Tab_2_-T56_J_and_A_Redacted.docx

JUSTIFICATION FOR OTHER THAN

FULL AND OPEN COMPETITION

I. CONTRACTING ACTIVITY

Contracting Office: AFLCMC/LPSK 3001 Staff Drive Tinker Air Force Base, OK 73145-3021

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

The United States Air Force, through the Air Force Life Cycle Management Center and the Propulsion Sustainment Contracting Office (AFLCMC/LPSK), requests approval to procure T56 Overhaul & Management of Items Subject to Repair (MISTR) support for the US Air Force (USAF), US Coast Guard, and US Navy under the Justification for Other Than Full and Open Competition detailed in this document.

Because of the unusual and compelling urgent need for continuity of contract performance, despite four years of intensive efforts to develop alternate sources (including consideration of organic solutions and solicitation of private sector sources through full and open competition) discussed in the appropriate sections below, AFLCMC/LPSK plans to enter into an undefinitized contractual action (UCA) with the incumbent for just enough ordering period to enable the Air Force to complete the source of repair assignment (SORA) and execute the resulting strategy, which may include transfer of Government-owned tooling and special equipment currently possessed by the incumbent. The definitized contract will be Firm Fixed Price.

The UCA award is required no later than Sep 2014 to meet T56 engine overhaul and MISTR requirements to support the C-130H transport aircraft mission. The contract will be awarded to:

Kelly Aviation Center (KAC) 3523 General Hudnell Dr. STE 213 San Antonio, TX 78226-1978 CAGE code 1FGL4

The contract will be awarded as an Indefinite Delivery/Indefinite Quantity for a period of four years consisting of a two-year basic period with two one-year options. The basic period is approximately $233M with each option period being approximately $129.5M for a total contract value of $492M.

III. DESCRIPTION OF THE SUPPLIES/SERVICES REQUIRED TO MEET THE AGENCY’S NEEDS

The C-130H aircraft is a heavily tasked weapon system with multiple missions, including humanitarian relief, across the globe. This aircraft has been the work horse aircraft for the last decade in Iraq and Afghanistan. The C-130H regularly transports supplies, such as food, water, medical supplies, troops, ammunition and equipment to regions in remote areas. The C-130H also conducts air drops in areas where landing strips are not available. The T56 engine is used exclusively on the C-130H.

Under the contemplated contract, KAC will provide the following services for repair and sustainment requirements and potential Organic transition if required for the T56 Engine Overhaul and MISTR requirements:

(1) Overhaul/repair of 109 Contract Line Item Numbers (CLINs) in support of Engine Overhaul and MISTR workload requirements. Effort includes: disassembly, teardown inspections, assembly, and testing of T56 components.

(2) Over and Above (O&A) support efforts for items outside the normal repair workload scope or work discovered during the course of performing overhaul, maintenance, and repair.

(3) Program Management and supply chain support to meet the production requirement needs and contract reporting requirements.

(4) Engineering and Technical assistance in support of contract requirements and T56 maintenance actions.

(5) Transition support for potential organic Secretary of the Air Force (SecAF) Source of Repair (SOR) decision.

In order to perform the required services, a contractor must be approved by the Air Force through a "source approval request" (SAR) and demonstrate its capabilities, including the requisite tooling and facilities. Currently, KAC is the only source that has been approved and possesses the government furnished tooling and contractor leased facilities to overhaul and repair T56 engines.

3400 Depot Purchased Equipment Maintenance (DPEM) and 3400 Material Support Division (MSD) funds will be utilized to support the anticipated engine and MISTR requirement best estimated quantities placed on the UCA.

IV. STATUTORY AUTHORITY PERMITTING OTHER THAN FULL AND OPEN COMPETITION

10 USC 2304(c)(2), as implemented by FAR 6.302-2(a)(2), Unusual and Compelling Urgency

V. DEMONSTRATION THAT THE NATURE OF THE ACQUISITION REQUIRES THE USE OF THE AUTHORITY CITED ABOVE

As explained in Federal Acquisition Regulation (FAR) Part 6.302-2(a)(2), under the authority cited, full and open competition need not be provided when the agency's need for the supplies or services is of such an unusual and compelling urgency that the Government would be seriously injured unless the agency is permitted to limit the number of sources from which it solicits bids or proposals. To use this authority, the agency must have engaged in adequate advance planning that reasonably could have been expected to avoid the urgent conditions.

a. There is a qualifying urgent need for new ordering period starting 1 Oct 2014.

This acquisition is an unusual and compelling urgent requirement because there is insufficient time to execute a competitive acquisition or transition to organic capability in time to meet the need for routine, programmed and unexpected overhaul and repair of T56 engines, components and spare parts. The C-130H is used on a daily basis across the globe. Its capability is vital to the projection of United States power and critical for emergency response to humanitarian efforts worldwide. Any disruption of T56 availability would cause serious injury to the United States, our allies and beneficiary countries.

In Nov/Dec 2014, the incumbent contractor under the last order placed against the Propulsion Business Area (PBA) contract will finish overhaul, repair, and production of all the T56 engines and components inducted into the repair process. However, without an immediate award of a new contract in Sep 2014, there will be no new assets inducted for repair beginning in Oct 2014, which will result in an unacceptable break in the repair line and no serviceable assets being produced after Nov/Dec 2014. Failure to award this urgent requirement will cause spare parts to be consumed by the field without replacement spares being inducted into the pipeline, which will result in zero spare parts and will cause all spare engines to be used with no new spare engines being produced. Ultimately, this will result in the grounding of C-130H aircraft, thus severely impacting the ability of the Air Force, Navy and Coast Guard to meet their respective mission requirements.

b. Adequate advance planning was conducted.

The Air Force began acquisition planning in April of 2012 with a Request for Information (RFI), for a competitive acquisition. The Request for Proposal (RFP) was released in February 2013. Unfortunately, only one bid was received that resulted in delays to negotiating a finalized contract. As such, from 2012 through 2014, the Air Force solicited competitive offers and then exhausted every effort to negotiate a fair and reasonable contract price with the sole offeror. Upon a review of requirements in July 2014, there was 41% reduction in flying hour requirements that forced the Contracting Officer (CO) to cancel the current RFP. Thus, the unusual and compelling urgency is a consequence of significant change in requirements and not a lack of advanced planning.

Prior to 1999, the T56 engine was repaired organically at San Antonio Air Logistics Center (SA-ALC). Due to the 1995 base realignment and closure decision, the T56, TF39, and F100 engine/component repair workloads were made part of the public-private competition won by Oklahoma City-Air Logistics Center (OC-ALC). OC-ALC then contracted out the T56 and TF39 engine workloads to KAC in San Antonio, TX. This contract is referred to as the Propulsion Business Area (PBA) contract.

In turn, KAC subcontracted all of the T56 workload to StandardAero, located within facilities KAC leased in San Antonio TX, and to StandardAero’s own facility in Winnipeg, Canada. The PBA contract began in 1999 with a seven-year basic period and eight one-year award term options. All eight one-year options have been earned and the ordering period expired on 15 Feb 2014. The contract was a firm-fixed price (FFP) effort with annual economic price adjustments.

Anticipating the need for continued T56 engine/component repair in order to provide mission support for the C-130 fleet after expiration of the current PBA contract, AFMC/A4D directed the program office to complete a SORA and business case analysis (BCA) to determine if the future depot-level repair source should be contracted or performed organically at Tinker AFB, OK. The BCA and recommended SORA were prepared in 2011.

The Secretary of the Air Force (SecAF) reviewed the SORA with supporting BCA recommendations in Dec 2011, and elected to delay the SORA decision until after the Air Force could obtain prices from the private sector for the same period to compare against the estimated organic prices. Soliciting competitive offers would, presumably, result in lower, more competitive prices than had been in the 1999 PBA contract. The new award prices were to then be compared to the BCA. In addition to the comparison of prices, the Air Force would consider "50/50" shifts (per 10 U.S.C. 2466) and the United States Air Force (USAF) strategic posture to make a final SORA decision. This was known as the “compete & compare SORA strategy."

The acquisition strategy was briefed in Jun 2012, and the Acquisition Plan was approved in Oct 2012. Market research including "industry day" meetings indicated multiple sources were interested in performing this work. In addition to KAC (which has already been approved), two potential sources submitted "source approval requests" (SAR) so that they could qualify to perform this work. The Air Force returned one of these SAR for corrections and the potential source has not resubmitted it. The other was pulled by the requestor as they teamed with KAC for the RFP competitive solicitation.

The USAF released a competitive solicitation in Feb 2013. In Apr 2013, only one bid was received, despite the market research indicating a competitive environment. The bid received was from the incumbent contractor, KAC, with StandardAero performing as the subcontractor. Due to its partnership agreement with KAC, StandardAero withdrew its SAR.

Because only one offer was received with no other viable means available for price analysis, the Contracting Officer was unable to successfully determine the prices fair and reasonable. As required by 10 U.S.C. 2306a (implemented in FAR Part 15.4), the Contracting Officer requested certified cost and pricing data from KAC in Jan 2014 to negotiate fair and reasonable prices. Numerous delays and difficulties were experienced during the process of obtaining a qualified proposal and subsequent certification of the cost or pricing data.

While working through these difficulties, the Government started researching alternative support solutions and began a thorough review of requirements. In Jun 2014, in comparison with the number and timing of T56 overhaul and repairs stated in the Feb 2013 solicitation, the final review and analysis revealed a 41 percent drop in requirements, due to substantial post-war reduction in flying hours, force structure and workload mix. In accordance with FAR Part 15. 206(e), the Contracting Officer determined the changes to be outside the scope of the solicitation and cancelled the solicitation in Jul 2014, leaving insufficient time to competitively solicit and negotiate a follow on contract, thus creating an immediate urgent need.

c. A two-year basic period with two one-year options is justified as urgent due to insufficient time as described below.

Without an approved contract or organic source that possesses the requisite tooling and facilities to overhaul and repair T56 engines, sustainment of the C-130H fleet will be almost immediately compromised due to lack of serviceable engines and components.

As has been evidenced by the efforts taken by the Air Force during the advance planning and solicitation of commercial sources that has already taken place since 2011 to date, it takes an extensive amount of time to conduct market research, qualify new sources, approve a new acquisition strategy, issue a competitive solicitation, conduct a source selection, revisit and obtain a SORA decision, and transition workload. Transition of the workload may include relocation of the special tooling. As a result, the two-year basic and two one-year options are unusual and compelling urgent requirements to provide appropriate coverage for the entire period while the Air Force gathers additional cost and pricing data, processes SARs from other sources (if any come forward), and revisits the possibility of transferring this workload to an organic capability based on the final SORA decision.

It will take two to four years to transition to a competitive contract or to transition to organic capability depending on the outcome of the SORA decision. The two-year urgent basic period is the minimum required if the SORA decision is contract. If the SORA decision is organic it will take a minimum of three years. However, if the process takes four years, which is more than likely given the history of the T56 PBA contract, SORA and BCA to date, the two one-year options will be required. Therefore, they are considered unusual and compelling urgent requirements and are required as part of the UCA. There will be no other source between now and then, given the long-lead time to approve and transition to another source. Therefore, this unusual and compelling urgent requirement is within the lead-time for either scenario (two years or four years; alternate contractor source or new organic capability).

Should the Air Force be able to complete the SORA decision making and transition earlier, one or both of the options would not be exercised. At the current time, however, the entire four-year ordering capability needs to be negotiated so that the quantities and pricing can be identified and taken into account as part of the SORA process that needs to start immediately.

VI. DESCRIPTION OF EFFORTS MADE TO ENSURE THAT OFFERS ARE SOLICITED FROM AS MANY POTENTIAL SOURCES AS DEEMED PRACTICABLE

As explained in FAR Part 6.302-2(c)(2), when using the authority cited, the agency shall request offers from as many potential sources as is practicable under the circumstances. In the current circumstance, the Air Force has already taken extensive measures to solicit private sector sources on an unrestricted basis, but is left with only the one approved source that currently possesses the government owned special tooling and contractor leased facilities needed for T56 repair/overhaul.

From approximately 2012 to date, the acquisition strategy for the contract period starting Oct 2014 was to use competitive procedures to solicit commercial sources and consider alternatives to the incumbent. Despite extensive market research using FEDBIZOPPS consisting of seven requests for information from Nov 2011 to Dec 2012, an industry day, release of two draft Request for Proposals (Aug and Jan 13), and a pre-proposal conference there was only one proposal was received. Then as alluded to in section V above the inability to obtained certified cost or pricing data to support that one proposal caused delays as the Contracting Officer was unable to determine whether the proposed price was fair and reasonable. While working through the process of negotiating based on the sole proposal received, the requirement changed significantly, making it out of scope of the solicitation. Cancellation of that solicitation resulted in an immediate unusual and compelling urgent requirement.

The rationale for requesting a proposal only from one offeror is that KAC is the only approved vendor capable of performing the services required under this J&A. Any potential vendors would be required to submit a SAR package for review and approval. There is not sufficient time for a new vendor to submit a SAR package and be approved to meet the urgent award date and ensure uninterrupted component and engine support starting Oct 2014.

Approval of a SAR package takes between 90 to 365 days depending on the package submitted. If the contractor is an original equipment manufacturer (OEM)-approved source of repair, the SAR approval would take less time. However, the Air Force would require more time to validate all repair processes if the SAR package is submitted by a new contractor who is not OEM-approved.

There are more than 2500 pieces of government furnished equipment (GFE) currently located at the contractor’s facility. Any movement of GFE from the incumbent’s location would disrupt the mission to allow for disassembly, reassembly, calibration and re-qualification of equipment before any work could be started in the new location. The Government only has one set of depot-level GFE. The Government has no replacement data, drawings or manufacturing facilities to replace any damaged equipment. Thus, movement of the GFE can cause significant risk to the program. Because of this high risk, the SORA decision, approval of a SAR, transition to a new contractor, and relocation of the GFE must be undertaken with great care and sufficient time to minimize the risk.

KAC holds the lease to the repair facilities where the GFE currently resides and where the GFE has resided for the past 50 years. Transitioning to a new contractor before the pending SORA decision would cause severe risk to the program if equipment was damaged and duplication of cost [e.g. multiple GFE movement costs] that is not expected to be recovered as a result of competition.

Even if a new contractor were approved today, there is not sufficient time to transition the workload from the current contractor to a new vendor without causing a significant break in contract support, thus creating unacceptable delays. The estimated time for approval of a SAR package, along with the estimated 180-day transition period to achieve full operational capability for a new contractor (not OEM-approved), would cause an unacceptable delay of 9 to 18 months.

For these reasons, under the circumstances, it is practicable only to solicit an offer from KAC.

VII. DETERMINATION BY THE CONTRACTING OFFICER THAT THE ANTICIPATED COST TO THE GOVERNMENT WILL BE FAIR AND REASONABLE

A contract not-to-exceed price will be established with issuance of the UCA. The Government will subsequently definitize all unit prices as firm fixed price. Actions to ensure reasonableness will be in accordance with procedures and criteria contained in FAR Part 30, Cost Accounting Standards Administration; Part 31, Contract Cost Principles and Procedures and Subpart 15.4 Contract Pricing. Contractor will provide certified cost or pricing data. The Contractor’s proposal will be subjected to audit by the Defense Contract Audit Agency (DCAA). In addition, field reports will be obtained from the Defense Contract Management Agency (DCMA). Both organizations will be requested to assist the Contracting Officer during negotiations as necessary. The combination of pricing data and field pricing support will ensure the negotiation of a fair and reasonable price IAW 15.404-1.

VIII. DESCRIPTION OF THE MARKET RESEARCH CONDUCTED AND THE RESULTS, OR A STATEMENT OF THE REASONS MARKET RESEARCH WAS NOT CONDUCTED

Extensive market research was conducted for the previous competitive acquisition strategy described above and a competitive solicitation was issued as well as requests for information and publication of the opportunity for new vendors to submit SARs. As of today, KAC is the only approved source. On 25 Jul 2014, StandardAero submitted a new SAR package for performance in San Antonio, TX. StandardAero San Antonio, TX does not currently own or have lease rights to the facility where the GFE resides and where the workload is performed. Therefore, any approval of StandardAero’s SAR package would have to include proof of lease ownership and a risk mitigation plan if movement of GFE is contemplated. In addition, approval of StandardAero’s SAR package does not create a competitive environment since StandardAero would be performing the same work in either scenario. As stated in Section VI, above, SAR approval and transitioning to another vendor at another location would take 9 to 18 months, which would significantly impact the mission and ground the C-130H fleet. Because the urgent and compelling nature of the requirement, there is not sufficient time to conduct additional market research for the revised requirement.

IX. ANY OTHER FACTS SUPPORTING THE USE OF OTHER THAN FULL AND OPEN COMPETITION

None

X. LIST OF SOURCES, IF ANY, THAT EXPRESSED INTEREST IN THE ACQUISITION

Only approved source:

Lockheed Martin, Kelly Aviation Center Building 360 3523 General Hudnell Dr San Antonio, TX 78226 Mark Crowell; Stephen Lavrack; Tim Williams

(210) 928-5603 Cage: 1FGL4

Current Submitted SAR Package (August, 2014):

StandardAero Corp 3523 General Hudnell Drive San Antonio, Texas 78226 Jon Rousay; Terry Hastman; Ernie Elizondo

(210) 704-1197 Cage: 1XP69

XI. A STATEMENT OF THE ACTIONS, IF ANY, THE AGENCY MAY TAKE TO REMOVE OR OVERCOME ANY BARRIERS TO COMPETITION BEFORE MAKING SUBSEQUENT ACQUISITIONS FOR THE SUPPLIES OR SERVICES REQUIRED

A SORA decision is pending and requires the program to structure the UCA to meet both the mission requirements and allow for transition/execution of either an organic or contract SORA decision that may come after the contract is awarded and the period of performance is well into or past the one-year mark. Should the SORA decision be organic repair, the two-year basic period will allow for depot activation planning, budgeting, and shop stand-up, while the two one-year options will allow for the required two-year effort to move the workload to organic in a phased approach. Should the SORA decision be contractor repair, it would require approximately two years for the program to develop and implement a competitive acquisition strategy following the decision. Only the option periods required to implement the competitive acquisition will be exercised. If the SORA decision is for contractor repair, the Government will develop a competitive acquisition strategy and seek to approve additional sources.

XII. CONTRACTING OFFICER’S CERTIFICATION

The contracting officer’s signature on the Coordination and Approval Document evidences that she has determined this document to be both accurate and complete to the best of her knowledge and belief (FAR 6.303-2(b)(12)).

XIII. TECHNICAL/REQUIREMENTS PERSONNEL’S CERTIFICATION

As evidenced by their signatures on the Coordination and Approval Document, the technical and/or requirements personnel have certified that any supporting data contained herein, which is their responsibility, is both accurate and complete (FAR 6.303-2(c)).