RedactedJAmachiningcent.pdf

CONTROL No. RIA10030 Program/Item: Horizontal Machining Center

Est. Dollar Value: $980,000.00

CMO # 10-398

JUSTIFICATION AND APPROVAL

FOR OTHER THAN FULL AND OPEN COMPETITION

CONCURRENCE SHEET

Program/Equipment: 4 Each Horizontal Machining Centers Authority: 10 USC 2304 (1) Amount $980,000.00

Prepared by: Typed Name: Amy Nissen DSN: 793-5189 Title: Contract Specialist Date:15 Sept 2010

PCO: Typed Name: Gail Bindewald DSN: 793-3656 Title: Contracting Officer Date:

Technical: Typed Name: Gary Milefchik DSN: 793-4059 Title: Production Director Date:22 Sept 2010

Requirements: Typed Name: Gary Milefchik DSN: 793-4059 Title: Production Director Date:22 Sept 2010

COORDINATION:

TARA-CO (Legal)

E-Signed by TUFTEE.BRIAN.A.1257722070 VERIFY authenticity with ApproveIt

20 Sept (concur/nonconcur) (signature) (date)

TARA-CT

(concur/nonconcur) (signature) (date)

JUSTIFICATION AND APPROVAL

FOR OTHER THAN FULL AND OPEN COMPETITION

1. Contracting Agency: Rock Island Arsenal-Joint Manufacturing & Technology Center, Rock Island, IL 61299-6400.

2. Description of Action: This action will result in a firm fixed price contract with Phillips Corporation. Award is projected for the first quarter of FY11 and FY11 CIP Funds will be used. An acquisition plan is not required because it does not meet the dollar threshold for an acquisition plan.

3. Description of Supplies/Services: Reference Project N2000-09-9-105 for 4 EA (2 EA with an option to purchase an additional 2 EA) Horizontal CNC Machining Centers. The equipment requested is used primarily for production of small arms components (SWRC) and artillery. The parts are small, precision components in quantities ranging from 10,000 to 50,000 of each component. The parts are made of steel, pre-hardened alloy steel, aluminum, and bronze. These systems perform the final machining processes for most of the involved parts. The estimated value is $980,000. This action will include an option for an additional 2 Horizontal Machining Centers.

4. Authority Cited: 10 USC 2304(c)(1), Only One Responsible Source as implemented by FAR 6.302-1.

5. Reason for Authority Cited: In accordance with FAR 6.302-1, procurement by other than full and open competition is necessary because there are no other sources for equipment meeting the requirements. These Horizontal CNC Machining Centers are only available through Phillips Corporation who is the sole licensed distributor of Haas equipment to the Federal Government. There are no other vendors that sell this equipment as new. Purchase from any other source would be considered used equipment by the Original Equipment Manufacturer (OEM) and would therefore not carry the manufacturer’s warranty, training, or support. Other brand equipment would not meet the accuracy and repeatability needs of RIA-JMTC.

The purpose of limiting competition is twofold. The first purpose is to achieve financial savings to the Government. As shown below, the cost savings for limiting competition is at an estimated $2,107,291 across the life of the equipment:

1. POST PROCESSOR SOFTWARE: A new control (a control other than those currently used at RIA-JMTC) would require the purchase of a new software package to support programming of the equipment. This software requires a maintenance agreement for technical support and updates. This would cost RIA- JMTC approximately $3,000 to purchase and approximately $500 per year for maintenance. Across the 20-yr expected life of the equipment, limiting competition to the existing equipment controls represents $13,000 savings to the Government. This number is conservative in that it does not account for the probable increases in the cost of the annual maintenance agreement over the next 20-years. ($3,000+20yrs*$500/yr)

2. TRAINING COST:

a. OPERATOR: The cost of the vendor supplied trainer is approximately $1,500 per day for 5-days with a $2,000 travel cost. These costs are standard for the industry. Also, RIA-JMTC must provide at least (5) operators for the 5-days of training (8 hrs/day, $40.11 per hr). A refresher training session is normally required at least once during the life of the machine as personnel change positions and responsibilities. This training has already been provided for the equipment existing at RIA-JMTC and would not need to be duplicated. Across the 20-yr expected life of the equipment, limiting competition to the existing equipment controls represents $35,044 savings to the Government.

i. 000,19$)000,25500,1(2 Dollars Session

Days x

Day

Dollars Sessionsx

ii. 044,16$11.408552 Hr

Dollars x

Day

Hrs x

Operator

Days x

Session

Operators Sessionsx

iii. $19,000 + $16,044 = $35,044

b. PROGRAMMING: The cost of the vendor supplied trainer is approximately $1,500 per day for 5-days with a $2,000 travel cost. These costs are standard for the industry. Also, RIA-JMTC must provide at least

(3) programmers for the 5-days of training (8 hrs/day, $51.93 per hr). A refresher training session is normally required at least once during the life of the machine as personnel change positions and responsibilities. This training has already been provided for the equipment existing at RIA- JMTC and would not need to be duplicated. Across the 20-yr expected life of the equipment, limiting competition to the existing equipment controls represents $31,463 savings to the Government.

i. 000,19$)000,25500,1(2 Dollars Session

Days x

Day

Dollars Sessionsx

ii. 463,12$93.518 Pr

Pr

Hr

Dollars x

Day

Hrs x ogrammer

Days x

Session ogrammers Sessionsx

iii. $19,000 + $12,463 = $31,463

c. MAINTENANCE: The cost of the vendor supplied trainer is approximately $1,500 per day for 4-days with a $2,000 travel cost. These costs are standard for the industry. Also, RIA-JMTC must provide at least

(3) maintenance personnel for the 4-days of training (8 hrs/day, $39.26 per hr). A refresher training session has not historically been required for this type of equipment. This training has already been provided for the equipment existing at RIA-JMTC and would not need to be duplicated.

Across the 20-yr expected life of the equipment, limiting competition to the existing equipment controls represents $11,946 savings to the Government.

i. 000,8$000,24500,1 DollarsDaysx Day

Dollars

ii. 769,3$26.39843 Hr

Dollars x

Day

Hrs x

Person

Days Personnelx

iii. $8,000 + $3,769 = $11,769

d. TOTAL TRAINING SAVINGS = $35,044 + $31,463 + $11,769 = $78,276

3. SPARE PARTS: This type of equipment requires a significant amount of spare parts be maintained at RIA-JMTC. This is to prevent extended periods of lost production when repairs are necessary. For each make and model of machining center RIA-JMTC must maintain between $10,000 and $15,000 worth of spare parts. Average = (10,000+15,000)/2 - $12,500

4. CONSUMABLE PARTS: These parts are common to many different makes and models of equipment and therefore there is no perceived cost savings from limiting competition.

5. OPERATOR CAPABILTY RESTRICTION: Operators must be trained and certified to operate each specific “make” of cutting system. An operator that has been trained to run an Okuma “make” of machine is not necessarily capable of running a Mazak “make” system unless he has been trained on operation of both pieces of equipment. Addition of another “make” of system would require training operators specific to the new system who would then not be able to operate the existing systems and vice-versa or the operators would be required to know how to operate an additional control system. The probable results of this are that either the operators will be responsible for knowing more control systems which historically will result in higher scrap rates, or the operators will be control specific which causes scheduling difficulties and staffing issues.

a. Consider the possibility of increased scrap rate. These systems perform cutting operations on precision small parts. As a conservative average, assume an average value $100 per piece scrapped. This type of machine will process approximately 1,200-parts-per-week per machine. This indicates that a 0.25% increase in scrap (e.g. total scrap rate increase from 0.5% to 0.75%) represents a cost to the Government of $300-per-week of operation. Even assuming that experience reduces this in a linear 10% improvement per year, across the 20-yr expected life of the equipment, limiting competition to the existing equipment controls represents a $137,034 savings per machine to the Government or a total savings of $548,136.

b. The alternate possibility is dedicating operators to a specific machine controls. Assuming a 24/7 operation (which is the current and foreseeable future operating condition) each machine would need a minimum of 3-operators working 7-days per week or 4-operators working 5-shifts per week. Due to operational limits such as sick time, leave time, mandatory training and meetings either an additional operator would be required or the machine would be out of operation for a minimum of 250-shifts per year, which equals 12-weeks of 24/7 operation per year. Just the labor cost of this loss would be $62,572 per year (This does not consider the impact of lost production.) or $1,251,432 across the life of the system.

c. A combination would minimize the impact to the Government. This combination would dedicate operators by control except during the times when operational limits would cause the system to sit idle. During this time, an alternate operator would be utilized from one of the other control type machines, which would cause the increased scrap rate, but only during the 12-week period described in alternative b. This would result in an increase cost of $263 per week for 12-weeks with no experience reduction because the experience would be limited. This is very conservative because with limited experience, the scrap rate increase would probably be greater than 0.25%. Across the 20-yr expected life of the equipment, limiting competition to the existing equipment controls represents a $72,000 savings to the Government.

000,72$2030012 Yearsx Week

Dollars x

Year

Weeks

6. PROGRAMMING INTEROPERABILITY COST: Moving parts from one brand to another. Due to the nature of production at RIA-JMTC parts are routinely moved from one system to another. To transfer from one machine to another of the same “make” takes approximately 30-minutes because the programs, tools, and fixtures are transferrable without modification. If transfer requires moving a production run to a different “make” of system, the floor supervisor must request a programmer to write a new program for the specific control, a process planner must identify another machine, tool design must confirm that the fixture can be moved or redesign to allow it to transfer, the programmer must spend time writing the new program and delivering the new program to the production system, there is a delay in production until the new program is produced, and finally there is a new prove-out to validate the new process. As an average it requires 66-hrs to reprocess/reprogram a part at $51.93 per hour for labor and 3-hr of supervisor time to manage the change request at $48.87 per hour for labor. At an average of 1-change per 2-months (very conservative), across the 20-yr expected life of the equipment, limiting competition to the existing equipment controls represents $428,879 savings to the Government per machine or a total savings of $1,715,515. This is an extremely conservative number of changes considering that this operation is running nearly 3-shifts per day, 5-days per week and has been in past years and will for the foreseeable future. This equipment supports production of a multitude of programs including the small arms components (SWRC) and others.

7. TOTAL SAVINGS:

a. Post Processor Software = $13,000

b. Training = $78,276

c. Spare Parts = $12,500

d. Consumable Parts = $0

e. Operator Capability Restriction $72,000

f. Programming Interoperability Cost $1,715,515

g. Total $2,107,291

The second purpose of limiting competition would be to gain flexibility of work load.

Limiting the possible new equipment to be the same controls as the existing equipment will allow RIA-JMTC to significantly increase portability of programs and interoperability of the equipment. Operators, programs, tools, fixtures and workload could be transferred from system to systems without incurring large transfer costs and production delays which would occur if an additional make of equipment were introduced to the existing process. RIA-JMTC currently has (10) machines identical to the requested make and model and has (5) additional machines with identical controls manufactured by Haas. These machines are smaller mills; however can accept programs from the larger machines as required. RIA-JMTC does not have any equipment from any other manufacturer of this type and size.

Failure to limit competition to the recommended source will result in the possibility of an increase in the number of controls in the existing process. This would cause an increased cost to the Government of $2,107,291 in direct costs, and significant production delays to major weapons programs which would be unacceptable to the ultimate end customer who is the war-fighter in the field.

6. Efforts to Obtain Competition: This procurement action will be synopsized in FedBizOpps.

7. Actions to Increase Competition: There is no Technical Data Package (TDP) available to the government for the Horizontal Machining Centers because they are a commercial item. All technical and proprietary information is owned by Haas. There are no plans or funds for the Government to purchase their TDP. If a different manufacturer had been awarded the original contract, the Government would have been requesting this same type of procurement to guarantee standardized equipment for RIA-JMTC.

Competition would not occur until the controls and programming would be greatly outdated that would require a new system.

8. Market Research: Market research was conducted by Mr. Brad Niles (Engineer at Rock Island Arsenal JMTC), in August 2010, who contacted Haas to determine that they only sell to the Federal Government through Phillips Corporation and that no other company could provide “new” Haas equipment to RIA-JMTC. Equipment provided by any other seller would be considered used equipment with no factory warranty and support commensurate with used equipment. Also, it was verified that new equipment would be identical to the existing equipment allowing for seamless transfer of programs, parts, fixtures, tooling, and operators at the shop floor level. Previous research with major machine builders has confirmed that this ability to transfer work from one OEM’s equipment to another OEM’s equipment would not be possible.

9. Interested Sources: To date, no other sources have expressed an interest in writing.

The notices required by FAR 5.201 will be published and any proposals received shall be considered.

10. Other Factors:

Procurement History:

Contract: W9098S-09-P-0419

Phillips Corporation

W9098S-09-P-0786 Phillips Corporation

11. Technical Certification: I certify that the supporting data under my cognizance which are included in the J&A are accurate and complete to the best of my knowledge and belief.

Name: Gary Milefchik Date: 22 Sept 2010

Title: Production Director Signature: //signed//

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

Name: Gary Milefchik Date: 22 Sept 2010

Title: Production Director Signature: //signed//

13. Fair and Reasonable Cost Determination: I hereby determine that the anticipated cost for this contract action will be fair and reasonable based on solicitation and a price analysis. The contractor may be required to provide “other than cost or pricing data” for the completion of the price analysis. In accordance with FAR 15.403(1)(b)(3), certified cost or pricing data will not be requested because this is a commercial item.

Name: Gail Bindewald Date: 29 Sep 10

Title: Contracting Officer Signature:

E-Signed by BINDEWALD.GAIL.A.1231227241 VERIFY authenticity with ApproveIt

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

Name: Gail Bindewald Date: 29 Sep 10

Title: Contracting Officer Signature:

E-Signed by BINDEWALD.GAIL.A.1231227241 VERIFY authenticity with ApproveIt

APPROVAL

Based on the foregoing justification, I hereby approve the procurement of a quantity of 4 EA Horizontal Machining Centers at a total estimated value of $980,000 on an other than full and open competition basis pursuant to the authority of 10 USC 2304(c)(1) and FAR 6.302-1, provided that the property described herein have otherwise been authorized for acquisition.

DATE: 1 Oct 2010 SIGNATURE: //signed//

LA RUTH SHEPHERD

Competition Advocate