W9127825R0031_DF Consolidation_Redacted.pdf

DEPARTMENT OF THE ARMY

U.S. ARMY CORPS OF ENGINEERS, MOBILE DISTRICT

DETERMINATION AND FINDINGS

REQUEST FOR CONSOLIDATION

W9127825R0031

INDEFINITE DELIVERY INDEFINITE QUANTITY (IDIQ)

SINGLE AWARD TASK ORDER CONTRACT (SATOC)

FOR GENERAL REPAIR AND CONSTRUCTION AT

ENGINEER RESEARCH AND DEVELOPMENT CENTER (ERDC), VICKSBURG, MS

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), AFARS Appendix GG, and USACE Acquisition Instruction 5107.107-2-100(b)(ii)(B). My review resulted in the following findings:

1. Introduction: Headquarters, U.S. Army Corps of Engineers, Mobile District, proposes to award a sole-source 8(a) IDIQ SATOC in the amount of $4.5M to Arrowhead Contracting Inc.

(Arrowhead) 504 W Intendencia St. Pensacola, FL 32502-5537. The SATOC will meet repair and construction mission requirements under North American Industry Classification System (NAICS) code 236220 at ERDC. 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 on ERDC. 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, repairs, and construction at ERDC.

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 (including the Office of Small Business Programs), and the end user and facilities’ engineering organizations. 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 at ERDC. The support to be provided for these facilities is generally Sustainment, Restoration, and Modernization (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. Project sizes range from the simplified acquisition threshold to approximately $2.5M with a wide variance in complexity. This contracting effort, in conjunction with the installation’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 at ERDC, the District intends to award a sole-source 8(a) 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 $4.5M to Arrowhead for repair and construction work at ERDC. The period of performance will be a three year ordering period. Individual task orders will be negotiated with the contractor.

The Mobile District determined that an 8(a) SATOC is the most effective manner of meeting ERDC’s construction mission for several reasons. This acquisition approach supports the Small Business Administration’s (SBA) 8(a) Business Development Program for socio-economically disadvantaged concerns. Additionally, the SATOC 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)13 National Defense Authorization Act (NDAA) 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 on ERDC, Vicksburg, MS.

d. Requirements Being Consolidated: The planned SATOC will provide full service repair and construction of real property facilities and/or their systems and components at ERDC. Almost all of the projects are unknown at this time; however, Mobile District expects the majority of the projects to be maintenance and repair requirements from tenant organizations on ERDC.

e. Procurement History:

(1) Beginning each FY, the District’s Office of Small Business Programs, Contracting, Programs and Project Management, Engineering, Construction, and Office of Counsel conduct comprehensive acquisition strategy sessions for upcoming projects to determine those suitable for the 8(a) program. The team takes into consideration the District’s Area of Responsibility (AOR), suitability of projects that match capabilities marketed by 8(a) firms, and recommendations made by the SBA Procurement Center Representative (PCR) reviewing the District’s requirements.

Generally, larger, complex projects are procured through “C” contracts, placed in existing Multiple Award Task Order Contract (MATOC) pools, or occasionally negotiated with contractors awarded competitive SATOCs. Less complex, smaller scale projects are reserved for 8(a) sole source awards.

For example, SRM projects have proven to be very good projects to help develop 8(a) construction contractors.

(2) The District currently administers a suite of IDIQ MATOCs and SATOCs for facilities repair and construction performed by contractors from various socio-economic categories. In FY24, the District awarded 66.54% or $1.56B, of its program to various socio-economic groups, including $287M to Small Disadvantaged Businesses (SDB). The majority of these awards were made through the 8(a) Program. The District’s FY25 SB goal is a very aggressive 30% (SDB (8a) - 15%, Women Owned Small Business (WOSB) - 4%, Service Disabled Veteran Owned Small Business (SDVOSB) – 4%, and Historically Underutilized Business Zone (HUBZone) – 5.77%). The District intends to achieve this goal, in part, by sole sourcing suitable projects to 8(a) SATOC contractors.

(3) This SATOC is for new construction requirements at ERDC and therefore no procurement history exists.

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 an 8(a) SATOC in accordance with FAR 16.504 to consolidate the requirements for repair and construction work at ERDC 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 post security by minimizing the number of contractors accessing the post 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 at ERDC, to include any tenant organizations.

(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 at ERDC. The consolidated approach is critical to the success of not only ERDC, 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 ERDC.

Further, in accordance with FAR 19.805-1, proposed 8(a) requirements that do not exceed the competitive thresholds at FAR 19.805-1(a) or meet the exceptions detailed at FAR 19.805-1(b) may be awarded on a non-competitive basis. The independent statute allows this procurement to be awarded on a sole source basis and there is no harm to competition. Therefore, this procurement is not subject to competition and there is no competitive harm to the selected 8(a) as a result of the consolidation because this company is capable of fulfilling all requirements under the SATOC.

Though it is feasible to fulfill the requirements by awarding multiple stand-alone 8(a) sole source “C” contracts, which could perhaps be awarded to multiple 8(a) contractors, the advantages of the SATOC tool fully support the intended approach.

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

4. Results of Market Research:

a. To support the District’s determinations on where to place projects, market research regarding

8(a) sole source contractors is performed throughout the year. The purpose of this market research is to provide the District with the necessary information regarding the capabilities and limitations of 8(a) contractors needed to perform the work required at the dollar levels anticipated. To this end, the District reviews 8(a) contractor referrals from SBA district offices in Alabama, Tennessee, Mississippi, and Florida, as well as other SBA offices. Interested 8(a) firms are scheduled for marketing meetings with the District’s Office of Small Business Programs Chief who conducts interviews to determine the 8(a) company’s bonding and technical capabilities and its number of employees to determine if the 8(a) is a proper match for the prospective projects. Companies possessing the requisite capabilities are scheduled for face-to-face marketing meetings with District technical personnel where they consider whether the contractor’s experience demonstrates the capability and bonding capacity to perform multiple projects simultaneously. Arrowhead was selected based on prior successful work history in Mobile District’s AOR and based upon customer satisfaction with previous and ongoing work performed within their installation boundary.

b. For ERDC, the following market research techniques were used to assess Arrowhead’s capabilities:

(1) Individual marketing meetings held with Arrowhead in the last 18 months.

(2) Review and analysis of Arrowhead’s Capabilities and Surety Statements.

(3) Review and analysis of Arrowhead’s past experience specified in the company’s portfolio that indicated experience relevant to the type of projects anticipated under this SATOC.

(4) Communication with SBA Business Development Specialist as to Arrowhead’s status in 8(a) program.

(5) Review of Arrowhead’s company profile found in the Dynamic Small Business Search engine.

c. Following market research, it was determined that an acquisition approach to utilize Arrowhead under the 8(a) program was appropriate. The requirement was offered to and accepted by the SBA. In its letter, the SBA also affirmed that the proposed procurement would have no adverse impact on small businesses. Arrowhead is fully capable of fulfilling all requirements that will be awarded under the SATOC and will not be negatively impacted by the consolidation.

5. Alternate Contracting Approaches Considered and Rationale for Rejection: Mobile District considered stand-alone 8(a) “C-type” contracts on a project-per-project basis. However, based on reasons described herein, it was determined that a sole-source 8(a) SATOC was the best solution for satisfying the repair and construction requirements of ERDC. 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 8(a) Sole-Source “C” Type Contracts: The District considered the award of multiple stand-alone sole source contracts to 8(a) vendors to perform the work at ERDC. 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 8(a) sole-source 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 8(a) vetting process discussed in paragraph 4, Market Research, achieves essentially the same result for task orders under the proposed SATOC – a high quality contractor that is suited for the requirements. 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. While the potential exists for the 8(a) 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 8(a) SATOC contractor does not perform well, the Government can quickly pursue another 8(a) SATOC contractor or avail itself of other contract vehicles.

(2) Acquisition Cycle. A complicating element of the installation’s SRM program 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, 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 offer and acceptance to the SBA or voluminous solicitations and proposal submissions, as required for “C” contract procurements. As compared to awarding a stand-alone 8(a) contract, it is estimated that placing task orders under a SATOC reduces acquisition time from 60 to 30 days on average for each project, as shown in the table below.

(b) Historically, the funds for repair and construction requirements of the type contemplated at ERDC are 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 task orders. As opposed to stand-alone contracts, the intended SATOC will not impose a requirement to offer each project to the SBA or require voluminous solicitations and

Table 5 – Analysis Summary

Benefit SATOC Standalone 8a “C”

Quality Highest Highest

Acquisition Cycle* 30 days or less 60 days

Terms and Conditions No Difference No Difference

Administrative Cost Lowest High

* 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. This acquisition does not meet the definition of bundling since the Government will be procuring this requirement via a sole source procurement to an 8(a) small business concern. In accordance with FAR 19.805-1, proposed 8(a) requirements that do not exceed the $4.5M competitive threshold for non-manufacturing NAICS are awarded on a non-competitive basis unless a waiver is approved. The selected 8(a) is capable of fulfilling all requirements under the SATOC.

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, 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 an 8(a) SATOC with a responsive and responsible contractor to perform individual task orders as the need arises. Additionally, the Government has independent statutory authority to proceed as proposed - to fulfil these requirements via a sole source procurement to an 8(a) small business concern.

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

8. Summary: Though this sole-source 8(a) 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 at ERDC. This approach also accrues to the benefit of the District’s aggressive small business goals. 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.

Because of the increased amount of time to award a project and the number of projects, if these benefits are not leveraged, the District will not be able to fully execute the SRM requirements of ERDC, particularly in the fourth quarter, which constitutes the largest portion of the District’s SRM construction program. Failure to award these SRM projects will result in the loss of critical District S&A income, which could negatively impact the District. Additionally, ERDC will be drastically impacted with mission readiness, which will negatively affect the ability of the Army and other tenant organizations to accomplish their mission on a state and national level.

Therefore, the consolidated approach is critical to the success of not only ERDC, 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. Moreover, the planned approach meets the intent of the statute to protect small business, in that it is the Government’s intent to make an award using an 8(a) sole source. 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 at ERDC, and the consolidated approach provide advantages that substantially exceed the benefits of an approach that provides a lesser degree of consolidation.

DETERMINATION REQUEST FOR CONSOLIDATION

W9127825R0031

IDIQ SATOC FOR GENERAL REPAIR AND CONSTRUCTION AT

ERDC, VICKSBURG, MS

Upon the basis of the findings above and with the concurrence of the SBA, I hereby determine, pursuant to the authority of FAR 7.107-2, 15 U.S.C. § 657q, and Army Federal Acquisition Regulation Supplement 5107.107-2(b)(ii) “Consolidation,” that the proposed consolidation of two or more discrete construction projects for the Department of Defense and other Federal Agencies within the Mobile District is both necessary and justified.

Carl Wade Chief of Contracting Office, Contracting Division, Mobile District