SPE7MX-23-R-0013ConsolidationMemo.pdf

DEFENSE LOGISTICS AGENCY

LAND AND MARITIME

P.O. BOX 3990

COLUMBUS, OHIO 43218-3990

MEMORANDUM FOR THE FILE

SUBJECT: Consolidation Determination- DLA Land and Maritime, for Project CM22237001

Background:

This DLA Land and Maritime acquisition is for an Indefinite Quantity/Indefinite Delivery

(IDIQ) contract for Project CM22237001 check valve and pressure switch items. The acquisition will include a population of four (4) National Stock Numbers (NSNs), which are listed below. The Highest Priority Weapon System Designator Code for these items is FYLN - Helicopter, Seahawk, H-60, FEAN - Helicopters CH-53, and F40A - Helicopter, Blackhawk UH-60A, UH-60L, HH/UH-60M, UH-60V. The North American Industry Classification System (NAICS) code is 335313-Switchgear and Switchboard Apparatus Manufacturing with a size standard of 1,250 employees. This acquisition is being pursued to provide continued or improved supply availability to preclude backorders, reduce administrative and production lead-times (ALT and PLT), decrease potential contract administration actions, and obtain reduced and stable unit pricing.

NSN ITEM ADQ

(MLTON)

ADV

(MILTON)

AMC AMSC QCC

4820016319532 VALVE,CHECK 40 $90,600.00 3 C FEA

5930002314960 SWITCH,PRESSURE 61 $39,313.89 3 B EBC

5930009359584 SWITCH,PRESSURE 61 $65,663.45 3 B DAA

5930011550744 SWITCH,PRESSURE 159 $91,917.90 3 C DAA

DLA Land and Maritime intends to enter into a firm-fixed price (FFP), long-term contract (LTC) with a maximum contract period of five years, consisting of a three-year plus two (2) one-year option periods. The total estimated annual demand value is $1,437,476.20 for five years. The estimated contract maximum dollar value is $2,267,130.20. The solicitation will be evaluated and awarded considering single awards on an All-or-None-by-NSN basis using the best value trade-off evaluation method.

Based on the procurement history and a technical review, the solicitation will be issued as other than full and open competition in accordance with FAR 6.302-1, only one responsible source and no other supplies or services will satisfy agency requirements. Competition will be limited to those offering the material of the listed sole source for these NSNs. The sole source is small business Spectrum Associates Inc. (55723), and they have been the only vendor to submit a quote for new material since October 2016. Spectrum Associates Inc. (55723) was the only vendor to respond to the market research questionnaire and survey. The OEM confirmed they will not quote to dealers, only directly to the Government, on September 21, 2022.

This action represents a new and follow-on consolidation. NSN 4820-01-631-9532 has never been consolidated. Three NSNs, 5930-00-231-4960, 5930-00-935-9584, and 5930-01-155-0744 were

Consolidation Determination {Project CM22237001} Page 2 previously consolidated on contract SPE7LX-18-D-0143. The total expenditure for LTC’s SPE7LX-18-D-0143, $916,381.61, and SPM7MX-13-D-0055, $68,637.24, is less than the estimated value for this procurement. FAR 7.107-5(e) requires a notification to the SBA-PCR of the follow-on consolidated requirement and to provide the amount of savings and benefits achieved under the prior consolidation. The Buyer will comply with this required action, and evidence of compliance will be in the procurement file.

• Defense Priorities and Allocation System (DPAS) Priority DO; it was determined to be in the best interest of the warfighter and the Agency to initiate the development of an LTC that supports spare parts for multiple weapon systems.

• This contract will provide repair and replacement parts for military customers both in the Continental United States and Outside the Continental United States. The support of these items will be through DLA Direct (DD).

• The scope is limited only to the four (4) NSNs listed in Section B of the solicitation.

The NSNs included in this procurement have been mostly purchased using Simplified Acquisition Procedures (SAP). The Contracting Officer found two contracts with a value higher than the Simplified Acquisition Threshold (SAT). The two contracts were both LTCs. LTC SPM7MX-13-D-0055 was for one (1) NSN, and the second LTC, SPE7LX- 18-D-0143 was for twelve (12) NSNs . A previous consolidation was done under LTC SPE7LX-18-D-0143. Accordingly, the proposed acquisition constitutes a consolidation of contract requirements as defined in FAR 2.101 and 7.107-2 because the proposed procurement will result in a single contract for items that DLA previously procured under separate acquisitions, each of which was lower in cost than the total cost of the contract for which offers are solicited.

Market Research:

• DLA Land and Maritime conducted market research, consisting of a market survey issued to Spectrum Associates Inc. (55723).

• The market survey sought and gathered information regarding commerciality, shipping costs, zone pricing, option periods, pricing and electronic data interchange (EDI) capability.

o Spectrum Associates Inc. (55723) is a small business manufacturer. Their preference is a LTC with a base period of three years and single options years. It stated that the items qualify for quantity price breaks and recommended price ranges. Spectrum Associates Inc. understood the concept of certified cost and pricing data and would provide such documentation if necessary. It did not consider the items to be commercial. Spectrum Associates Inc. has no production limitations on the items but would require a minimum buy of ten (10) each for NSN 4820-01- 631-9532, twenty-five (25) each for NSNs 5930-00-231-4960 and 5930-00-935- 9584, and fifty (50) each for NSN 5930-01-155-0744. It estimated delivery to be 240 days. Spectrum Associates Inc. did not recommend any additional items to be included in this procurement.

• Sources sought posted to beta.SAM.gov from September 21 to September 28, 2022.

Spectrum Associates Inc. confirmed that they were still interested in a LTC, and that their responses to the LTC spreadsheet and questionnaire were still valid. Surplus vendor Aviarms Support Corp. (58985) provided a stand-alone buy quote for NSN 5930-00-231- 4960, but they are not a viable option for this procurement.

Consolidation Determination {Project CM22237001} Page 3

• Based on the market research, and on the current technical data, there are no additional OEMs beyond those referenced above, and there are no possible new sources of supply being evaluated by Engineering Support Activity to be approved to source these items.

• Spectrum Associates Inc. is registered in the System for Award Management and in good standing with the Government. Procurement history shows contracts have only been awarded to them.

Small Business Impact:

This acquisition will be solicited under other than full and open competition because there isn’t a reasonable expectation that quotes will be received from two or more responsible small business concerns. This material is sole source to Spectrum Associates Inc., which is a small business manufacture, and only quotes directly to the Government. Consequently, there should be no impact to small business participation in the acquisition because there are no large business approved sources. Separate synopsis’ will be posted referencing the consolidation memo and solicitation.

Procurement history shows that a small business has been one of the primary awardees for these items. Solicitations for either of the two NSNs would not be set-aside at any dollar value. Thus, procuring these two NSNs together has no detrimental impact to the small business community.

In accordance with FAR 7.107-2(a)(3), this consolidation determination has been coordinated with the Agency’s Office of Small Business. A copy of the DD2579 documenting the proposed acquisition strategy of other than full and open competition for the consolidated procurement, along with an unsigned draft version of this consolidation memorandum, was sent to the DLA Small Business Office on October 14, 2022, and concurrence was received on 10/25/22 from the Small Business Administration.

Benefit Analysis:

The details of the proposed approach are discussed in the Acquisition Plan. The proposed acquisition approach results in the following benefits:

1. Acquisition Cycle: Administrative Lead Time (ALT) will be reduced because items will not have to be procured via individual purchase orders (spot buys) each time a requirement arises.

Requirements will source automatically to the proposed LTC using DLA’s automated procurement system, which will generate delivery orders against the contract. As of August 2022 in the Maritime Supply Chain, the average ALT for delivery orders on LTC was 29.3 days, 97.6 for small buys, 95.7 days for large purchases, and 28.2 days for Procurement Automated Contract Evaluation (PACE) awards. Using this data for comparison, there is a minimum savings of 68.3 days when comparing the proposed LTC approach to small buys, 66.4 days compared to large purchases, and 1 day compared to PACE awards.

2. Relationship Management: Orders from a LTC will provide a continuous relationship between the contractors and the contracting activity. After award issuance, the contract(s) will be assigned to a Basic Contract Administrator (BCA). The BCA and an Administrative Contracting Officer (responsible for post award actions on delivery orders) will be responsible for ensuring Purchase Requests are sourced properly to this contract and tracking delivery. The BCA will also be responsible for exercising any options until contract expiration. Having a primary contact within the administration area will ensure that potential quality/delivery issues will be resolved more efficiently and quickly than individual spot buys. Also, contractors are more likely to be proactive in seeking avenues to resolve quality/delivery discrepancies since the items are on

Consolidation Determination {Project CM22237001} Page 4 contract for an extended period of time.

3. Cost: The vendor(s) will reduce duplicate efforts and thereby lower administrative costs associated with quoting on multiple solicitations over the same period. Additionally, the vendor(s) may be able to reduce material costs for items on a LTC by using long-term production planning, which allows buying raw material or finished materials in bulk, resulting in quantity discounts.

These efficiencies can result in reduction of Government costs. There are also internal Government benefits from using a LTC, such as decreased inventory capital investment requirements as a result of lowered ALT, since quicker and more reliable vendor delivery means that less stock is required to be kept on-hand. Also, the Government’s administrative and operational costs to initiate and manage multiple solicitations, evaluations, award decisions, and contracts is significantly reduced, ordering is automated, and the automated ordering process time is almost instantaneous.

In addition, according to the Cost Simulation performed using the AAA/BCA Simulator tool, this consolidated procurement will save the Government an estimated total of $46,862.01 over 5 years in comparison to spot buys. The proposed procurement is estimated at $287,495.24 per year and the estimated Cost Simulation savings are approximately 3.3% per year, primarily resulting from cost reductions in the following cost drivers: depot throughput, transportation, asset management, and storage. Since the proposed vendor materiel prices are unknown at this time, this savings assumes the vendor's materiel prices will be the same as the average DLA acquisition prices for each NSN. The actual savings will depend on the final negotiated materiel prices.

The advantages of this project include cost avoidance for the Government, workload reduction, opportunity for continued participation in a supplier partnership, little disruption of the current flow of items to the customer, and minimal level of maintenance. These benefits are interrelated and largely result from elimination of the numerous separate contract actions (with associated lead-time and contracting resource requirements) now required to support Maritime based weapon systems on a worldwide basis.

The benefits of this consolidation are critical to the Agency’s mission success. DLA is the military’s premier logistics provider, and it is imperative that DLA structures its contract actions to maximize benefits while minimizing costs. The consolidation does this by reducing administrative costs which, in turn, helps to keep DLA’s cost recovery rate low. Critical benefits include increased material availability, reduction in lead time, and increased warfighter equipment operational readiness.

Alternative Contracting Approaches:

The Contracting Officer considered the less consolidated alternatives in developing the acquisition strategy for this project. The least consolidated, but also least beneficial, approach would be to procure the items via individual purchase orders (spot buys). This approach would not achieve the efficiencies, cost avoidance, and other benefits when compared to the acquisition strategy proposed.

A second approach that is only slightly less consolidated than that proposed is to separately solicit for and award individual LTCs for each NSN. While this approach seeks to leverage the contract administration advantages of long-term delivery order contracts, it provides very little

Consolidation Determination {Project CM22237001} Page 5 practical difference from the first alternative above. This approach would require greater resources both to award and administer (even if the contracts were awarded to the same vendor) and would take substantially longer to award than the proposed approach. Therefore, this alternative contracting strategy is substantially less beneficial than the proposed approach because it significantly decreases efficiencies during the pre-award cycle and provides no better benefits associated with competition than the proposed approach, as both approaches allow for the individual evaluation and award of each NSN.

Determination:

For the reasons stated above, I hereby determine:

a. This proposed acquisition constitutes a consolidation of contract requirements.

b. The contract requirements being consolidated exceed $2 million.

c. There are benefits of consolidating the contract requirements, which include both quantifiable and non-quantifiable benefits.

d. The expected benefits do not meet the thresholds for a substantial benefit at FAR 7.107- 2(d)(1), but are critical to the Agency’s mission success.

e. The procurement strategy provides for maximum practicable participation by small business.

f. The consolidation of contract requirements is necessary and justified.

LINDA KELLY Date Chief of the Contracting Office Strategic Acquisition Program Directorate

Attachments:

1) VSRM Cost simulation

2) ALT Data August 2022

AUGUST FY22

Type NUM POS OBLIGATIONS ALT NUM POS OBLIGATIONS ALT Large 44 $ 24,687,638 114.6 60 $ 53,195,207 95.7

LTC 135,096 $ 677,736,216 6.0 37,527 $ 382,784,812 29.3

GSA 16 $ 560,579 114.2 8 $ 34,547 75.9

BOA 525 $ 14,259,331 152.4 1,192 $ 40,926,067 97.7

Small Manual 25,252 $ 384,962,769 102.5 39,828 $ 624,983,870 97.6

PACE 28,263 $ 135,956,582 32.5 40,727 $ 268,931,682 28.2

AUTOMATED 163,359 813,692,798$ 11 78,254 651,716,494$ 29

MANUAL 25,837 424,470,317$ 104 41,088 719,139,691$ 98

TOTAL 189,196 1,238,163,115$ 23 119,342 1,370,856,185$ 52

Actions Obs Actions Obs

PCT AUTO 86.3% 65.7% 65.6% 47.5%

Actions minus LTCs 54,100$ 81,815$

PACE % 52% 50%

LAND MARITIME

Consolidation Memo Attachment #2

NUM POS OBLIGATIONS ALT

104 77,882,845$ 103.7

172,623 1,060,521,028$ 11.1 24 595,126$ 101.4

1,717 55,185,398$ 114.4 65,080 1,009,946,639$ 99.5 68,990 404,888,264$ 30.0

241,613 1,465,409,292$ 16.5 66,925 1,143,610,008$ 99.9

308,538 2,609,019,300$ 34.6

Actions Obs 78.3% 56.2%

135,915$ 51%

COLUMBUS

Consolidation Memo Attachment #2

OH SchedRcpts UFOs SS MaxOH CovDur Cost Base_TotalOASpend_5Yr 1 119 13 121 122 28 607.88 257133.24 3 84 8 83.5 84 28 1174.68 317163.60

157 46 0 235.5 236 28 578.96 372271.28 0 48 21 30.5 31 28 2265 480180.00

1,426,748.12$

BEP

Consolidation Memo Attachment #1

Base_PRCount_5Yr Base_ManualSetUpCost_5Yr Base_Del_Order_Cost_5Yr Base_IHC_5Yr Base_Revenue_5Yr Base_Avg_InvUnits_5Yr 41 11368.89 1004.50 22443.23 391096.26 75.076 27 7486.83 661.50 32141.44 485684.27 55.648 57 15805.53 1396.50 40184.15 565688.79 139.025 44 12200.76 1078.00 1819.11 758032.56 -0.656

46,862.01$

3.28%

Base_StockOut_Count_5Yr