W9127824R0021_Consolidation DF Peru SATOC Redacted.pdf

DEPARTMENT OF THE ARMY

U.S. ARMY CORPS OF ENGINEERS, MOBILE DISTRICT

DETERMINATION AND FINDINGS

REQUEST FOR CONSOLIDATION

W9127824R0021

INDEFINITE DELIVERY INDEFINITE QUANTITY (IDIQ)

SINGLE AWARD TASK ORDER CONTRACT (SATOC)

FOR SMALL CONSTRUCTION REQUIREMENTS IN PERU

Federal Acquisition Regulation (FAR) 2.101 defines consolidation or consolidated requirement as a solicitation for a single contract, a multiple-award contract, a task order, or a delivery order to satisfy— (i) Two or more requirements of the Federal agency for supplies or services that have been provided to or performed for the Federal agency under two or more separate contracts, each of which was lower in cost than the total cost of the contract for which offers are solicited; or (ii) Requirements of the Federal agency for construction projects to be performed at two or more discrete sites. FAR 7.107-2 requires that consolidation of requirements with an estimated total dollar value exceeding $2 million shall be supported by a written determination that consolidation is necessary and justified in accordance with 15 United States Code (U.S.C.) § 657q.

I have reviewed this requirement and associated market research and determined in accordance with 15 U.S.C. § 657q and FAR 7.107-2 that consolidation is both necessary and justified. This approval is made in accordance with the approval thresholds set forth in Army Federal Acquisition Regulation Supplement (AFARS) 5107.107-2(b)(ii), “Consolidation.” My review resulted in the following findings:

1. Introduction: Headquarters, U.S. Army Corps of Engineers, Mobile District, proposes to award a competitive unrestricted, best value IDIQ SATOC in the amount of The SATOC will meet repair and construction mission requirements under North American Industry Classification System (NAICS) code 236220 for U.S. and partner nation requirements in Peru. This procurement constitutes consolidation of requirements per 15 U.S.C. § 657q(a)(2)(B) in that it involves construction at two or more discrete sites in the country of Peru. Mobile District has conducted analysis and market research that demonstrates consolidation of requirements in this procurement is both necessary and justified.

2. Description of Procurement Action:

a. Project Description:

(1) Mobile District performs studies, investigations, designs, repairs, and construction in Peru. Each project is assigned a Project Delivery Team (PDT) comprised of various organizational elements within the District, including technical (Engineering and Construction Divisions), contracting, legal, project management, and the end user and facilities’ engineering organizations as applicable. From internal elements, the District fields an in-house staff that provides project management, technical, contracting, legal, and resource management services to support facility life-cycle programs. The District's contracting responsibilities for the facilities support include acquisition planning; procurement actions leading up to award of contracts with associated preparation of documentation and approvals; and administration of the resulting contracts, including award and administration of individual task orders.

(2) The purpose of this acquisition is to establish a highly responsive repair and construction contracting tool to support the District's facility mission in Peru. The support to be provided for these facilities is generally Sustainment, Restoration, and Modernization (SRM) work or work for non-DoD stakeholders which is equivalent to SRM work, but could include new construction. The specific portion of the facilities’ mission addressed by this acquisition consists of full service repair and construction of real property facilities and/or their systems and components.

. For the U.S. enduring and temporary locations served by the contract, this contracting effort, in conjunction with the stakeholder’s facilities maintenance program, ensures the facilities meet established Department of Defense (DoD) facilities standards.

Furthermore, due to the enduring nature of the requirement to ensure compliance with these standards, the necessity for this contract is not expected to be impacted by current or future budget limitations.

b. Acquisition Strategy/Procurement Summary: To meet the demanding repair and construction project requirements of its customers in Peru, the District intends to award a competitive, best value, IDIQ, Firm-Fixed-Price (FFP) construction contract in accordance with FAR 16.504(b), as the Government anticipates recurring requirements but cannot predetermine with precision the exact quantity, nor exact time period needed. The SATOC will be awarded in an amount not to exceed for repair and construction work in Peru. The period of performance will be a five year ordering period. Individual task orders will be negotiated with the contractor.

The Mobile District determined that a SATOC is the most effective manner of meeting the repair and construction mission in Peru for several reasons. This acquisition approach will efficiently facilitate the District’s smaller repair and construction programs and will position the District to successfully meet short-fused, end of fiscal year requirements. Use of a SATOC tool is in the best interest of the Government with respect to timeliness, oversight, and administrative costs.

c. Applicability of Consolidation: As stated above, Sec 1671 of the Fiscal Year (FY) 2013 National Defense Authorization Act amended the definition of consolidation as set forth in Sec 44 of the Small Business Act, 15 U.S.C. § 657q. As implemented in FAR 2.101, consolidation or consolidated requirement means a solicitation for a single contract, a multiple-award contract, a task order, or a deliver order to satisfy -- (i) Two or more requirements of the Federal agency for supplies or services that have been provided to or performed for the Federal agency under two or more separate contracts, each of which was lower in cost than the total cost of the contract for which offers are solicited; or (ii) Requirements of the Federal agency for construction projects to be performed at two or more discrete sites. The definition applies to this procurement because a SATOC will be used to perform multiple construction projects, awarded on individual task orders, at two or more discrete sites in Peru.

d. Requirements Being Consolidated: The planned SATOC will provide full service repair and construction of real property facilities and/or their systems and components in Peru. Almost all of the projects are unknown at this time. However Mobile District expects the vast majority of projects will all be maintenance and repair requirements from the United States Southern Command (SOUTHCOM) and its components, other U.S. Government agencies such as the Bureau for International Narcotics and Law Enforcement, and federal/Ministry of Defense agencies of the Peruvian Government.

e. Procurement History:

(1) Per FAR 19.000(b)(1)(ii), Contracting officers may apply this part outside the United

States and its outlying areas when referencing Small Business programs. Therefore, given the Outside the Continental United States (OCONUS) location of this requirement, Small Business programs are not being used because historically the contractors that participate in these types of acquisitions are not certified as a concern by the definition of FAR Part 19.001. Despite this fact, the Latin America PDT applied a process similar to that conducted by the District for acquisition planning in its Area of Responsibility, considering the suitability of projects for smaller contractors comparable to Small Businesses in the U.S. in comparison to larger and more complex projects which would typically be performed by large businesses if performed in the U.S. Generally, larger, complex projects are procured through “C” contracts or placed in existing Multiple Award Task Order Contract (MATOC) pools. Less complex, smaller scale projects may be reserved for SATOC awards.

(2) The Mobile District currently administers a $49M Design Build (DB) MATOC for use in South America. The MATOC was awarded in 2022 with a five-year ordering period, and may be used for requirements in all twelve countries in South America. While the general scopes of work for the South America MATOC and the proposed Peru SATOC are similar in terms of the type of repair and construction to be performed, the Peru SATOC is intended provide a faster and more cost-effective contracting vehicle to accomplish small construction requirements with a dollar value for U.S. and partner nation stakeholders in Peru. The more limited project size and geographic scope differentiate the planned procurement from the existing MATOC.

(3) This SATOC is for new repair and construction requirements in Peru and therefore no procurement history exists. The following are similar requirements recently performed in Peru:

Table 1 – Recent Similar IDIQs Awarded in Peru

Contract / Solicitation #

Contractor Name

IDIQ

Type

Award Capacity

Ordering Period

Award Date

Remaining Capacity

W9127818D0034

Serrano Proano Dieseno Y

Constructura

SATOC

$10,000,000

5 Years

July 2018

Expired

f. Rationale for Consolidation:

(1) In order to be determined necessary and justified, the benefits of the consolidated acquisition must substantially exceed the benefits that would be derived from alternative contracting approaches that involve a lesser degree of consolidation. Such benefits may include quantifiable cost savings or price reductions as well as other benefits, regardless of whether quantifiable in dollar amounts, to include quality improvements that will save time or improve or enhance performance or efficiency, reduction in acquisition cycle time, better terms or conditions, or any other supportable benefit. Benefits that are quantifiable are considered substantial if they meet the dollar amounts set forth in FAR 7.107-2(d). If the quantifiable benefits do not meet these thresholds, the approving authority may determine that consolidation is necessary and justified if the expected benefits of the consolidated approach are critical to the agency’s mission success and the procurement strategy provides for maximum practicable participation by small business. For this procurement, the quantifiable benefits of consolidation do not meet the threshold set forth in FAR 7.107-2(d). See Section 5 analysis below for the benefits of this proposed consolidated acquisition. Although the quantitative benefits are not met, the qualitative benefits of the consolidated approach are critical to the success of the Mobile District.

(2) Utilizing a competitive SATOC in accordance with FAR 16.504 to consolidate the requirements for small repair and construction work in Peru is necessary to meet the mission objectives because it provides for a contracting vehicle that minimizes acquisition planning and contract execution costs, shortens contracting lead time, assures operational continuity, and improves force protection by minimizing the number of contractors accessing the U.S.portions of installations at any given time period. Use of an IDIQ contract is appropriate in accordance with FAR 16.50l-2(a), when exact times and/or exact quantities of future deliveries are not known at the time of award. FAR 16.504(b) indicates that the Contracting Officer may use an indefinite-quantity contract when the Government cannot predetermine, above a specified minimum, the precise quantities of supplies and services that the Government will require during the contract period, and it is inadvisable for the Government to commit itself for more than a minimum quantity. The Contracting Officer should use an indefinite-quantity only when a recurring need is anticipated. It is anticipated that the SATOC will be used to fulfill customer requirements in Peru.

(3) In accordance with FAR 7.107-2(e)(1), when the benefits of consolidated requirements is not quantifiable as stated at FAR 7.107-2(d)(1), the consolidation must be determined to be necessary and justified based on the anticipated benefits of being critical to the agency’s mission success and that the procurement strategy provides the maximum practicable participation by small business. The work required under the proposed solicitation involves SRM and new construction in Peru. The consolidated approach is critical to the success of not only SOUTHCOM’s mission in Peru, but also the Mobile District. An IDIQ SATOC will provide a flexible and effective contract vehicle that can accommodate both the known and unknown repair and construction requirements of U.S. and Peruvian stakeholders in Peru. Further, per FAR 19.000(b), Small Business programs only apply in the United States or its outlying areas. Therefore, given the OCONUS location of this requirement, Small Business programs do not apply to this procurement, meaning that there is no harm to Small Business programs. Though it is feasible to fulfill the requirements by awarding multiple stand-alone “C” contracts, which could perhaps be awarded to multiple contractors, given the limited dollar value of the actions intended for award under this contract procurement costs would be prohibitive. The advantages of the SATOC tool fully support the intended approach.

3. Applicable Statutes/Regulations: 15 U.S.C. § 657q, FAR 7.107-2, FAR 19.000(b), and AFARS 5107.107-2.

4. Results of Market Research:

a. To support the District’s determinations on where to place projects, market research is performed for each acquisition. For requirements in Peru, because Small Business programs do not apply, the primary focus of market research is on increasing competition. Experience on past acquisitions indicates that few U.S. contractors are willing to engage in construction in Peru. Those which do accept the higher risk profile for what are typically smaller requirements compared to USACE projects performed in the Continental United States (CONUS) are reached through traditional notification methods. To reach the regional contractors which are much more likely to respond, particularly for a small requirement like the planned Peru SATOC, additional measures are required.

b. For Peru, the following market research techniques have been used and will continue up to the point of issuance of the solicitation package to promote competition in the procurement process:

(1) Work with US Embassy agencies/offices to obtain information on contractors and conduct outreach. This includes requesting that US Embassy Economics and Commerce offices in Peru publicize the requirement, as well as requesting publicity through US Embassy Public Affairs Office (PAO) team to include posting on local social media sites.

(2) Expand upon Mobile District PAO efforts for recent Latin America (LATAM) procurements promoting the upcoming acquisition on the District’s external website and social media platforms (in English and Spanish) with information on points of contracts, frequently asked questions, and system registration links.

(3) Expand upon contacts with local Chambers of Commerce, Construction

Chambers/Organizations, Engineering Societies, etc. in Peru to publicize opportunities.

c. Market research efforts indicate that adequate interest exists among qualified sources to fulfill competitive requirements.

5. Alternate Contracting Approaches Considered and Rationale for Rejection: Mobile District considered stand-alone “C-type” contracts on a project-per-project basis. However, based on reasons described herein, it was determined that a competitive SATOC was the best solution for satisfying the small repair and construction requirements in Peru which are too small or have too short a timeline for performance under the existing South America MATOC. The intent of this analysis was to address all alternative contracting approaches that would involve a lesser degree of consolidation, or no consolidation. See analysis below for the benefits of this proposed consolidated acquisition, which do not meet the standard set forth in FAR 7.107-2(d).

a. Alternative 1: Stand-Alone “C” Type Contracts: The District considered the award of multiple stand-alone contracts to perform the work in Peru. While this approach could provide a lesser degree of consolidation, or no consolidation at all if individual contracts are awarded for single requirements, the benefits of the SATOC approach substantially exceed the disadvantages of consolidation for the reasons outlined below.

(1) Quality. The ability to work with a single contractor directly through a SATOC tool provides significant advantages in comparison to awarding multiple contracts where various contractors may be utilized. It is the District’s experience that the iterative process of negotiating and executing repair and construction efforts with a single contractor generates greater understanding between contractor and Government, resulting in more thorough proposals and quality projects. While “C” contracts give the Government the opportunity to avail itself of a wider range of potential contractors for each project, the anticipated size of the projects to be awarded under the proposed contract is so small that very limited competition would be expected on a solicitation for a single requirement which would still require registration in all U.S. Government systems and preparation of a detailed proposal. Moreover, as also noted above, the iterative process of working with one contractor under a SATOC tends to generate a more thorough shared understanding between the contractor and Government for the Government's requirements, and the installation's and facilities' procedures, particularly when dealing with regional contractors. While the potential exists for the SATOC holder to end up being a poor performer, due diligence by the Government at the outset makes this risk highly unlikely, resulting in a “good to great” contractor for every project. Too, in the unlikely event that the SATOC contractor does not perform well, the Government can pursue another SATOC contractor or avail itself of other contract vehicles.

(2) Acquisition Cycle. A complicating element of the repair and construction program in Peru is the difficulty in estimating future year annual funding levels. The program is subject to significant annual fluctuations in funding, and to impacts on funding priorities by emerging DoD, using agency, partner nation, and installation-level issues and priorities. The District addresses this budgetary uncertainty with regular IDIQ acquisition actions to create capacity to accomplish a customer’s known requirements, and to respond to those that arrive on short-notice.

(a) In addition to building capacity, the use of task orders under a SATOC streamlines the procurement process under a regimen that is significantly more expeditious than a “C” contract scheme. Specifically, task orders under a SATOC do not require voluminous solicitations and proposal submissions, as required for “C” contract procurements. As compared to awarding a stand-alone contract, it is estimated that placing task orders under a SATOC reduces acquisition time from 180 to 30 days on average for each project, as shown in the table below.

(b) Historically, the repair and construction requirements of the type contemplated in Peru are typically funded by annual appropriations that expire at the end of the FY. These projects are typically not identified, defined, and provided to the District for execution until the third and fourth quarters. The customer’s process of prioritizing and funding mission essential projects leaves little time for contract execution and therefore necessitates procurement strategies that facilitate rapid pre-award processes and award of contract actions. Use of an IDIQ contract under FAR Part 16 provides streamlined acquisition procedures that allow rapid execution of individual projects via

* Project Identification to Award

6. Bundling Analysis:

a. Definition of Bundling. FAR 2.101 defines bundling as consolidating two or more requirements for supplies or services, previously provided or performed under separate smaller contracts, into a solicitation for a single contract that is likely to be unsuitable for award to a small business concern due to: (i) The diversity, size, or specialized nature of the elements of the performance specified; (ii) The aggregate dollar value of the anticipated award; (iii) The geographical dispersion of the contract performance sites: or (iv) Any combination of the factors described in paragraphs (i) through (iii) of this definition.

b. Applicability of FAR Bundling Definition. In accordance with FAR 7.107-3 and 7.107-4 bundling does not apply to this acquisition because it does not consolidate two or more requirements that were previously performed under separate smaller contracts. Therefore “bundling” within the meaning of FAR 2.101 is not applicable.

c. Definition of the Competition in Contracting Act (CICA) Bundling Principle. This principle, as developed by the Government Accountability Office (GAO) case law, focuses on whether the combined requirement (new, old, or otherwise) restricts competition, and whether the agency is consolidating or bundling a new requirement unnecessarily. In order to justify CICA Bundling the agency must show "a reasonable basis for why the bundling is necessary to meet the agency need." (Vantex Serv., Inc., B-29041 5, Aug. 8, 2002 and Outdoor Venture Corp., B-299675; B-299676, Jul. 19, 2007).

CICA requires solicitations to provide for full and open competition except where restrictions on competition are necessary to satisfy the procuring agency’s needs. In such a case, restrictions on competition are allowed. Bundled procurements combining separate requirements into one contract have the potential to restrict competition by excluding firms that can provide only a portion of the bundled requirement. However, combining like and related efforts to achieve economies of scale and eliminate duplication of effort, consistent with industry practice and market research is reasonable basis for bundling requirements, though it may have the effect of restricting competition. All the acquisition approaches discussed above implicate CICA bundling, though in varying degrees.

d. Applicability of CICA Bundling Principle. Although this action constitutes CICA bundling by combining like and related construction and MILCON support with design capabilities, it is consistent with industry practice and necessary to satisfy the customers’ needs.

This procurement will allow the District to leverage economies of scale, streamline acquisition cycles, and eliminate duplication of efforts by establishing a SATOC with a responsive and responsible contractor to perform individual task orders as the need arises.

7. Considerations, facts, and reasoning supporting the determination: All facts, considerations, and rationale have been covered previously in the findings.

8. Summary: Though this SATOC constitutes consolidation in that it combines construction at two or more discrete sites in one contract, this approach provides the best combination of competitive procedures, timely acquisition, cost efficiency, quality, and capable prime contractors to execute repair and construction requirements in Peru. Standalone “C” contracts were considered but rejected as they would result in significantly higher administrative costs and increased acquisition cycle time. Although cost savings do not amount to 10% of the contract value, a consolidated SATOC, as opposed to using a stand-alone contract or other procurement strategies provides qualitative benefits including a significant increase in quality and acquisition cycle. Consolidating these requirements also provides significant cost savings up to in administration costs and additional cost savings during task order negotiations, as previously discussed.

If these benefits are not leveraged, the District will not be able to fully execute the small repair and construction requirements in Peru, particularly in the fourth quarter, which constitutes the largest portion of the District’s small scale construction program. Failure to award these projects will result in the loss of critical District S&A income, which could negatively impact the District.

Additionally, NAMRU-S, SOUTHCOM, and our partner nation will be drastically impacted with mission readiness, which will negatively affect the ability of the DoD to fulfill their missions in Peru. Therefore, the consolidated approach is critical to the success of not only NAMRU-S, SOUTHCOM, and other stakeholders, but also the Mobile District. Additionally, it is significantly less burdensome for the District’s Contracting and Construction Divisions to administer one SATOC than numerous “C” contracts. The findings of the market research and the documentation provided herein support the conclusion that consolidation of requirements is both necessary and justified, based on sound business judgment in view of the size, complexity, and number of efforts to be executed in Peru. The consolidated approach provides advantages that substantially exceeds the benefits of an approach that provides a lesser degree of consolidation.