SPE7MX-24-R-0032 - 24R0032ConsolMemoCCO REDACTED_Redacted.pdf

CUI

Consolidation Determination SPE7MX-24-R-0032 Page | 2

All NSNs have one approved manufacturer, Wamco Inc. (58744); therefore, all NSNs have an Acquisition Method Code (AMC) of 3, which indicates to acquire, for the second or subsequent time, directly from the manufacturer. This does not preclude offers from dealers; it means the manufacturing sources are restricted to the approved source. Acquisition Method Suffix Codes (AMSC) B, C, D and Z apply to the four NSNs on this project. There is one NSN with an AMSC of B, which means the part must be acquired from a manufacturing source(s) specified on a source control or selected item drawing. There is one NSN with an AMSC of C, which means the part requires engineering source approval by the design control activity in order to maintain the quality of the part. There is one NSN with an AMSC of D, which means data to produce the part is not physically available. The remaining NSN has an AMSC of Z, which means that this is a commercial item.

All NSNS have been purchased via small buys and Procurement Automated Contract Evaluation (PACE) awards under the Simplified Acquisition Threshold of $250,000.00. 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 Land and Maritime previously procured under separate acquisitions, each of which was lower in cost than the total cost of the contract for which offers are solicited. Accordingly, the proposed acquisition constitutes a consolidation of contract requirements and requires a written determination.

Market Research

Initial market research was conducted by the Sourcing Strategy Specialist (SSS) in August 2023.

They sent a market questionnaire to the approved manufacturing source, Wamco Inc. (58744) as well as dealers in the last three years of the procurement history. A sources sought notice was issued on February 28, 2024 with a response date of March 6, 2024, and there were no responses to this notice. The market questionnaire asked companies to provide information such as willingness to quote a three-year base period and priced option years, provide stock delivery, state if the items are quantity sensitive, state if the items are commercial, preference for zones, asked if they could provide packaging requirements, asked information regarding FOB and zones. The following companies responded:

Wamco Inc. (58744)-

- Small businessManufacturer of all 4 NSNs

- No preference for a three-year base period

Impact on Small Business:

As required by FAR 7.107-2(a)(3), the consolidation was coordinated with the DLA Land and Maritime Small Business Office and Small Business Administration. It is reasonable to conclude that the consolidation of these requirements will not negatively impact small business participation since this is 100% Small Business Set Aside. Although all the items will be limited to approved part numbered items, award is not limited to the manufacturer and dealers can also receive the award. The solicitation will be awarded on an all-or-none by NSN basis, so that each item can be awarded to a different vendor, thereby precluding quantities or dollar values that make it difficult for a small business to compete for a contract.

In effort to ensure that offers are solicited from as many sources as practicable, the acquisition will be synopsized on SAM.gov and posted on the DLA Internet Bid Board System (DIBBS).

Benefits of Consolidation:

The details of the proposed approach are discussed in the acquisition plan. The proposed acquisition

Consolidation Determination SPE7MX-24-R-0032 Page | 3 approach results in the following benefits:

1. Acquisition Cycle: The purchase request process typically includes assembling a technical data package (if applicable), developing an acquisition strategy, soliciting proposals from industry, negotiating (if applicable), reviewing, and finally awarding the contract or purchase order. This administrative processing is called administrative lead time (ALT). As of November 2023, for DLA Land and Maritime Supply Chains, the average ALT for delivery orders on LTC is days, for small buys is days, for large buys is days, and for PACE awards is days. Using this data for comparison, there is a minimum savings of days when comparing the proposed LTC approach to small buys, days when compared to large buys, and days when compared to PACE awards.

ALT will be reduced because items will not be individually solicited, competed, evaluated, and awarded each time a requirement arises. Reduced ALT is important to ultimately reduce the time for awards in an effort to get the parts delivered quicker to the Military customer. Requirements will source automatically to the proposed LTC using DLA’s automated procurement system, which will generate delivery orders against the contract.

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 contract for an extended period.

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 an 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.

A full BCA was determined to be unnecessary for this initiative since it falls under DLAI 5010.06 Exemption #2: The acquisition is for supplies and the end-item will be delivered to DLA stock at the depots. The BCA Simulator (formerly the Vendor Stock Retention Model (VSRM) estimates a total of $ potential cost avoidance over using the proposed contract for LTC for Stock versus Spot Buys for Stock; see attachment #1- BCA Simulator. The estimated savings are 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

Consolidation Determination SPE7MX-24-R-0032 Page | 4 resource requirements) now required to support DLA Land and Maritime based weapon systems on a worldwide basis.

The quantifiable benefits identified above do not meet the threshold for a substantial benefit atFAR 7.107- 2(d)(1)(ii) of this subsection; however, enumerated benefits are critical to DLA Land and Maritime’s mission success. DLA Land and Maritime uses LTC methods to offer the best value to our customers. By consolidating these requirements, DLA Land and Maritime will be able to ensure consistent supplies while achieving economies of scale and reducing ALT and PLT. 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.

Alternate Contracting Approaches:

The Contracting Officer has identified the less consolidated alternatives in developing the acquisition strategy for this project. The least beneficial approach would be to procure the items via individual purchase orders (spot buys). The use of spot buys to satisfy requirements for some or all of these items does have benefits. Specifically, there is low risk of transitional disruption associated with moving to a different procurement alternative, and the relatively low dollar value of spot buys may increase small business participation. However, these benefits are outweighed by the costs of spot buys and the benefits of long-term contracting. Spot buys, whether small or large, are more expensive than delivery orders. Additionally, there are efficiencies and other benefits with long-term contracting. A long-term contracting instrument has the potential to improve in all areas. Better prices will probably be obtained with a long-term instrument rather than increases that would likely occur with an individual spot buy.

Another less consolidated contracting strategy would be to procure these items using Automated Indefinite Delivery Contracts (IDCs). However, Auto IDCs have a $250,000 threshold per item and are typically shorter than LTCs. Therefore, these NSNs should not be placed on Auto IDCs.

A third 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 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:

In view of the foregoing, I hereby determine:

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

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

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

4. The expected benefits do not meet the thresholds for a substantial benefit at FAR 7.107-2(d)(1) but

Consolidation Determination SPE7MX-24-R-0032 Page | 5 are critical to the Agency’s mission success.

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

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

COLEEN MCCORMICK

Chief of the Contracting Office

Attachments:

1. BCA Simulator

MCCORMICK.COLEE

N.DIANE.130010033

Digitally signed by

MCCORMICK.COLEEN.DIANE.130

0100330 Date: 2024.09.17 10:23:51 -04'00'