SPE4A521R0013__Redacted.pdf

Solicitation Number: ___SPE4A5-21-R-0013___________________

Source Selection Information – See FAR 2.101 & 3.104 1

CLASS JUSTIFICATION FOR OTHER THAN FULL AND OPEN COMPETITION

Solicitation: SPE4A5-21-R-0013

I. CONTRACTING ACTIVITY

This Class Justification and Approval (J&A) requests authority for Other Than Full and Open Competition for all sole source items exclusively licensed to Ontic Engineering & Manufacturing (Ontic) and managed by the

Department of Defense (DoD). The contracting authority for this requirement is Defense Logistics Agency

(DLA) Aviation, Richmond, VA, Strategic Acquisition Programs Directorate.

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

Due to the circumstances described herein, this activity requests authority to acquire the Original Equipment

Manufacturer (OEM) sole source items for which Ontic is either the owner or the exclusive licensee 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 Class J&A is being submitted to establish a single ten-year, Fixed Price Requirements Type Contract

(RTC) to procure DLA Direct (DD) consumable items which are sole source to Ontic in support of the United

States (US) Military Services and Foreign Military Sales (FMS). This justification may also cover additional items that become sole source after award and/or replacements for obsolete items. The resulting contract will be considered a Joint Opportunity Contract (JOC).

A Fixed Price RTC with Prospective Price Redetermination IAW FAR 16.503(a)(1) is considered the most appropriate contract type for acquiring items in which the Government anticipates recurring requirements but is unable to predetermine the precise quantities that may be required during any given time period. This approach transfers the maximum performance and cost risk to the contractor. In addition, Prospective Price

Redetermination limits the administrative burden for both parties as it provides a fixed price contract with one base period of five years and one five-year option period. Price redetermination would occur every two years.

The Services have not yet identified Deport Level Repairable (DLRs); therefore, the value of this J&A has been calculated based upon consumable items. The total estimated maximum value of the proposed ten-year contract is . This estimated value was calculated by using the LTC Candidate Report and sorting by the proposed population of 872 consumable NSNs. The total five-year spend for this population was calculated and multiplied by two to get the total estimated value for ten years of Fifty percent was added to the estimated value to account for demand fluctuation and potential forecast changes, bringing the estimated maximum contract value to The J&A value will be amended as the Services’ requirements are identified and/or items are considered for inclusion into the add population.

This sole source requirement will be purchased from the following company:

Source Selection Information – See FAR 2.101 & 3.104 2

Ontic Engineering & Manufacturing, Inc.

20400 Plummer Street

Chatsworth, CA 91311-53712

CAGE: 45934

DUNS #: 15-538-9224

Large Business

III. DESCRIPTION OF THE SUPPLIES/SERVICES REQUIRED TO MEET THE AGENCY’S

NEEDS

DLA Aviation, Strategic Acquisition, Richmond, VA, seeks to establish a Joint Opportunity Contract (JOC) with Ontic for items managed and procured by DoD. The scope of the Class J&A includes all items for which

Ontic is or will become the exclusive licensee for any OEMs and for which Ontic owns the data and is determined to be the only source capable of providing the items (exclusive of the OEMs).

Ontic owns a number of parts purchased directly from Ametek, ARO, Conair, Curtiss-Wright, General

Airmotive, Honeywell International, Parker Hannifin and Woodward. In addition to the ownership of parts, Ontic maintains around 160 licensing agreements with addendums with Aeroterra, Arkwin Industries, Bay

Precision, Boeing, Crane Hydro-AireEaton, GE Aviation, United Technologies Aerospace Systems (formerly

Goodrich and Hamilton Sundstrand), ITT Aerospace, Honeywell, HR Textron, Meggit, Moog, Parker Hannifin, TWR Aeronautical Systems, Safran, Securaplane Technologies and Woodward. Under these agreements, Ontic has purchased the rights for the 872 items that are sole source to the OEMs and are considered for this contracting action. These items are military-unique spare parts and/or Depot-Level Repairable (DLR) items under multiple Federal Supply Classes (FSCs). (see attachment 1).

The proposed population supports a multitude of weapons systems across all branches of the military and include, but are not limited to the fixed-wing aircraft, helicopters, and a wide range of other military equipment

The estimated annual quantities for the applicable National Stock Numbers (NSNs) vary with each NSN. Any resulting Delivery Order (DO) issued under this contract will specify Working Capital Fund for DLA

Consumables as the funding source. Should the Services elect to order from the resulting contract, the appropriate accounting code will be acquired with the purchase request.

This initiative involves identifying demand patterns for sole source NSNs in various FSCs and placing those

NSNs on contract as demand warrants. Continuous spare part support is required to avoid negative effects on the mission requirements of the various weapon systems utilizing these parts. The goals of this initiative are to:

improve production lead time (PLT), production capacity, forecasting and material availability (MA); reduce administrative lead time (ALT), unfilled orders (UFOs), set up costs and unit prices; and achieve 100% on-time delivery (OTD).

The AMC codes for all 872 NSNs are either 3 or 4, indicating that the items are sole source. The AMC /

AMSC codes are as follows:

3A – Government rights to use tech data in its possession are questionable

3C – Requires engineering source approval by the design control activity

3D – Data not available

3H – Data insufficient (temporary)

3L – Annual buy value below screening level

Source Selection Information – See FAR 2.101 & 3.104 3

3P – Data proprietary

3Q – Inadequate data and/or lacks rights to data

3R – Data rights not owned by the Government, uneconomical to purchase data

3V – High reliability required (formal program)

3Z – Commercial / off-the-shelf item

4D – Data not available

4R - Data rights not owned by the Government, uneconomical to purchase data

The delivery requirements for the initial population were developed by reducing the historical PLT by 25%.

The PLT for each NSN was obtained from the LTC Candidate Report. Additionally, the LTC Candidate Report identified fifteen items with surge and sustainment requirements.

IV. STATUTORY AUTHORITY PERMITTING OTHER THAN FULL AND OPEN COMPETITION

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.

V. DEMONSTRATION THAT THE CONTRACTOR’S UNIQUE QUALIFICATIONS OR NATURE

OF THE ACQUISITION REQUIRES THE USE OF THE AUTHORITY CITED ABOVE

The authority in paragraph IV above applies because the OEMs are the sole source and/or own the data rights for these items and have licensed these items exclusively to Ontic Engineering & Manufacturing. The licensing agreements directs all parties, both Government and Commercial, to Ontic as the exclusive licensee for these sole source items.

This J&A covers 872 items that are sole source and for which Ontic is the exclusive licensee. The licensing agreements for the initial population are with Goodrich Corporation Landing Gear Division (GR), Honeywell

Intellectual Properties (HON), Hamilton Sundstrand Corporation (HSC), and Lucas Aerospace Power

Equipment (DBA TRW Aeronautical Systems), among other.

Licensing agreements grant Ontic and its Divisions, affiliates, and subsidiaries, exclusive rights to manufacturer or have manufactured by subcontractors, and to use, sell, and support the proprietary products specified in each licensing agreement. Each agreement is unique to the respective OEM. In all cases, Ontic maintains reproducible copies of the original drawings and all existing technical and manufacturing data for the products contained within each agreement. Such data may include but is not limited to:

1. Engineering information consisting of detail and assembly drawings, material specifications, test specifications, parts list and assembly specifications.

2. Manufacturing information consisting of manufacturing drawings and instructions, designs of special manufacturing tools, dies, fixtures, patterns and gauges, and names of any established subcontractors supporting the product.

3. Inspection information consisting of inspection procedures and instructions, designs of special inspection gages and fixtures.

4. Existing product manuals required for service, repair and overhaul.

In most cases, Ontic has been granted Type I & II engineering change authority. In some cases the Material

Review Board (MRB) authority remains with the OEM and in others, MRB authority has been granted to Ontic.

The length of each agreement varies, as does the license fee. The one constant in all reviewed agreements is that license fees shall be paid on the Net Selling Price (amount charged to customer) for each item sold, used, repaired, overhauled or otherwise disposed of by Ontic.

Source Selection Information – See FAR 2.101 & 3.104 4

The Acquisition Method Code (AMC) and Acquisition Method Suffix Code (AMSC) for the items are identified in Attachment 1. Items identified with an AMC code of 3, 4, or 5 are to be directly acquired from the actual manufacturer or the sole source contractor, which is Ontic. Items identified with an AMC code of 1 may be included in the population when the Engineering Support Activity (ESA) controls the source of supply and no other source of supply will suffice aside from Ontic. Items within the population are sole source for a variety of reasons, including but not limited to, proprietary technical data or otherwise unavailable to the

Government; items requiring engineering source control approval by the design control activity; and/or parts must be acquired from a manufacturing source specified on a source-controlled drawing.

For AMSC A or H coded items, follow the annual screening and review requirements in DFARS 217.7506.

J&As will state that AMSC A and/or H coded items will not be placed on contract (or will be removed from contract, as applicable) if the annual screening and review does not result in assignment of a permanent AMSC code within one year of the date the J&A is approved. A 2579 was submitted, reviewed, and approved by the

Small Business Office (SBO) and Small Business Administration (SBA) for the J&A population of 872 items.

Should DoD elect to expand the NSN population for items that are sole source and exclusively licensed to Ontic, a review of technical certifications and verification by the SBO and SBA offices will be required.

The acquisition for the initial population is restricted to the only sources of supply that are capable of furnishing the required items. Prior to requesting pricing for items to be added to the contract, a technical review and certification will be documented and included in the contract file.

As the OEMs’ exclusive licensee, Ontic possesses the data, and Ontic or its license-directed subcontractors possess the tooling, machining, and assembly capability to produce the items in accordance with the drawing requirements. Due to the direction contained within the licensing agreements, Ontic is now the only responsible source who possesses the full capability to satisfy the agency’s requirements.

VI. DESCRIPTION OF EFFORTS MADE TO ENSURE THAT OFFERS ARE SOLICITED FROM AS

MANY POTENTIAL SOURCES AS DEEMED PRACTICABLE

This requirement will be synopsized on Contract Opportunities (beta.Sam.gov) 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 this synopsis will be identified to the prime contractor as a potential for subcontracting possibilities.

Sources Sought Synopsis was posted to Contract Opportunities (beta.Sam.gov) on August 21, 2020, and closed on August 28, 2020. The notice was issued as a means of conducting market research to determine if other companies are capable of manufacturing (or legitimately obtaining) the items listed in the attached workbook that have been determined sole source to Ontic. An attachment of all 872 NSNs was attached to the notice. The attachment also included the NAICS code, CAGE, and part number for each NSN. No responses to the Sources

Sought notice were received.

Source Selection Information – See FAR 2.101 & 3.104 5

VII. DETERMINATION BY THE CONTRACTING OFFICER THAT THE ANTICIPATED COST

TO THE GOVERNMENT WILL BE FAIR AND REASONABLE

The overall cost of this acquisition will be fair and reasonable to the Government. In accordance with FAR

15.403-4, the contractor will be required to provide certified cost and pricing data to support the Government’s evaluation of the proposed unit prices. The proposed skill mix of labor, labor hours, types and quantities of material, other direct costs, and direct and indirect rates will be negotiated by the Government based on recommendations from the Defense Contract Audit Agency (DCAA) and expert technical personnel supporting the program. The contract price will be negotiated in accordance with the procedures in FAR Part 15.

DLA Aviation intends to implement a mutually agreed-upon Formula Price Agreement (FPA) with Ontic

Engineering & Manufacturing. The FPA will contain negotiated rates, escalation, and profit to be utilized when pricing proposals to the Government. In addition, the FPA will define how Ontic builds up cost to arrive at the selling price and the Government’s analytical method to be used when evaluating the proposal. It is anticipated that upon agreement, Ontic will submit their proposal in accordance with the FPA. DLA Aviation’s Cost &

Price Division (Cost & Price) and the Defense Contract Management Agency (DCMA) will review the proposal for verification. This FPA will be made available for use by all Government entities. In the event that the parties are unable to reach an agreement regarding the FPA prior to the solicitation closing date, rates and profit will be reviewed by DLA Aviation Cost & Price as well as DCMA via cost analysis. The lack of an FPA will not delay the award.

Recommendations from Cost & Price and DCMA will be taken into consideration and used to develop the negotiation position for labor by skill set, direct and indirect rates, escalation rates, and profit. DLA will use the

Weighted Guidelines (WGL) Method to determine and negotiate contract profit as required by DFAR 215-404-

4.

Based on 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

Efforts were made to conduct market research since the Government has internal information that demonstrates the items are not competitive. NSNs were reviewed for items listed as sole source to Ontic with AMC codes of

3 and 4. In addition, market research included North American Industry Classification Systems (NAICS) code references, direct contact with potential sources, and the actual licensing agreements. Coordination with the

DLA Aviation Competition Advocate reveals that we have extensive history to support that these items have been and will continue to be sole source to the OEM, the data owners who have entered into an exclusive license agreement with Ontic to support the items.

A Sources Sought notice was posted to Contract Opportunities (beta.Sam.gov) on August 21, 2020, and closed on August 28, 2020. No responses were received.

This requirement will be synopsized on Contract Opportunities (beta.Sam.gov) 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 this synopsis will be identified to the prime contractor as a potential for subcontracting possibilities.

Source Selection Information – See FAR 2.101 & 3.104 6

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

COMPETITION

For items listed in the initial population, Ontic is the manufacturer or has exclusive licensing agreements with the OEMs. OEMs under the various licensing agreements are unwilling to sell data rights to the Government.

Therefore, the technical data package, specifications, and engineering descriptions suitable for Full and Open

Competition cannot be developed without reverse engineering. The Government has determined that reverse engineering is cost prohibitive.

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

See Section VI above.

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

As previously stated, Ontic, the exclusive licensee for the OEM, is the only source with the capability of furnishing the required supplies. Therefore, the Government does not intend to compete this procurement.

For any groups of NSNs considered for addition to the contract under the authority of this J&A, a technical review, sole source certification, and synopsis will be performed prior to items being priced and added to the contract via modification.

Procurement Note L22, Restriction of Alternate Offers for Source Controlled Items, will be included in the solicitation, which provides guidance for potential suppliers for items with AMSC code of “B”. Procurement

Note L04, Offers for Part Numbered Items and M06, Evaluation of Offers for Part Numbered Items, will be included in the solicitation, which provides guidance for potential suppliers with AMSC codes other than “B”.

The Competition Advocate will review the solicitation and all potential add-on items to locate additional sources of supply. Any items that become competitive after the award will be removed from the contract in accordance with Procurement Note L27, Addition and Deletion of Items.

XII. CONTRACTING OFFICER’S CERTIFICATION

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

XIII. TECHNICAL/REQUIREMENTS PERSONNEL’S CERTIFICATION

Source Selection Information – See FAR 2.101 & 3.104 7

As evidenced by their signatures on the Coordination and Approval Document, the technical and/or requirements personnel have certified that any supporting data contained herein, which is their responsibility, is both accurate and complete.

Attachments:

1. NSN add population

2. Technical certifications