RedactedACC14C0002.pdf

CMO Control #: 2012-166

Paladin Integrated Management (PIM)

Low Rate Initial Production (LRIP)

JUSTIFICATION REVIEW DOCUMENT FOR OTHER THAN

FULL AND OPEN COMPETITION

Program/Equipment: Paladin Integrated Management (PIM) Low Rate Initial Production (LRIP)

Authority: FAR 6.302-1(a)(2)(ii)(A and B)

Amount: $815,800,000.00

Prepared by:

Typed Name: Catherine Miller DSN: 786-2827

Title: Procurement Analyst Date: _11 Jul 12__

Procuring Contracting Officer:

Typed Name: Raena R. Swanson DSN: 786-6977

Date Reviewed: _17 Jul 12__

Technical Representative:

Typed Name: Constance M. Tucker DSN: 786-7730

Title: Deputy Project Manager, Heavy Brigade Combat Team

Date Reviewed: _20 Jul 12___

Requirements Representative:

Typed Name: William H. Sheehy DSN: 786-5630

Title: Project Manager, Heavy Brigade Combat Team

Date Reviewed: _20 Jul 12___

REVIEWS: I have reviewed this justification and find it adequate to support other than full and open competition:

Program Executive Office (PEO), Ground Combat Systems (GCS):

Typed Name: __SCOTT J. DAVIS________ DSN: 786-6662____

Signature: _hardcopy signature on file_____ Date: _30 Jul 12____

Legal Counsel:

Typed Name: ARTHUR M. BOLEY DSN: 786-7646____

Signature: _hardcopy signature on file______ Date: _17 Jul 12____

Chief Counsel:

Typed Name: KATHY A. KREWER ______ DSN: 786-0006__

Signature: _hardcopy signature on file________ Date: _17 Jul 12__

Principal Assistant Responsible for Contracting:

Typed Name: HARRY P. HALLOCK DSN: _786-7025__

Signature: _hardcopy signature on file_______ Date: _2 Aug 12___

Competition Advocate:

Typed Name: _LARUTH SHEPHERD ______ DSN: _786-6597___

Signature: _hardcopy signature on file________ Date: _17 Jul 12___

Head of the Contracting Activity:

Typed Name: MICHAEL J. TERRY DSN: 786-5131___

Major General, USA

Commanding

Signature: __hardcopy signature on file_______ Date: _20 Aug 12__

JUSTIFICATION AND APPROVAL FOR OTHER THAN FULL AND

OPEN COMPETITION

1. Contracting Agency: Army Contracting Command-Warren (ACC-WRN), Warren, Michigan

48397-5000 is the responsible contracting agency.

2. Description of Action: ACC-WRN proposes to award a combined Fixed Price Incentive

(FPI)/Cost Reimbursement contract to BAE Systems, York, Pennsylvania, for the Low Rate

Initial Production (LRIP) of up to 145 Paladin Integrated Management (PIM) vehicles. This new contract will cover the four years of PIM LRIP (FY13–16) and will include Research, Development, Test, and Evaluation (RDT&E) and Army Procurement Appropriations (APA) funding.

3. Description of Supplies/Services:

a. The PIM program addresses the current size, weight, and power (SWaP) limitations within the

M109/M992 fleet (hereinafter, M109 FOV) by integrating technologies from other current platforms into a new chassis. While supportable in its current configuration, the predecessor system, the M109A6 Paladin, will not meet future Army capability requirements. Based on the results of an October 2007 Business Case Analysis (BCA), Product Manager Self-Propelled

Howitzer Systems (PM SPHS) determined that a systems engineering upgrade was the most advantageous way to address SWaP issues within the M109 FOV. The selected design leveraged common Bradley Fighting Vehicle System (BFVS) components and those developed for the

Future Combat System (FCS) Non-Line of Sight Cannon (NLOS-C). This systems engineering approach, incorporating emerging capabilities through technology insertion and upgrades to the vehicle, will ensure long-term interoperability within the Heavy Brigade Combat Team (HBCT).

b. The PIM program includes a PIM Self Propelled Howitzer (SPH) and a PIM Carrier, Ammunition, Tracked (CAT) vehicle.

c. For the LRIP vehicle requirements, current plans call for Anniston Army Depot (ANAD) to induct the vehicles, overhaul critical components, make PIM-specific modifications to the cab, overhaul the gun mount and gun tube, and partially assemble the cab. The contractor will be required to perform the chassis and cab assembly and complete the integration and testing needed to deliver vehicles that meet the vehicle Performance Specifications.

d. The proposed contract will also include all tooling, facilities, spare parts, training, and data required to build and field the LRIP vehicles.

e. The total estimated amount of this action is $815.8M (including all options). This action will cover the following vehicle quantities and dollar amounts (including all options):

BY FISCAL YEAR ($ in millions) (forecasted as of 23 March 2012)

Year FY13 FY14

(option)

FY15

(option)

FY16

(option)

TOTALS

Veh Qty 37 36 36 36 145

Procurement 169.3 181.0 196.4 206.0 752.7

RDTE 14.6 -0- 12.6 35.9 63.1

Total Dollars 183.9 181.0 209.0 241.9 815.8

f. The PIM program is currently scheduled for a Milestone C Defense Acquisition Board (DAB) in June 2013. The LRIP contract covered by this document will not be awarded until after DAB approval.

4. Authority Cited: The statutory authority permitting other than full and open competition is 10

United States Code (U.S.C.) 2304(c)(1), as implemented by Federal Acquisition Regulation

(FAR) 6.302-1, "Only one responsible source and no other supplies or services will satisfy agency requirements." Specifically, FAR 6.302-1(a)(2)(ii) provides that “supplies may be deemed to be available only from the original source in the case of a follow-on contract for the continued development or production of a major system . . . when it is likely that award to any other source would result in either a substantial duplication of cost to the Government that is not expected to be recovered through competition or unacceptable delays in fulfilling the agency’s requirements.”

5. Reason for Authority Cited:

a. BAE Systems is the only source capable of providing the supplies and services described herein without unacceptable delays attributable to learning, and substantial duplication of costs that are not expected to be recovered through competition. BAE Systems is the original equipment manufacturer (OEM) of both the predecessor systems, the M109A6 Paladin and the

M992A2 Field Artillery Ammunition Support Vehicle (FAASV). BAE Systems also designed and developed the current PIM SPH and PIM CAT vehicles and has delivered seven prototypes under the existing PIM Engineering and Manufacturing Development (EMD) contract.

b. No other manufacturer has the unique detailed design and engineering understanding of both the M109 FOV and BFVS platforms to be able to integrate off-the-shelf components from the existing Bradley vehicle, also designed and produced by BAE Systems, into a new chassis while maintaining the performance of the M109 FOV. In addition, BAE Systems is in the unique position to introduce electric gun drives (from BAE Minneapolis), Common Modular Power

System (CMPS) (from BAE Johnson City), and track (from BAE Steel Products).

c. In FY07, BAE Systems developed an Independent Research and Development (IR&D) funded vehicle that demonstrated the feasibility of using an alternative chassis to house common components. The PIM vehicle hull-welded structure was developed under the BAE Systems

IR&D effort. The Government plans to acquire a Production Level Technical Data Package

(TDP) through the LRIP contract. However, the Government will be restricted in its ability to compete the PIM vehicle using this TDP due to the number of key BAE Systems proprietary components.

d. In May 2011, the Government issued a request for proposal (RFP) to BAE Systems for the continuation of the EMD portion of the program. As part of that RFP, the Government requested that BAE Systems price an option for government purpose rights for those items for which the

Government had limited rights. BAE Systems responded that it would change the data assertions as related to one Line Replaceable Unit (LRU) at no cost; however, BAE Systems declined to bid on providing technical data and related rights to the hull-welded structure or key production processes. Therefore, even if the Government were able to negotiate increased technical rights to proprietary components (which the Government has been unable to do up to this point), the technical rights would not include the key production processes. The Government would only be able to provide another contractor with a TDP showing the components needed to build a PIM, but not the detailed work instructions required to fully integrate the components into the platform.

e. In April 2012, Rand Corporation completed an analysis of alternative contracting strategies for both the PIM LRIP and Full Rate Production (FRP). Because the Government will not have a competitive TDP prior to LRIP production, Rand concluded that the Government would be unable to compete the LRIP procurement. Rand’s analysis of competition at LRIP focused on the short timeframe between Milestone C and the start of LRIP and the inability for an alternative contractor to meet the LRIP production schedule. The Army has an immediate need to replace the aging M109A6 Paladin. The current vehicle does not have the growth margin (in power) to accept the Army’s new network capability requirements or the growth margin (in weight) to meet the new force protection/survivability requirements. The current program schedule calls for

Milestone C in June 2013 and First Unit Equipped (FUE) in 2017.

f. At this point, without the ability to provide a competitive Production Level TDP to another vendor, it would take approximately 72 months (36 months for development and prototype build and 36 months for Government testing) for a second vendor to be ready for production. PM

SPHS based the projected development and build times on the number of months BAE Systems took to design and build the existing seven PIM prototypes delivered under the current PIM

EMD contract. PM SPHS based the projected timeframe for Government test on the PIM test schedule detailed in the approved PIM Test and Evaluation Master Plan (TEMP). The total 72 months is an unacceptable delay to the program. In order to achieve the current schedule with

First Unit Equipped (FUE) by January 2017, PM SPHS requires LRIP test vehicle deliveries no later than January 2015. This delay would negatively impact the Army because the M109 FOV fleet would not be in a position to accept the Army’s network capability upgrades that are expected in FY17. Moreover, a delay to the program would mean that the Army would have to delay providing the soldiers with the enhanced force protection/survivability capabilities included in the PIM vehicles.

g. The PIM development costs (including both contractor and Government) have exceeded

$418M as of 29 February 2012. The Government would have to expend at least $418M to enable a second vendor to reach the same level of development. Moreover, the Government would expend additional duplicate costs to develop an alternative vendor while completing development and Government test of the BAE Systems PIM vehicles. The Government anticipates spending approximately $461M in additional Government and contractor costs before the start of LRIP. Therefore, the anticipated duplicate costs are approximately $879M ($418M +

461M = $879M). Based on the current PIM projected vehicle manufacturing cost of $3.5B over the life of the program, the Government would have to achieve over 25% in savings

($879M/$3.5B = 0.25) from competition in order to off-set the duplicate costs required to develop an additional source. The Government does not anticipate being able to realize this savings.

6. Efforts to Obtain Competition: Based on the detailed rationale provided in paragraph five, ACC-WRN will not solicit other sources for this effort. At the subcontract level, ACC-WRN will require BAE Systems to maximize competition between qualified sources. ACC-WRN will synopsize this effort in FedBizOpps to maximize subcontracting opportunities, as required by

FAR 5.201(c).

7. Actions to Increase Competition: The Government intends to require delivery of a Production

Level TDP as part of the PIM LRIP contract. Restrictions on the Government’s data rights to key components, as well as limitations on delivery of manufacturing data (such as work instructions), will hinder the Government’s ability to compete future PIM production. Therefore, the

Government will focus on maximizing competition at the subcontract level. BAE Systems will be required to make the maximum use of competition between qualified sources. During LRIP, PM SPHS will work with the prime Contractor to qualify second sources for key components to the greatest extent practicable, keeping quality and fiscal considerations in mind, such that competition at the subcomponent level will be possible for FRP.

8. Market Research:

a. Although there is no commercially available equivalent to a combat vehicle such as the PIM, PM HBCT engineering, logistics, quality, and contracting personnel perform market research on a continual basis to evaluate commercial and non-developmental items that will meet the Army's operational requirements. This is done primarily by interacting with knowledgeable individuals within Government and industry to find items that can be integrated within the PIM system. PM

HBCT sponsored an Industry Day in parallel with the Association of the United States Army

Winter Program in Ft. Lauderdale, Florida, from 22 to 24 February 2012. This analysis considered the capabilities of industry to accomplish the proposed acquisition. The market research showed commercial items, whether modified or not, will not satisfy the requirement.

b. ACC-WRN issued a sources sought notification/market survey for PIM production in March

2012. Of the responses received, only one prime vehicle manufacturer (BAE Systems) responded. The two other responses were from component manufacturers that do not have the capability to manufacture the PIM vehicle system.

c. The United States Army Materiel Systems Analysis Activity (AMSAA) completed an

Analysis of Alternatives (AoA) for the PIM program in December 2011. As part of this AoA, AMSAA evaluated other non-developmental foreign systems (such as the PzH 2000 and K9).

According to the AoA, none of these foreign systems meets all the requirements established in the M109 FOV Capability Production Document (CPD).

9. Interested Sources: ACC-WRN synopsized previous requirements under the PIM program and, to date, no other sources have written to express an interest in the system-level procurement.

ACC-WRN issued a sources sought notification/market survey in March 2012 to assess the capability of industry to meet PIM production requirements. As noted in paragraph 8(b), the responses were reviewed and only one responder, BAE Systems, was deemed capable of manufacturing the entire PIM vehicle. ACC-WRN will publish the notices required by FAR

5.201 and will evaluate any proposals received.

10. Other Facts:

a. Procurement History:

Contract W56HZV-09-C-0550, 14 August 2009, PIM EMD contract, cost plus fixed fee

(CPFF) and cost plus incentive fee (CPIF), awarded on a sole source basis to BAE Systems pursuant to the authority of 10 U.S.C. 2304(c)(1); FAR 6.302-1(a)(2)(ii), “Only One Responsible

Source.”

Contract W56HZV-07-C-0256, PIM efforts were awarded under work directives on the BAE

Systems Corporate System Technical Support (STS) contract, CPFF, awarded 13 April 2007 on a sole source basis pursuant to the authority of 10 U.S.C. 2304(c)(1), and FAR 6.302-1(a)(2)(ii)

“Only One Responsible Source.”

b. Acquisition Data Availability: The Government currently has a mixture of unlimited, limited, and Government purpose rights to technical data related to the PIM system. BAE Systems developed parts of the vehicle (e.g., the hull-welded structure) at its own expense in advance of the PIM development efforts; therefore, the Government only has limited rights to that data.

BAE Systems has stated it will not provide, sell, or license the proprietary data. Moreover, other major components of the PIM (such as the Cummins V903 engine) are proprietary to other vendors. The Government plans to procure a Production Level TDP as part of this effort;

however, the Government will be restricted in its ability to compete the PIM vehicle using this

TDP due to the number of key proprietary components.

c. Subcontracting Competition:

ACC-WRN will require BAE Systems to submit a Subcontracting Plan. In addition, the contract will include FAR Clause 52.244-5,"Competition in Subcontracting," which requires the maximum practical competition in 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.

NAME: CONSTANCE M. TUCKER DATE: ____19 Jul 12______________________

TITLE:__DPM, HBCT SIGNATURE: _hardcopy signature on file_____

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.

NAME: WILLIAM H. SHEEHY DATE: _______28 Jul 12_____________________

TITLE:__PM, HBCT SIGNATURE: _hardcopy signature on file_______

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. The contractor's proposal will be reviewed by Government requirements personnel who will address the appropriateness of the proposed labor hours and labor categories, material, other direct costs, and other cost elements as requested by the Contracting Officer. Cost/Price Analysis and audit recommendations will be used to discern whether the costs proposed are current and justifiable. The final negotiated agreement will give full consideration to all contractual requirements, including the delivery schedule, to support a determination of fair and reasonable prices for this action. Certified Cost or Pricing Data, which will be subjected to DCAA audit, will be required and will form the basis for negotiating a fair and reasonable price.

NAME: RAENA R. SWANSON DATE: ____17 Jul 12_______________

TITLE: CONTRACTING OFFICER__ SIGNATURE: _hardcopy signature on file____

14. Procuring Contracting Officer Certification: I certify that this justification is accurate and complete to the best of my knowledge and belief.

NAME: RAENA R. SWANSON DATE: ____17 Jul 12______________

SIGNATURE: _hardcopy signature on file_______________________________________

APPROVAL

Based on the foregoing justification, I hereby approve the procurement of 145 each PIM vehicles and associated tooling, facilities, test support, spare parts, training, and data required to build, test and field the PIM vehicles, for a total estimated price of $815.8M on an other than full and open competition basis pursuant to the authority of 10 U.S.C.

2304(c)(1), as implemented by FAR 6.302-1, subject to the availability of funds, and provided that the services and property herein described have otherwise been authorized for acquisition.

DATE:_28 Sep 12_______ SIGNATURE:_ hardcopy signature on file

Heidi Shyu Senior Procurement Executive