I_4 Justification for Sole Source Redacted.pdf

IRS Form (Rev. 6/21)

IRSAP 1006.3

JUSTIFICATION FOR OTHER THAN FULL AND OPEN COMPETITION

(JOFOC)

FAR SUBPART 6.3

I recommend the use of other than full and open competition for the acquisition of the following supplies or services. If this acquisition is to be made with only one source or a limited number of sources, negotiations will be conducted with the indicated proposed supplier(s).

1. IDENTIFICATION OF THE AGENCY AND CONTRACTING ACTIVITY:

Requiring Activity: Internal Revenue Service (IRS), Statistics of Income Division (SOI) Contracting Activity: Office of Business Solutions Acquisitions (OBSA), Support Services Branch, Studies and Analysis Section

2. NATURE/DESCRIPTION OF THE ACTION BEING APPROVED:

The purpose of this sole source justification is to obtain approval to award a firm fixed-price contract to Urban Institute for the development of an additional Public Use File and validation methodology as described in Section 3. The current contract No. 2032H5-23-P-00106 will expires on September 29, 2024. The anticipated period of performance will be for a 12-month base period from September 30, 2024 – September 29, 2025, with four 12-month option years.

3. DESCRIPTION OF SUPPLIES OR SERVICES:

The Internal Revenue Service (IRS) Statistics of Income Division (SOI) has a continuing need to create and test a new fully synthetic Public Use File (PUF), train SOI data science staff on applying the necessary techniques to create a PUF, develop methodology for improving synthetic datasets in general, and to work with IRS IT and data security experts to evaluate security plans as part of a proposed validation process.

The goal of this project is to continue the expansion of high-quality synthetic tax data and a validation process—two innovative new statistical methodologies designed to allow and expand research access to administrative tax data while protecting privacy. These are both cutting-edge approaches. Over the last seven years the new methods have been adapted to the large scale and complexity of tax datasets and finding ways to improve quality while protecting privacy. Using these methods, a synthetic supplemental PUF was created containing information about people who did not file income tax returns or have an obligation to file. Those data had never been publicly available before, but a synthetic version was produced that was safe to release. In combination with the PUF, these two files provide a more complete picture of the range of households in the US, including those with low incomes. A synthetic version of the 2012 PUF was created and a 2013 synthetic PUF is currently being tested. Evaluation of the 2012 synthetic PUF and the methodological contributions embodied in it were the subject of articles in the National Tax Journal and statistical journals.

4. SHOPPING CART

NUMBER:

5000180597

5. NAME OF PROPOSED SOURCE(S):

The Urban Institute

6. COST ESTIMATE:

$2,224,530.00

IRSAP 1006.3

10. JUSTIFICATION

(add pages if needed)

A. DEMONSTRATION THAT THE PROPOSED CONTRACTOR’S UNIQUE QUALIFICATIONS OR

THE NATURE OF THE ACQUISITION REQUIRES USE OF THE AUTHORITY CITED.

Beginning in fiscal year 2017, SOI had a zero-dollar contract with the Urban Institute, a non-profit organization, to conduct research designed to produce prototype synthetic data files and design a process for validating results obtained from these files. That work was funded through foundations (mainly Sloane and the National Science Foundations) because the work benefited the broader statistical system, and all the research and code was being shared with the public. Starting with fiscal year 2023, the project moved from research into production under the direction of Urban Institute. Failure to continue the production work that Urban Institute has already started would jeopardize the overall program. SOI would not have the staffing and financial resources to recreate the progress that has been made over the past years. This work has been guided at every step by an expert panel of Urban employees. It is unimaginable that another vendor could step in and have equivalent skills and expertise at this point. While there are vendors selling black box data synthesis solutions, none of them can produce detailed statistical data that replicate the true filing population in ways that would provide users realistic results.

As a statistical agency, SOI is challenged to balance user needs for detailed information to support evaluation and evidence building activities against the responsibility to protect the confidentiality of the information individuals and businesses provide to the IRS for tax administration purposes. Improvements in computer processing and advances in statistical methods have made it easier for intruders to reconstruct the data underlying tabulations protected using standard disclosure limitation methods. Personal information exposed through data breeches also makes it easier for intruders to identify individuals whose data are represented in tables and public-use microdata files. The Urban Institute is leading efforts to develop fully synthetic public-use tax data files as alternatives to standard statistical products. They have produced Tax Year 2012 synthetic income data representing low-income individuals who do not file tax returns. This is an important new data source on a vulnerable portion of the population not observed in most of SOI’s products. Due to careful consultation with a wide range of experts, this file is useful for a variety of research purposes. The Urban Institute team has also produced a preliminary Tax Year 2012 file representing all income tax filers. The work to date has shown that synthetic data can be a useful substitute for public-use files produced using traditional statistical disclosure limitation methods. In fact, this approach has the potential to make more data available, including data with rich geographic and demographic details that fully represent the entire distribution of filers, as well as panel data. Further research to develop methods that ensure the synthetic data more closely embody the statistical distributions in the 'real' data and to decrease the processing time required to produce a file will increase the utility of this approach for both users and other data producers.

In addition to Urban’s specialized expertise with tax data is their commitment to sharing its research and outcomes so that the work will impact not just access to tax data, but potentially statistical and administrative data from across the government. They also have unique skill set to automate access to real data through a validation server that would produce statistically valid outcomes processed with state-of-the-art privacy protection. Because access to the validation server would be automated, it increases data security by eliminating direct researcher access to confidential microdata. Urban’s synthetic tax data and proposed validation server are important components of SOI’s overall data dissemination strategy.

IRSAP 1006.3

B. DESCRIBE THE EFFORTS TAKEN TO ENSURE OFFERS WERE SOLICITED FROM AS MANY

POTENTIAL SOURCES AS IS PRACTICABLE, INCLUDING WHETHER A NOTICE WAS OR

WILL BE PUBLISHED AS REQUIRED BY FAR SUBPART 5.2 AND, IF NOT, WHICH EXCEPTION

UNDER FAR 5.202 APPLIES.

The SOI and OBSA solicited available capabilities from industry for the development of an additional Public Use File and validation methodology by issuing a Sources Sought via GSA from April 3, 2024 - April 17, 2024, and SAM.gov from April 18, 2024 – April 28, 2024. A total of two (2) responses were received, one of which was the incumbent. After review of the received capabilities, SOI determined that adequate competition to provide the described services were not available. The 2nd responder did not appear to have the required experience creating synthetic datasets or with the very particular nuances of working with Federal tax information needed to meet all the tasks of the PWS.

C. DETERMINATION THAT THE ANTICIPATED COST TO THE GOVERNMENT WILL BE FAIR

AND REASONABLE.

The Contracting Officer determines that the anticipated price(s) will be fair and reasonable based on applicable price analysis techniques. Prior to award of the proposed contract, price information shall be obtained from the contractor and a pricing comparison of similar research and development services will be performed to sufficiently determine that the cost to the proposed acquisition is fair and reasonable.

IRSAP 1006.3

D. DESCRIBE THE MARKET RESEARCH THAT WAS CONDUCTED AND THE RESULTS OF THAT

SURVEY. IF ACTIONS WERE TAKEN BY PROCUREMENT PERSONNEL TO SATISFY THIS

REQUIREMENT (SUCH AS A GPE SOURCES SOUGHT SYNOPSIS), PLEASE SPECIFY.

Market research was conducted by the SOI and the Contracting Officer to identify available sources and to evaluate the availability of the marketplace to meet the requirement as follows:

• Reviewed the Acquisition Gateway for Treasury Mandatory Sources No Best in Class (BIC) vehicles were available for this requirement.

• Reviewed prior acquisition history

Due to the specialized experience required, the previous acquisitions were sole sourced to the incumbent contractor.

• Published Sources Sought on GSA No vendors response was received.

• Published Sources Sought on sam.gov

Urban institute was the only vendor out of two (2) responders that could meet all the tasks of the PWS. The second responder, Pyramid Systems, Inc., is not capable of meeting the IRS’ because they are an IT company focused on designing and integrating technology products. There is no discussion in the submitted capability statement that Pyramid has any experience creating synthetic datasets or with the very particular nuances of working with Federal tax information. Additionally, there is nothing in their capability statement showing that they have anyone on staff with any relevant experience, or the hiring capability to bring someone onboard quickly with that expertise. SOI requires a vendor who has deep and extensive statistical expertise and experience working with tax data and creating synthetic datasets; there is nothing in the submitted capability statement to indicate Pyramid has that experience.

E. DESCRIBE ANY OTHER FACTS TO SUPPORT THE JOFOC.

The Urban Institute appears to be the most qualified vendor for this requirement. The vendor developed this process over seven (7) years ago and is currently the incumbent under the current contract (2032H5-23-P- 00106) with a period of performance of 9/8/2023-9/29/2024. The purchase order was used to fulfill a commitment by the Statistics of Income Division of the IRS to provide statistical products that would safely allow researchers to perform statistical analyses using administrative tax data while protecting the confidentiality of taxpayer information.

F. LIST SOURCES, IF ANY, THAT EXPRESSED, IN WRITING, AN INTEREST IN THE

ACQUISITION.

A Sources Sought Notice (2032H8-24-R-00003 / 2032H8-24-N-00005) was posted via GSA from April 3, 2024 - April 17,2024, and SAM.gov from April 18, 2024 – April 28, 2024, in which two (2) vendors responded, one of which was the incumbent. The 2nd vendor did not appear to be capable of performing the required service.

IRSAP 1006.3

G. LIST THE ACTIONS THE BUREAU WILL TAKE TO REMOVE OR OVERCOME ANY BARRIERS

TO PROMOTE THE COMPETITION ON ANY SUBSEQUENT ACQUISITIONS FOR SIMILAR

SUPPLIES OR SERVICES.

The Government will continue to conduct thorough market research to gauge the marketplace capabilities for future requirements. SOI will continue to search for and analyze services and types of information provided by other potential sources and recommend limited competition for future solicitation, if warranted.

H. STATEMENT THAT REQUIREMENT DOES NOT RESULT FROM A LACK OF PLANNING OR

THE EXPIRATION OF FUNDS.

This requirement does not result from a lack of planning or the expiration of funds.

IRSAP 1006.3

O V

E R

M

IL

L

IO

N E. SENIOR PROCUREMENT

EXECUTIVE (Name & Title)

[ ] APPROVE

[ ] DISAPPROVE

(Signature) (Phone No.)

(Date)

NOTE: Each review must be preceded by lower level approval(s). For example, actions over $75 million require all approvals.

IN NO CASE WILL AN INDIVIDUAL SIGN MORE THAN ONE APPROVAL LEVEL.