SPE7LX-19-D-0077 -reviewed_Redacted.pdf

JUSTIFICATION FOR OTHER THAN

FULL AND OPEN COMPETITION

CONTRACTING ACTIVITY: Defense Logistics Agency, DLA Land & Maritime PROGRAM/PROJECT: Contract Maximum Increase for Michelin North America LTC

SPE7LX-19-D-0077

AUTHORITY: 10 U.S.C. 2304(c)(1), available from only one or a limited number of responsible sources as implemented by FAR 6.302-1, and 10 U.S.C. 2304(c)(2), unusual and compelling urgency, as implemented by FAR 6.302-2.

ESTIMATED CONTRACT COST (MAXIMUM): increase request of over current maximum

I. CONTRACTING ACTIVITY

The contracting activity for this action is the Defense Logistics Agency (DLA), Land and Maritime, Strategic Acquisition Programs Directorate (SAPD), Basic Contract Administration Branch (ZDB) located in Columbus, Ohio. The Contracting Officer is Thomas Dragolich. This is a justification for other than full and open competition.

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

This acquisition is a three-year firm-fixed price contract awarded on January 25, 2019, with Michelin North America (12195) for NSN(s) 2610-01-311-6853, 2610-01-357-8333 and 2610- 01-554-1191. The contract provides vehicle pneumatic tire support to the Global Tires Program (GTP) performance based logistics contractor, contract SPE7LX-19-D-0029, who is authorized to purchase tires pursuant to FAR Part 51 directly from Michelin; contractor may also provide direct support to the Government. The GTP contract provides coverage for CONUS, OCONUS and FMS shipments with orders placed by the GTP Contractor on behalf of military customers’ requirements.

The NSNs covered under the contract were solicited on a restricted basis and utilized other than full and open competition procedures in accordance with FAR Part 12, 10 U.S.C. 2304(c)(1) and FAR 6.302-1 for items of supply that are available from only one or a limited number of responsible sources. The contract term of three (3) years will expire on January 24, 2022 which leaves approximately twenty-one (21) months of contract support remaining. The vehicle platform supported by this contract is a palletized load trailer M1076.

The purpose of this Justification and Approval is to support an increase to the contract maximum value for SPE7LX-19-D-0077 pursuant to the authority at FAR 6.302-1 and FAR 6.302-2. In October 2019 the Basic Contract Administrator reviewed the total amount spent on the contract and calculated that there was only one (1) percent of the contract maximum value remaining on the contract with twenty-six (26) months of the total contract term still remaining.

This is a very high demand/high volume long-term contract (LTC) for critical vehicle tires that must have supply support. The average procurement lead time to have a new LTC in place to cover the NSN in question would be approximately 8- 10 months, depending on pricing, negotiation and other factors. With the total contract maximum being met for contract SPE7LX-19-D-0077, the Government has recently initiated successor follow-on projects in order to maintain contract support. This project is currently being solicited and award is not expected until August 2020. In order to ensure contract performance continues, an urgent contract action is needed to address the contract maximum value to ensure uninterrupted support and continued contract coverage for this vehicle tire NSN.

The need for this contract action is to account for the unforeseen spike in demand quantities, which the original calculations did not fully account for. The cause in the spike in demand was due to an Army Palletized Load System (PLS) M1076 trailer tire assembly repair program which was previously undisclosed to DLA. Annual demand quantity for NSN 2610-01-357- 8333 has increased tremendously since 2019 from 778 to 3,300 in 2020. Increased annual demands exhausted the contract spend in a little over 1 year from contract award date.

Immediate action is required to increase the contract maximum value of contract SPE7LX-19- D-0077 in order to maintain continued operational support and avoid any interruption in supply of ground tires to support the GTP contract. As this contract contains a high-demand tire that supports active military operations and operational readiness requirements for the Army, it is critical to execute this increase in order to maintain supply coverage without disruption to operational support. Failure to do so will result in the inability to execute their mission requirements and as a result, life, property, and equipment would be compromised.

This contract has neared the contract maximum value of $5,367,658. According to the Acquisition Plan, the contract maximum was calculated as 5x the annual demand value (ADV).

The contract ceiling increase modification resulting from this effort will remove NSN’s 2610- 01-311-6853 and 2610-01-554-1191 because there is currently an effort to award a long-term contract (LTC) for them and there is a critical need for NSN 2610-01-357-8333. The requested increase value of $4,399,200 is based upon current demand information for NSN 2610-01-357- 8333 and is deemed as sufficient to cover the demand until a new LTC is awarded, which is expected to be in August 2020.

III. AUTHORITY FOR 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 only one or a limited number of responsible sources and no other supplies or services will satisfy agency requirements, and 10 U.S.C. 2304(c)(2) and FAR 6.302-2, unusual and compelling urgency, as the Government would be seriously injured unless the Agency is permitted to limit the number of sources. This acquisition is restricted to the only source of supply known to have the capability of furnishing the required supplies, Michelin. Failure to provide uninterrupted support for these items would adversely affect the performance of military components in accomplishment of their assigned missions.

IV. DESCRIPTION OF THE SUPPLIES REQUIRED TO MEET THE

AGENCY’S NEEDS

Agency needs for NSN 2610-01-357-8333 were solicited on solicitation SPE7LX-18-R-0112. A sole offer was received from Michelin North America and on January 25, 2019, contract SPE7LX-19-D-0077 was awarded under FAR Part 12 acquisition procedures. The contract was awarded for NSNs 2610-01-311-6853, 2610-01-357-8333 and 2610-01-554-1191 which are all classified as Pneumatic, Tire, Vehicle NSNs, in support of the Global Tires Program (GTP).

The solicitation was issued under other than full and open competition pursuant to the authority at 10 U.S.C. 2304(c)(1) and FAR 6.302-1 for items of supply that are available from only one or a limited number of responsible sources.; Michelin was the only offeror and was subsequently awarded the contract. The contract was awarded with a three- year base period and no options.

The contract is in the second year of the three-year base period, and has reached the contract maximum value because the Annual Demand Quantity (ADQ) for this item has escalated from 778 in 2019 to 3,300 in 2020 according the GTP Integrator, Science Applications International Corporation (SAIC), whom is responsible for forecasting and reporting GTP NSN demand. The ongoing need for contract coverage of this critical item is imperative, thus an increase of $4,399,200 is requested over the current maximum of $5,367,658.

V. RESTRICTED TO ONLY ONE SOURCE OF SUPPLY

This effort is being restricted to Michelin North America (CAGE 12195), NSN 2610-01-357-8333.

The use of the authority cited below:

AMC 1. Suitable for competitive acquisition for the second or subsequent time.

The use of the authority cited is based on:

AMSC C. Acquisition of the part from the approved source(s). The approved source(s) retain data rights, manufacturing knowledge, or technical data that are not economically available to the Government, and the data or knowledge is essential to maintaining the quality of the part. An alternate source must qualify in accordance with the design control activity's procedures, as approved by the cognizant Government engineering activity. The qualification procedures must be approved by the Government engineering activity having jurisdiction over the part in the intended application. If one source is approved, AMCs 3, 4, or 5 are valid. If at least two sources are approved or if data is adequate for an alternate source to qualify in accordance with the design control activity's procedures, AMCs 1 or 2 are valid.

Only Michelin North America (CAGE 12195) retains the data rights, manufacturing knowledge, or technical data that are essential to maintaining the quality of this part. , the Product Specialist for Tires at DLA L&M, completed a technical review for NSN 2610-01-357- 8333, stating that “A complete tech review was completed on subject LTC NSN on 09 Dec 2019 and is annotated in the material master internal comments. The tech data, AMC/AMSC codes and approved sources were reviewed and certified as complete and accurate.”

VI. EFFORTS TO ENSURE OFFERS ARE SOLICITED FROM AS MANY

SOURCES AS PRACTICABLE

A pre-solicitation notice of intent to award sole source was posted on SAM.gov website on April 20, 2020 and it contained a response date of May 5, 2020. No responses were received by the contracting officer for this notice.

VII. MARKET RESEARCH

Market research was initiated for the contract ceiling increase effort on December 10, 2019, with a Sources Sought Notice and market survey in FEDBIZOPS. The closing date for this notice was December 19, 2019 and no responses were received. In addition to posting a Sources Sought notice, a copy of the market survey was also e-mailed on 12/11/19 to the tire offerors listed below:

Anthony E. Balser LLC (CAGE 5CAZ4) Bridgestone Americas (CAGE 073A9) Bridgestone Americas DBA GCR (CAGE 22337) Colony Tires Corporation (CAGE 7W3F5) Continental Tire Americas (CAGE 73808) Goodyear Tires & Rubber Company (CAGE 04NP3) Michelin North America (CAGE 12195) Oshkosh Defense (CAGE 75Q65) Pomp’s Tire Service (CAGE 1T1Z4) Southern Tire Mart (CAGE 3RRT3) Specialty Tires of America (CAGE 66798) Terex American Crane Corporation (CAGE 49185)

Responses to the request for a market survey were received from three of the suppliers contacted.

Their responses are summarized below:

Anthony E. Balser (5CAZ4) Small Dealer o Offering Michelin tire

Pomp’s Tire Service (1T1Z4) – Mark Bitzan – Large Dealer o Offering Michelin tire

Michelin (12195) – Barry Bomier – Large Manufacturer o Offering Michelin tire

Although 3 suppliers responded to the market survey, all three offered to supply the same tire.

Since Michelin is the only manufacturer of the three responders, the other two dealers would have to procure their tires from Michelin. There is no indication that these dealers are capable of meeting the Government’s need for uninterrupted support. When dealers procure tires from manufacturers there are typically additional costs that are added to the price such as, transportation costs to ship tires from the manufacturer to the dealer, administrative costs for the dealer to purchase tires from manufacturers, and markup for the dealer’s profit.

Demand for this item could be covered by “spot buys” until the follow-on contract is awarded but doing so would not make good business sense, as the Administrative Lead Time (ALT) would significantly increase; currently one day for Global Tires Program (GTP) awarded delivery orders.

The use of spot buys would increase lead times to over 60 days due to the administrative time for issuance, evaluation and award of each individual purchase order. Increased ALT = decreased material availability. This additional ALT is an unacceptable risk to supporting the demands for the Tank Army Command (TACOM). Currently, TACOM has a backorder for 2,100 tires for their PLS M1076 trailer repair program and will continue to have a need for tires on a monthly basis for an unknown quantity. If spot buys are used for this NSN then readiness levels for TACOM’s repair program will be adversely impacted, delaying the repairs to a vital component of their trailer mobility system.

Information received regarding the commerciality of the item:

Commerciality was investigated using multiple techniques. The item on this contract is a tire used on Army Palletized Load System (PLS) M1076 trailer. While commercial tires may be manufactured to different specifications, there is no evidence that those specification differences are so substantial to render the military version unsuitable and unavailable for commercial purposes. The definition of Commercial, as found in FAR Subpart 2.101, states "Any item, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purpose." Clearly, a tire used by the military is "of a type" as a tire used commercially. The difference may simply be the size or perhaps a more stringent specification, but nevertheless, this NSN meets the definition of commercial.

In addition to independent research, the Contracting Officer relied on market research analysis conducted for the solicitation of NSNs for LTCs to support the GTP contract. This was done I/A/W FAR 12.1 by submitting a market survey to industry (tire manufacturers and distributors). Industry was asked whether each NSN constituted a commercial item, as defined in FAR 2.101. All of the vendors indicated, in their market survey responses, that all of products listed for the proposed solicitation are commercial. The manufacturers make both commercial and non-commercial tires, thus further solidifying the “of a type” application herein. Accordingly, the acquisition specialist is able to conclude that the tires subject to this requirement fall under the FAR commerciality definition “of a type” language, referenced above. Therefore, this acquisition will proceed in accordance with FAR Part 12-Acquisition of Commercial Items procedures.

VIII. ACTION BEING TAKEN TO OVERCOME BARRIERS TO COMPETITION

The unforeseen spike in demand of Army requirements, which exceeded the estimated demand quantities utilized to calculate the contract maximum, has created a situation that would produce a gap in support until a new LTC is awarded. Michelin North American is the only responsible source for this tire and this is the reasoning behind the Government’s efforts to limit competition for this action. The SAPD Pre-Award team is currently in the solicitation phase for the successor LTC and is aware of possible spikes in customer demand and the direct effect this has on the contract ceiling. To prevent a reoccurrence of exceeding the contract ceiling prior to the end of the period of performance, the Pre-Award team is coordinating with customers of this NSN to obtain their demands and will be using a higher multiplier to the ADQ to calculate the contract maximum. In addition, a section of the PWS will include monthly spend reports to monitor the overall spend against the LTC contract. By having the monthly reports to monitor the spend amount, the Government will be better prepared to react to spikes in demand and to solicit for a new contract before the contract ceiling is exceeded. In addition, the Government is attempting increase competition for the next LTC by synopsizing/soliciting the contract requirement on FedBizOps and on DIBBS to promote competition.

IX. ADDITIONAL FACTS SUPPORTING OTHER THAN FULL AND OPEN

COMPETITION

Based upon the technical certification on file in DLA Land and Maritime-VEP technical data is not available and cannot be developed to permit full and open competition. The data presently available reflects the minimum needs of the Government.

X. PRICE/COST CONSIDERATIONS

Unit pricing on SPE7LX-19-D-0077 was determined fair and reasonable IAW price analysis (FAR 15.404-1(b)) by the pre-award Contracting Officer on January 22, 2019. Price analysis was based upon the comparison of the offer received to prices of similar commercial tires. Michelin agrees to hold the tire price for NSN 2610-01-357-8333 and all orders issued under the terms and conditions of this contract will have the same fair and reasonable pricing including those awarded after the contract maximum is increased. IAW FAR 15.404-1(b)(2)(ii)(A), historical pricing can be used if a significant time lapse has not occurred. As less than 15 months has lapsed since the last time the price was determined fair and reasonable, the price remains valid. DAG 15.403-101(a) further defines “recent” as pricing history within the prior 24 months. Furthermore, if requisitions were solicited and awarded via “spot buys”, market research concludes that due to limited competition, more favorable pricing will not be achieved than what is currently available under SPE7LX-19-D- 0077. Michelin has been notified of the contract ceiling increase proposal amount and concurs. All other terms and conditions of the contract remain unchanged and in full effect.

XI. CONTRACTING OFFICER’S CERTIFICATION

Based on the facts outlined in this document, the most effective way to continue support for this tire is to increase the contract maximum to avoid decreased material availability until the replacement LTC is awarded competitively. As a result of this action, the contract maximum for SPE7LX-19-D-0077 will be increased by to a new contract maximum of Pricing for this increase is determined fair and reasonable IAW FAR 15.404-1(b)(2)(ii)(A) using a comparison of recent historical pricing for the same item. In accordance with FAR 6.303-2(b)(12), the Contracting Officer has determined this document to be both accurate and complete to the best of his/her knowledge and belief.

CERTIFICATION/APPROVAL:

Jonathan Stone Basic Contract Administrator

Thomas Dragolich Contracting Officer

Mary Shearer Competition Advocate

APPROVAL REQUIREMENTS

(X) $700,000 to $13,500,000 Competition Advocate

Attachments:

1. Proposal to Increase Contract Maximum Email

STONE.JONATH

AN.L.1401984174

Digitally signed by

STONE.JONATHAN.L.14019841

Date: 2020.05.18 10:07:40 -04'00'

DRAGOLICH.THO

MAS.WILLIAM.1079

889608

Digitally signed by

DRAGOLICH.THOMAS.WILLIAM

.1079889608 Date: 2020.05.18 10:32:58 -04'00'

SHEARER.MAR

Y.E.1250702449

Digitally signed by

SHEARER.MARY.E.1250702449

Date: 2020.05.19 10:29:00 -04'00'