REDACTED_JA_19-0022_3M_Software_Sole_Source_JA.pdf

Justification and Approval for Other than Full and Open Competition

J&A Tracking No. JA19-0022

1. Identification of the agency and contracting activity:

The Defense Health Agency (DHA), Contracting Office - Health Information Technologies (CO-

HIT), 4130 Stanley Road, Suite 208, Joint Base San Antonio (JBSA), Fort Sam Houston, Texas

78234.

2. Nature and/or Description of Action being approved:

The Government intends to negotiate and award a firm-fixed price contract using FY19

Operations and Maintenance (O&M) funds to 3M Health Information Systems (3M), 3M Center

Government Markets, Bldg 225-4N-15, St. Paul, MN 55144-1000, on a sole source basis for renewal of brand-name Outpatient Prospective Payment System (OPPS) Outpatient Code Editor

(OCE) Pricer software licenses and maintenance. This requirement is a continuation of the current level of effort under contract HT9420-18-P-0002, which will expire on 21 December

2018. The purpose of this requirement is to continue required 3M software and software maintenance for DHA without interruption, starting on 22 December 2018.

3. Description of Supplies/Services:

DHA is responsible for editing and processing hospital outpatient claims for TRICARE eligible beneficiaries. The fundamental functionality required by DHA is for licensing a mainframe version of a TRICARE specific Outpatient Prospective Payment System (OPPS) Pricer that can be fully integrated with the 3M Outpatient Code Editor (OCE), and licensing PC versions that includes both the 3M OCE and 3M Pricer software that are compatible with the 3M mainframe software used by DHA. The compatibility of the mainframe and PC software allows for the auditing and verification of accuracy of payment for hospital outpatient claims. The OPPS

Pricer determines how to price claims based on the output from the TRICARE OCE. The Pricer can only be operational with the OCE. The OCE is proprietary to 3M and the information driving the OCE has been authorized to be provided to 3M by Centers for Medicare and

Medicaid Services (CMS).

TRICARE’s OPPS is comprised of two programs:

a. The first program is the OCE designed for editing and processing hospital outpatient claims. There is a Letter of Agreement maintained in the Medical Benefits and

Reimbursement Branch between 3M and DHA for the development and maintenance of

TRICARE specific OCE at no cost to the government. 3M will retain proprietary rights to the TRICARE Mainframe and PC OCE software designed for editing and processing

TRICARE hospital outpatient claims. Since 3M maintains CMS’ OCE for its OPPS, they agreed to develop and maintain a similar TRICARE OCE with the understanding that they would retain proprietary rights to the software, i.e., source code, technical code, programmer specification and data source. There are differences between CMS’ and TRICARE’s OPPS, due to the uniqueness of TRICARE’s beneficiary population and claims processing requirements. 3M had devoted significant time and effort in modifying CMS’ OCE to accommodate the special requirements of the TRICARE

Program. DHA does not have the rights to release information through open architecture and open software development production.

b. The second program is the Pricer that determines how to price claims based on the output from the TRICARE OCE. While developing TRICARE’s OPPS, DHA decided to license a commercial mainframe, TRICARE Pricer, to include quarterly updates that coincide with those of CMS. The Pricer can only be operational with the OCE. The

OCE is proprietary to 3M and the information driving the OCE has been authorized to be provided to 3M. It is for these reasons that the Pricer product can only be developed in conjunction with the existing OCE, therefore putting the procurement as a single source to 3M.

The expected period of performance will occur on date of award for one base year. The FAR

Extension of Services clause 52.217-8 will be included in the contract with an estimated value of $ , if exercised. The Government intends to negotiate a new firm-fixed price contract using FY19 Operations and Maintenance (O&M) funds. The total estimated price of this effort including all options and the Extension of Service Clause is $ .

Qty Description Period of Performance

5 TRICARE Mainframe Pricer Software

License-includes maintenance, such as, technical support, debugging and upgrades.

22 December 2018 – 21 December

5 PC Version, 3M Core Grouping Software with

TRICARE OPPS Grouping and

Reimbursement License -includes maintenance, such as technical support, debugging, and upgrades.

22 December 2018 – 21 December

4. Statutory and Regulatory Authority Permitting Other Than Full and Open Competition

(see FAR 6.302), or the Specification of the Statutory and Regulatory Provision Providing

Exception to 8(a) Program Competitive Requirements (see FAR 19.805-1): 10 U.S.C.

2304(c)(1) 6.302-1 -- Only One Responsible Source and No Other Supplies or Services Will

Satisfy Agency Requirements

5. Rationale Justifying Use of the Statutory Authority Cited:

3M is not only the Original Equipment Manufacturer (OEM) of the required OPPS OCE Pricer software, which is proprietary to 3M; it is also the sole publisher and supplier of this proprietary software and related support services. In addition, 3M had modified the OPPS OCE Pricer software to accommodate the requirements of DHA Programs. The Department of Health and

Human Services (DHHS) CMS provides data to 3M in advance of the quarterly effective dates for use in the development of its OPPS software. Because of TRICARE’s regulatory requirements in 32 C.F.R. 199.1(c)(2)(ii) that authorizes DHA to administer TRICARE for components of DHHS, 3M subsequently modified the OPPS OCE Pricer software to accommodate the requirements of DHA programs relating to TRICARE. As explained in the previous section, 3M developed the OPPS OCE software without charge to the Government with the understanding they will retain proprietary rights to the software.

In other words, the current version of the OPPS OCE Pricer software that DHA uses is specifically designed for DHA by 3M. Therefore, due to the proprietary and unique nature of the

3M’s OPPS OCE Pricer software, no other sources of these products/services exist. Therefore, 3M is the only vendor capable of providing the needed 3M OPPS OCE Pricer software, software upgrades, licensing, and maintenance for unimpeded operation of application. For this product, 3M does not release the codes to third parties or operate through resellers. According to letter received from 3M, 3M does not authorize any other entity to resell, distribute, or maintain this product. As owner, developer, and sole distributor, 3M is the only authorized supplier for 3M’s

OPPS OCE Pricer software, and the only source to satisfy DHA’s current requirement.

DHA is responsible for editing and processing outpatient claims for TRICARE-eligible beneficiaries. The fundamental functionality required by DHA is for licensing a mainframe version of the TRICARE-specific OPPS Pricer that can be fully integrated with the 3M OCE and licensing PC version software. The OPPS Pricer determines how to price claims based on the output from the TRICARE OCE. The Pricer can only be operational with the OCE, and the OCE is proprietary to 3M and the information driving the OCE has been authorized to be provided to

3M by CMS. TRICARE is statutorily mandated to follow CMS’ reimbursement rules, just like

Medicare, and the quarterly effective dates for the updates must coincide with the CMS’s OPPS quarterly updates. Because this requirement is to fulfill a need within an existing 3M hardware/software network, the 3M OPPS OCE Pricer software is the only one that’s compatible with the exiting 3M mainframe software used by DHA. The requirement to license a mainframe version of the 3M Pricer software used by DHA is to ensure:

a. Uniformity of pricing among regions;

b. Programmatic control to ensure consistent and timely updates (requires quarterly updating of pricing files);

c. Consistency with Centers for Medicare and Medicaid Services (CMS) pricing methodologies;

d. Integration between TRICARE specific OCE and Pricer software; and

e. Portability of Pricer software for future contract transitions.

Without this compatibility of the mainframe and PC software, the auditing and verification of accuracy of payment for hospital outpatient claims will not be possible. If DHA does not acquire, by 22 December 2018, advance copies of CMS’ OCE software that are modified by 3M to accommodate the requirements of the TRICARE program, the Agency would not be able to meet the quarterly effective dates for the updates (to coincide with the CMS’s OPPS quarterly updates). Any delay would cause claims to be overpaid or underpaid and result in subsequent offsets and adjustments at an additional cost to the Government. In addition, any delay in meeting the quarterly effective dates will have an effect on the Managed Care Support Centers

(MCSCs) meeting their claims processing timeless standards and will negatively impact beneficiaries and providers in receiving timely payment of claims. 3M is the only company that can provide mainframe and PC Pricer software in the required timeframes to meet TRICARE quarterly effective dates that coincide with CMS, because they obtain the CMS OCE and Pricing changes in advance of the quarter.

6. Efforts to Obtain Competition:

The requested contract will be awarded on a sole source basis to 3M. At this time, no effort will be made to solicit from multiple offerors due to the fact that 3M’s OPPS OCE Pricer Software and Software Maintenance Support cannot be delivered by any other vendor.

7. Determination that Anticipated Cost to the Government will be Fair and Reasonable:

The Contracting Officer will determine that the anticipated cost to the Government will be fair and reasonable through a comparison and analysis of proposed prices with historical prices paid, the Contractor’s list prices, and the Independent Government Cost Estimate, and by analysis of other than certified cost and pricing data provided from 3M.

8. Market Research: In accordance with FAR Part 10, market research was conducted to assess the availability of potential 3M resellers for 3M’s OPPS OCE Pricer Software and

Software Maintenance Support. This product cannot be found on NASA SEWP or GSA

Advantage. A sources sought was posted on Federal Business Opportunities on 17 December

2018 to verify if authorized resellers are available in the commercial market place, but no certified resellers can be found. Per letter notification from 3M, 3M is the sole owner, publisher, and supplier of 3M OPPS OCE Pricer Software; this software and/or maintenance of this software is not available from any other source.

9. Other Facts:

a. 3M Health Information Systems is the sole provider of 3M’s OPPS OCE Pricer Software and Software Maintenance Support.

b. Historical data. N/A.

c. Unusual and compelling urgency. N/A.

10. Interested Sources: To date, there are no other known sources that can provide this type of software maintenance support.

11. Actions to overcome barriers:

DHA will continue to monitor the availability of 3M’s OPPS OCE Pricer Software and Software

Maintenance to 3M resellers; this requirement may be competed if and when 3M resellers are authorized to distribute the software and software maintenance to end users.

COORDINATION:

12. Technical/Functional Representative:

I certify that the information provided in this justification, is accurate and complete to the best of my knowledge and belief.

Click here to enter a date.

13. Requirements Certification:

I certify that the information provided in this justification, is accurate and complete to the best of my knowledge and belief.

14. Fair and Reasonable Cost Determination: I have determined that the anticipated cost to the Government for this contract action will be fair and reasonable on the basis of price comparison with previous pricing under HT9420-18-P-0002 as well as the Independent

Government Cost Estimate.

15. Legal Review: I have reviewed this justification and have found it to be legally sufficient.

Office of General Counsel

APPROVAL:

16. Contracting Officer: Based on the foregoing justification, I hereby approve the procurement of 3M OPPS OCE Pricer Software and Maintenance Support on an other than full and open competition basis pursuant to the authority of 10 U.S.C. 2304(c)(1), subject to availability of funds, and provided that the supplies and/or services herein described have otherwise been authorized for acquisition.