SPE4AX19D9444_REDACTED.pdf

Source Selection Information – See FAR 2.101 and 3.104 1

DEFENSE LOGISTICS AGENCY

HEADQUARTERS

8725 JOHN J. KINGMAN ROAD

FORT BELVOIR, VIRGINIA 22060-6221

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, Defense Logistics Agency (DLA), and Foreign Military Sales (FMS) via a Supplier Capability Contract (SCC) DLA formal solicitation.

The contracting activity 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 a single unpriced umbrella requirements contract containing terms and conditions with multiple priced subsumable contracts, on a sole-source basis, for supply and performance based supply chain management and logistics support of aircraft and systems manufactured by Rolls Royce Corporation, including but not limited to, the T-56 aircraft engine and associated military and commercial engines, such as the T56-A-14, T56-A-15, T56-A-427, and T56-A-427A (corresponding to aircraft: Orion P3, the C-130, E2C2, and the E2C2 upgrade).

As explained in more detail herein, the support includes providing consumable and depot level repairable items from multiple supply codes, wholesale supply and logistics support, inventory management, maintenance planning, configuration management, repair of repairables for Service customers, and sustainment engineering associated with these end items. 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. The umbrella contract and the first priced subsumable contract, which are to be awarded in Fiscal year 2018, are each anticipated to be ten (10)-year Long Term Contracts consisting of a three (3) year base period, two three (3) year option periods, and a single one (1) year option period. Other later awarded priced subsumable contracts may have a shorter term so as not to exceed ten years. In no event will the total contract period of any contract exceed the ten-year period authorized by 10 U.S.C. 2304a(f), unless appropriate approval is obtained. In accordance with FAR Part 10, additional market research will be conducted prior to the exercise of options.

This sole source requirement will be negotiated with the following company:

Rolls Royce Corporation 450 S Meridian St.

Indianapolis, IN 46225

Sole source Rolls Royce parts from any Rolls Royce facility will be candidates for possible inclusion in the contracts. The Government anticipates purchasing sole source material under this contract from, but not limited to, the following Rolls Royce CAGE Codes:

Rolls Royce Corporation 450 S Meridian St.

Indianapolis, IN 46225

CAGE 63005

Rolls Royce Marine North America 2001 S Tibbs Indianapolis, IN 46206

CAGE 38ZC7

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.

• 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 allows Rolls Royce the opportunity to leverage investment in support processes across similar items, thereby saving additional costs.

This support strategy unifies support for components across weapons systems and Service boundaries, defining performance objectives that must be delivered by Rolls Royce.

Two hundred sixteen of the items identified in the initial candidate population are currently supported by the existing long term contract, SPE4AX-14-D-9415, which expires on September 2019. These items would also be eligible for support under the new contracts.

The current contract covers multiple Rolls Royce CAGE Codes.

The total maximum dollar value of this Class J&A is based on a ten--year performance period. 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, platform and system modifications, and service life extension programs.

Various contract types may be considered for each contract phase of implementation, as applicable, including Firm Fixed Price, Firm Fixed Price Incentive, and Fixed Price Re-determinable. Further discussion on the phased approach for this contract is 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 consumable and repairable material end items and support to engine Depot maintenance to include both material and services, including potential repair or remanufacturing of repairables. This Class J&A covers all solesource Rolls Royce consumable and repairable spare parts for multiple Federal Supply Classes (FSCs) associated with Rolls Royce engines identified in paragraph II above. A population of 998 consumable NSNs with an estimated 10-year dollar value of has been identified as potential items under the contracts, as reflected in Attachment 1. The total maximum dollar value of this Class J&A is .

As a basis for the maximum dollar value, calendar year 2015 – 17 actual spends were used (see table below). From that table, 3 past year annual spends were averaged at approximately /yr. To develop a total spend over the course of this proposed 10 year contract, the average spend was multipled by 10 years and a 15% overage was included ( M/yr. X 10, plus a 15% overage on the total). This calculation yields an anticipated total maximum value of $

The table below shows the past three years of total obligations for Rolls Royce cage:

63005.

Year 2015 2016 2017

Consumables

DLA DLRs

Totals:

The acquisitions will cover three phases: Standard Umbrella Contract with Incentives/Disincentives; Supplier Initiated Ordering; and Performance Based support which would involve Stock support, Transactional support and Depot support. An umbrella contract containing terms and conditions will be established simultaneously with a priced subsumable contract covering consumable and DLR items with a disincentive for failure to meet on time delivery. Continuous spare parts support is required to avoid impacting the mission requirements of the various weapon systems utilizing theseparts.

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)(l) and FAR 6.302-1, as there is 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

Concerning the requirement to provide spare parts, the authority in paragraph IV above applies because Rolls Royce, the prime weapons systems manufacturer, is the only known source of supply for the items identified in Attachment 1. Rolls Royce is the only source that possesses the full range of proprietary technical data required to manufacture the items that are covered by this Class J&A. For the sole source material provided for direct aviation platform support, it has been determined the Government does not have complete, unrestricted technical data packages available.

The Acquisition Method Code (AMC) and Acquisition Method Suffix Code (AMSC) for each item are identified in Attachment 1. Items are identified with an AMC of 3 or 5, which specifies that the parts are to be directly acquired from the actual manufacturer or the sole source contractor, which for these items is Rolls Royce.

Items within this population are sole source for a variety of reasons, including in part, that the technical data is proprietary or is not otherwise available to the Government;

the parts require engineering source control approval by the design control activity;

and/or the parts must be acquired from a manufacturing source specified on a source control drawing.

Items identified in the class population may currently carry a temporary AMSC of A or H or not have an AMSC assigned yet. Only items with a permanent AMSC will be placed on contract; items with temporary AMSCs are currently excluded from consideration. In the future, if an item currently not assigned an AMSC or currently assigned AMSC A or H is assigned a permanent AMSC, that item may be considered for addition to the contract. A complete review, screening and technical certification of each NSN will be completed prior to inclusion on the contract. Technical certifications for the initial candidate population will be completed prior to issuance of the solicitation.

Based on the technical certifications, only parts that are restricted to the only source of supply known to have the capability of furnishing the required parts will be included in any solicitation. Each individual population of supplies or services to be added to contract will require independent coordination with the Small Business office via Form

DD 2579.

In addition to providing spare parts, this Class J&A covers performance based support and related efforts for Rolls Royce aviation systems, to include, wholesale supply and logistics support, inventory management, maintenance planning, configuration management, sustainment engineering associated with these end items, and repair services. As the original equipment manufacturer (OEM), Rolls Royce is the only entity with the systems engineering expertise to fully support the complete range of depot maintenance requirements across the full spectrum of Rolls Royce provided weapons systems. Only Rolls Royce can provide the necessary expertise, capacity, capability and proficiency to perform this effort. Rolls Royce solely 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 weapon systems reliable and safe. With regards to the material support for the repair of aviation components at DoD repair depots, Rolls Royce's overall systems, engineering knowledge and technical expertise in the various aviation's platforms systems integration make it singularly capable of performing the full scope of the depot support requirement.

Rolls Royce is the only contractor that can leverage necessary production capability and has an in-depth knowledge of the vendor base capable of supporting these various weapon systems at the required level of support. No other source has the long-standing business relationships with the supplier base that Rolls Royce has developed relative to this requirement. No other source can leverage this supplier base as well as Rolls Royce can to assure continued effective, reliable, and safe sustainment of the supply chain.

Any other contractor would introduce an unacceptable degree of risk into the supply chain and ultimately into the weapons systems. Additionally, Rolls Royce has established internal production processes and qualified various industrial support contractors as suppliers. No contractor other than Rolls Royce, the sole manufacturer and integrator of the various platforms to be supported, has the capability to perform all the requirements of the comprehensive performance based supplychain management program.

The key overarching objective of the contract is to maximize the availability/use of the various weapons systems 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 weapons system configuration and, more importantly, understand, analyze, and assess the implications -both in terms of weapons system 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- Rolls Royce - to support engineering investigations, fault detection and isolation, repair development, modification development, supportability analysis, and the associated technical documentation development and support.

Rolls Royce is the only source that can provide this capability. Only Rolls Royce 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 Rolls Royce has the existing infrastructure to ensure timely execution of such changes, including the ability to efficiently execute changes simultaneously into production and fielded aircraft.

In sum, no contractor other than Rolls Royce 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 Rolls Royce’s robust capabilities DLA is expected to see improvements in material availability to greater than 90%, material cost savings of 5% or greater, as well as 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

The sources sought for this requirement was posted on 22 December 2017 in the Federal Business Opportunities (FedBizOpps) website (www.fedbizopps.gov) as required by FAR Part 5.201. It is anticipated that sources having an interest in subcontracting may be identified through the sources sought and synopsis. This sources sought described the overall intent of the Government to award a contract covering strategic support for consumable and repairable supplies, with the capacity to expand to performance based logistics support in the future. 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. Rolls Royce will be required to provide certified cost or pricing data in accordance with FAR Part 15 for non-commercial items. A review of the proposed prices will be conducted where the Government will review Rolls Royce'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 Rolls Royce facilities that do not have an FRPA or FRPR, direct and indirect rates will be negotiated and established in a rate agreement. Profit will be negotiated using the Weighted Guidelines Method.

Rolls Royce will not be required to provide certified cost or pricing data for commercial items acquired using FAR 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 using the Weighted Guidelines Method. A fully compliant audit will be performed and DCMA/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 Rolls Royce aviation requirements together increases DLA's leverage with the contractor. DLA believes this leverage will result in significant savings over existing disparate support strategies, which a business case analysis will support.

The ten year term of each contract will incentivize continued investments in reliability improvements, obsolescence management, process improvements, and more efficient depot operations over the contract period by Rolls Royce. Inherent in the ten year contract structure is an incentive to continue to improve reliability and drive down cost, which not only better serves Department of Defense and other Federal Government customers, but results in better stewardship of taxpayer dollars.

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 that 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 CONDUCTED

Limited efforts were made to conduct market research on individual parts since the Government has internal information that demonstrates the items are not competitive. A review of the class population confirmed that the initial items to be solicited are all coded as sole source to Rolls Royce. Technical certifications will be required for every NSN prior to issuance of a Letter RFP. A review of the contract history reveals that there is extensive history to support the parts have been and will continue to be sole source to Rolls Royce. A sources sought was posted to FedBizOpps on 22 December 2017 to advise industry of the pending procurement and solicit inquiries from interested parties. This sources sought included the Governments intent to award a requirement that could expand to include performance based logistics support. The only responses received were from Rolls Royce and a limited response from Pacific Sky. The responses to this sources sought, as well as the rest of the market research, indicated that while other supply chain managers might have the capability to supply a portion of the requirement, only Rolls Royce had the ability to fully support all of the sole source supply and supply support requirements, to include a full range of the contemplated performance based logistics support activities required and referenced in Section III of this Class J&A.

IX. ANY OTHER FACTS SUPPORTING THE USE OF OTHER THAN

FULL AND OPEN COMPETITION

As detailed herein, Rolls Royce is the OEM for the aircraft and systems described herein. Rolls Royce'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 aircraft 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 was synopsized on the FedBizOpps website as required by FAR 5.201. It is clear from the response by Pacific Sky they intend on applying for SARs for the NIINs noted. However, the SAR process is sometimes a lengthy process for approvals and therefore while their response to the RFI was noted it was not considered to be suitable for consideration as competition on this project. The response from Rolls Royce was far more robust and replied to all the questions in the RFI. This confirms that at this time Rolls Royce is the only company capable of providing these NIINs.

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 - Subcontracting Plan, and FAR 52.219-10, Incentive Subcontracting Program, in the contracts and work in close coordination with both the DLA Small Business Office and Rolls Royce to select subcontractors on a competitive basis to the maximum practical extent consistent with the objectives and requirements of the contracts and sound business case analyses.

Procurement Note M06 Evaluation of Offers for Part Numbered Items (SEP 2016) will be included in the solicitations to provide guidance for potential suppliers. The Contracting Officer will continue to synopsize items that may be added to the contracts 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, Rolls Royce is the only known source with the capability of furnishing the required logistics support.

Future requirements will nevertheless be advertised in the FedBizOpps website 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 will be removed from the contract in accordance with Procurement Note L27 Addition and Deletion of Items (AUG 2017).

XII. CONTRACTING OFFICER'S CERTIFICATION

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

XIII. TECHNICAL/REQUIREMENTS PERSONNEL’S CERTIFICATION

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 – Initial Population NSN Listing 2 – Sources Sought Posting Confirmation 3 – Sources Sought Description 4 – Market Research Report