DCAMS LSJ Exhibit One1 Beta.Sam.pdf

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

WASHINGTON, DC 20410-3000

OFFICE OF THE CHIEF INFORMATION OFFICER

J&A# 21- 01

EXHIBIT 1

U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD)

LIMITES SOURCES JUSTIFICATION

Debt Collections and Assets Management System (DCAMS)

1. IDENTIFICATION OF THE AGENCY AND THE CONTRACTING ACTIVITY,

AND SPECIFIC SPECIFICATION OF THE DOCUMENT AS A " LIMITED

SOURCES JUSTIFICATION.”

Agency: U.S. Department of Housing and Urban Development (HUD) 451 7th Street SW, RM 5256 Washington, DC 20410

Contracting Activity: Office of the Chief Procurement Officer, Headquarters Program Office: Office of the Chief Information Officer (OCIO), Headquarters

2. NATURE AND/OR DESCRIPTION OF THE ACTION BEING APPROVED.

Approval is being sought to enter a one-year and three-month contract to Leidos Innovation Corporation, Inc. to provide uninterrupted and continuing Operations and Maintenance (O&M) Support services for Debt Collections and Assets Management System (DCAMS). A new sole source contract is being sought to ensure continuity of services while the follow-on competitive acquisition is being conducted.

DCAMS provides information technology support for collecting and servicing Federal Housing Administration (FHA)) debts and serves as the official system of records for the FHA debts serviced by the Office of Housings Financial Operations Center (FOC) located in Albany, NY

Performance Period: Base 01/01/2021 through 12/31/2021 (12 Months) Transition-out 01/01/2022 through 03/31/2022 (3 Months) optional

Method of Contracting: New Contract Type of Contract: Firm Fixed Price Type of Funds: IT funds will be provided to fund this contract modification

3. A DESCRIPTION OF THE SUPPLIES OR SERVICES REQUIRED TO MEET

THE AGENCY'S NEEDS (INCLUDING THE ESTIMATED VALUE).

The current contractor, Leidos Innovations Corporation, provides the DCAMS software package and performs critical software services including Operations and Maintenance (O&M) that is required to support HUD’s critical FHA loan programs supporting the Department’s mission and programmatic requirements. The DCAMS software is in compliance with Government laws, regulations and mandates.

Without the services provided by the current contractor, FHA would not have access to the DCAMS system, and they will not have the required support needed to perform critical tasks that this Contractor provides on a regular basis. These tasks include daily monitoring of batch jobs for posting financial and non-financial transactions, correcting production files caused by fatal data entries made by system users, correcting collection files received from eight external Treasury interfaces, running ad hoc jobs for establishing new FHA receivables, correcting accounting files for FHA’s general ledger, producing monthly trial balance reports, producing ad hoc data extracts to support program and financial audit requests, and updating automated correspondence to comply with revisions to governmentwide debt collection requirements made by Treasury and OMB.

Performance of these tasks enable the business operations for FHA’s financial mission work. The current contractor maintains the current business functional capabilities, provides necessary support for upgrades that are required by regulation, statute, technology, or product support and systems compliance.

Utilizing the DCAMS software and the skills of the current contractor, the FOC collected over $490 million of delinquent FHA debts in the last three fiscal years, providing effective debt servicing and achieving full compliance with government-wide requirements for managing federal receivables in the Debt Collection Improvement Act.

Performance Period: 01/01/2021 through 12/31/2021 (12 Months) Transition 01/01/2022 through 03/31/2022 (3 Months) optional

Due to the complexity and the fact that the current contractor owns the COTS software, which contains all technical and business functionality, transitioning from the legacy DCAMS system to the a new modernized one requires issuing a separate additional three months (optional) task order under the on-going contract for utilizing an independent team from with software transition, technical and debt collection business skills.

The transition-out period allows OCPO to release the new solicitation and OCIO will have sufficient time to successfully transition software support services from the incumbent to to the new contractor.

During the Transition-out period, the incumbent workforce will remain on the O&M task to ensure continuity of all O&M activities throughout transition. The transition-out team will perform their transition activities per HUD approved transition-out plan delivered to HUD 60 days prior to the end of the O&M contract by the contractor. At the high-level, these activities include knowledge transfer, data transfer, transfer of authorities, stakeholder training, ensures all training documentation, user and technical manuals are complete and are in accordance with HUD standards and delivered and approved by HUD. Ensures that all documentations, data remained on the incumbent site are disposed according to HUD’s standards and procedures an approved by HUD. Ensures all incumbent account accesses and authorizations have been disabled and all incumbent software be removed from the HUD environment. Ensures that all data and documents required for DCAMS decommissioning and disposition are delivered to HUD.

The additional three months optional DCAMS transition-out estimate is based on the technical structure and business knowledge which remained within the contractor’s software and support team for years supporting HUD’s Debt Collection requirements. The fixed-price estimated cost is based on the transition-out of systems with similar size and complexity, and current contractor’s labor category, labor rate and level of effort required for transition to a new system.

4. THE AUTHORITY AND SUPPORTING RATIONALE (see 8.405-6(a)(1)(i) and (b)(1))

AND, IF APPLICABLE A DEMONSTRATION THAT THE PROPOSED

CONTRACTOR'S UNIQUE QUALIFICATIONS TO PROVIDE THE REQUIRED

SUPPLY OR SERVICE.

Authority: FAR 8.405-6(a)(1)(i)(b) “Only one source is capable of responding due to the unique or specialized nature of the work”

The current contractor – Leidos Innovations Corporation is the only responsible source with the required software and specialized knowledge capable of satisfying HUD’s requirements within the established timeframe needed. The current contract expires 12/31/2020. A competitive acquisition is currently underway for the re-compete of DCAMS services, but the it is not anticipated that there is enough time to have the follow-on in place to allow sufficient time for transitioning to a new contractor or data migration.

The basis for the current contract’s six-month option, extended in accordance using Federal Acquisition Regulation (FAR) clause 52.217-8 from 07/01/2020 through 12/31/2020 was to provide uninterrupted and continuing support for DCAMS and transition-out to the replacement system. The planned transition of DCAMS to HUD Debt System, the replacement solution for the Debt Collection and Asset Management System (DCAMS), was disrupted by last year’s protracted lapse in appropriation and by periodic continuing resolutions which resulted in changing the OCIO and OCPO contract priorities.

As outlined below, this one-year and three-month contract will avoid a lapse in business services supported by the current contractor and include a reasonable amount of time for transitioning and migrating data as summarized in paragraph 3 above. It also allows OCPO to release the solicitation and OCIO will have sufficient time to successfully transition software support services from the legacy based DCAMS system to the new replacement system HUD Debt.

If due to the complexity and issues related to a high priority modernization project, the transition from the legacy system to the new system takes longer than one year the OCIO will request an extension to this contract based on the modernization progress.

DCAMS is a software solution that supports all of the critical business processes for recovering, resolving, and reporting FHA debts and is a major factor in FHA’s continued compliance with several government-wide financial management statutes, including the Debt Collection Improvement Act of 1996, Federal Credit Reform Act of 1991, Improper Payments Elimination and Recovery Improvement Act of 2012, and Digital Accountability and Transparency Act of 2014. DCAMS uses automation to implement the most critical business processes.

The current vendor owns the debt collection COTS (DCAMS) proprietary software code comprising the Debt Collection and Asset Management System (DCAMS) and provides HUD with software modules necessary for operating the system. The current vendor also provides regular support services without which FHA could not perform mission critical functions for managing the risk to its Single Family and https://www.acquisition.gov/far/8.405-6#FAR_8_405_6

Multifamily loan programs and the insurance funds that support these programs. Critical tasks performed by the vendor on a regular basis include daily monitoring of batch jobs for posting financial and non-financial transactions, correcting production files caused by fatal data entries made by system users, correcting collection files received from eight external Treasury interfaces, running ad hoc jobs for establishing new FHA receivables, correcting accounting files for FHA’s general ledger, producing monthly trial balance reports, producing ad hoc data extracts to support program and financial audit requests, and updating automated correspondence to comply with revisions to government-wide debt collection requirements made by Treasury and OMB. Performance of these tasks enable the business operations for FHA’s financial mission work.

The HUD Financial Operation Center (FOC) uses the DCAMS system for processing of debt management and account servicing for Title I debts and twenty-five other Federal Housing Administration (FHA) debt programs, including receivables resulting from both civil and criminal enforcement actions. The monies collected are applied to the appropriate FHA fund, typically Mutual Mortgage Insurance Fund (MMI) or General Insurance (GI) Fund.

Through the contract with Leidos providing the DCAMS system, the FOC collected over $490 million of delinquent FHA debts in the last three fiscal years, providing effective debt servicing and achieving full compliance with government-wide requirements for managing federal receivables in the Debt Collection Improvement Act. Over 99% of the eligible debts were referred to the Treasury offset and cross servicing programs within the mandated timeframes. Without this contractor, FHA would be unable to collect debt. In addition to providing operations and maintenance, the contractor provides use of their system.

The DCAMS system is critical to the Department’s FHA loan programs. The requested extension will accommodate the automated business processing functions that are critical resources for recovering, resolving, and reporting debts owed to HUD. The requested extension will accommodate the time required finding and implementing a new system.

Meanwhile, failure to award a sole source contract for the period of performance would lead to a break in service resulting in monthly financial losses of $13.9 million as revenue streams vital to funding FHA loan programs would be disabled. HUD would be unable to provide mortgage servicing for 7,000 households.

HUD would be unable to respond to requests for program data from auditors, Congress, OMB, and entities seeking such information under the Freedom of Information Act.

HUD would fail to meet its mission objectives for managing the FHA insurance funds and fall out of compliance with several legislative mandates for managing federal credit programs, which are monitored by OMB, Treasury, and the Congress. Such failures would result in financial statement audit findings. Essential lines of business and compliance activities that would be adversely affected by a break in service include:

• Insurance and claims processing for the FHA Title I Property Improvement and Manufactured Home loan programs. HUD would be unable to complete new claims processing, about sixty cases per month for a monthly loss of $6.2 million.

• Supporting FHA’s enforcement and risk mitigation programs by pursuing collection of Single- Family reverse and forward mortgage loans indemnified by lenders, civil enforcement debts, and criminal restitution judgments.

• Enforcement action on $657 million risk-based portfolio would rendered inactive.

• Compliance with Title I of the National Housing Act which requires collection of deficiency balances on defaulted property improvement and manufactured home loans. HUD would fail to collect $73 million on over 4,000 defaulted loans.

• Compliance with the Debt Collection Improvement Act of 1996 by failing to refer delinquent debt to Treasury for collection within mandated timeframes.

• Compliance with the requirements of the Federal Credit Reform Act of 1990 by tracking collections on FHA debts by cohort at the case level. FHA would be unable to accurately report credit program cash inflows and outflows impacting four of its insurance funds by failing to properly account for $52.3 million in applicable monthly loan program transactions.

• Compliance with Improper Payments Elimination and Recovery Improvement Act of 2012, avoidance of potential monthly losses of $10 million to FHA loan programs and credit programs operated by other federal agencies would be jeopardized as FHA would no longer be furnishing delinquent debtor and defaulted loan data to Treasury’s Do Not Pay Business Center and HUD’s Credit Alert and Verification System (CAIVRS).

5. A DETERMINATION BY THE ORDERING ACTIVITY

CONTRACTING OFFICER THAT THE ORDER REPRESENTS THE

BEST VALUE CONSISTENT WITH 8.404(d).

The contracting officer will conduct the appropriate cost analysis prior to contract modification award to determine the cost is fair and reasonable and ensure the contract action represents the best value to the Government. The Contracting Officer will use the Independent Government Cost Estimate (IGCE), associated cost elements information and historical pricing from previous modifications in which similar services were awarded to conduct the required cost analysis.

6. A DESCRIPTION OF THE MARKET RESEARCH CONDUCTED AMONG

SCHEDULE HOLDERS AND THE RESULTS OR A STATEMENT OF THE

REASON MARKET RESEARCH WAS NOT CONDUCTED.

Market Research was not conducted for this extension as no other source is able to meet the immediate need for DCAMS support, with the specialized proprietary knowledge required for the proprietary (DCAMS) software and at a cost that would not represent significant financial injury to the Department.

However, market research was conducted for the HUD Debt follow-on contract. HUD received 23 responses to an RFI posted April 2018 to FedBizOps to determine the respondents’ capability to develop a debt collection system and also to determine whether a COTS package is available on the market to meet HUD’s requirement. Contacted other federal agencies such as Treasury, Veterans Administration and private industry to determine if DCAMS was used for their debt collection system. The result of the market research concluded that COTS packages are available. Therefore, HUD is pursuing a competitive procurement to replace the DCAMS system.

7. ANY OTHER FACTS SUPPORTING THE USE OF LIMITED SOURCES.

Since DCAMS is proprietary software owned by Leidos, they are the only vendor authorized to maintain it.

8. A LISTING OF THE SOURCES, IF ANY, THAT EXPRESSED, IN WRITING, AN

INTEREST IN THE ACQUISITION.

No sources were given the opportunity to express in writing, because Leidos owns and manages the Data Center that is being relocated.

9. A STATEMENT OF THE ACTIONS, IF ANY, THE AGENCY MAY TAKE TO REMOVE

OR OVERCOME ANY BARRIERS THAT LED TO THE RESTRICTED

CONSIDERATION BEFORE ANY SUBSEQUENT ACQUISITION FOR THE SUPPLIES

OR SERVICES IS MADE.

The barriers to competition were created by the proprietary software as described in paragraph 5. The incumbent would have an unfair advantage in a competitive environment since they would be the only vendor that would be able to perform the effort with the proprietary source code. However, HUD will re-procure this acquisition on a competitive basis for an alternative to DCAMS thus removing the barriers to competition for any potential offerors.

10. THE ORDERING ACTIVITY CONTRACTING OFFICER’S CERTIFICATION THAT

THE JUSTIFICATION IS ACCURATE AND COMPLETE TO THE BEST OF THE

CONTRACTING OFFICER’S KNOWLEDGE AND BELIEF.

See form HUD-24013, Part 2 – Contracting Officer Determination and Certification