SAM_Consolidation Determination.pdf

DEPARTMENT OF THE ARMY

U.S. ARMY CORPS OF ENGINEERS, CHICAGO DISTRICT

231 SOUTH LA SALLE STREET, SUITE 1500

CHICAGO, IL 60604

CELRC-CT 11 January 2024

MEMORANDUM FOR RECORD U.S. Army Corps of Engineer, Chicago District, Contracting Branch

SUBJECT: CONSOLIDATION OF CONTRACT REQUIREMENTS DETERMINATION

FOR USACE Chicago District, Operations and Maintenance Program

1. References:

a. Federal Acquisition Regulation (FAR) §1.102 Definitions, and §§ 7.107-5(c) and

(d) Notifications, and §§ 7.107-2 (a) and 7.107-3 (f) , Additional requirements for acquisitions involving consolidation, bundling, or substantial bundling,

b. Defense FAR Supplement (DFARS) § 219.201 (c)(11)(B),

c. Army FAR Supplement (AFARS) §§ 5107.107-2, 5119.202-1 (1), and Appendix

GG

d. USACE Acquisition Instructions (UAI) 5107.107-2-100 and Delegation of

Authority to Approve Consolidation Determination, dated 12 February 2021

e. Market Research report dated 11 January 11, 2024.

2. Rationale.

In accordance with (IAW) FAR 7.107-2 (a), Consolidation may provide substantial benefits to the Government. However, because of the potential impact on small business participation, before conducting an acquisition that is a consolidation of requirements with an estimated total dollar value exceeding $2 million, a written determination shall be made that the consolidation is necessary and justified in accordance with 15 U.S.C. 657q, after ensuring that—

(1) Market research has been conducted;

(2) Any alternative contracting approaches that would involve a lesser degree of consolidation have been identified;

(3) The determination is coordinated with the agency's Office of Small

Disadvantaged Business Utilization or the Office of Small Business Programs;

(4) Any negative impact by the acquisition strategy on contracting with small business concerns has been identified; and

(5) Steps are taken to include small business concerns in the acquisition strategy.

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3. Introduction.

USACE, Chicago District (LRC), plans to solicit offers for quarrying and delivery of stone to Sturgeon Bay, Sheboygan, Milwaukee, Chicago, Calumet, and Michigan City harbors. LRC has conducted market research that demonstrates consolidation and bundling of this procurement to be both necessary and justified.

FAR 2.102 defines consolidation as

(1) 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; or;

(2) separate contract as used in this definition, means a contract that has been performed by any business, including small and other than small business concerns.

FAR 2.102 defines bundling as

(1) a subset of consolidation that combines two or more requirements for supplies or services, previously provided or performed under separate smaller contracts, into a solicitation for a single contract , a multiple-award contract , or a task or delivery order that is likely to be unsuitable for award to a small business concern (even if it is suitable for award to a small business with a Small Business Teaming Arrangement) 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 (1)(i), (ii), and (iii) of this definition.

4. Description of the Procurement Action:

Each harbor requires limestone, dolomite, and other sedimentary stone to maintain

3 | P a g e the breakwaters and protect shorelines at six harbors located on the west and south borders of Lake Michigan. The stone sizes range from ¼ to 1 ton and 3 to 7 ton sizes and must meet specific American Society for Testing and Materials (ASTM) and USACE Rock Testing standards. The table below includes the maximum estimates of delivery at each harbor during the April to November delivery season.

Table 1: Maximum estimate of tonnage Harbor Maximum Estimated Tonnage Calumet 7,500 Chicago 5,000 Michigan City 5,000 Milwaukee 7,500 Sheboygan 5,000 Sturgeon Bay 5,000

Total 35,000

The Government recommends awarding a Single Award Task Order Contract (SATOC), Indefinite-Delivery, Indefinite-Quantity (IDIQ) contact for a three year period. The Government has limited the delivery to the three year period because the Government intends to enter into a Firm-Fixed Price contract type, based upon delivery by the ton.

Historically, this Government has ordered for delivery to multiple harbors under full and open competition procedures. For example, W912P623C0010 ($4,243,750, including options), awarded in 2023 included delivery to Calumet and Milwaukee Harbors in 2023, in addition to other harbors. Under W912P622C0003 ($3,601,000 including options), the Government had stone delivered to Chicago and Milwaukee harbors in 2022. In 2020, the government reframed the boundaries of LRC, adding harbors previously located in the Michigan District (LRE). LRC made those awards to a small business, Midwest Construction Company.

Awarding to a single contractor is most advantageous to the Government as reduces the amount of taxpayer dollars spent on duplicative Government administrative costs and contractors costs specifically related to transportation of the stone via a barge to the harbors, except Milwaukee harbor. Milwaukee harbor has the ability to accept delivery of stone via a truck. The delivery to harbors along the shoreline follow USACE’s floating dock season schedule at each harbor.

Each barge delivery may include up to 2,500 tons. The Government anticipates delivery at least bi- weekly, and maybe even on a weekly basis. The dollar amount and frequency of the deliveries could financially strain a small business and impair their willingness to participate in the procurements. While the small size standard for this requirement under NAICS 423320, Brick, stone and related construction

4 | P a g e material merchants, wholesalers is 150 employees, the annual costs for the delivered stone could strain the financial capabilities of some small businesses.

5. Results of Market Research:

Market research revealed three small businesses deliver construction material on barges on Lake Michigan. In the Dynamic Small Business Search engine, the government found five small business under the NAICS. During the last procurement one other small business under a different but similar NAICS was identified as able to supply the stone. Market research reveals at least three viable small business exist to supply the stone. An insufficient number of vendors exist to warrant further narrowing of the small business set-aside into a socioeconomic category.

6. Alternative Contracting Approaches and Rationale for Rejection:

Alternative procurement approaches other than the recommended three years SATOC, include Multiple Award Task Order Contract (MATOC), simplified acquisition purchase orders (PO), invitation for bids (IFB), blanket purchase agreements (BPA), and (a) sole sources.

The Government must reject BPAs, IFBs, and 8(a) sole sources. Based upon market research, an insufficient number of contractors exist to support IFBs (see FAR 6.401 (a)(4), and meeting and maintain minimum three interested vendors required for BPA call order competition requirements. Additionally, BPAs are not ideal, as a contractor is under no obligation to update their annual price lists or agree to any call, a risk to great for the Government to assume. Market research did not result in any findings of an 8(a) capable of performing the requirement.

Additionally, the FAR 19.805-1 (d) $4.5M threshold limitations of an 8(a) contract would require competitive procurements each year, creating additional and unnecessary procurement administrative costs to the Government.

The Government tries forecasting and ordering a reasonable seasonal amount of stone at the beginning of each season, for testing and evaluation stone, and efficient production at approved quarries, transportation from quarry to lake, and distribution to the harbors occurs. Each quarry used by a vendor requires testing and evaluation of the stone on at least an annual basis. Two or more contractors would duplicate the testing and evaluation costs of the quarries. Delivery of stones by the ton are not precise, and ordering small amounts may drive up transportation costs, as sizing of transportation needs increases in uncertainty, and space might not be fully utilized. The larger size of shipments from a quarry to the harbor reduces transportation cost spread over each ton. If a MATOC, a contractor may not include the most efficient transportation solutions in their per ton cost.

As described above duplicative costs for testing and barge rentals would exist

5 | P a g e under a MATOC or standalone purchases. For example, vendors rent barges are typically at a monthly amount at https://wimscobarges.com/inventory-and-prices/.

The contractor must use barges on five of the six sites. The Government may require delivery to more than one site within a month or deliveries to one site may last longer than one month. It is in the best interest to permit efficient use of an efficient transportation needs by offering deliveries to more than one site over the entire season.

While the Government tries to plan deliveries for the entire season, the conditions of the water make it difficult to plan deliveries after September, when the surface of Lake Michigan water becomes rougher. If the waters remain calm, the program may issue additional orders, and any contractor who spread the cost among the firm-fixed tonnage price for a season, may not submit an offer for the last seasonal work since they may not recoup efficient transportation costs included in their prices.

The government may use FAR 12 in conjunction with FAR 15 procedures for placing contract with a performance period more than one year for as a standalone contract, Multiple Award Task Order Contract (MATOC), and SATOCs.

Administrative effort varies based upon use of options instead and single task orders verses competing task orders. However, competing individual purchase SAP POs or MATOC orders, the Government will experience duplicative testing and transportation costs each year, and at the end of each season. FAR 13.5 limits SAPs to procurements below $7.5M and is only able to be used for more than one year of not consolidated or consolidating less sites. Each annual bundled/consolidated amount meets the ability to use SAP, but not the estimated amount for all three years. The reoccurring annual need supports an IDIQ contract vehicle covering more than one year which would not use SAP.

7. Consolidation Benefit Analysis:

The costs in the table below include LRC contracting personnel effort to perform market research, produce a consolidated memo, plan the acquisition, procure using specific methods, perform administrative tasks, and close out the contract vehicles.

Effort for program effort increases each of these costs proportionally considering they would require a proportionate amount of effort for producing a procurement packages, so for simplicity were not included.

Only one action a year per contract SATOC or standalone w/ annual options.

MATOC SAP bundled SAP unbundled

Number of contracts

1 2 NA because exceeds SAP https://wimscobarges.com/inventory-and-prices/

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Number of Actions

3 3 threshold for 3 years.

Total Cost $70,240 $88,160 $148,800 Two actions per year, per contract (accounting for end of year adjustments) SATOC MATOC SAP bundled SAP unbundled Number of contracts

1 2 9 18

Number of Actions

6 6 9 36 (exercise an option)

Total Cost $80,800 $125,600 $77,600 $184,000

The Government only considered feasible solutions in the following table, if bunded and if not bundled. For bundling solutions, the Government determined in the previous section, 8(a) sole source procurements and SAP purchase order for more than one year are unfeasible solutions. The Government chose to use a SATOC instead of a standalone because of uncertainty in the quantity and delivery schedule favors use of task orders instead of options. For IDIQ, the Government did not consider solutions less than three year. The estimated need for more than one year exceed FAR 13.5 and 19.805-1 (d) thresholds for placing an /IDIQs so efficiency assumes maximizing economies of scale over more than one year- in this case three years. For unbundled solutions, the Government individually analyzed the cumulative costs for all three years, at six sites using SAP procedures.

As observed in the cumulative totals, the benefits, with contract administrative costs 2/3 less with a bundled SATOC than an unbundled SAP regardless if only one contract action per contract a year, or two (one placed end of season) over a three year period. The bundled SATOC is the best procurement method, saving between $79k and $103k in administrative over the three years. The approximate $100k in savings is not considered substantial as it equals less than 1% of the contract ceiling and would be less than 2% if including program package effort.

Based upon historic pricing, the Government could reap 8% in total annual cost savings when using a contract vehicle permitting economies of scale for ordering quantities to more than one site, with more than one order a year. That savings in conjunction with the 2% administrative cost savings creates substantial benefits of 10% in savings. The substantial benefits do not include the savings from duplicative contractor costs associated with more than one contractor, such as the testing and transportation costs.

The Government benefits has qualitative characteristics too, such as a better ability to coordinate deliveries with the floating dock movement and reduced risk to emergency repairs and impairments to public use. Coordination with more than one

7 | P a g e contractor, creates risk. The Government has only one floating dock that needs to move from each harbor during each season. Any delay from one contractor can ripple through the dates and impact the other five contractor’s deliveries at the other sites, and potentially increases risk of requests for equitable adjustments because of the delay. The total effect could be missing an opportunity to make any deliverables at the last site, and result in a vulnerability in that harbors breakwater over winter. That vulnerability could create costly emergency repair conditions and limit public use a harbor in the spring.

8. Bundling:

The SATOC ceiling exceeds the DoD $8M substantial bundling threshold in FAR 7.107-4 (a)(1)(i). As described in the previous couple sections above, the Government anticipates substantial quantitative benefits with reduced Government administrative costs and economy of scale discounts with the SATOC bundling the six harbors, so the bundling is justified. The Government anticipates substantial qualitative benefits and reduced risk, with coordinating delivery of the armor stone via a barge to the harbors located along the southern and western shores of Lake Michigan with only one contractor, so the bundling is necessary. The Government will include the HubZone price evaluation preference provision (FAR 52.219-4, Notice of Price Evaluation Preference).

9. Considerations, Facts, Reasoning Supporting the Determination:

The consolidation would not impact small businesses. Historically, whether as a standalone annual procurement or bundled procurement, the Government has competed under full an open competition. The Government will set-aside as a small business award. The Small Business Procurement Center Representative for LRC approved the DD 2579 and supports the set-aside SATOC acquisition strategy.

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CoCO DETERMINATION

Based on the foregoing rationale, I hereby determine, pursuant to the Federal Acquisition Regulation 7.107-2 and Army Federal Acquisition Regulation Supplement

5107.107 (a)(4), that the consolidation of the requirements for (insert brief description) is both necessary and justified and will serve the best interests of the Government.

SIGNATURE:

TITLE: Chief of Contracting, Contracting Office CoCO, Chicago District

ELIZABETH A. DENNISON