J&A6.302-2SPE7M115D0012.pdf

MEMORANDUM FOR RECORD

SUBJECT: Justification and Approval for Other than Full and Open Competition under Authority of 10 U.S.C. 2304(c)(2) of the Federal Acquisition Regulation (FAR)

The Defense Logistics Agency, DLA Land and Maritime, is the contracting activity.

The action being approved is the acquisition of supplies on other than a full and open competition basis.

Description of Agency’s Need (10 U.S.C. 2304(f)(3)(A):

The supplies required to meet the using activity's needs are described as follows:

SPE7M1-15-D-0012 (Goodyear-Ground) NSN Listing CLIN Description NSN/PN EST. ADQ AMSC 0026 Tire, Pneumatic, Vehicular 2610-01-368-9949 30 D 0031 Tire, Pneumatic, Vehicular 2610-01-397-6972 33 D 0042 Tire, Pneumatic, Vehicular 2610-01-481-7817 87 D 0056 Tire, Pneumatic, Vehicular 2610-01-517-4327 28 D 0070 Tire, Pneumatic, Vehicular 2610-01-544-9490 506 D 0106 Tire, Pneumatic, Vehicular 2610-01-605-1344 5 D

Totals: 689

Identify end item, weapon system, or class of item: Tire, Pneumatic,Vehicular

TOTAL BASE VALUE:

CONTRACT TOTAL FOUR YEAR VALUE (BASE + OPTIONS):

MAXIMUM CONTRACT VALUE:

REVISED MAXIMUM CONTRACT VALUE:

The agency seeks to increase the contract maximum value of contract SPE7M1-15-D-0012 by . This amount would increase the current contract maximum value from with a remaining balance of $ available to account for the six (6) months remaining of the life of the contract. For administrative purposes, the urgent and compelling action will be a new CLIN added to contract SPE7M1-15-D-0012. By adding the CLIN to the current contract, this will ease the administrative burden for monitoring and recording performance for only one (1) contract.

Summary/Introduction (10 U.S.C. 2304 (c)(2) - Unusual and compelling urgency):

Contract SPE7M1-15-D-0012 was awarded by DLA Land and Maritime to The Goodyear Tire & Rubber Company (Goodyear) (04NP3) on December 2, 2014, as an Indefinite Delivery

DEFENSE LOGISTICS AGENCY

DLA Land and Maritime

POST OFFICE BOX 3990

COLUMBUS, OH 43216-5000

Indefinite Quantity (IDIQ) contract for a Fixed Price with Economic Price Adjustment (EPA), consisting of a two-year base period and two, one-year option periods. The scope of this contract is to provide CAGE Code and part numbered ground-vehicle tire support to the Tires Successor Initiative (TSI) performance based logistics contractor, contract SPM7LX-11-D-0157, who is authorized to purchase tires pursuant to FAR Part 51 directly from Goodyear; contractor may also provide direct support to the Government. The TSI contract provides coverage for CONUS, OCONUS and FMS shipments with orders placed by the TSI Contractor on behalf of military customers’ requirements.

Contract SPE7M1-15-D-0012 provides support for a total of seven (7) NSNs. Of the 7 NSNs on Goodyear’s contract SPE7M1-15-D-0012; this contract action pertains to the six (6) NSNs that are sole source to The Goodyear Tire and Rubber Company and addressed in this Justification and Approval. One (1) of the 7 NSNs, 2610-01-560-1382, has two (2) approved sources of supply; (1) The Goodyear Tire and Rubber Company (CAGE Code 04NP3), and (2) Silver Eagle Manufacturing (CAGE Code 01084). NSN 2610-01-560-1382 is being removed from contract SPE7M1-15-D-0012 and is also excluded from this contract action. In order to maintain continuous supply coverage and contract support for this NSN, the Government intends to create a separate action for an Indefinite Delivery Purchase Order (IDPO) project requirement.

The NSNs covered under contract SPE7M1-15-D-0012 were solicited on an unrestricted basis and utilized full and open competition procedures in accordance with FAR Part 12, 10 U.S.C.

2304, and FAR 6.302-1(a)(2). The second, one year, option period was exercised on November 28, 2017 with an effective date of December 2, 2017. The contract term of four (4) years will expire on December 1, 2018, which leaves approximately six (6) months of contract support remaining. The ground-vehicle tire platforms supported by the NSNs on contract SPE7M1-15- D-0012 are illustrated in the table below:

CLIN Description NSN Ground Vehicle Platform 0026 Tire, Pneumatic, Vehicular 2610-01-368-9949 Low Bed Trailer/Industrial Utility Trailer 0031 Tire, Pneumatic, Vehicular 2610-01-397-6972 Aircraft Refueler 0042 Tire, Pneumatic, Vehicular 2610-01-481-7817 A/S32A-37 A/C Tow Tractor 0056 Tire, Pneumatic, Vehicular 2610-01-517-4327 LRT110 71/2 Ton Crane/Over the Road Truck Bus 0070 Tire, Pneumatic, Vehicular 2610-01-544-9490 R-11 Kovatch Refueler 0106 Tire, Pneumatic, Vehicular 2610-01-605-1344 Light Truck Trailer Cargo (Boat Trailer)

Authority for Other Than Full and Open Competition (10 U.S.C. 2304(f)(3)(B):

The purpose of this Justification and Approval is to support an increase to the contract maximum value referenced in Section A.17 of contract SPE7M1-15-D-0012 pursuant to the authority of 10 U.S.C. 2304(c)(2) and FAR 6.302-2. As of March 6, 2018, contract SPE7M1-15-D-0012 had a balance of of the total contract spend remaining. At this time, there was no indication of a potential issue with exceeding the contract maximum amount based upon the available balance of cover the remaining seven (7) months of the total contract term. On March 29, 2018, the TSI Contractor received a large FMS order for a quantity of 3,840 each (EA) for NSN 2610-01-517-4327. The TSI Contractor notified the Government that by placing this un-forecasted order to Goodyear against contract SPE7M1-15-D-0012, the total order amount would exceed the remaining balance of contract spend available. The total value of this order is and is also the amount of the increase to the contract maximum value.

The average procurement lead time to have a new LTC in place to cover the 6 NSNs in question would take approximately 8- 12 months, depending on pricing, negotiation and other factors.

With the total contract term for contract SPE7M1-15-D-0012 expiring on December 1, 2018, the Government has already initiated successor follow-on projects in order maintain contract support. These projects are currently in the early stages of the solicitation phase and award is not expected until October 2018. Due to the recent increase in un-forecasted FMS orders, the contract maximum value of contract SPE7M1-15-D-0012 has been exceeded. In order to ensure contract performance continues, an urgent contract action is needed to address the contract maximum value. This urgent contract action will ensure uninterrupted supply support and provide continuous contract coverage for the six (6) ground tire NSNs.

The need for this contract action is to account for the unforeseen spike in demand quantities (specifically for CLIN 0056, NSN 2610-01-517-4327), which the original calculations did not fully account for. The table below outlines the estimated annual demand quantities (ADQ) used in the original contract value calculations, in comparison to the actual annual demand quantities (by calendar year) the Government experienced from January 2014 to the date of this action.

The annual demand values (ADV) used in the calculations to determine the contract thresholds were determined by multiplying the estimated ADQ by the base contract unit price.

Estimated Annual Demand Actual Annual Demand

*Actual demand data from Jan 2014 – June 2018; separated by calendar year

As outlined in the table above; the “1.5” figure utilized in the contract maximum value calculation (ADV x 4 x 1.5), did not fully account for the actual increase in annual demand the Government experienced for NSN 2610-01-517-4327 throughout the entire duration of the total contract term. The increase in the actual annual demand quantities are attributed to an unforeseen and un-forecasted increase of Foreign Military Sales (FMS) orders. These orders are intermittent in nature and fluctuate based on operational needs. The nature of FMS orders are also driven by availability and allocation of funding on an individual country basis, which further complicates the ability to forecast these unexpected increases in demands.

The Government’s estimated four (4) year ADQ for CLIN 0056, NSN 2610-01-517-4327 was for a quantity of 112 each (EA). The actual demand quantity over the most recent six (6) month period (January 2018 – June 2018) alone was 4,380 EA; which is approximately thirty nine (39) times the original estimated quantity. As previously conveyed, the “1.5” figure was not an accurate representation of the actual demands received. The total estimated contract maximum value for this NSN was and as a result of the un-forecasted increase in demands, actual spend on this NSN is This is a $ over the estimated value and the increase alone is of the contract maximum.

Immediate action is required to increase the contract maximum value of contract SPE7M1-15-D- 0012 in order to maintain continued operational support and avoid any interruption in supply of

CLIN NSN Est

ADQ

Est

ADQ

(x4)

2014 2015 2016 2017 2018 (as of June)

Total- Actual*

0026 2610-01-368-9949 30 120 2 127 199 79 43 450 0031 2610-01-397-6972 33 132 41 11 8 32 4 96 0042 2610-01-481-7817 87 348 25 15 91 53 13 197 0056 2610-01-517-4327 28 112 2105 27 87 136 4380 6735 0070 2610-01-544-9490 506 2024 570 539 640 542 301 2592 0106 2610-01-605-1344 5 20 0 0 0 0 0 0 ground tires to fully support the TSI contract and program requirements. As contract SPE7M1- 15-D-0012 provides support to the US military and foreign partnering countries, 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 mission requirements and as a result, life, property, equipment, and diplomatic regional stability would also be compromised.

DLA Land and Maritime SAPD “Pre-Award” team is currently preparing the follow-on contract for the NSNs covered in contract SPE7M1-15-D-0012. The average procurement lead-time to have a new contract in place for a requirement of this complexity is anticipated to be approximately 8 – 12 months; at this point mission readiness and customer support would be critically impacted if this contract action is not urgently executed.

The Government considered individual “Spot Buy” contracts to fulfill demand requirements until a new LTC was awarded. Due to the volume of tires required to meet mission capabilities, the procurement lead-time, production lead-time, and transportation time to process individual spot buys would be of such length that mission readiness would be compromised. In addition, executing spot buys would be against the Base Realignment and Closure Act (BRAC) initiatives.

On November 9, 2005, the BRAC established that the wholesale supply, storage, and distribution functions for all tires used by the Department of Defense were to be discontinued. As a result of this BRAC, DLA Land and Maritime created a performance based logistic tire supply contract;

currently known as TSI. Contract SPE7M1-15-D-0012 provides direct tire supply to the TSI contract that is able to provide customer direct delivery timeframes for CONUS requirements of 4, 6 or 12 days and OCONUS requirements with a delivery of 4, 7, or 14 days. By establishing these delivery timeframes, DLA provides a “Just in Time” supply of tires to the customer. Spot buy contracts would not be capable of meeting the delivery timeframes the US military and FMS customers require to maintain mission readiness capabilities.

The increase of to the contract maximum value for contract SPE7M1-15-D-0012 would increase the current contract maximum value from . This contract action will be executed using the same methodology and calculations initially used to establish the contract values set forth on contract SPE7M1-15-D-0012. The value of this increase was calculated by taking the contract base unit price ($507.49) for NSN 2610-01-517- 4327 and multiplying it by a revised quantity of 3,498 EA, in order to calculate the revised 6 month annual demand value (ADV) of or this NSN to account for the large FMS order received by the TSI Contractor. The revised ADV would not be multiplied by the additional factors originally used (ADV x 4 x 1.5), as the number of possible years would no longer apply. See table below for revised ADV calculations and total.

CLIN NSN/PN ADQ - 6

months

Base Unit Price Revised ADV

0114 2610-01-517-4327 3,498 Revised ADV Total:

Price/Cost Considerations (10 U.S.C. 2304(f)(3)(C):

As previously conveyed, this contract action will be executed using the same methodology and calculations initially used to establish the contract values set forth on contract SPE7M1-15-D- 0012. Contract SPE7M1-15-D-0012 included an Economic Price Adjustment (EPA) clause that accounted for market conditions during the performance of this contract. As a result of this EPA adjustment, the base period NSN pricing has seen an overall reduction of since contract award. This adjustment will be used to ensure that a fair and reasonable price will be established for the CLIN added to contract SPE7M1-15-D-0012. The base unit price for NSN 2610-01-517- 4327 was deemed fair and reasonable prior to award of contract SPE7M1-15-D-0012. The two primary techniques used to determine price reasonableness entailed competition (FAR 15.403- 1(c)(1)) and a price analysis model developed by the Pre-Award Contract Specialist. Additional methods used to determine price reasonableness included: (1) comparison of the proposed prices to historical prices paid for the same or similar items (FAR 15.404-1(b)(2)(ii)), or (2) comparison of proposed prices with prices obtained through market research for the same or similar items (FAR 15.404-1(b)(2)(vi)), or (3) analysis of data other than certified cost or pricing data provided by the offeror (FAR 15.404-1 (b)(2)(vii)). In addition to price, these factors were also evaluated on the basis of technical acceptability: Materiel Requirement Factor, Delivery Requirement Factor, Experience Requirement Factor, Work Experience Sub-Factor, Schedule Experience Sub-Factor, Compliance Requirement Factor, Technical / Quality Control Plan Sub- Factor, Information Technology Sub-Factor, Subcontracting Plan Requirement Factor, Surge and Sustainment Requirement Factor.

Market Research/Efforts to Obtain Competition (10 U.S.C. 2304(f)(3)(D) and 10 U.S.C.

2304 (f)(3)(E):

Market research was conducted by reviewing the procurement item descriptions and the approved source(s) of supply identified for each of the ground tire NSNs listed in this contract.

The NSNs are coded as AMC/AMSC 3/D, which means the data needed to acquire these items competitively is not physically available, cannot be obtained economically, nor is it possible to draft adequate specifications or any other adequate, economical description of the material for a competitive solicitation. Because the Government lacks the technical data necessary to allow additional sources to manufacture these tires, each NSN is only available from one (1) or a limited number of sources. Additionally, these items are to be acquired directly from the manufacturer. Goodyear is the manufacturer of these tires and is the only approved source of supply for all 6 NSNs addressed by this contract action. As this is a urgent and compelling situation, the requirement to synopsize the proposed contract action is not required per the exception at FAR 5.202(a)(2).

Action Being Taken to Overcome Barriers to Competition (10 U.S.C. 2304(f)(3)(F):

The unforeseen spike in demand of Foreign Military Sales (FMS) requirements, which exceeded the estimated demand quantities utilized to calculate the contract maximum, has led to the unusual and compelling urgent situation and is the reasoning behind the Government’s efforts to limit competition for this action. The SAPD Pre-Award team that is currently in the solicitation phase for the next round of tire supply LTC’s are aware of possible spikes in FMS demands and the direct effect this has on the contract ceiling. To help prevent this situation from reoccurring in the future, contract estimates will be based on the highest ADQ over the past three (3) years.

Additionally, the Government will attempt to increase competition in the future by synopsizing contract actions on FedBizOpps, and posting solicitations on DIBBS as an additional measure to promote competition.

APPROVAL

Based upon the foregoing justification, I hereby certify that the information contained in this justification is accurate and complete to the best of my knowledge and belief.

THOMAS W. DRAGOLICH Date Contracting Officer DLA Land and Maritime

MARY E. COUTURE Date Competition Advocate DLA Land and Maritime

APPROVAL REQUEST

( ) Up to $700,000 Contracting Officer

(X) $700,000 to $13,500,000 Competition Advocate ( ) $13,500,000 to $93,000,000 Head of Contracting Activity ( ) Over $93,000,000 Senior Procurement Executive (AQ)

06/21/2018

06/22/2018

DRAGOLICH.THOMAS

.WILLIAM.1079889608

Digitally signed by

DRAGOLICH.THOMAS.WILLIAM.1

079889608 Date: 2018.06.21 07:34:19 -04'00'

COUTURE.MAR

Y.E.1230253613

Digitally signed by

COUTURE.MARY.E.1230253613

Date: 2018.06.22 15:58:45 -04'00'