M1037JARedacted.pdf

Program/Item: 5.56mm SRTA, XM1037

Estimated Dollar Value: $16M

Control No.:

J&A CONCURRENCE SHEET

Program/Item: 5.56mm Short Range Training Ammunition (SRTA), XM1037

Authority: 10 U.S.C. 2304(c)(1) or 41 U.S.C. 253(c)(1); FAR 6.302-1(a)(2)(ii), Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements.

Prepared by: Typed Name: Stephanie Kless DSN: 880-6671

Title: Contract Specialist Date:7 May 2012

Contracting Officer Typed Name: Margaret A. Heyrich DSN: 880-3871 Title: Contracting Officer Date:7 May 2012

Technical: Typed Name: COL. Paul M. Hill DSN: 880-5307 Title: Project Manager, Maneuver Ammunition Systems Date: 15 May 2012

Requirements: Typed Name: COL. Paul M. Hill DSN: 880-5307 Title: Project Manager, Maneuver Ammunition Systems Date: 15 May 2012

CONCURRENCE:

Philip R. Clark

LTC, FA

PD, Small Caliber //s// Philip R. Clark________ ____8 May 2012_ SFAE-AMO-MAS-SMC Signature Date

Cynthia L. Schoner Center Director /s/ Cynthia L. Schoner____ _17 May 2012___ ACC-NJ-MA Signature Date

Mark S. Walsh Legal Counsel __//Mark S. Walsh//______________ _11 June 2012____ RDAR-DGC-P Signature Date

Lawrence A. Visconti, Jr.

Associate Director //s// Lawrence A. Visconti, Jr. 15 June 2012

ACC-NJ Signature Date

Rebecca E. Wisser Competition Advocate //s// Rebecca E. Wisser 5 July 2012 ACC-NJ-CM Signature Date

Justification and Approval for Other Than Full & Open Competition

1. Contracting Activity: The contracting activity responsible for this action is the Army Contracting Command, New Jersey (ACC-NJ). The Product Manager for Small Caliber Ammunition (PM SCA) under the Project Manager for Maneuver Ammunition Systems (PM-MAS) manages the 5.56mm Short Range Training Ammunition (SRTA), XM1037 Program for the Program Executive Officer for Ammunition (PEO-AMMO).

2. Description of Action: The approval is being requested for a new five (5) year (FY12 – FY17), Sole Source, Firm Fixed Price (FFP) Indefinite Delivery/Indefinite Quantity (IDIQ) production contract utilizing Procurement of Ammunition Army (PAA) funds. This effort does not meet the DFARS 207.103 threshold for Acquisition Plans.

The minimum guarantee of the contract is 700,000 rounds. The Canadian Commercial Corporation will be obtaining award on behalf of General Dynamics Ordnance & Tactical Systems – Canada’s (GDOTS):

5, Montée des Arsenaux Repentigny, (Quebec) Canada J5Z 2P4

3. Description of Supplies/Services: The purpose of the new contract is to procure an estimated six million 5.56mm SRTA Linked, NSN 1305-01-582-7502, DODIC AB66 and 5.56mm SRTA, Clipped, NSN 1305-01-582-7499, DODIC AB67. The period of performance of the contract will be five (5) years from date of award. The award is planned for 4QFY12.

The 5.56mm SRTA, Linked (AB66) is designed to function in the M249 Squad Automatic Weapon (SAW, both semi and automatic modes) without the need of a special training bolt or modification to the weapon systems, while the 5.56mm SRTA, Clipped (AB67) is designed to be used with the M16 and M4 without the need of a special training bolt or modification to the weapon systems. The SRTA program is an Acquisition Category (ACAT) III program which supports live fire training for individuals through collective training in Brigade Combat Team tasks via the integration of a full range of small arms SRTA; 5.56mm through .50 caliber.

The current 5.56mm SRTA, (DODIC A065 and AA68) was procured using the M862 Training Device Requirement (TDR). The M862 however, cannot be fired from all currently fielded 5.56mm weapon systems and is consequently no longer being produced. Specifically, the current 5.56mm SRTA, M862 is not designed to be used with the M249 Squad Automatic Weapon (SAW) and has a maximum effective range of only 25 meters. The limited range means that Soldiers can only get a positive training effect and feedback on targets less than or equal to 25 meters, limiting its application for collective training.

The 5.56 SRTA, XM1037 however, can be fired from all currently fielded 5.56mm weapon systems and provides realistic training alternatives to service ammunition in the

M4/M16 and M249 family of weapons. This ammunition will be used for individual and collective live fire training scenarios in which lack of fixed facilities and/or Surface Danger Zone (SDZ) restrictions prevent the use of service ammunition. The 5.56mm SRTA, XM1037 must have a maximum range not to exceed 600 meters and a round to round dispersion similar to that of the M855 when impacting F-type silhouettes out to 50 meters and E-type silhouettes out to 100 meters. The ammunition must provide full functionality in the aforementioned weapons within a temperature range of -4°F to 104°F without any ancillary equipment or weapon modifications. Key Performance Parameters (KPP) are the user’s requirements that must be met for the program. All KPPs for the 5.56mm SRTA, XM1037 are listed in table below:

Key Performance

Parameter

Production Threshold

Production Objective

KPP 1

Maximum Range

The maximum range will not exceed 600 meters.

Threshold = Objective

KPP 2 Safety Fan

The safety fan dispersion area shall not exceed 15 degrees on either side of the centerline.

Threshold = Objective

KPP 3

Dispersion

The mean radius will not exceed 9 centimeters at 100 meters when fired from an accuracy barrel.

The mean radius will not exceed 4 centimeters at 100 meters when fired from an accuracy barrel.

KPP 4

Feedback

Activate target lifting mechanism at 50m with the F-type silhouette attached and 100m with the E-type silhouette attached.

Threshold = Objective

KPP 5

Reliability

Reliability of 0.9947. The functional reliability of 5.56mm SRTA shall be no worse than standard M855 ball ammunition, .9968

KPP 6

Weapon Modification

M4/M16/M249 will not require weapon modification to cycle the weapon when firing 5.56mm

SRTA.

Threshold = Objective

The requirement is for approximately six (6) million 5.56mm SRTA, XM1037 rounds valued at approximately $16,000,000, which is based upon the Total Army Munition Requirement (TAMR) for the 5.56mm SRTA, XM1037.

The total planned production quantity per year is based on the funding that is available for the 5.56mm SRTA program for the linked version of the round and is as follows:

Fiscal Year Quantity/Each Funding

FY13 100,000 $270,000

FY14 100,000 $270,000

FY15 100,000 $270,000

FY16 100,000 $270,000

FY17 200,000 $519,000

Total 600,000 $1,599,000

It is planned that additional funding will become available for the clipped version of the round as well.

4. Authority Cited: 10 U.S.C. 2304(c)(1) or 41 U.S.C. 253(c)(1); FAR 6.302-1(a)(2)(ii), Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements.

5. Reason for Authority Cited: FAR 6.302-1(a)(2)(ii)(A), Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements, Substantial duplication of Costs to the Government that is not expected to be recovered through competition. There is a reasonable basis to conclude that the agency’s minimum needs can only be satisfied by unique supplies or services available from only one source or only one supplier with unique capabilities. General Dynamics Ordnance & Tactical Systems – Canada’s (GDOTS) unique capabilities are a result of a Firm Fixed Price (FFP) Research and Development (R&D) contract that was awarded to them in 2001 under Full and Open Competition (F&OC) procedures (DAAE30-01-C-1092). The purpose of the contract was to develop a 5.56mm SRTA under a three (3) phase effort to be used for training with the M16/M249 family of weapons. Under the R&D contract, GDOTS – Canada funded the development costs, in order to retain rights to the technical data and provided the Government with only limited/restricted rights to certain technical data including patents that were either granted to/applied for by GDOTS – Canada. GDOTS - Canada is therefore, the only source that currently has a qualified design of the 5.56mm SRTA, XM1037. Although the R&D contract specified that the Government was entitled to the opportunity to challenge the validity of such assertions of the Contractor, the Government did not elect to do so. Since GD paid for the development to occur, the Government decided not to challenge the rights. As such, GDOTS - Canada holds the rights to the technical data for the 5.56mm SRTA, XM1037.

Therefore, due to the existence of limited rights in data; it makes it impossible for other sources to produce to the current performance specification of the 5.56mm SRTA, XM1037.

The Armament Research Development and Engineering Center (ARDEC) Project Engineers for the 5.56mm SRTA and similar rounds have developed a detailed estimate for the cost associated with a source paying for a development and qualification effort versus the Government paying for a source to develop and qualify an M1037 cartridge.

The estimates were derived by the use of costs developed under the approved M1037 Independent Government Cost Estimate (IGCE), and by the use of actual costs from similar efforts. When actual costs from similar efforts were used from previous fiscal years, an annual inflation rate of 3% was assumed.

ARDEC Engineers determined that an interested source would require approximately

3.5 years to develop and qualify a design that is comparable to the 5.56mm SRTA, XM1037. If the source were to pay for the development and qualification it is estimated that it would cost the source approximately $2.516M (see chart below). The approximate cost is derived from the Government’s first-hand knowledge of the Development and Qualification of the XM1037 round manufactured by GDOTS Canada under the DAAE30-01-C-1092 contract. Due to this experience, it will take 4 engineers working 50% of the time for 3.5 years. Please note current man year rate is $175,658.

The engineers will perform an iterative process that includes but is not limited to the development of models, simulations, prototypes, limited testing, prototype refinement, and documentation of findings. The development process would conclude with the successful completion of qualification testing. This process typically requires a minimum of 3.5 years. However, the aforementioned development contract required a total of 9 years from contract award to the completion of qualification testing. The difference in the actual time for full qualification and the average time is due to many reasons, the most significant being changes in user requirements due to the need for additional training capabilities. This would not occur under this program, if the training requirements changed again, it would no longer be a XM1037 round, and would be developed under a new program. The Capabilities Production Document (CPD) for this Army Acquisition Program has been approved, and therefore cannot be changed. It is possible that some other delays could occur during another qualification, however due to the uncertainty of any qualification, using the average time for a typical qualification to calculate the cost is sufficient. The necessary testing that occurs during a qualification is reliability, durability, high and low temperature function and casualty, Electronic Pressure and Action Time, Salt-fog and Humidity, Time of Flight, Attitude, Chemical Compatibility, Toxic Fumes, etc. (an exhaustive list can be found in the PEO Ammo approved Test and Evaluation Master Plan). The qualification testing requires 152,000 rounds. The time required to complete qualification testing for the rounds developed under the aforementioned contract was 1 year. The cost of rounds consumed during qualification testing is estimated to be $311k (152k rounds at $2.05/round as determined by the current IGCE for an FY13 purchase), additionally it is preferable that the testing be completed at an Army Test and Evaluation Command approved location such as the Aberdeen Test Center, which in the year 2009 had a quoted cost of $400k, which is estimated to be approximately $450k in FY13 dollars. An additional $525k is required for Energetic Materials Qualification. If this total cost is amortized over the total requirement of 6M rounds required by the Army, it would cost the Government approximately an additional $.42/round.

If the Government were to pay for the development and qualification testing it would cost the Government an estimated $2.704M (see chart below). In addition to the costs laid out above for the qualification itself, a Government qualification would include Government contracting costs to pay the labor of the Procuring Contracting Officer, Contract Specialist, and Contracting Officer’s Representative which is estimated at 25% of a man year for 3.5 years, and travel costs of $10k/year for contract oversight. These costs are based on the assumption that the typical Government Contracting individual, listed in the previous sentence, manages only 4 procurement contracts per year. The travel costs were determined by assuming the COR would have to travel to the contractor location a minimum of 4 times per year to ensure Government contractual requirements are being met. The cost of the Government paying to develop and qualify a new round would equate to an additional $.45/round, if the total cost is amortized over the total requirement of 6M rounds.

Source Pays Development & Qualification Cost

Government Pays Development & Qualification Cost

Development/Limited Testing (Engineering Labor)

$1,229,606 $1,229,606

Qualification Testing $450,000 $450,000

Rounds Consumed (152k)

$311,600 $311,000

Energetic Materials Qualification

$525,000 $525,000

Government Contracting Support

$153,700

Government Travel $35,000

Total $2,516,206 $2,704,306

Based upon the significant costs to develop the 5.56mm SRTA, XM1037 and to perform the qualification testing, there are currently no interested sources other than GDOTS - Canada to produce this round in accordance with the current draft performance specification. The Government paying for the development and qualification effort, as was previously done with GDOTS - Canada, would not be beneficial to the Government.

It would result in a substantial duplication of cost that could not be recovered in the foreseeable future through competition.

The specific alternatives that were considered to Other than Full & Open Competition (OF&OC) include 1. Full & Open Competition (F&OC), 2. Qualifying additional source(s) of supply and 3. Limited Competition (LC).

PM MAS attempted utilizing a Full & Open Competition approach for this acquisition, and considered a limited competition approach; however, utilizing these approaches would not promote real competition. In addition, this approaches presented an unacceptable level of risk in terms of performance and schedule. Performance risk was considered to be significant because based upon the market research conducted, the Government could only identify one source that had the ability, experience, resources, and knowledge to design, develop, manufacture, and support the program within the near foreseeable future (less than 2.5 years). The program schedule would be impacted because even in the event an offeror submitted a proposal, the offeror would have to complete testing prior to producing the 5.56mm SRTA, XM1037 which would result in a production schedule slip of at least 1.5 years due to the average time taken to complete qualification testing of the rounds needed for full qualification. This schedule slip would jeopardize the program’s success. Program success would be impacted because the program would not be able to fulfill current user requirements due to the delay.

The possibility to qualify additional sources(s) was also considered. In order to qualify an additional source(s), interested parties would have to present the Government with their design to be tested and qualified by the Government. Based upon the market research conducted however, there are currently no sources that have a design. In addition, the possibility to qualify additional source(s) would be limited due to the funding that is currently available for the 5.56mm SRTA, XM1037 (FY12 – FY17) program. The Army does not currently have the means to qualify an additional source(s) and would not be able to do so to meet FY12 – FY17 TAMR production requirements. However, if the Government were able to procure the data rights for this item, then the possibility to qualify an additional source will be considered for any follow on or future 5.56mm SRTA, XM1037 acquisitions.

Therefore, because there is no other source or potential source other than GDOTS - Canada that currently has a viable design, or is working to qualify a design, utilizing an F&OC approach would cause unacceptable duplication of costs in fulfilling the agency’s requirements. Since GDOTS - Canada design is qualified already, they should have no problem meeting the production schedule necessary to meet the requirements.

The 5.56mm SRTA, XM1037 is scheduled to be Type Classified in 4QFY12 and as such the round will remain in the Army inventory for decades. There are no other pending competitive acquisitions that resemble the substance of this item.

6. Efforts to Obtain Competition: The Office of the Project Manager for Maneuver Ammunition Systems (OPM-MAS) has been trying to ensure that adequate efforts have and will be taken to ensure that offers are solicited from as many potential sources as practicable for the current and any future acquisitions for the 5.56mm SRTA, XM1037. A Market Survey was published in FedBizOpps on March 2011 (W15QKN-11-X-E008) to determine interested sources to produce the 5.56mm SRTA, XM1037. Three (3) responses were received in response to the Market Survey from the following vendors:

General Dynamics Ordnance & Tactical Systems – Canada (GDOTS-Canada), Ten-X Ammunition, Inc., and Olin Corporation Winchester Division. OPM-MAS also provided the draft performance specification to two (2) sources that had not responded to the

Market Survey (Ultimate Training Munitions, Inc. and Federal Cartridge), in hopes of further increasing competition for the item. OPM-MAS also approached Olin Winchester at the annual Shot Show Convention held in Las Vegas, Nevada to find out if they had an interest in bidding when the Request for Proposal is released. After reviewing the responses from all vendors, GDOTS-Canada was the only source who had the interest and a round capable of meeting the requirements. Although the market survey is more than one year old, the results are still current and valid. As such, GDOTS is the only anticipated source that will respond to the RFP. Due to the fact that the U.S.

Government does not own the rights to the 5.56mm SRTA, XM1037, effective competition is not anticipated for this acquisition.

7. Actions to Increase Competition: Although there is only one qualified source to produce the 5.56mm SRTA, XM1037, OPM-MAS will continue to seek sources to procure this item in order to increase competition. Since GDOTS-Canada currently holds the rights to the technical data, the Government will attempt to purchase the Technical Data Package (TDP) from them. If successful, a second source could be qualified. In doing so, the Government will be able to create a means of developing additional sources of supply for future procurements. Additional sources of supply will also result in a reduced unit cost for the 5.56mm SRTA, XM1037. If future requirements arise, full and open competition procedures will be used to the greatest extent possible.

8. Market Research: Sources Sought Notices as required by FAR 5.201, was published in March 2011 (W15QKN-11-X-E008) by the Contracting Officer to FedBizOpps to determine interested sources to produce the 5.56mm SRTA, XM1037.

The Government’s project engineer has also conducted internet searches and attended various conferences of the past year and had determined that there are no other sources available.

Three (3) responses were received in response to Market Survey W15QKN-11-X-E008 from the following vendors: General Dynamics Ordnance & Tactical Systems – Canada (GDOTS-Canada), Ten-X Ammunition, Inc., and Olin Corporation Winchester Division.

GDOTS - Canada again provided details of a round that has a trajectory similar to that of the M855 standard service ammunition, out to a range of 100m, with a max range of 600m. Additionally, the response detailed all the parameters the 5.56mm SRTA rounds was designed to meet, and is equivalent to the requirements presented in the specification MIL-PRF-32409. The 5.56mm SRTA produced by this vendor has completed Government qualification testing, and is scheduled for Type Classification (TC) in the fourth quarter of FY12. In addition to the Market Survey Response, the Government had knowledge of the past contract DAAE30-01-C-1092, and data acquired from the completed qualification testing of the GDOTS-Canada round, which helped to determine their acceptability. The information provided by GDOTS – Canada was reviewed by the Government and it was determined that GDOTS – Canada is considered acceptable and capable of meeting the Government’s needs.

Ten-X Ammunition Inc. indicated an adequate level of experience in the design, development, and manufacture of frangible small caliber training munitions. Ten-X Ammunition specifically submitted information on the frangible 5.56mm round, claiming that it exceeded the Government requirements, however, the vendor submitted no test data indicating the availability of a feasible design or any plans for a Government qualification of the design. The information that Ten-X Ammunition submitted to document their capabilities was not equivalent to the 5.56mm SRTA or able to meet the Government performance requirement. The information submitted by Ten-X Ammunition was reviewed by the Government and it was determined that the round was incapable of meeting the requirements of the Government’s specification, therefore, this potential offeror was considered unacceptable and unable to meet the Government’s needs.

Olin Corporation Winchester Division had requested the draft performance specification but no data or information was submitted by the company. At the Las Vegas Shot Show in January 2012, Olin Winchester stated that this was not a program that they were going to pursue as part of their business case, and would not bid when the RFP was released. They stated they would however think about doing so in the future. Since there was not enough information submitted by Olin Corporation Winchester Division to determine their abilities, the Government determined that that this potential offeror was unacceptable and unable to meet the Government’s needs.

In addition to the Source Sought Notices, Ultimate Training Munitions, Inc (UTM) and Federal Cartridge indicated an interest in the 5.56mm SRTA, XM1037. As such, the Government provided both sources with the draft performance specification.

In response to receiving the draft performance specification, UTM had provided their technical capabilities, however, based upon the information that UTM provided to OPM- MAS, it was determined that the company fails to meet Capability Production Document (CPD) Key Performance Parameters requiring no ancillary devices for proper weapon function, and the ability engaging targets out to 100m. Additionally, the UTM design will not meet trajectory Key System Attribute (KSA). Additionally, the information provided by UTM does not indicate that they are capable of producing a round that meets our CPD requirements. The information submitted by UTM was reviewed by the Government and due to the inability to achieve the two KPPs and one KSA; the Government determined that this potential offeror was unacceptable and unable to meet the Government’s needs.

Federal Cartridge stated that they do not have a product that would meet our draft specification for the 5.56mm SRTA, XM1037, based upon review of the projected quantities from the sources sought and would not be able to build the business case for the development of a round to meet this specification. Consequently, the Government determined that this potential offeror was unacceptable and unable to meet the Government’s needs.

9. Interested Sources:

Notices required by FAR 5.201 shall be published and any bids or proposals received shall be considered. Three (3) responses were received in response to Market Survey W15QKN-11-X-E008 from the following vendors: GDOTS-Canada, Ten-X Ammunition, Inc. in California, and Olin Corporation Winchester Division in Illinois. After the closing of the Market Survey, the specification was requested from UTM in New Jersey and Federal Cartridge in Minnesota. To date, no other sources have written to express an interest.

10. Other Facts:

a. Procurement history:

(1) DAAE30-01-C-1092 was a Full and Open Competitive Research & Development Contract that was awarded on 2 August 2001 to GDOTS - Canada to develop a 5.56mm Lead Free Short Range Training Ammunition (SRTA) for training with the M16/M249 family of weapons, however, due to the fact that GDOTS-Canada retained the data rights obtained from this contract, and based upon current market research, GDOTS- Canada is the only source that has a qualified design and can meet the requirements of the program.

b. Acquisition Data Availability:

GDOTS possess unique capabilities due to the Firm Fixed Price (FFP) Research and Development (R&D) contract that was awarded to them in 2001 under Full and Open Competition (F&OC) procedures (DAAE30-01-C-1092). The purpose of the contract was to develop a 5.56mm SRTA under a three (3) phase effort to be used for training with the M16/M249 family of weapons. Under the R&D contract, GDOTS - Canada funded the development costs in order to retain rights to the technical data and provide the Government with only limited/restricted rights to certain technical data including patents that were either granted to/applied for by GDOTS - Canada.

It is the intent of the Government to attempt to negotiate the technical data rights with GDOTS - Canada within the Request for Proposal (RFP). The plan is to request a price for the technical data rights in the RFP and negotiate them at the time of contract negotiations, if program funding allows for the expense. Negotiations are expected to take place in July 2012 with a planned contract award in August 2012. The Government is aware that the cost to purchase these rights may be prohibitive due to the current program dollars available to the Army for this item. Additionally, any cost negotiated between GDOTS - Canada and the Government may not warrant the purchase of technical data rights.

The draft performance specification for the 5.56mm SRTA, XM1037 has been provided to all interested sources, therefore, all necessary data required to promote Full and Open Competition has been adequately provided.

c. Unusual and Compelling Urgency: N/A

d. Subcontracting Competition: The Government intends to ensure that GDOTS - Canada obtains as much competition as possible in its subcontracting.

11. Technical Certification:

I certify that the supporting data under my cognizance which are included in the justification are accurate and complete to the best of my knowledge and belief.

Typed Name: _ COL Paul M. Hill________Date: __15 May 2012_______ Title: __ Project Manager, MAS_________Signature: //s//Col Paul M. Hill

12. Requirements Certification: I certify that the supporting data under my cognizance which are included in the justification are accurate and complete to the best of my knowledge and belief.

Typed Name: COL Paul M. Hill__________Date: _15 May 2012_______ Title: _Project Manager, MAS___________Signature://s//Col Paul M. Hill_

13. Fair and Reasonable Cost Determination:

I hereby determine that the anticipated cost to the Government for this contract action will be fair and reasonable. This determination will be based on a technical evaluation and a price analysis. Pursuant to DFARS 215.403-1(4)(c), DoD has waived the requirement for submission of cost or pricing data for the Canadian Commercial Corp and its subcontractors.

Typed Name: _Margaret A. Heyrich ______Date: __15 May 2012_____ Title: __Contracting Officer_____ Signature: //s//Margaret A. Heyrich____

14. Contracting Officer Certification:

I certify that this justification is accurate and complete to the best of my knowledge and belief.

Typed Name: _Margaret A. Heyrich ______Date: __15 May 2012_____ Title: __Contracting Officer_____________Signature: //s//Margaret A. Heyrich__

Approval Based on the foregoing justification, I hereby approve the procurement of the 5.56mm Short Range Training Ammunition (SRTA) XM 1037, Linked, NSN 1305-01-582-7502, DODIC AB66 and 5.56mm SRTA, Clipped, NSN 1305-01-582-7499, DODIC AB67 on an other than full and open competition basis pursuant to the authority of 10 U.S.C.2304(c), FAR 6.302-1(a)(2)(ii), Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements subject to availability of funds, and provided that the services and property herein described have otherwise been authorized for acquisition.

Date: ___8 July 2012______ _____//S//________________

GERARDO J. MELENDEZ

Director, ARDEC