EFO Redacted.pdf

CUI

DEFENSE LOGISTICS AGENCY

CONTRACTING SERVICES OFFICE - PHILADELPHIA

700 ROBBINS AVENUE

PHILADELPHIA, PENNSYLVANIA 19111-5092

Controlled by: DLA DCSO – Philadelphia (DCSO-P)

CUI Category: PROCURE / SSEL

Distribution/Dissemination Controls: FED ONLY

POC: Charles.Fitzsimmons@dla.mil/(267) 693-6308

Controlled Unclassified Information (CUI)

Source Selection Sensitive Information - See FAR 2.101 & 3.104

JUSTIFICATION FOR AN EXCEPTION TO FAIR OPPORTUNITY

UNDER FEDERAL ACQUISITION REGULATION (FAR) SUBPART 16.5

1. IDENTIFICATION OF THE AGENCY AND THE CONTRACTING ACTIVITY:

Requiring Activity:

DLA Information Operations

8725 John J Kingman Hwy

Ft Belvoir, VA 22060

Contracting Activity:

700 Robbins Avenue

Philadelphia, PA 19111-5092

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

Pursuant to FAR 16.507-6, the action being approved is an exception to the fair opportunity process.

This justification authorizes increasing the contract ceiling to support the sole-source procurement of

Construction-in-Progress (CIP)/Work-in-Progress (WIP) and United States Standard General Ledger

(USSGL) Accounting Treatment Manual (ATM) services leveraging cloud native technologies, artificial intelligence/machine learning (AI/ML) to automate and improve user experience and operations efficiency.

The action being approved is a continuation of CIP/WIP/ATM application support services provided by SP4709-24-D-0059/SP4709-26-F-0042, DLA J62A – Defense Agencies Initiative (DAI) delivered by . This task order was solicited as unrestricted (JETS Group

A) and competitively awarded as a JETS task order, in total amount of .

The Task Order period of performance (PoP) extends through 3 May 2028.

The work to be performed under the proposed modification to the Task Order must be issued on a sole-source basis to Information Technology Strategies, Inc. The order must be issued on a sole-source basis in the interest of economy and efficiency because it is a logical follow-on to the order already issued under the current contract; all awardees were given a fair opportunity to be considered for the original order. In 2025, the DAI Program Office was approved for in funding under the

One Big Beautiful Bill Act (Pub. L. 119-21) and authorized contractual support for

CIP/WIP/ATM/AI/ML support services.

There are economies of scale benefits and efficiencies to the development timeline that DLA is uniquely poised to reap by having this contractor continue this work. No other vendor can come into this work at this juncture and harness the unique institutional knowledge that this vendor has;

recreating this knowledge would take time and additional resources and not be in the best interests of the Government. Any other vendor would have to learn the J62A DAI application, learn the problems, and reinvent solutions when this vendor already possesses this knowledge.

All eligible JETS IDIQ contract holders were provided with a fair opportunity to be considered for all

Task Orders cited within.

Addendum 1

The workload detailed in Tasks 5 and 6 represents a direct expansion of the requirements and efforts initially established in Task 2. Specifically, Tasks 5 and 6 serve as natural expansions to the ongoing work identified in Task 2, building directly upon the established architecture and solutions. This logical progression ensures a seamless continuation of the project's objectives and maximizes the efficiency of the overall development effort.

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

THE AGENCY’S NEEDS, INCLUDING THE ESTIMATED VALUE:

As the Department of War (DoW) and the Defense Logistics Agency (DLA) continue to modernize and apply artificial intelligence, DLA J6 has an obligation to continue expanding these capabilities to accommodate the exponentially growing data utilized by artificial intelligence applications and services.

DLA requires an increase to the ceiling for Task 2 – USSGL (ATM) Support Services. The Agency requires robust oversight and fully realized compliance mechanisms to satisfy strict federal audit standards and mitigate regulatory risk; the selected contractor is uniquely positioned to seamlessly integrate these critical oversight mechanisms immediately, delivering the necessary regulatory compliance in the most economical and timely manner possible.

Failure to revise the ceiling will directly jeopardize the initiatives listed below and constrain our mission's growth. Specific consequences include: halting the USSGL/ATM and Acquire-to-Retire (A2R) infrastructure enhancements and, most critically, failing to support our Stakeholder/Partners and stagnating the development of mission-critical AI capabilities and remediate systemic posting logic errors and accounting anomalies as part of the USSGL effort.

a) USSGL Compliance and Accounting Treatment Remediation - The Contractor shall provide the necessary capabilities to continuously identify, analyze, and remediate systemic posting logic errors and accounting anomalies as part of the USSGL effort.

a. Ensure all system posting logic and financial transactions align with the applicable Accounting

Treatment Manual.

b. Meet United States Standard General Ledger (USSGL), SFIS, DoD Transaction Codes, and TFX

Account Transactions requirements.

c. Includes but not limited to understanding DAI customers’ business process, Oracle pre-seeded accounting entries, Auto accounting pairs, configured transaction types, subledger accounting, custom coded accounting logic, etc.

b) Employ iterative analysis and remediation strategies to address both known historical discrepancies and emergent accounting issues discovered during execution of Artificial Intelligence and Machine Learning

(AI/ML) Integration for Audit Readiness -The primary objectives of these ML/AI implementations are to facilitate comprehensive audit readiness, significantly reduce massive manual data-processing workloads, and improve predictive and historical budgetary accuracy.

a. Evaluate, design, and implement scalable Machine Learning (ML) and Artificial Intelligence (AI) capabilities optimized for financial operations.

b. Maintain the flexibility to pilot, refine, and deploy automated solutions across various financial workflows as prioritized by the Government.

c) Advanced Dashboarding and Analytics

a. Design, develop, deploy, and maintain dynamic reporting dashboards and analytical tools

b. Provide stakeholders with near real-time, actionable visibility into USSGL compliance metrics

c. Dashboards shall be designed for scalability and user configurability, ensuring they can be adapted to meet future oversight, auditing, and reporting requirements without requiring extensive redevelopment.

The estimated dollar value for the ceiling increase to CLIN 0002/Task 2 is for the remainder of the Base Year period of performance. This modification will increase the CIP/WIP/ATM task order ceiling from to an estimated .

As the Department of War (DoW) and the Defense Logistics Agency (DLA) continue to modernize and apply artificial intelligence, DLA J6 has an immediate obligation to expand existing capabilities to accommodate the exponentially growing data utilized by AI applications and services. Furthermore, the

Agency requires robust oversight and fully realized compliance mechanisms to satisfy strict federal audit standards and mitigate regulatory risk.

To fulfill these mission mandates, DLA requires the contractor to execute new and expanded deliverables.

The selected contractor is uniquely positioned to seamlessly integrate these critical oversight mechanisms immediately. The required expansion of scope encompasses enhanced deliverables under Task 2, as well as the addition of two highly critical operational tasks (Task 5 and Task 6).

a. Expanded Scope: Task 2 – USSGL (ATM) Support Services

To meet United States Standard General Ledger (USSGL), SFIS, DoD Transaction Codes, and TFX Account

Transactions requirements, the contractor shall provide the following expanded capabilities:

USSGL Compliance and Accounting Treatment Remediation: Continuously identify, analyze, and remediate systemic posting logic errors and accounting anomalies. This includes ensuring all system posting logic and financial transactions align with the applicable Accounting Treatment Manual (ATM).

AI/ML Integration for Audit Readiness: Evaluate, design, and implement scalable Machine Learning (ML) and Artificial Intelligence (AI) capabilities optimized for financial operations. The primary objectives are to facilitate comprehensive audit readiness, significantly reduce massive manual data-processing workloads, and improve predictive and historical budgetary accuracy.

Advanced Dashboarding and Analytics: Design, develop, deploy, and maintain dynamic, highly scalable reporting dashboards. These tools will provide stakeholders with near real-time, actionable visibility into

USSGL compliance metrics without requiring extensive future redevelopment.

b. New Requirement: Task 5 – Automated Financial Logic & AI-Driven Compliance (DAI Financial

Plumbing)

Moving beyond reactive code fixes, this task requires a continuous cycle of discovery, remediation, and visualization to systematically eliminate historical data anomalies.

Financial Logic Mapping: The contractor must map every system trigger—down to the attribute level— across Sub Ledger Accounting (SLA), Auto Accounting, and the Account Generator to ensure alignment with ATM and USSGL rules.

Proactive Monitoring & DevSecOps: The contractor will build real-time dashboards to shift stakeholders to proactive compliance monitoring, and construct a robust DevSecOps pipeline with automated testing to verify system updates against financial posting logic prior to deployment.

AI/LLM Integration: The contractor will implement a Retrieval-Augmented Generation (RAG) pipeline powered by a secure, local Large Language Model (LLM). This capability will ingest the latest policy documents, automatically flag logic deviations, and generate audit-compliant justification memos for complex transaction corrections.

c. New Requirement: Task 6 – Automated Asset Lifecycle Management & NFR Closure

This task represents a vital operational shift from manual data entry to automated lifecycle management, integrating the physical reality of an asset (ELMS/DPAS) with its financial reality (DAI) from acquisition

(CIP/WIP) through retirement.

Hands-Off Accounting by FY27: The contractor will design and build robust interfaces (such as the Global

Capitalization Interface) to automate bulk asset capitalization. This requires deep business process re-engineering for Property, Plant, and Equipment (PP&E) to ensure timely valuation transfers and drive the permanent closure of outstanding Notices of Findings and Recommendations (NFRs).

Impact of Inaction

Failure to execute these expanded requirements will halt critical CIP/WIP/ATM and Acquire-to-Retire

(A2R) infrastructure enhancements and directly constrain DLA's mission growth. Most critically, inaction will result in a failure to support our Stakeholder/Partners, stagnation in the development of mission-critical

AI capabilities, and leaving the agency exposed to prolonged audit vulnerabilities and outstanding NFRs.

Delaying this effort also risks future funding unavailability to meet the OSW mandate for FY26 enhancements.

Required Ceiling Increase

Because these emerging requirements dictate a significant expansion in contractor tasks and deliverables, a corresponding modification to the task order ceiling is required.

The estimated value to accommodate the expanded deliverables under CLIN 0002/Task 2 is for the remainder of the Base Year period of performance.

The estimated value to accommodate the addition of Tasks 5 and 6 is .

Consequently, executing these required deliverables will increase the total CIP/WIP/ATM task order ceiling from to an estimated .

4. IDENTIFICATION OF THE EXCEPTION TO FAIR OPPORTUNITY (SEE PARAGRAPH

(b)) AND THE SUPPORTING RATIONALE, INCLUDING A DEMONSTRATION THAT

THE PROPOSED CONTRACTOR’S UNIQUE QUALIFICATIONS OR THE NATURE OF

THE ACQUISITION REQUIRES USE OF THE EXCEPTION CITED:

In accordance with FAR 16.507-6(b)(3), the proposed modification must be issued on a sole-source basis in the interest of economy and efficiency because the work to be performed is a logical follow-on to Task

Order SP4709-24-D-0059/SP4709-26-F-0042.

The proposed modification will be made under the terms of the existing JETS IDIQ contract SP4709-24-

D-0059/SP4709-26-F-0042. As stated in Section 2, all eligible JETS IDIQ contract holders were provided with a fair opportunity to be considered for the initial Task Order award.

The work to be performed under the proposed modification is a logical follow-on to the initial Task Order because it will be a continuation of the application enhancements. This modification will enable efficiency and consistency for further DAI application development and sustainment services.

Adding additional vendors to provide this support outside of the current contract would add additional scope and complexities to the Government’s audit requirements, which would drive additional cost and create inefficiencies.

Additionally, a second vendor providing these development services would duplicate efforts and cost, creating inefficiencies with operations. As an example, there are software developers and systems engineers resources on the current contract. If a second vendor were added, the Government would have to fund additional software developers and system administrators on the second contract to ensure workload is properly implemented. This would unnecessarily duplicate resources, preventing the Government from achieving operational efficiencies. The Government estimates that coordinating the efforts of two contractors would require an additional 6-8 full time resources, creating an unnecessary expense to the

Government of to above and beyond the estimates of this contract modification.

Aside from the time required to train a new vendor, which would place DLA at risk of not delivering the requisite system performance to the warfighter for J62A, choosing a new vendor would also put the schedule for CIP/WIP/ATM and additional artificial intelligence services and resources in severe risk. There are economies of scale benefits and efficiencies to the development timeline that DLA is uniquely poised to reap by having this specific contractor continue this work. No other vendor can enter at this juncture and harness the unique institutional knowledge that this vendor has; recreating this knowledge would take time and additional resources and not be in the best interests of the

Government. Any other vendor would have to learn the J62A DAI application, learn the problems, and reinvent solutions when these vendors already possess this knowledge.

Technical Necessity for Incumbent Execution of Expanded Scope (Tasks 5 & 6)

The addition of Task 5 (Automated Financial Logic & AI-Driven Compliance) and Task 6

(Automated Asset Lifecycle Management & NFR Closure) introduces highly complex, deeply integrated systems engineering requirements that only the incumbent contractor is technically equipped to execute. Introducing an alternative vendor for these specific tasks is operationally unfeasible for the following critical reasons:

Technical Driver Incumbent Proprietary

Advantage & Necessity

Impact / Risk of Alternative

Vendor

SLA & Auto Accounting

Mapping (Task 5)

The incumbent has already spent months mapping the

J62A DAI application database schema. They possess the baseline telemetry and access permissions required to trace transaction triggers immediately at the attribute level.

A new vendor would require

4 months of discovery just to replicate this systemic mapping, halting immediate remediation of financial posting logic errors.

DevSecOps Pipeline

Integration (Task 5)

The incumbent designed, deployed, and currently maintains the active CI/CD

DevSecOps pipeline.

Implementing automated unit and regression testing of financial logic requires direct integration into this existing codebase.

A second vendor would lack authorized write-access to the code repository, requiring manual, duplicate hand-offs that would introduce severe configuration errors and jeopardize system stability.

Secure AI/RAG Pipeline

Deployment (Task 5)

The incumbent has already established the secure, local

LLM testing environment aligned with DLA J6 AI governance. They are uniquely positioned to

Re-authorizing and configuring a secure IL5 environment for an external vendor's LLM tools would result in accreditation delays.

immediately ingest ATM and

USSGL policy documents into the existing architecture.

Automated Asset Lifecycle

Interface (Task 6)

Automating asset capitalization requires modifying the complex, custom-built Global

Capitalization Interface. The incumbent holds the direct functional expertise on how this interface bridges the physical tracking system

(ELMS/DPAS) with DAI.

Any attempt by an outside vendor to modify this custom interface without deep, historical business process re-engineering knowledge would risk breaking active asset valuation transfers and failing to close outstanding

NFRs.

5. A DETERMINATION BY THE CONTRACTING OFFICER THAT THE ANTICIPATED

COST TO THE GOVERNMENT WILL BE FAIR AND REASONABLE:

The Contracting Officer will determine that the price is fair and reasonable prior to task order award.

Price will be analyzed in accordance with FAR 15.404-1 procedures, and the Government will use various price analysis techniques, as needed, including but not limited to: (1) Comparison with competitive price lists in accordance with FAR 15.404-1(b)(4); (2) Comparison of proposed price with the Independent Government Cost Estimate in accordance with FAR 15.404-1(b)(5); and (3) Comparison of proposed prices obtained through market research for the same or similar items in order to obtain a fair and reasonable price in accordance with FAR 15.404-1(b)(6).

6. ANY OTHER FACTS SUPPORTING THE JUSTIFICATION:

N/A

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

OVERCOME ANY BARRIERS THAT LED TO THE EXCEPTION TO FAIR OPPORUNITY

BEFORE ANY SUBSEQUENT ACQUISITION FOR THE SUPPLIES OR SERVICES IS MADE:

DLA will conduct market research and will continue its practice of ensuring that full and open competition is exercised to the maximum extent practicable.

8. CERTIFICATIONS

Requirements/Technical Certification:

I hereby certify that the supporting data provided for which I am responsible, and which form a basis for this justification are complete and accurate.

Contracting Officer Certification:

I hereby certify that this justification is accurate and complete to the best of my knowledge and belief.

Competition Certification:

Per FAR 16.507-6(d)(2)(x), I have determined that FAR 16.507-6(b)(3) applies and I hereby approve this justification.