MICC_JA_13-76_Redacted.pdf

MICC Control No.: 2013-76 MICC WSMR Control No. 13-22

JUSTIFICATION DOCUMENT

FOR OTHER THAN FULL AND OPEN COMPETITION

THERMAL SPRAY KIT MANUFACTURING

1. CONTRACTING AGENCY: Mission and Installation Contracting Command, White Sands Missile Range (CCMI-CHD-WS), New Mexico.

2. DESCRIPTION OF ACTION: Request approval to negotiate a sole source, Firm Fixed Price (FFP) Requirements contract with Raytheon Ktech Corporation for the manufacture and supply of Thermal Spray Primer and Thermal Spray Powder Kits.

Delivery orders issued under this contract will be funded with Fiscal Year (FY) 2013 (or future year) Research Development Test and Evaluation (RDT&E) funds.

3. DESCRIPTION OF SUPPLIES/SERVICES: The requirement is to manufacture and deliver a maximum of 1180 - Thermal Spray Primer and 280 - Powder Kits in accordance with the following regulations; PS-TSG2-001 “Navstar Global Positioning System Product Specification for Thermal Spray Generation Two Kit Manufacturing, Revision A” (U//FOUO) and PS-TSG2-002 “Navstar Global Positioning System Product Specification for Thermal Spray Generation Two Kit Materials, Revision A” (SECRET//NOFORN). Note while the process can be seen as commercial, the regulator manufacturing requirements are classified. The proposed five-year requirements contract will have a base year and four one-year option periods (30 Aug 2013 - 29 Aug 2018). Total estimated contract value is $3,965,910.22 for five-year period.

4. AUTHORITY CITED: This action is authorized under provisions of 10 U.S.C.

2304(c)(1) as implemented by Federal Acquisition (FAR) 6.302-1(a)(2)(ii)(B), Only One Or a Limited Number of Responsible Sources, and No Other Type of Supplies or Services Will Satisfy Agency Requirements. This is a follow-on contract for the continued production of highly specialized thermal spray kits. An award to any other source would result in unacceptable delays in fulfilling the agency’s requirements

5. REASON FOR AUTHORITY CITED:

a. Background: The Global Positioning Systems Directorate has an on-going requirement to provide Thermal Spray Kits to various Department of Defense (DoD) product vendors for the DoD. The Survivability, Vulnerability and Assessment Directorate / White Sands Test Center (SVAD / WSTC) provides vital Government program management and capabilities in the execution of supporting this critical DoD mission.

In the mid-1990s, to improve functionality and security of Precise Positioning Service (PPS) User Equipment (UE), the Joint Staff directed the Air Force, the National Security Agency (NSA) and trusted vendors to develop the Selective Availability/Anti-Spoofing Module (SAASM) security architecture.

4 Coordination pages 1-3 have been redacted

SAASM UE operates with unclassified keying material, lessening the probability of classified compromise. In order to protect the integrity and security of the component systems, which are sold to allies but for security reasons can only be serviced by the U.S. Government, the Government mandated thermal spraying and security parameters for SAASM components.

b. Alternatives: To meet this continuing requirement, three possible alternatives were considered, two of which will not satisfy the underlying the request.

i. Use of In-House Resources: There is no resident Government personnel with the expertise required to produce the required Thermal Spray products. Acquiring the necessary personnel is not feasible, due to Table of Distributed Allowances (TDA) restrictions and current Government hiring practices. Hiring Government personnel for a relatively short-term requirement is not practical. Another factor is that the Government and White Sands do not possess the necessary infrastructure equipment to produce and adequately maintain the testing performance documentation that Thermal Spray primer and powder kits are in compliance with the mandated specifications. Due to the urgent need for these Thermal Spray Primer and Powder Kits, it would result in unacceptable mission delays (expect at least 24 – 30 months for procuring the needed infrastructure) and increased costs (> $ 7 Million Dollar Investment) for the SAASM components to have the mandated anti-tampering solution applied to critical DoD hardware.

ii. Establish a competitive IDIQ Contract: A comprehensive inquiry/assessment was conducted to adequately determine the viability of implementing a competitive contract. The customer’s market research indicated that there were no other companies with the capabilities to meet the Government’s expressed requirements. This was confirmed with the November 19, 2012 sources sought. Raytheon Ktech was the only company that responded to the sources sought. The discriminators to produce these products are quite significant. They include the security requirements to safeguard this technology, oversight, and NSA facility certification requirements. NSA controls the Thermal Spray materials specifications and the processing procedures used for their application. In addition, the NSA must certify facilities producing the required Thermal Spray and Primer Kits for this contract.

The true barrier for competition is not the manufacturing of the powders but the requirement to get NSA facility approval and the length of time it would take to get the facility certified. This precludes companies from investing the time and or cost into their infrastructure to submit a proposal because the NSA certification would need to be completed before contract award. This stringent security requirement of SECRET//NOFORN also eliminates vendors from being able to get qualified employees and have their facilities qualified for the classified requirement. If the NSA prerequisite was eliminated from the constraints of the powders productions and handling requirements, then most thermal powder manufactures small and large would compete for this contract. Raytheon Ktech is currently the only contractor with the required NSA certifications, personnel with the proper clearance, and the infrastructure willing to supply the thermal powders within the Governments parameters.

iii. Issue a non-competitive sole source requirements contract to the last contractor of record: This alternative ensures continuity of existing supplies until the SAASM program is suspended or other vendors are identified and willing to have the NSA facility certifications. Executing this contract through the completive process will generate the same results of only one vendor (Ktech) submitting a proposal but with months added to the procurement process

c. Justification: The current stock level’s burn rate of approximately 30 kits/month will be depleted from WSTC around 31 August 2013, due to the fact that only 32 kits remain in stock with respect to SAASM developers and WSTC. Based upon the best available data, the remainder of the bench stock will be completely consumed by around 30 September 2013. On the other hand, Raytheon KTech needs a lead time of one month to produce additional Thermal Spray Powder and Primer kits. To avoid a break in the availability of Thermal Spray kits, the next contract needs to be awarded no later than 31 August 2013. Failure to obtain approval of the J&A to award to KTech for the Thermal Spray Kits, the impact to SAASM integrations and ultimately GPS production will be catastrophic. The requested contract action serves multiple DoD programs by creating a store of Thermal Spray Primer and Powder kits at WSTC so that this product can be sold and distributed to SAASM developers, as authorized by the GPS Directorate. As a result, of the current military environment, SAASM development needs are increasing and it is essential to ensure that the DoD maintain a reliable supply of Thermal Spray products. The lack of thermal supply kits will manifest in the stoppage of production programs. This is due to the fact that they must utilize Thermal Spray, in conjunction with the CINCO IIA in order to meet their anti-tamper and data protection requirements IAW direction provided by the Joint Chiefs of Staff. The end-state is that the manufacturers would be unable to fulfill their technology security requirements and contractual obligations to the Government in delivering their hardware to the War Fighter.

d. Prior Acquisitions: Procurement history indicates that there have only been two contracts awarded for Thermal Spray Kits. The initial requirement occurred in 2003. The HQ Space and Missile Systems Center (SMC) awarded a sole source FFP $239,400.00 contract F04701-03-D-0001 to Honeywell Aerospace Electronic Systems. This contract was for a one year base and a one year option period. The only evidence for this contract is an award synopsis on FedBidOpps.gov. There is no documentation that the option period was ever exercised. The pre-solicitation notice states this contract is needed for Honeywell Aerospace Electronic Systems to continue supplying Thermal Spray Materials, which suggests that there are potentially other contracts that cannot be identified.

The last contract issued by WSMR was competitively awarded to Ktech., 1300 Eubank SE, Albuquerque, NM 22206 for $9,501,162.00 under an IDIQ contract, MICC contract number W9124Q-07-D-0800. The IDIQ contract was for 5 years with an award date of 16 October 2006. Two proposals were received; one from Honeywell International and the other from Ktech (now Raytheon Ktech). After Honeywell International lost this contract, they capitalized their Thermal Spray manufacturing equipment to support other commercial coating ventures such as the high-performance ceramic coatings market which is estimated to be a $1.8 billion industry.

The end date for ordering Thermal Spray Kits against the previous contract was 15 Oct 2011. The performance from this contractor was exemplary for handling customer concerns, product manufacturing, and meeting required deliveries dates.

e. Impact: If approval is not received to execute this contract with Raytheon Ktech for the Thermal Spray Kits, impact to SAASM integrations and ultimately GPS production will cease. The requested contract action serves multiple DoD programs by creating a store of Thermal Spray Primer and Powder Kits at WSMR so that this product can be sold and distributed to SAASM developers, as authorized by the GPS Directorate.

If the Thermal Spray powders contract is delayed and the current WSTC stock is expended (forecasted 31 September 2013), will ultimately shut down multiple military hardware production lines because of the Navstar anti-tamper spray requirement for GPS devices. The manufacturers would be unable to fulfill their contracted obligations to the Government in delivering war fighting equipment such as Defense Advanced GPS Receiver (DAGR) (over 100,000 fielded), Joint Direct Attach Munitions (JDAM), Small Diameter Bomb, F-15 and F-16 aircraft, MH-60 helicopter, Land Warrior, Navy AEGIS smart missile, Satellite Launch Control System, Paveway 4 Guided Bomb, Combat Survival and Evader Locator, Unmanned Aerial Vehicles (Predator, Global Hawk, Raven, Shadow), Tactical Tomahawk, High-speed Anti- Radiation Missile (HARM) targeting system, Joint Precision Approach and Landing system, Joint Standoff Weapons System (JSOW) Smart Missile, Joint Tactical Radio System (JTRS) and the Single Channel Ground and Airborne Radio System (SINCGARS).

6. EFFORTS TO OBTAIN COMPETITION: After reviewing the past Industry Base, there were two contracts awarded in support of the Thermal Spray manufacturing;

Honeywell based in Clearwater, FL (F04701-03-R-0001) and Raytheon Ktech based in Albuquerque, NM (W9124Q-07-D-0800). Both vendors were considered large businesses. Additionally, an extensive Internet search was conducted to determine existing industry capabilities for thermal applied anti-tamper technologies. The results were that several vendors used and produced thermal coatings but no known vendor, except Honeywell and Raytheon Ktech has produced a similar product in an NSA environment. Thermal Spray powder vendors were notified of the need of this requirement and were asked to respond to the sources sought. Only one company, Ktech, responded even though other vendors exhibited interest. Some vendors called to get clarification on the NSA requirement, personnel to have a clearance, and the NOFORN component. The results of these informal discussions are that a classified environment that is driven by NSA caused a hesitation on the part of interested vendors to align themselves to this type of security requirement. The time and money to become compliant did not necessitate an added value to their operations in supplying Thermal Spray Kits to the Government. Also the issue of the NOFORN component was a barrier for the personnel security portion of this requirement.

7. ACTIONS TO INCREASE COMPETITION: The industry is growing due to demands and new technologies using Thermal Spray powders. With the growing demands, there is always the potential that another vendor will be interested in this type of market. This industry must be constantly monitored for emerging vendors capable to supply the kits.

As stated before, the true barrier for competition is not the manufacturing of the powders; but the requirement to get NSA facility approval and the length of time it would take to get the facility certified. This precludes many companies from investing the time and or cost into their infrastructure to propose, because the certification would need to be completed before contract award.

8. MARKET RESEARCH: When establishing the Thermal Spray contract in August 2006 only two vendors were identified. There were only two proposals received on the 2006 solicitation and they were from Honeywell Aerospace Electronic Systems which was awarded the 2003 contract and Raytheon Ktech who was ultimately awarded the 2006 contract. After Honeywell lost this contract, they capitalized their Thermal Spray manufacturing equipment to support other coating ventures such as the high-performance ceramic coatings market which is estimated to be a $1.8 billion industry.

A sources sought notice targeting the Thermal Spay powder manufacturing community was posted on the Army Single Face to Industry (ASFI) on November 19, 2012. The notice invited interested concerns to provide capability packages to MICC-WSMR on December 10, 2012. Ktech was the only firm that responded to the notice.

Internet searches were conducted to determine existing industry capabilities for thermal applied anti-tamper technologies. A search on SAM, FBO, and SBA were also reviewed and other vendors were identified to meet the powder manufacturing requirement but none currently had or were willing to get the NSA certification.

The market research was confirmed by the sources sought that only Ktech is capable of NSA certification or willing to pursue the certification in order to supply the Thermal Spray Primer and Powder Kits for this requirement.

9. INTERESTED SOURCES: One company, Raytheon Ktech, provided a response stating their experience and capability in producing Thermal Spray Primer and Powder Kits. Their capability statement read as “Raytheon Ktech has unique expertise and experience in the production, shipment, and management of Thermal Spray Primer and Powder kits. We have been the sole source manufacturer of the current Thermal Spray Kits since 2006. We have an established secure laboratory dedicated to Kit Production with the capability of conducting raw material incoming analysis and all outgoing inspection and material testing of the Primer and Powder kits.” Raytheon Ktech has produced over 1,750 primer kits from 199 primer batches and processed and shipped 1,129 powder kits. In addition the current personnel are the same that worked on the 2006 contract and were involved in the development of the formulations at Sandia National Laboratories from 2004 through 2006.

As stated in (para 6.e.) of the Anti-Tamper (AT) security classification guide Oct 26 2010, “Each contractor must have a valid facility clearance at least as high as the classification indicated in item la of the DD Form 254 which is a requirement for PS- TSG2-002 “Navstar Global Positioning System Product Specification for Thermal Spray Generation Two Kit Materials, Revision A” (SECRET//NOFORN). Raytheon Ktech states that their lab is cleared to the SECRET//NOFORN level which meets the NSA requirements.

To date, no other sources have expressed an interest in this requirement and none are anticipated.

10. OTHER FACTS:

a. Procurement History: See paragraph 5.d. above.

b. Acquisition data availability: The technical specifications for this requirement are classified.

c. Unusual and compelling urgency: Not applicable. The basis for this action is only one responsible source to maintain continuity of services to meet the mission needs.

d. Subcontracting Competition: The Thermal Spray Primer and Powder kits are completely manufactured at the Raytheon Ktech facility and there are no subcontracting possibilities with the exception of raw materials to produce the kits. The current contract will contain the appropriate clauses for competition in subcontracts.

11. TECHNICAL/REQUIREMENTS CERTIFICATION: I certify that the supporting data under my cognizance included in this Justification are accurate and complete to the best of my knowledge and belief.

Name:

Title: Lead, GPS UE Certification/Verification Team (SMC/GPUIV), GPS Directorate Signature:

Date: 14 Aug 2013

12. MANAGEMENT REVIEW/APPROVAL: The requirement herein described is a valid requirement for the activity named in this Justification. The technical and requirements information contained in this Justification represent the minimum needs of the Government. The only way to satisfy this requirement is by limiting the competition as described herein.

Name:

Title: Deputy Chief, GPS User Equipment Division (SMC/GPU), GPS Directorate Signature:

Date: 14 Aug 2013

13. FAIR AND REASONABLE COST DETERMINATION: I hereby determine that the anticipated price for this contract action will be fair and reasonable. The techniques identified at FAR 13.106-2 and FAR 15.404-1(b)) will be used to ensure award will be at fair and reasonable prices. The Contracting Officer used a comparison of previously proposed prices for the same or similar items. The Independent Government Cost Estimate (IGCE) will also be used as an analysis of the contractor’s proposed prices.

Certified Cost and Pricing Data will not be obtained.

Name:

Title: Contracting Officer

Signature:

Date: 15 August 2013

14. PROCURING CONTRACTING OFFICER CERTIFICATION: I certify that this Justification is accurate and complete to the best of my knowledge and belief.

Name:

Title: Contracting Officer

Signature:

Date: 15 August 2013

Approval

Based on the foregoing justification, I hereby approve the procurement of Thermal Spray Kits on an other than full and open competition basis pursuant to the authority of 10 U.S.C. 2304(c)(1) as implemented by Federal Acquisition (FAR) 6.302-1, subject to the availability of funds, and provided that the services herein described have otherwise been authorized for acquisition.

Signature: Date: 22 AUG 13

Name: Christopher W. Chapple Title: Special Competition Advocate Agency: MICC/418th CSB