JA_SPRDL1-18-R-0467_REDACTED.pdf

J&A SPRDL1-18-R-0467

(Previous J&A for Contract W56HZV-04-D-0041 is not available.)

JUSTIFICATION AND APPROVAL

FOR OTHER THAN FULL AND OPEN COMPETITION

1. Contracting Activity: Defense Logistics Agency Land Warren (DLA - Warren)

2. Description of Action: This action will result in a new firm fixed price contract for a quantity of 471 each, with an option of an additional 471 each, transfer transmission assemblies used in the High Mobility Multi-Purpose Wheeled Vehicle (HMMWV) Family of Vehicles (FoV) with serial number 299,999 or below. The estimated unit price for each transfer transmission assembly with container is each. Army Working Capital Funds estimated at will be used for this action.

3. Description of Supplies/Services: This action will procure the transfer transmission assembly with container, NSN 2520-01-469-9893, Military Part Number 57K350. The Government part number consists of two items, the Transfer Transmission (drawing number 12447125) and the Container (drawing 13414). Per drawing 12447125, the transfer transmission is restricted to the following approved sources of supply:

AM General LLC 408 S. Byrkit Street Mishawaka, IN 46546-0728

CAGE: 34623

MPN: 6009731-A

New Venture Gear, Inc.

New Process Gear Division 6600 New Venture Gear Drive E. Syracuse, NY 13057-1209

CAGE: 76760

MPN: 21908

Magna Powertrain of America, Inc.

dba MPT Muncie East 1400 West Fuson Road Muncie, IN 47302-8684

CAGE: 65U15

MPN: 21908

NSN 2520-01-469-9893 is for the transfer transmission assembly with container used in the HMMWV with a serial number of 299,999 or below. A HMMWV with a 299,999 or below serial number are expanded capacity vehicles (ECV), but before the revision B model (Rev B) cut in. The ECV designation is indicative of performance and reliability improvements that were made to what is now called the legacy HMMWV variants.

These changes were implemented as a direct result of the evolving war environment that the HMMWV was subjected to. Specifically speaking, the transfer transmission assembly, NSN 2520-01-469-9893, was designed to handle the increased payload and the improved power output from the 6.5L turbo engine. NSN 2520-01-469-9893 transfer transmission assembly can only be used on the pre-Rev B models as the Rev B transfer transmission assembly introduced a new cooling system which prevents the two transfer transmission assemblies from being used in each other's revision variant.

While this kit, 57K3505, is coded to TACOM, the major item procured is sole-sourced.

That item is the transfer transmission assembly itself. AM General LLC developed the technical data with New Venture Gear for this item and obtained the Government's approval for its use in the HMMWV at the vendor’s own expense. The Government did not acquire any rights to the technical data to enable competition of this item.

Acquisition Method Code (AMC) 1: Suitable for competitive acquisition for the second or subsequent time.

Acquisition Method Suffix Code: (AMSC) C: This part requires engineering source approval by the design control activity in order to maintain the quality of the part. Existing unique design capability, engineering skills, and manufacturing knowledge by the qualified source(s) require 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.

4. Authority Cited: The statutory authority permitting this action is 10 U.S.C.

2304(c)(1) as implemented by Federal Acquisition Regulation (FAR) 6.302-1 (a)(2), “Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements.”

5. Reason for Authority Cited:

a. Background: The HMMWV transfer transmission assembly was originally designed and developed by New Venture Gear with AM General. However, Magna Powertrain has since acquired New Venture Gear and all of the rights to all of the New Venture Gear products, including this transfer transmission assembly. As such Magna Powertrain is now considered the OEM of the transfer transmission assembly, but they do not supply the kit or militarized container.

Those items are provided by AM General or any other vendor willing to package up all of the source controlled components and then supply the kit to the Government. T h e original HMMWV program acquisition strategy incorporated a combination of off-the shelf commercial parts, existing ordinance parts, and contractor-developed parts to speed up the acquisition process and allow the

Government to own some portions of the HMMWV, but not the full TDP of the vehicle system. This strategy reduced research and development time as well as overall program cost. Thus, while the HMMWV FOV has a Technical Data Package (TDP), it is not all inclusive of every component of the vehicle system.

Furthermore, the TDP does not include vendor-developed components that were considered the intellectual property of the developer. A TDP for the transfer transmission assembly was not acquired with the vehicle TDP. Since this item was developed by the OEM, and at their expense, the technical information for this item is proprietary to the OEM. As such, the use of such descriptions in the acquisition is essential to the Governments’ requirement, thereby precluding consideration of a product manufactured by another company.

b. Costs: There are no known funding efforts in progress at this time to acquire the commercially controlled data necessary to make NSN 2520-01-469-9893 fully competitive. Further, because this is a major system component of the HMMWV, there would be a time, cost, and schedule impact associated with every competitive purchase action taken for the transfer case. This is a result of the full qualification test that would need to be conducted for each awarded vendor to validate that the transfer transmission assembly's Form, Fit and Function remains the same each time. This would add unnecessary cost and schedule to the acquisition of each transfer transmission assembly of the HMMWV.

If the Government insisted on fully competitive procurement for the transfer transmission assembly, the Government would have the three choices to obtain the necessary information to enable full competition: Research and Development of our own transfer transmission assembly design; Reverse Engineering of the existing system; or simply ask the vendor, in this case AM General LLC, for a price to purchase the full Technical Data and rights to use the item competitively.

PD-LTV has repeatedly tried to obtain pricing for the HMMWV TDP in recent history, the latest attempt being made in March 2017. AMG’s response was that it is Not for Sale. AM General has not changed its position on selling the TDP because that would result in a net loss of business to AM General. Without the option to purchase the TDP, the Government has two remaining methods to acquire the data required and execute a competitive transfer transmission assembly purchase. The remaining options are:

(i) Research and Development (R&D): To develop a competitive data package through a Research and Development (R&D) effort would involve a ground up design of a transfer transmission assembly that doesn’t infringe on any existing patents which would include research, generating requirements, and any associated technical drawings. Followed by testing and validation, and finally, qualifying additional sources for the Government transfer transmission assembly program. This action would entail a significant amount of time, facility resources, man-hours, and funding to provide a solution that is identical to what we have already.

Based on past experience with similar efforts, the estimated cost to research and develop a compatible product and qualify additional sources exceeds $10 million with a setback of forty-eight (48) months. Required funding would include $3.5 million for personnel to support research, and redevelopment of an item that would perform the same task as this NSN.

That $3.5 million would also include funding for staff to develop the CAD models and drawings that would be required for any potential vendor to manufacture from. Another $4 million would be required for developmental testing and validation of the design, and the remaining $2.5 million would be used for prototype tooling. If funding for a new-start research and development effort became available, the forty-eight (48) month process would consist of the following: 12 months to develop and refine the requirements, 6 to 12 months in design and prototyping, 18 months to test compatibility and function, and an additional 12 months to capture changes from testing, write the technical data package, and finally, provision the parts. A timeline of the estimated R&D process is shown for clarity.

LTV Engineering estimates the following timeline for R&D:

Requirements development 12 Months Design and prototype development 6 Months Component, safety and system level testing 18 Months Write TDP, technical bulletins and provision parts 12 Months

Estimated Time to research and develop 48 Months

(ii) Reverse Engineering (RE): To reverse engineer, validate the design, procure prototypes for testing, and release a competitive data package would entail a significant amount of time, facility resources, man-hours, and funding. Based on past development experience, the estimated cost to develop a reverse engineered competitive product is $6.5 million, with an estimated delay of no less than forty-eight (48) months. Required funding would include: $500,000 to purchase 10 copies of the transfer transmission assembly for detailed study, tear down and part measurement; $3.5 million for personnel to support the reverse engineering and validation effort, as well as fund staff to develop the CAD models, drawings, and necessary documentation to enable a fully competitive procurement of the HMMWV transfer transmission assembly;

and $2.5 million to purchase prototypes, execute testing, and finalize the product to verify that the newly-created item provides equivalent performance when compared against the original. If funding for reverse engineering became available, the forty-eight (48) month process would consist of the following: 6 months to obtain existing parts; 6 months to tear down and understand the design; 6 months to iteratively develop drawings, prototypes and bench test; 18 months to perform system and vehicle level testing; and 12 months to write the technical data package and provision the parts. To complete the reverse engineering process successfully, the Government would have to obtain a sufficient sample size of existing parts to provide a 95% probability and 90% confidence level in the actual size of the existing item to be studied. Once a large enough sample has been collected, the Government would then tear down and understand the design, conduct prototype development and produce the final TDP and associated provisioning documents at a cost of $6.5 million. A timeline of the estimated R&D process is shown for clarity.

LTV Engineering estimates the following timeline for RE:

Obtain existing parts 6 Months Tear down and understand the design 6 Months Prototype development 6 Months Component, safety and system level testing 18 Months Write TDP, technical bulletins and provision parts 12 Months

Estimated Time to Reverse Engineer 48 months

In addition to the cost and delay for an R&D action or RE effort, Pd-LTV estimates that it would take approximately one additional year to establish another source and procure this kit on a competitive basis due to First Article Testing and on-vehicle verification. Specific events would include additional market research, solicitation, evaluation, and awarding a contract. Finally, any new source of supply would require component, safety and system-level testing that is estimated to take 6 months. These estimates are based on similar Government projects. These events combined are estimated to take an additional 12 months after development of the item.

Considering this vehicle configuration is out of production and future vehicle demand is unknown, the costs cited above appear to exceed any potential savings to be realized through any future competitive procurement process.

Typically, a 15% saving would be assumed when calculating savings between the Government-owned TDP and the Contractor-owned TDP; however, for the transfer transmission assembly, there are large capital tooling expenditures that need to be accounted for which reduce the associated savings. Due to this, the assumed savings amount is reduced from 15% to 5%. This change captures the capitol expense costs like hard tooling, manufacturing plant, raw material, and labor and training from which these parts would be made. All of these capital expenses reduce the total savings percentage from what would be realized over a much smaller component of the HMMWV, like a mirror bracket. Assuming that we spend $6.5 million dollars to obtain our own version of the item and realize a savings of 5%, the new cost of the Government-owned transfer transmission assemblies would be each. That is a savings of $54.32 between the Contractor-owned and the Government-owned versions. Dividing $6.5 million by $54.32 results in 119,662 transfer transmission assemblies required to recover the development cost. Assuming transfer cases every years, we can calculate that it would take around 128 contracts, or roughly 384 years, to recover our costs and break even on the competitive action.

c. Unacceptable Delay: If the procurement of the HMMWV transfer transmission assembly is delayed until the TDP is bought by the Government and made suitable for a competitive procurement, the Government would experience an unacceptable delay of a minimum of four years in fulfilling this requirement. The four year delay is a result of the time required to develop items of equivalent performance. AM General is currently the only source that can meet the requirements without substantial duplication of cost and without unacceptable delay against this action. As the approved source, AM General has the requisite technical and engineering expertise to perform all efforts required to provide the NSN identified in this Justification and Approval (J&A).

6. Efforts to Obtain Competition: The Government does not have the complete TDP required to manufacture the transfer case or use for competitive procurement, and there are no known funding programs active at this time for qualification of additional sources.

No other transfer transmission assembly manufacturers have a drop-in replacement that mounts to the HMMWV without major modifications. If there are vendors that believe they offer a product that requires no modification, costs less, and increases power, they can submit their offer to the Government Competition Management Office (CMO).

Those vendors can seek qualification through the Source Approval Program at their own expense. Testing and validation of any claims would have to be realized before any approval is granted. At this time, there are no contractors seeking approval through the CMO. Therefore, only AM General will be solicited for this effort. This effort will be synopsized in accordance with FAR Part 5.201(c).

7. Actions to Increase Competition: There are no vendors in the process of being qualified for this NSN at this time and none prior to contract award. At this time, there are no current or planned efforts to qualify additional sources due to the fact that the Government does not possess a fully defined and validated TDP for NSN 2520-01-469- 9893. AM General owns the technical data regarding this item. Any vendor that believes they can provide this NSN for a lower cost while meeting the same requirements as the existing item should seek qualification as a secondary source through the CMO Source Approval Program at their own expense.

8. Market Research:

a. On April 5, 2018, Engineering conducted an online search of known transfer case suppliers looking for published material on new-built replacement units.

The results of this search did not produce any new companies that would provide a direct replacement for the transfer transmission assembly for the ECV HMMWV with serial number 299,999 and below.

Approval Authority for Acquisitions Equal to or Greater Than $700,000

APPROVAL OF JUSTIFICATION

FOR OTHER THAN FULL AND OPEN COMPETITION

Based on the foregoing Justification, I hereby approve the procurement of the following:

a. Noun: Transfer Transmission Assembly

b. NSN: 2520-01-469-9893

c. Basic Quantity: 471 each

d. Basic Estimated Value:

e. Option Percent: 100%

f. Quantity with Option: 942 each

g. Estimated Value with Option:

This action will be awarded under other than full and open competition pursuant to the authority of 10 USC 2304(c)(1) and subject to the availability of funds. This approval is subject to the provision that the property herein described has otherwise been authorized for acquisition.

Signature:

Date: 22 Jun 2018