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Thursday, July 10, 2014

Sole sourcery at the core?

Sole sourcing is a perpetual sore point in procurement because it is the magic door through which competition is put to the side.

It seems easy enough to appreciate that if there are multiple sources of a product, or service, open competition should be employed to obtain best pricing. That works well for most things routinely purchased. But that presumes that the description of that which is being sought has not been tailor made. Bespoke specifications are the devil's workshop drawings.

Is the core propulsion system for rocketry a routinely used product manufactured by multiple sources? That is at the core of the protest dispute in the articles below. But time is a critical factor. A new entrant to the industry hasn't entered it until it is proven to be up and running, that is capable of delivering at the time specified in the award. Until then, regardless of whatever is on the horizon, the procurement show must go on.

In US Federal procurement, the "sole source" immunity to competitive purchasing is not entirely intuitive based on the simple explanation given above. The federal government describes sole source contracting in a conveniently circular way: “Sole source acquisition” means a contract for the purchase of supplies or services that is entered into or proposed
to be entered into by an agency after soliciting and negotiating with only one source." (FAR Subpart 6.003.)

It then describes a number of "Circumstances permitting other than full and open competition" (FAR 6.302), including: Only one responsible source and no other supplies or services will satisfy agency requirements, Unusual and compelling urgency, Industrial mobilization; engineering, developmental, or research capability; or expert services, International agreement, Authorized or required by statute, National security, and, Public interest. (FAR 6.302-7) How big is that hole you need to drive your rocket through? To be sure, justifications are required (FAR 6.303), and the justifications must be articulated, reasonable and consistent with the needs as specified in the solicitation requirements (FAR 6.303), but ....

SpaceX Protest Challenges U.S. Air Force Plan To Buy 22 Rocket Cores from ULA Apr. 29, 2014
A formal bid protest filed April 28 by upstart rocket maker Space Exploration Technologies Corp. is targeting most, but not all, of a large block of national security launches the U.S. Air Force intends to award without competition to its incumbent provider, United Launch Alliance.

Hawthorne, California-based SpaceX has asked the U.S. Court of Federal Claims to bar the Air Force from buying 22 first-stage rocket cores on a sole-source basis from ULA. That number is a subset of the 36 cores the Air Force plans to buy from Denver-based ULA, some of which will be used for heavy-lift missions that require three cores strapped together in a side-by-side configuration.

SpaceX concedes that until its planned Falcon Heavy rocket is fully up and operating in fiscal year 2017 it cannot compete for these heavy missions, currently carried out by ULA’s Delta 4 Heavy rocket. But in the meantime, SpaceX is fighting for the right to bid on the missions it can launch with its proven Falcon 9 rocket.

In December, ULA and the Air Force reached contractual terms for the first batch of rockets under the block buy, which is a pillar of the service’s strategy for saving money on its overbudget satellite-launching program.

The other pillar is competition, and the Air Force, in parallel to the block buy, had planned to put an additional 14 missions up for bid to give newcomers like SpaceX a crack at Pentagon business.

However, that number was later reduced to seven, at least initially, for reasons that included a slowdown in the procurement of satellites whose launches were targeted for competition.

In its complaint, SpaceX said it has identified seven planned missions for which it can compete: two for the U.S. National Reconnaissance Office, three next-generation GPS 3 navigation satellites, one missile warning satellite and one mission known as Air Force Space Command-4. The company said it has not seen information from the Air Force that explains why SpaceX is “not qualified to compete for the other fifteen missions.”

In an April 28 response to SpacX’s claim, ULA said launch is one of the “most risk-intolerant and technologically advanced components” of national security.

“ULA is the only government certified launch provider that meets all of the unique ... requirements that are critical to supporting our troops and keeping our country safe,” ULA spokeswoman Jessica Rye said.
Amid SpaceX Protest, USAF Defends Sole-Source EELV Strategy May 7, 2014
The U.S. Air Force is defending its sole-source buy of launches from the United Launch Alliance (ULA) as a “good deal” for the taxpayer. The service broke its silence on the matter in an interview with Aviation Week since SpaceX filed its lawsuit April 28 in Federal Claims Court. “The only reason we have taken any of the actions we have goes back to the fact that we have one single mission, which is getting these payloads on orbit to defend the nation,” says Lt. Gen. CR Davis, military deputy to the Air Force procurement chief. “As we were getting to that point where we had to negotiate that contract [with ULA] and obligate that money, I will remind everybody there was no certified [new] entrant. There were no documents submitted. There were no three launches. There was nothing we could do to anticipate that that would work out other than get a worse deal for the taxpayer through buying less cores from the company that has gotten us there 70 times before.”

In order to be certified to compete against ULA, SpaceX was required to execute three successful launches of its Falcon 9v1.1 and deliver required documentation to the Air Force for review. Davis says SpaceX has now met that requirement and is eligible to receive a request for proposals for forthcoming launch competitions. Though eligible to bid, the company cannot win a contract until the Air Force certifies it.

The National Reconnaissance Office is planning to award a launch next year for a 2017 mission. Davis says the Air Force and NRO are trying to schedule the award to allow for a competition. “We’d love to have them done by the end of December of this year. Our best guess that we think we’ll end up with is March of next year,” he says. “If we can work to slip the award to March or April of next year … we are trying to go through that debate right now.” The service is spending $250 million to conduct the certification work, Davis says.

The service is also conducting an audit of the company’s engineering, accounting and other process; since SpaceX is a commercial launch service provider, it does not adhere to the onerous paperwork requirements set up by the Pentagon.

Davis defends the decision to guarantee ULA 36 cores worth of work – 28 launches (as some require multiple cores) – over five years despite common knowledge that SpaceX – and eventually Orbital Sciences with its Antares – were breaking into the market.

“When we realized there was no way at the time as we looked at it for new entrants to pick up additional launches, there was no reason to go below 36 [cores]. The more you buy the better price break we are going to get.” Davis says studies prompted the Air Force to originally plan for a 50-core deal; however, Pentagon procurement chief Frank Kendall directed the service in a November 27, 2012 acquisition decision memorandum to “procure up to 36 EELV core across five years” and “introduce a competitive procurement environment in the EELV program by competing up to 14 cores with initial contract awards as early as fiscal 2015.”

“For ULA to be able to continue to be able to deliver at the price that they gave us we over that period of years, we have to buy 36 launch cores worth of service,” Davis says. “If we don’t buy that, ULA will have the opportunity for ULA to say we have to readjust the prices … there is probably a cost increase that would occur in there … Anything you pull out of the contract suddenly results in us reopening the contract, which drives more cost that has been negotiated on a very competitive quantity.”

SpaceX Challenge to ULA Block Buy Could Hinge on Questions of Timing May 14, 2014
With a temporary injunction barring United Launch Alliance from buying Russian-made engines for its Atlas 5 rocket now lifted, the case brought by Space Exploration Technologies Corp. challenging the U.S. Air Force’s sole-source order of ULA rockets appears to be focusing on questions of timing, including whether the plaintiff met the deadline for filing its protest.

By waiting until April 28 to sue the government in the U.S. Court of Federal Claims, lawyers say, SpaceX might have missed its 90-day window for challenging the procurement.

Government argues for dismissal of SpaceX rocket contract complaint July 2, 2014
"SpaceX's complaint is amorphous," the motion claims. "Rather than challenge a single procurement action, SpaceX broadly protests any sole-source purchase of single-core evolved expendable launch vehicles (EELV) and associated launch services. This challenge appears to implicate the United States Air Force's entire EELV program -- including past and future purchases under various contracts."

"Although SpaceX may have ongoing concerns regarding the EELV program that it wishes to explore, SpaceX's own failure to timely object to the RFP means that it does not have standing to bring those complaints to this Court by challenging what it calls the 'block buy' contract."

"SpaceX's argument appears to be that any sole-source purchase of single-core launches from ULS is improper," according to the government motion. "In SpaceX's view, all such launches must be competed now that SpaceX has performed the third certifying flight of its single-core Falcon 9 v1.1 launch vehicle and submitted test data to the Air Force.

The government motion claims a procurement can only be challenged by an "interested party," in this case "an actual or prospective bidder" with a "direct economic interest."

SpaceX fails to meet either of those standards, the government says, because the company was not an actual or prospective bidder for the contract in question and that its "failure to timely indicate an interest in competing for the RFP" shows a lack of direct economic interest.

To prove the latter, the government argues, citing other federal cases, SpaceX would have to show that it had a "substantial chance" of winning the contract in question. Given SpaceX's failure to "timely respond" to the original solicitation, the company "cannot possibly make this showing."

"It is too late for SpaceX to try to bring a challenge to that procurement now," the government said.

SpaceX completed its third and fourth successful Falcon 9 v1.1 flights earlier this year and while eventual certification is expected, the review process is not yet complete. Company officials have said it is their belief that certification is required to launch a military payload but not required to bid on a contract.
Under Guam and ABA Model procurement law, a bidder is not responsible unless it is capable. Capability is meant to be determined at the time of award. Here there has been no award, at least as stated in the articles, only an intent to award. Capability means the ability to perform when required to do so, and responsibility is determined by having ability to perform.

To your blawger, this is going to turn on the issue of timing: when were bids due? It appears the government had completed negotiations for the purchase in late 2012, and that the solicitation began at least as early as 2011. When did the protestor prove its capability? When was the protestor a viable "source"?

As was stated in the Aviation Week article above, quoting Lt. Gen. CR Davis,
“As we were getting to that point where we had to negotiate that contract [with ULA] and obligate that money, I will remind everybody there was no certified [new] entrant. There were no documents submitted. There were no three launches. There was nothing we could do to anticipate that that would work out other than get a worse deal for the taxpayer through buying less cores from the company that has gotten us there 70 times before.”

In order to be certified to compete against ULA, SpaceX was required to execute three successful launches of its Falcon 9v1.1 and deliver required documentation to the Air Force for review. Davis says SpaceX has now met that requirement and is eligible to receive a request for proposals for forthcoming launch competitions. Though eligible to bid, the company cannot win a contract until the Air Force certifies it. Davis says the service expects that SpaceX will be certified by March of 2015.
Whatever the ultimate decision on the sole source nature of this solicitation, it will be eclipsed by the changing nature of rocket science.




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