A02 LSJ Audit Infrastructure signed 18 Mar 2022_Redacted.pdf

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Control Number

Controlled By: Department of the Army Controlled By: ASA (FM&C)

CUI Categories: PROCURE, PRIVCY Distribution/Dissemination Controls: FED ONLY

POC:

Justification Review Document for Other than Full and Open Competition - FAR Part 8 Under the General Services Administration

Federal Supply Program

Program/Equipment: Audit infrastructure to support the Army’s annual General Fund Financial Statements audit for Treasury Index (TI) 21 and Army (TI-97), develop and implement solutions to control gaps in Army’s business processes, monitor and validate corrective actions, and to provide education and training to the Army financial management workforce on the Army’s audit requirements.

Authority: Title 40 U.S.C. 501, Services for Executive Agencies, as implemented by FAR 8.405-6.

Amount: $380,000,000.00

Prepared by:

Contracting Officer’s Representative

Email:

Contracting Officer:

Contracting Officer Email:

Technical/Requirements:

Contracting Officer’s Representative

Email:

Reviews: I have reviewed this justification and find it adequate to support other than full and open competition.

________________________________ Date___________

Contracting Officer

________________________________ Date___________

3/16/22

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____________________________________ Date___________

Command Advocate for Competition

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Limited Sources Justification for Other than Full and Open Competition – FAR Part 8 Under the General Services Administration

Federal Supply Schedule

1. Contracting Activity: Army Contracting Command - Aberdeen Proving Ground (ACC-APG), Aberdeen Division D, 6515 Integrity Court - Bldg. 4310, Aberdeen Proving Ground, MD 21005-3013

2. Description of Action: The Assistant Secretary of the Army (Financial Management and Comptroller) ASA (F&MC) requests a bridge action modification to extend the period of performance (PoP) of Task Order W91CRB-18-F-0238 by 21 months and to increase the ceiling by $380,000,000.00. Task Order W91CRB-18-F-0238 was awarded under General Services Administration (GSA) Multiple Award Federal Supply Schedule GS00F290CA, which is active, does not have any ceiling restrictions, and is available for this bridge action modification to be awarded. The Task Order provides support for audit infrastructure to support the Army’s annual General Fund Financial Statements audit. The contractor is ERNST & YOUNG LLP, Inc. (EY), 1101 New York Avenue, NW, Washington, DC 20005-4213. The proposed modification will increase the estimated amount of the Task Order by $380,000,000.00, from $269,593,137.41 to $649,593,137.41, and will extend the period of performance (PoP) from 21 March 2022 to 31 December 2023. This PoP will be inclusive of an initial period of seven months (7), an option period of twelve (12) months, and an additional two (2) month option period. The present Task Order PoP runs through 20 March 2022. The Government projects award of this extension by 21 March 2022, and the extension will be incrementally funded using FY22 and FY23 Operations and Maintenance Army (OMA) funding.

The Task Order PoP extension and value increase will provide the Government with continuity of services for audit support during the time required to transition performance to the newly competed Army Financial Improvement (AFI) Program Support Services Contract upon its projected award in October 2023.

3. Description of Supplies/Services: This is a non-personal services Task Order providing audit infrastructure to support the Army’s annual General Fund Financial Statements audit for Treasury Index (TI) 21 and Army (TI-97), develop and implement solutions to control gaps in the Army’s business processes, monitor and validate corrective actions, and to provide education and training to the Army financial management workforce on the Army’s audit requirements. The Task Order provides all personnel, equipment, supplies, facilities, transportation, tools, materials, supervision, and other items and non-personal services necessary to provide an audit infrastructure to interact with external financial statement auditors, improve the Army’s financial reporting processes, monitor financial reporting controls and validate the corrective actions, and communicate and coordinate change management with Army’s Senior Leadership, to comply with Section 1002, paragraph 204d(b) of the 2019 National Defense Authorization Act (NDAA), as well the Chief Financial Officer Act of 1990 (P.L. 101-576) and 10 U.S.C.

§240a et seq. The Task Order also prepares and presents executive level briefings for Army installation personnel, Headquarters Department of the Army and Department of Defense personnel concerning work performed on the Task Order.

All of the support required under this Task Order is connected and interrelated and cannot be broken into individually awarded actions available for competition to multiple sources. One source is required to complete the above mentioned work. The work required is considered highly specialized and includes a myriad of complex audit functions.

The requested amount of the value increase was derived from the Government’s estimate based on the projected level of support needed for a 21 month PoP extension, inclusive of a transition-in period for the new competitive acquisition. The below is a summary of the Independent Government Estimate (IGE).

General Fund Audit Remediation Contract IGE

Period of Performance (PoP)

Labor ODC’s Total

Base Period PoP:

21 Mar 22 - 31 Oct 22

Option Period One PoP:

01 Nov 22 - 31 Oct 23

Option Period Two PoP:

01 Nov 23 - 31 Dec 23

TOTAL *

* The increased LSJ request over the value of the IGE will ensure sufficient approved ceiling is available prior to award of the modification to account for unknowns in the vendor proposal.

4. Authority Cited: Title 40 U.S.C. 501, Services for Executive Agencies, as implemented by FAR 8.405-6, Limiting sources.

5. Reason for Authority Cited:

As described at FAR 8.405-6, Limiting sources, “orders placed or BPAs [Blanket Purchase Agreements] established under Federal Supply Schedules are exempt from the requirements in part 6. However, an ordering activity must justify its action when restricting consideration in accordance with paragraph (a) or

(b) of this section.” FAR 8.405-6(a) further states that “orders or BPAs exceeding the micro-purchase threshold based on a limited sources justification” may be warranted if, under FAR 8.405-6(a)(1)(C), “In the interest of economy and efficiency, the new work is a logical follow-on to an original Federal Supply Schedule order provided that the original order was placed in accordance with the applicable Federal Supply Schedule [FSS] ordering procedures. The original order or BPA must not have been previously issued under sole-source or limited-sources procedures.”

(a) The original audit services Task Order was placed under the applicable FSS ordering procedures and was issued as a competitive unrestricted acquisition. There is an immediate need from 21 March 2022 for continuing audit services, and following full and open competition procedures as established for the new AFI requirement would result in an unacceptable break in service. EY currently has all of its resources optimally allocated to serve the needs of the Government while minimizing waste and inefficiency. EY has the current knowledge and understanding of the complex audit response required, which another vendor would not be able to economically or efficiently replicate prior to the Government experiencing an unacceptable break in service. As discussed below in further detail, EY is currently mobilized at all Army IMCOM locations putting EY in a unique efficient position to ensure continued services as the incumbent. Additionally, EY provides the Government continued support ensuring that the Army meets the Congressionally mandated audit request, minimizing the risk of potential reductions in the Army’s budget. Under these circumstances the proposed extension qualifies as a logical follow-on to the current Task Order in the interest of economy and efficiency.

The current General Fund Task Order is responsible for providing congressionally mandated audit infrastructure to support the Army’s annual General Fund Financial Statements audit for Treasury Index (TI) 21 and Army (TI-97), develop and implement solutions to control gaps in Army’s business processes, monitor and validate corrective actions, and to provide education and training to the Army financial management workforce on the Army’s audit requirements. The Appropriations Act of 2010 required DoD to be ready for audit by 2018. The Army did go through an audit in 2018 but received a disclaimer of opinion. A disclaimer of opinion has been received every year since the Army’s initial audit in 2018, and is issued when the auditor is unable to obtain appropriate audit evidence on which to base the opinion. The Army continues to make corrective actions to the auditor’s findings and continues to have an annual audit. The Army’s strategic plan

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now projects the Army receiving a favorable opinion in FY27, which is mandated by Congress. Any break in service would significantly impact the Army’s ability to meet this statutory requirement. A break in service would cause the Army to suspend its FY22 audit, due to the large number of audit support personnel the contract provides, resulting in the date for favorable audit opinion to slip to the right by one or two years.

Contractor support runs the Army’s audit cell, which moves over 20,000 audit requests between the auditor and the field activities and consolidates the responses back to the auditor. The contractor attends all business process walk-throughs at Army installations worldwide. Remediation efforts are taking place at all Army IMCOM locations, and the contractor has employees at most of those sites conducting inventory of the Army’s property and equipment, which details the amount of widespread support required by the contract and puts EY in a unique position to ensure continued services as the incumbent. A break in these services would likely result in the Army losing access to experienced contractor personnel, resulting in the need for additional training which would further delay the Army’s strategic plan for audit. The need for these services is immediate and award to any other contractor would result in unacceptable delays severely impacting the Army’s ability to meet the requirement to complete an annual audit. If EY does not continue supporting this requirement, the entire Army’s annual audit would fail, which would be detrimental to the overall budget.

As a consequence of failing to complete a required annual audit, the Army could experience a significant reduction of funding. H.R. Bill 4272 was referred to the House Committee on Armed Services in FY21 entitled Audit the Pentagon Act of 2021. The bill states “If, during any fiscal year after fiscal year 2022, the Comptroller of the Department of Defense fails to certify to Congress that a department, agency, or other element of the Department of Defense has achieved an unqualified opinion on its full financial statements, the amount available for such department, agency, or element shall be reduced.” The bill further defines the reduction as “for the fiscal year during which such determination is made, by an amount equal to 0.5 percent; and for any subsequent fiscal year during which such determination is made, by an amount equal to 1.0 percent.” Such a reduction would undoubtedly have a profound negative impact on the Army’s flexibility, funding of the warfighter and critical requirements; ultimately limiting the Army’s ability to fully meet its mission.

While award of the new competitive AFI contract is anticipated for October 2023, full performance of the new contract will not begin until completion of a 60-day transition-in period in December 2023. Because a majority of the current value on the existing Task Order has already been obligated, and the period of performance ends on 20 March 2022, no additional work may be completed without this value increase and extension. Failure to approve this request would cause a serious and extreme interruption of work at ODASA-FOI and ASA (FM&C). There is no competitive action that could be accomplished sooner than the 21 month period anticipated under the current competitive action. A detailed timeline of the AFI contract award process is located at the bottom of this section. The proposed follow-on to the current Task Order is critical to ongoing activities that support the Army’s General Fund Audit while the competitive follow-on acquisition is executed.

The current three year, six month (including option periods) Time and Materials (T&M) General Fund Audit Infrastructure Contract with EY concludes on 20 March 2022. A follow-on solicitation, entitled Army Financial Improvement (AFI) Program Support Services Contract, was initiated in June 2021 to provide Congressionally-mandated audit infrastructure to interact with external financial statement auditors, improve the Army’s financial reporting processes, monitor financial reporting controls and validate the corrective actions, and communicate and coordinate change management with Army Senior Leadership, to comply with Section 1002, paragraph 204d(b) of the 2019 National Defense Authorization Act (NDAA), as well the Chief Financial Officer Act of 1990 (P.L. 101-576) and 10 U.S.C. §240a et seq., for an additional five years, from October 2023 through October 2028. This requirement was validated by Headquarters U.S. Army Installation Management Command (HQ IMCOM) and the Army Materiel Command (AMC) through a Request for Services Contract Approval (RSCA) Form. The Acquisition Strategy, Source Selection Plan, and associated Determination and Findings documents are currently

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being finalized by ACC-APG, including review by the supporting legal office. The AFI “Program Support Services Contract” solicitation is anticipated for release in October 2022 with award in October 2023 as projected by the milestones below in this section.

During 2020 and 2021, ACC began working on a recompete entitled Financial Improvement and Audit Remediation (FIAR). In May 2021, the Office of the Assistant Secretary of the Army (Financial Operations and Information) (ODASA-FOI) and the Assistant Secretary of the Army (Financial Management and Comptroller) (ASA (FM&C)) held discussions to redefine and refocus the requirement and a new direction was decided upon. Consequently, the anticipated timeline for issuance of the solicitation was delayed, meaning an award will not be in place prior to the expiration of the current General Fund Task Order in March 2022. A Request for Information (RFI) for the decided upon direction, AFI, was posted in June 2021 with a July 2021 closing date. The Market Research report was concluded in August of 2021, and ASA (FM&C) began working on the requirements documentation. The AFI requirement is anticipated to be a five (5) year T&M contract with an estimated value just under $1,000,000,000.00. The delays resulting from issues and concerns raised from 2020 through May 2021, coupled with the creation of the acquisition package for the new acquisition, have made it impossible to compete and award the follow-on competitive AFI contract before the expiration of the current General Fund Task Order. In Sep 2021, the General Fund Task Order was ready to expire, and FAR clause 52.217-8, Option to Extend Services, was executed to extend the Task Order PoP to 20 March 2022.

Based on current milestones, the AFI solicitation is projected for release in October 2022 and award is anticipated for October 2023. As a result, ODASA-FOI and ASA (FM&C) are seeking a twenty-one (21) month extension of the period of performance from 21 March 2022 to December 2023, which is inclusive of a transition-in period, requiring a ceiling increase of $380,000,000.00.

(b) The alternative available to the Government for the performance of this work and the evaluation of the alternative is below. The Government has exhausted all possible solutions and has determined that no other vendor, except the incumbent, is capable of providing the services without an unacceptable break in service.

To attempt to award a short-term contract for this 21-month period, independent of the AFI re-compete, to any source other than the current Contractor (EY) would require an additional time-consuming procurement cycle, mobilization, and transition to a new Contractor, resulting in unacceptable time delays and a gap in service to the Government totaling a minimum of 21 months inclusive of a transition-in period. A short term competitive action of this size would require acquisition planning, solicitation preparation and review, and proposal evaluation. Market research has demonstrated that there are vendors likely to respond to a competitive offering, but only EY is capable of performing without requiring a transition-in. Switching to any other vendor would cause the Government to sustain an unacceptable break in service. Because the services being provided are complex, and a time and materials (T&M) contract is anticipated, it is likely that extensive discussions/negotiations will be conducted as part of the evaluation process. Based on experience with similar contracts, services under a new contractor could not be in place sooner than 21 months, which would lead to a critical break in service to ASA (FM&C).

According to ACC-APG’s baseline for procurement action lead time (PALT), a competitive acquisition of this size is estimated at around 700 days.

The current contractor is the only contractor possessing the capability to provide uninterrupted service to the Government and continue/complete the work that is ongoing at ODASA-FOI and ASA (FM&C). Any other contractor, regardless of capability, would require a minimum of 60 days (the transition in period anticipated on the new competitive contract) to develop a basic understanding of the current Army’s audit requirements. Transition-in is not limited to workforce management; it also includes significant activities such as providing an audit infrastructure to interact with external financial statement auditors, improve the Army’s financial reporting processes, monitoring financial reporting controls and validating the corrective

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actions, communicating and coordinating change management with Army’s Senior Leadership. The transition-in period would also require the prime contractor to finalize contracts with subcontractors. In a competitive environment a number of the above tasks are completed during the solicitation phase, which is why the transition in of a new contractor would likely extend beyond the estimated 60 days. This alternative places the Army at risk of significant unacceptable delays on a Congressionally mandated task.

This alternative is not practical based on the demonstrated difficulty in releasing solicitations in an expedited manner and the significant potential consequences if award is not made prior to expiration of the current task order.

(c) Follow-On Action Additional Information: The AFI solicitation is anticipated to proceed to award in October 2023. Based on historical schedule timelines for similar cost contract actions, and given that the new time frame extends over the end of the year, award is anticipated at that time. As such, the new AFI contract should be awarded by the end of October 2023. The new AFI contract will include a 60 day transition period CLIN which is intended to overlap with the existing General Fund task order, so the existing General Fund task order must be extended until at least December 2023. The structure of the Period of Performance on the task order for 21 months (7 month base, 12 month option and 2 month option) will provide coverage through December 2023.

Current Milestones for AFI Solicitation

6. Efforts to Obtain Competition: In accordance with Defense Federal Acquisition Regulation Supplement (DFARS) 205.205-71, DFARS 206.302-1(d), and DFARS Procedures, Guidance and Information (PGI) 206.302-1(d), a sources sought notice for this proposed extension effort was published on 27 December 2021. A total of six (6) responses were received, as discussed below in paragraphs 8 and 9.

Effective competition either limited or full and open, is not expected for this specific action. EY is the only contractor capable of providing the continuous support necessary to ensure uninterrupted services during the required timeframe. However, competition requirements will be met as there is currently a competitive follow-on underway. ODASA-FOI and ASA (FM&C) has initiated a new contract action for a follow-on AFI Program Support Services Contract with ACC-APG, which is in progress.

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a. Effective competition. This action is for a $380,000,000.00 value extension to obtain specific services that have been provided by EY. Based on the information in paragraph 5 above, competition for the required audit infrastructure to support the Army’s annual General Fund Financial Statements audit services is underway, but a gap will exist in support between expiration of the current task order and award of the follow-on requirement without the requested contract modification.

b. Subcontracting competition. Subcontracting opportunities will be achieved by EY. The vendor itself is not a small business. The base contract contains the clauses 52.219-8 Utilization of Small Business Concerns, and 52.244-5 Competition in Subcontracting.

7. Actions to Increase Competition: No action is being taken to increase competition on this proposed value increase and PoP extension. This requirement is intended to allow for continuity of services while the replacement (AFI) contract is competed and awarded. The Government, due to continuity of services and the need for EY to provide the uninterrupted level of highly specialized experience, is unable to break out components of the PWS and issue separate competitive actions. Since the current General Fund task order requires a high degree of coordination to ensure all audit findings are addressed, breaking the current effort into another small competitive actions for 21 month duration is not feasible or cost effective. The current barriers that have led to this restricted consideration of sources will not exist for the subsequent acquisition of AFI services following this short-term action, as the acquisition planning for the anticipated consolidated requirement for Army infrastructure support, Financial Statements support, Army working capital fund support is already well underway; it is estimated that a solicitation will be posted in October 2022. Additionally, as discussed in the previous sections and section 8, below, any other alternative would cause an unacceptable and significant break in services, resulting in the Army’s failure to obtain a favorable audit option as required by Congress.

8. Market Research: In accordance with Defense Federal Acquisition Regulation Supplement (DFARS) 205.205-71, DFARS 206.302-1(d), and DFARS Procedures, Guidance and Information (PGI) 206.302-1(d), a sources sought notice for this proposed extension effort was published to www.SAM.gov on 27 December 2021. Six (6) responses were received, but five (5) vendors were deemed not capable as they did not specifically address the March 2022 start date and did not provide any further solution to transition at a later date. The only vendor to be deemed capable was the current contractor, EY, as no transition would be required. While it is possible the other five (5) vendors could be determined otherwise capable for the new competitive action, the vendors are determined not capable for this shorter-term extension as a transition to any other contractor for this period would require substantial documentation and approval causing the Government have to have an unacceptable break in service. This would cause a break in service that is unacceptable to the Government as discussed, above.

Results of the vendors who responded are below.

Vendor Cage Code

Size Status

Capability Determination for March 2022 Start

9. Interested Sources: In accordance with Defense Federal Acquisition Regulation Supplement (DFARS) 205.205-71, DFARS 206.302-1(d), and DFARS Procedures, Guidance and Information (PGI) 206.302-1(d), a sources sought notice for this proposed extension effort was published on 27 December 2021. A total of six (6) vendors responded to the Sources Sought Notice (SSN) mentioned in Sections 6

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and 8 above. Market research indicates that only one (1) vendor is capable of performing the requirement defined in the SSN. As noted, while it is possible for one of the five (5) vendors to be deemed capable for the future competitive acquisition, none of these vendors addressed the transition required for full performance on 21 March 2022 or at a future time which would leave the Government with an unacceptable delay in performance. The only vendor deemed capable of performing this work based on the results of the SSN is the incumbent EY. A sole source award to EY for the bridge action is recommended and is in the best interest of the Government.

10. Other Facts:

a. Procurement history.

Task order: W91CRB-18-F-0238 Contractor: ERNST & YOUNG LLP Award Date: September 2018 Period of Performance: 21 Nov 2018 – 20 September 2021 Competitive Status: Competitive FSS ordering procedures

Task order: W91CRB-14-F-0013 Contractor ERNST & YOUNG LLP Award Date: 22 May 2014 Period of Performance: 10 Jul 2014 – 09 Jul 2017 after protest dates revised to 28 Oct 2014 – 27 Oct 2017 Competitive Status: Competitive FSS ordering procedures

11. Technical/Requirements Certification: I certify that the supporting data under my cognizance, which are included in the justification, are accurate and complete to the best of my knowledge and belief.

__________________________________ Date___________

Contracting Officer’s Representative

12. Fair and Reasonable Cost Determination/Contracting Officer Certification: I hereby determine that the anticipated cost to the Government for this contract action will be fair and reasonable. This determination will be based upon price analysis as described in FAR 15.404-1(b). As a part of this basis, certified cost or pricing data will not be required. This action is a modification to Task Order W91CRB- 18-F-0238. I certify that this justification is accurate and complete to the best of my knowledge and belief.

Contracting Officer

61423 Date: 2022.03.16 13:12:29 -04'00' 3/16/22

Approval

Based on the foregoing justification, I hereby approve the modification of Task Order W91 CRB-18-F-0238 to increase the Task Order maximum value by $380,000,000.00, from $269,593,137.41 to $649,593,137.41, and extend the period of performance until 31 December 2023, for the procurement of Audit infrastructure to support the Army's annual General Fund Financial Statements audit for Treasury Index (Tl) 21 and Army (Tl-97) pursuant to the authority of Title 40, United States Code, Section 501, Services for Executive Agencies, as implemented by Federal Acquisition Regulation 8.405- 6(a)(1 )(C), Limiting sources, "In the interest of economy and efficiency, the new work is a logical follow-on to an original Federal Supply Schedule order." The approval is subject to availability of funds, and provided that the services or property herein described have otherwise been authorized for acquisition.

Date Senior Procurement Executive

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18 March 2022