TAB B - MRR VI DB MATOC_JA Capacity Increase_ 09Mar2023_HCAsigned_Redacted.pdf

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Control Number: CEHNC-23-0001

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It is impossible to predict the volume/value of annual requirements with certainty, primarily due to DHA’s funding approval processes and unplanned emergency repair and renewal needs that may negatively impact a medical facility’s operational status. Table 3 demonstrates an average usage of $193M/year over the last 5 years. As illustrated in Table 3 above, the total capacity used in FY18 ($131.4M) and FY20 ($167.1) was closer to the standard execution range for the MRR Program ($150M – $200M per year). The total capacity used in FY19 ($95.3M) and FY21 ($93.4M) was substantially lower based upon DHA funding approval priorities. Conversely, the capacity usage for FY22 ($477.1M) essentially doubled that of the standard execution range.

With continued national interest in healthcare issues associated with our country's active-duty military, veteran members, and their eligible dependents, DHA experienced an unusually high influx of funding for repairs to DoD medical facilities in FY22, which resulted in a project development and award rate that far exceeded expectations and projected estimates. In December 2021, DHA projected a reduction of nearly one-third of their Restoration and Modernization (RM) program budget between FY22 to FY25, which is the category from which the MRR projects are funded. However, in FY22, new requirement obligations surpassed expectations, totaling approximately $477M (including modifications to existing requirements and loaned capacity). For example, CEHNC executed a large FY22 year-end requirement valued at $209M to avoid delays for operating room repairs at the Navy’s 2nd largest medical center and obligate expiring FY22 Operation and Maintenance funds. This total usage essentially consumed almost the entire remaining MATOC capacity.

There are currently 81 active TOs under the MRR VI MATOC for specialized medical construction efforts, such as pharmacy renovations and nurse call, fire alarm and mass notification system renovations. Typical modifications include, but are not limited to, differing site conditions, removal of hazardous materials, and inflation which impacts contractor costs and schedule (material, labor, mobilization, demobilization, etc.). Without the additional capacity, CEHNC will not be able to execute modifications to any current TOs, creating unacceptable delays in fulfilling DHA’s requirements. Failure to execute timely or proper repairs can result in severe impacts on the mission. For example, surgical facilities are subject to health code inspections and specific sterilization requirements. If interrupted, facilities could be responsible for outsourcing sterilization activities, re-scheduling/outsourcing patient care, sourcing alternative supply/equipment storage, etc. Given these highly specialized medical repair and renovation requirements, shifting tasks to other contractors mid-stream would present risks related to physical security, lines of responsibility for contractual tasks and design solutions, duplicative costs/oversight requirements, and timely delivery of a complete and usable facility.

c. Alternatives: The government considered the following three alternatives for processing in scope changes:

i. First, the government considered executing in scope modifications to the existing 81 MRR VI MATOC TOs. The intent of this action is to have the ability to quickly complete these changes as efficiently as possible without delay. Typical changes include, but are not limited to, differing site conditions, removal of hazardous materials, and inflation which impacts contractor costs and schedule (material, labor, mobilization, demobilization, etc.). These types of modifications are not severable from the original construction project and must result in the delivery of a complete and usable facility and on take, on average, 65 days to execute. Modifications to the original TOs is a feasible approach for accomplishing such in accordance with FAR 52.243-4(c), Changes.

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ii. Second, the government considered establishing new non-competitive TOs under the MATOC on a case-by-case basis with the existing contractors for the necessary changes. On average, each new TO would take approximately 127 days to execute given the need to process a justification for the exception to fair opportunity and duplicate government and contractor resources. Since the ordering period for this MATOC will expire on 11 March 2023 this alternative would require approval of additional time in conjunction with the capacity increase. Adding time, however, would not overcome the potential for splitting requirements; therefore, this alternative was not deemed feasible.

iii. Lastly, the government considered establishing new sole source, stand-alone contracts which presented the same issue related to delivering a complete and usable facility.

Similar to the limitations of new sole source TOs, new stand-alone contracts for these in scope modifications would also result in split requirements and failure to deliver a complete and usable facility. On average, each new contract would take approximately 180 days to execute given the need to process a justification, establish new contract terms, re-obtain approval for facility access and duplicate government and contractor resources. As a result, this alternative was not deemed feasible either.

Based upon the foregoing, issuing modifications to the 81 existing TOs is more efficient and avoids splitting requirements. Therefore, it is the only feasible option for ensuring mission success.

d. Impact: Without the additional capacity, CEHNC will not be able to execute modifications to any of the 81 current TOs, resulting in unacceptable delays. Contract capacity shortfalls could pause support for critical medical facility repairs, violate TJC accreditation standards, cease operations, or close healthcare facilities. Failure of any DoD medical facility to qualify under these standards will result in short or long-term loss of DoD capacity to serve its patient population. The most serious consequence would be closure of one of the DHA facilities and the potential harm to patients that could not be quickly relocated to some other facility. In return for the additional $99M in capacity, CEHNC, MRR, DHA and the existing MRR VI MATOC contractors will continue to provide the necessary services that are uniquely critical to support the military medical mission of the DHA.

6. Efforts to Obtain Competition: The active MRR VI TOs were awarded using competitive procedures. CEHNC initially considered seeking approval for capacity and time to cover TO modifications and new work under MRR VI while awaiting award of the MRR VII MATOC slated for January 2025. A Notice of Intent (NOI) was issued on SAM.gov on 27 October 2022 and closed on 10 November 2023. The NOI informed interested parties of the government’s intent to pursue a capacity and time extension to the MRR VI MATOC. and the notice also requested interested parties provide their capabilities, business size, ability to perform multiple contracts simultaneously in various geographic locations and the states where they could perform MRR work. One large business concern responded and indicated their interest in new small, non-complex, stand-alone requirements. Additionally, a letter was issued to the current MRR VI MATOC holders to poll their interest in continued performance under the existing vehicle. All contractors confirmed. CEHNC leveraged recent industry engagement efforts from the CEHNC Small Business forum held on 20 October 2022 where 42 small business concerns (7 of which were 8(a)) expressed interest in supporting small, non-complex stand-alone requirements under the construction North American Industry Classification System code 236220, Commercial and

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Approval

Based on the foregoing justification, I hereby approve the capacity increase of $99,000,000.00 for the Medical Division, Medical Repair and Renewal (MRR) Branch, MRR VI Generation Design Build Multiple Award Task Order Contract on an other than full and open competition basis pursuant to the authority of 10 USC 3204(b)(B)(ii) as incorporated by FAR 6.302- 1(a)(2)(iii)(B). The anticipated work is a follow-on to the original MATOC subject to the availability of funds, and provided that the highly specialized construction services herein described have otherwise been authorized for this acquisition.

MEGAN R. DAKE

Army Enterprise Head of Contracting Activity Deputy Assistant Secretary of the Army (Procurement)

Head of Contracting Activity