional support will include items that are priced on an ad-hoc basis using an expedited pricing methodology to be negotiated. These NSNs are included in the Class J&A herein and will be recertified as GE sole source items prior to being procured.

IV. STATUTORY AUTHORITY PERMITTING OTHER THAN FULL AND OPEN

COMPETITION

Use of Other than Full and Open Competition is authorized by 10 U.S.C. 2304(c)(1) and FAR 6.302-1, as there is only one responsible source and no other supplies or services will satisfy agency requirements. The acquisition is restricted to the prime engine manufacturer and only source of supply known to have the capability of furnishing the required logistics support – GE.

V. DEMONSTRATION THAT THE CONTRACTOR’S UNIQUE QUALIFICATIONS

OR NATURE OF THE ACQUISITION REQUIRES THE USE OF THE AUTHORITY

CITED ABOVE

In addition to spares support, this Class J&A covers performance based support, forecasting, supply chain management and the application of OEM Engineering Expertise in analyzing wear-out rates and replacement factors impacting sustainment requirements for GE Engines. Only GE can provide the necessary expertise, capacity, capability and proficiency to perform this effort.

GE is the only company which possesses the requisite engineering expertise, configuration management, tooling, and management knowledge to ensure that items conform to the proper form, fit and function, thus keeping complex engines reliable and safe. GE is the only source that possesses the full range of technical data (some of which is proprietary) required to manufacture the items that are covered by this Class J&A. GE is the only contractor that can leverage the production capability and has an in-depth knowledge of the vendor base capable of supporting these engines at the required level of support. For the sole source material provided for direct engine support, it has been determined the Government does not have complete, unrestricted data packages available. Additionally, GE has established internal production processes and qualified various industrial support contractors as suppliers. With regards to the material support for the repair of engine components at DoD repair depots, GE’s overall systems engineering knowledge and technical expertise in the various engines make it singularly capable of performing the full scope of the depot support requirement. No contractor other than GE, the sole manufacturer of the various engines to be supported, has the capability to perform all the requirements of the comprehensive performance based supply chain management program. GE is the only entity with the full data rights to provide all the sole source material as well as the OEM based data and systems engineering expertise to fully support the complete range of depot maintenance requirements across the full spectrum of the GE provided engines.

The key overarching objective of these contracts is to maximize the availability/use of the various engines by providing timely material support through initiatives such as: incentivizing reliability improvements; streamlining supply chain management; and improving maintenance processes and procedures. In order to meet this overarching objective, the provider must have the ability to drive changes into the engine configurations and, more importantly, understand, analyze, and assess the implications—both in terms of engine performance and operational usage—of any potential configuration change. To do so, this effort will require engineering and logistics support personnel with an unfettered ability to reach back to the OEM--GE--to support engineering investigations, fault detection and isolation, repair development, modification development, supportability analysis, and the associated technical documentation development and support. GE is the only source that can provide this capability.

Only GE has personnel with the requisite breadth and depth of experience and understanding of the totality of technical data necessary to fulfill this requirement and ensure the currency, accuracy, and completeness of the technical data and associated databases. Finally, once modifications or process changes are made by the Government, only GE has the existing infrastructure to ensure timely execution of such changes, including the ability to efficiently execute changes simultaneously into production and fielded aircraft.

Furthermore, by having only one contractor responsible for the bulk of supply chain management, the Government has a single focal point with management accountability and contractual responsibility. No other source has the long-standing business relationships with the supplier base that GE has developed relative to this requirement. No other source can leverage this supplier base as well as GE can to assure the continued effective, reliable, and safe sustainment of the supply chain. Any other contractor would introduce an unacceptable degree of risk into the supply chain effort and, ultimately, into the GE engines.

In sum, no contractor other than GE has the requisite data and detailed systems engineering and integration knowledge to execute the highly integrated and complex performance based supply chain management and Depot maintenance support requirements successfully as detailed herein.

Additionally, by leveraging GE’s robust capabilities DLA is expected to see improvements in material availability to greater than 90%, savings of 5% or greater, and reduced inventory investment requirements of at least 10%.

VI. DESCRIPTION OF EFFORTS MADE TO ENSURE THAT OFFERS ARE

SOLICITED FROM AS MANY POTENTIAL SOURCES AS DEEMED PRACTICABLE

Due to the uniqueness of this initiative, the requirements for each possible support strategy as described herein are in the process of being developed and have not been finalized. Accordingly, a Sources Sought / Request for Information (RFI) waiver was granted by the Head of the Contracting Activity (HCA) pursuant to DFARS PGI 206.302-1(d). However, this requirement will be synopsized in the Federal Business Opportunities (FedBizOpps) web page as required by FAR 5.201. It is anticipated that sources having an interest in subcontracting may be identified through synopsis. Although the Government does not own data to support acquisition of these items from any other source, any source who responds to the Government as a result of the synopsis will be identified to the prime contractor as a potential for subcontracting possibilities.

Future interest from additional sources is not anticipated at this time, but future requirements will nevertheless be advertised via FedBizOpps as well to ensure that potential alternate sources are aware of the requirement and can identify interest in support for the applicable items.

VII. DETERMINATION BY THE CONTRACTING OFFICER THAT THE

ANTICIPATED COST TO THE GOVERNMENT WILL BE FAIR AND REASONABLE

The Contracting Officer has determined the anticipated cost to the Government of the supplies/services covered by this Class J&A will be fair and reasonable. General Electric will be required to provide certified cost or pricing data in accordance with FAR Part 15. A review of the proposed prices will be conducted where the Government will review GE’s cost data, to include proposed labor hours, types and quantities of material, historical material prices, and other direct costs. A Forward Pricing Rate Agreement (FPRA) or Forward Pricing Rate Recommendation (FPRR) for direct and indirect rates will be provided by the Defense Contract Management Agency (DCMA). For GE facilities that do not have a FPRA or FPRR, direct and indirect rates will be negotiated and established in a rate agreement. Profit will be negotiated using the Weighted Guidelines Method.

GE will not be required to provide certified cost or pricing data for commercial items procured using FAR Part 12 procedures. To evaluate the proposed price of commercial items, price analysis will be performed in accordance with FAR Subpart 15.4. Should data other than certified cost or pricing data be utilized, the Government’s negotiation objective will be developed using local technical analysis, negotiated direct and indirect rates, and profit.

A fully compliant audit will be performed and DCMA/Defense Contract Audit Agency (DCAA) assistance will be requested as necessary. Detailed documentation and justification of price reasonableness will be disclosed in the official price negotiation memorandum, as required, to be prepared upon completion of negotiations. Bringing all GE requirements together increases DLA’s leverage with the contractor. DLA believes this leverage will result in significant savings over existing disparate support strategies, as supported by a business case analysis.

The ten-year term of each contract (5-year base period plus one 5-year option period) will incentivize GE’s continued investments in reliability improvements, obsolescence management, process improvements and more efficient depot operations over the contract period. Inherent in the ten-year contract structure is an incentive to continue to improve reliability and drive down cost. These contracts will be negotiated assuming decreased costs associated with improved reliability and availability through the potential ten-year performance period of the contract. On the basis of the foregoing, the Contracting Officer hereby determines the anticipated cost to the Government will be fair and reasonable.

VIII. DESCRIPTION OF THE MARKET RESEARCH CONDUCTED AND THE

RESULTS, OR STATEMENT OF THE REASONS MARKET RESEARCH WAS NOT

CONDUCTED

While the market includes many supply chain service providers that would be capable of performing a portion of the logistics management required (i.e. forecasting, warehousing etc.), GE, as the OEM of the engines, is the single source with integration ability at multiple levels with the military services and the engineering, obsolescence management, modeling and simulation capabilities to provide the engine availability and end-to-end support the customers desire. A FedBizOpps synopsis will be issued to advise industry of the pending procurement and solicit inquiries from interested parties. It is anticipated that no other source other than GE, the only known source capable of providing these parts and services, will be interested in this procurement.

As indicated at Section VI above, a waiver to Sources Sought and RFI requirements was approved by the HCA. Sources Sought and RFIs are market research tools used by the Government to obtain information regarding industry's ability to provide products and services.

Customarily, once the Government defines its requirements, the procuring activity conducts market research in the form of Sources Sought or RFI to determine if commercial items or non-developmental items are available or could be modified to fulfill the Government's requirements.

Due to the fact that the requirements of this program are being developed, a Sources Sought or RFI would not be a beneficial market research tool at this point in the procurement process.

Market research will, however, be ongoing as the finalized requirement and any future requirements will be synopsized in the FedBizOpps, which is anticipated to result in sources having an interest in subcontracting opportunities being identified.

IX. ANY OTHER FACTS SUPPORTING THE USE OF OTHER THAN FULL AND

OPEN COMPETITION

As detailed herein, GE is the OEM for the Engines described herein. GE’s unique engineering expertise and world wide support infrastructure make it the only company capable of providing support of the magnitude and complexity needed, further supporting why this requirement for a package of engine logistics support to improve the level of availability is not suitable for Full and Open Competition. Additionally, the Government owns only limited data that could be made available to any other source to perform all of the requirements anticipated by this comprehensive level of support.

X. LIST OF SOURCES, IF ANY, THAT EXPRESSED INTEREST IN THE

ACQUISITION

As indicated in Section VI above, this requirement will be synopsized on the FedBizOpps website as required by FAR 5.201. No sources have expressed, in writing, an interest in the acquisition to date. However, if sources other than GE express interest, they will be directed to a copy of the solicitation.

XI. A STATEMENT OF THE ACTIONS, IF ANY, THE AGENCY MAY TAKE TO

REMOVE OR OVERCOME ANY BARRIERS TO COMPETITION BEFORE MAKING

SUBSEQUENT ACQUISITIONS FOR THE SUPPLIES

Due to the complex nature of this work, there is no opportunity at this time to remove barriers to competition at the prime contractor level. However, the Government intends to include FAR 52.219-16, Liquidated Damages- Small Business Subcontracting Plan, and FAR 52.219-10, Incentive Subcontracting Program, in the contract and work in close coordination with both the DLA Small Business Office and GE to select subcontractors on a competitive basis to the maximum practical extent consistent with the objectives and requirements of the contract and sound business case analyses. DLAD Procurement Note M06 Evaluation of Offers for Part Numbered Items, will be included in the solicitation which provides guidance for potential suppliers. Additionally, GE may be required to obtain common consumables required for this effort from DLA and all applicable competitive processes will continue to be utilized for acquisitions of common consumables. The Contracting Officer will continue to synopsize items that may be added to this contract in order to investigate the possibility of competition. The Competition Advocate will review the requirements to verify that all requirements are sole source. As stated above, GE is the only known source with the capability of furnishing the required logistics support.

Future requirements will nevertheless be advertised in the FedBizOpps website (www.fedbizopps.gov) in order to ensure that potential alternate sources are aware of the requirement and can identify interest in support for these items. Any items which become competitive after award of a Performance Based, Stock and Transactional support contract will be removed from the contract in accordance with DLAD 52.216-9006, Addition/Deletion of Items.

XII. CONTRACTING OFFICER’S CERTIFICATION

The contracting officer’s signature on the Coordination and Approval Document evidences that she has determined this document to be both accurate and complete to the best of her knowledge and belief.