Industry Day Slide Deck - F-35 East Campus_20231115.pdf

F-35 EAST CAMPUS INFRASTRUCTURE

INDUSTRY DAY

27 NOVEMBER 2023, 1:00 PM (MST)

Hosted by:

U.S. Army Corps of Engineers Sacramento District, Contracting Division Contracting Officer Jeremy Grimley

WebEx Link: https://usace1.webex.com/meet/britanie.v.butler

Join by phone +1-844-800-2712 US Toll Free +1-669-234-1177 US Toll Access code: 2762 551 8313

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https://usace1.webex.com/meet/britanie.v.butler

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RULES OF ENGAGEMENT

• Sacramento District is considering the use of a “Price Includes Variation Over Time (PIVOT)” strategy for this acquisition.

• COVID-19 and other economic impacts continue to negatively impact the US market, causing price hikes in simple commodities and skilled labor leading to higher prices, longer acquisition schedules, decreased competition, and more frequent requests for additional funding.

• The PIVOT approach requires the offerors to provide multiple prices that span several periods;

empowering contractors to hedge risk over the Government’s predefined periods.

• USACE Sacramento is seeking industry feedback on the potential use of this strategy for this acquisition.

BLUF OVERVIEW

Cost Range: Between $100M and $250M

Delivery Method: Design-Bod-Build (DBB)

Period of Performance: 730 calendar days from NTP

Description: Construction of utility infrastructure systems to support the planned and future development of multiple facilities on the east side of Hill Air Force Base (HAFB) including taxiways, tow-ways, etc., and the relocation of a tactical navigation (TACAN) facility.

F-35 EAST CAMPUS INFRASTRUCTURE

Special Construction and Functional Requirements:

• Significant amount of work requires coordination with public, government and privatized utilities.

• Culinary Water (Privatized)

• Sanitary Sewer (Privatized)

• Electrical Power (Privatized)

• Storm Sewer (Government)

• Natural Gas (Government - connection to public utility, Dominion Energy)

• Industrial Waste (Government)

• Fire Water (Government)

• Communications (Government)

F-35 EAST CAMPUS – CONTINUED

THE PIVOT PROCESS

BUILDING STRONG®

STEP 1: Define the Periods

• Thorough acquisition planning is critical to PIVOT success.

• GOV defines the NUMBER of “Periods” in the solicitation.

• All time periods key off the solicitation closing date; i.e when proposals are due.

• When using PIVOT, GOV must include at least (3) periods to spread the risk.

• For proposals to be deemed acceptable, KTRs must submit prices for ALL periods.

• GOV defines date RANGE of each period; tied to unique drivers of each acquisition.

• Periods may be of equal or unequal lengths, GOV prerogative.

• Ranges remain consistent across all CLINs.

Proposal ACME, Inc.

123 Elm St.

City, US 54321

CLIN 0001 …

CLIN 0002 …

CLIN 0003 …

TOTALS ……

$ 1,000 $ 5,000 $ 4,000

$10,000

$ 2,000 $ 8,000 $ 5,000

$15,000

$ 5,000 $ 17,000 $ 8,000

$30,000

Period 1 0-90 days

Period 2 91-180 days

Period 3 181-365 days

The number and length of periods are TAILORED to each unique acquisition.

Step 2: Define the Weights

• GOV defines weights for each period based on market price volatility over time.

• Each weight represents GOV/KTR confidence in prices during a given period.

• GOV cost estimates are tailored to align with same periods as the solicitation.

• KTR prices remain valid for all periods, at prices proposed by period.

• In competed actions, KTRs are NOT asked to extend prices at Period thresholds.

• However, with sole source actions, GOV may negotiate flexibility, KTR prerogative.

• PIVOT solicitations must clearly define the periods, weights and scaling alternative.

GOV weights are also TAILORED to each unique acquisition.

Example: prices in the next 90d are MUCH more predictable than 360d away, so Period 1 weights will be the highest.

High fidelity = Higher weight.

Step 3: Chose Scaling Approach

• Alternative #1 – Percentage Scaling.

o GOV selects an appropriate percentage used to scale KTR prices.

o KTRs use the GOV percentage to calculate prices for each period.

o Two methods, one calculates from base price, one from previous period price.

• Alternative #2 – Index Pricing.

o GOV uses public domain economic index; e.g., Producer Price Index (PPI).

o KTRs use the index rate to calculate prices for each period.

o Best approach uses subsector specific index values to better align with req’t.

o Example: “Non-residential construction PPI for OCT 21”.

• Alternative #3 – Vendor Parlay.

o Full KTR autonomy to choose prices by Period based on their modeling.

o Price per period is based entirely on KTR’s own competition/risk model.

o GOV price exposure is hedged by GOV selected period weights.

ALT 1 – Percentage Scaling

Example: Fixed Percentage

• Mechanism to scale prices is simply a fixed percentage chosen by GOV.

• Easier to align with actual regional prices compared to indices, which are typically all US.

2.2

2.42

Note: over time curve may prove more parabolic; presented in a linear fashion to underscore the fixed % value; however, slope may be linear depending on PDT approach.

ALT 2 – Indexed Pricing

Example: PPI * Previous Period Price

• Like ALT1 except mechanism to scale prices is a well-known index available in public domain.

• Very high fidelity with the contract requirement, but some indices are more current than others.

Note: over time curve may prove more parabolic; presented in a linear fashion to underscore the fixed index value, however, slope may be linear depending on PDT approach.

2.4

2.88

ALT 3 – Vendor Parlay

Example: KTR pricing by Period

• KTR has TOTAL autonomy to customize proposed period prices and scaling.

• Pricing for all periods are REQUIRED for proposal to be deemed acceptable.

• KTRs enjoy autonomy…yet price is still subject to cost realism and balanced pricing analyses.

• This approach most closely aligns with current Firm Fixed Price (FFP) single price model.

Step 4: Tailor the Solicitation Package

• As part of a PIVOT solicitation, GOV provides KTRs with a fillable MS Excel Workbook.

• KTRs fill in their prices by CLIN and by Period.

• Workbook Periods, Ranges, and Weights align with published solicitation.

• The Excel workbook automatically calculates:

1. Total Award Price by Period.

2. Adjusted Prices by CLIN.

3. Total Adjusted Price (TAP); used solely for the evaluation.

Step 5: Evaluate Price

• With PIVOT, price evaluation focuses ONLY on the Total Adjusted Price (TAP).

• TAP is a SUM of the weighted average calculations, by CLIN, by Period; see below.

• The weighted average approach smooths period fluctuations, while mitigating market risks.

• KTR award prices, by Period, are IRRELEVANT to the evaluation – TAP is the sole focus.

• Note that KTRs are allowed to update prices with Requests for Final Proposal Revisions.

• Likewise, PIVOT works just like other contracts with respect to DoL Wage Determinations.

1) Calculate Adjusted Price by CLIN 2) Total Adjusted CLIN Prices = TAP

Step 6: Source Selection

• Best Value Trade Off (BVTO) is the required source selection methodology for PIVOT.

• PIVOT is NOT for Lowest Price Technically Acceptable (LPTA) or sealed bid actions.

• LPTA and IFB are not appropriate as award may go to offeror with a HIGHER TAP.

• NOTE: TAP is NOT the award amount; TAP is ONLY used for price evaluation.

• Contract award value is the total of the unweighted CLIN prices in period of award.

• Example below: TAP = $13.2M; if we award in Period 2, award value = $13.3M.

Used in the award (if awarded in the 91-180d window after proposal receipt).

Used in the evaluation.

Note, since this is not LPTA but instead is BVTO, the final selected source MAY have a higher TAP than other offerors.

Step 7: Contract Award

• As a BVTO source selection, the winning offeror’s TAP may be HIGHER than other offerors.

• If awardee’s TAP is higher, the Source Selection Authority (SSA) TRADES price for other factor(s).

• Comparatively, the awardee’s price in a period may be higher in some periods, lower in others.

• Final award price is the awardee’s total prosed price in whatever period GOV awards.

• In the example below, Vendor 1 has a higher TAP, but was still chosen for award by the SSA.

Vendor #1 Vendor #2

Step 7: Contract Award

• As a BVTO source selection, the winning offeror’s TAP may be HIGHER than other offerors.

• If awardee’s TAP is higher, the Source Selection Authority (SSA) TRADES price for other factor(s).

• Comparatively, the awardee’s price in a period may be higher in some periods, lower in others.

• Final award price is the awardee’s total prosed price in whatever period GOV awards.

• In the example below, Vendor 1 has a higher TAP, but was still chosen for award by the SSA.

Lowest award price can vary by period, thus BVTO.

• Is the PIVOT strategy seen as beneficial to industry?

• Is there any additional cost and/or risk potential for a project utilizing the PIVOT strategy?

• Is there feedback related to the utilization of the Total Adjusted Price (TAP) as the basis for determining the best value offeror?

• Regarding amendments, what additional effort is foreseen with the re-pricing the PIVOT bid schedule?

• Please provide any written feedback regarding the PIVOT strategy to the Contract Specialist, britanie.v.butler@usace.army.mil, by 28 November 2023.

QUESTIONS & FEEDBACK

mailto:britanie.v.butler@usace.army.mil