FMDDT JA Redacted.pdf

Source Selection Information – See FAR 2.101 and 3.104

Document # 26-021

JUSTIFICATION FOR AN EXCEPTION TO FAIR OPPORTUNITY

(ABOVE SAT)

1. Identification of Requiring Activity and Contracting Activity.

The requiring activity the Assistant Secretary of the Navy, Financial Management & Comptroller (ASN (FM&C)), Washington, DC. The contracting activity is NAVSUP Fleet Logistics Center (FLC) Norfolk, Contracting Dept., FM&C/BUMED Directorate.

2. Nature and description of contract action.

This acquisition is conducted under the authority of 10 U.S.C. 3406(c)(5). This action is an exception to the fair opportunity process to be awarded as a new task order. The placement of a cost-plus-fixed fee order is anticipated.

This procurement action supports the provision of Financial Management Data and Digital Transformation (FMDDT) support services that are currently performed under Contract number N0018924FZ006. Contract number N0018924FZ006, was awarded on a competitive basis to KPMG, a large business; the existing contract expires on 31 January 2026. This task order would fall under the Financial Improvement Program (FIP) IV indefinite-delivery indefinite-quantity multiple award contract (IDIQ MAC).

3. Description of Required Supplies/Services to meet the agency’s needs.

The proposed acquisition is to issue a sole source task order to KPMG for the provision of support services and ODCs for FMDDT. It is intended to acquire services to enhance the data analytics capabilities of the Department of the Navy (DON) by leveraging data transformations, data analytics, and data engineering expertise with the goal of effectively collecting, storing, processing, analyzing, visualizing, and governing data for decision-making, operational efficiency, and strategic planning.

DON leadership has set an accelerated deadline of FY28 to receive an unmodified audit opinion (i.e. pass audit) on the DON’s General Fund (GF) and a deadline of FY26 for the DON’s Working Capital Fund (WCF). To meet these mission critical goals, part of the solution is achieving DON FM Strategy Strategic Goal #5: “Leverage data analytics to improve DON financial operations.”

The base period of the resultant follow-on contract will be funded with the corresponding Fiscal Year Navy Operations & Maintenance (O&MN) appropriations. These funds are expected to be available in the corresponding fiscal year.

Option periods will be exercised subject to the availability of funds. Options are expected to be funded utilizing appropriations O&MN of the fiscal year in which the option year is exercised.

4. Identification of the Exception to Fair Opportunity Rationale and/or Demonstration of Contractor’s Unique Qualifications.

The statutory authority that permits not providing each awardee a fair opportunity to be considered for each order exceeding the micro-purchase threshold issued under a multiple award contract is 10 U.S.C. 3406(c)(5), as implemented by FAR 16.505(b)(2)(i). The applicable exception to the fair opportunity process for this justification for the award of an order exceeding the simplified acquisition threshold is:

The exception to the fair opportunity process is FAR 16.505(b)(2)(i)(C)- The order must be issued on a sole-source basis in the interest of economy and efficiency as a logical follow-on to an order already issued under the contract, provided that all awardees were given a fair opportunity to be considered for the original order.

Over the past several years, the DON has established a robust Financial Improvement and Audit Remediation Program (FIAR) that encompasses all DON Major Commands and crosses numerous functional components including service provider interface and coordination.

In the FY2024 National Defense Authorization Act, Congress has mandated that all components of the DoD be auditable by FY28. As this deadline approaches, DON and DoD leadership have also made financial health and audit a renewed point of priority, which has driven increased urgency in achieving audit goals. In early 2025, the Secretary of the Navy has named Audit as a top challenge, included Audit as a priority, and indicated the need to achieve a clean audit “as soon as practicable.” In June 2025, the Secretary of Defense signed a memorandum reiterating the urgency of this goal, stating that anything less than achieving the 2028 goal as “unacceptable” and establishing audit readiness as an “immediate imperative.” In accordance with SECDEF and SECNAV priorities and statements of urgency, the DoN is aiming to achieve remediation of the WCF by FY26 and GF by FY28.

For these audits to be both successful in the short term and sustainable in both operation and cost in the long term, the DON’s must modernize how it collects, stores, processes, analyses, presents, and governs data. This is for two primary reasons: 1) changes in technological landscape since 2022 offers opportunities to accelerate audit through artificial intelligence, machine learning, and other advanced data techniques, and 2) since 2022 there has been a significant shift in the DON’s audit strategy toward substantive testing, which focuses auditors toward transaction-level testing of the DON’s data and requires massive improvements in the DON’s data.

KPMG has been the primary vendor providing FMDDT services to the DON since SEP 2018.

KPMG has significantly improved the DON’s FMDDT capabilities. Changing vendors at this point would severely delay remediation efforts.

KPMG is the primary provider of DDT services to the DON. These efforts are in a critical phase, and changing vendors for these efforts would significantly increase the risk of failed audit. Such results would severely damage the DON’s credibility and ability to demonstrate fiscal accountability and meet administration priorities.

KPMG won the FMDDT Support (N0018918FZ937) FIP III task order awarded in SEP 2018 FMDDT (N0018924FZ006) and the follow-on FIP IV FMDDT effort in FEB 2024. Both task orders were solicited as competitive task orders on their respective FIP III/IV vehicle.

KPMG is the only organization postured to continue DDT development fast enough to meet audit deadlines.

Award to any non-incumbent would likely result in substantial duplication of cost to the Government and unacceptable schedule and programmatic delays. If a new vendor were to provide these services, it would necessitate a lengthy learning curve. The new vendor would be required to procure and configure a contractor site development environment resulting in added cost passed to the government and require transition time to a new vendor. This totals an approximate duplication of cost detailed in the table below in order to bring the new contractor up to speed on work already completed and build the expertise to continue the effort.

Impact to any of these efforts would result in unacceptable delays to FMDDT, which in turn would impede auditability. In addition, transitioning the work to a contractor other than KPMG to perform these services would also involve time lost to Government personnel who would have to familiarize the new contractor to the entire working environment to sufficiently transition them into this effort. Thus, awarding to another vendor at this time would result in both an unacceptable schedule and programmatic delay to DDT, and a substantial and unreasonable duplication of cost. The actions and processes of the audit environment as well as this program are of a time sensitive nature as DON is working to comply with the Department of Defense’s (DoD’s) Financial Improvement and Audit Readiness (FIAR) Plan and the congressionally mandated deadlines for audit readiness.

The established audit deadline is approaching and the risks to performance and schedule associated with a new contractor entering the project at this point are unacceptable. Further bringing another contractor would be inefficient, given the time required for the new contractor to assess the history of the prior efforts and develop what would amount to a short-term plan to achieve the desired timeline. Allowing the existing contractor to utilize the knowledge and efficiencies gained through the course of performance is necessary to support the Navy in meeting the audit milestones.

Based on the foregoing, the services are deemed to be available only from KPMG because the award of these highly specialized services to any other source would result in substantial duplication of cost to the Government that would not be recovered through competition and in unacceptable delays in fulfilling the agency's requirements. Awarding to a firm other than KPMG would result in schedule delays, degradation or breakdown of services, and harm the agency’s mission.

5. Determination of Fair and Reasonable Cost.

In accordance with FAR 16.505(b)(2)(ii)(B), the contracting officer has made the determination that the anticipated cost to the Government will be fair and reasonable.

6. Any other facts supporting the justification.

This procurement uses a MAC and will be solicited and awarded in accordance with FAR Subpart 16.5.

7. Actions Taken to Remove Barriers to Competition.

The Navy will overcome barriers to competition for the FMDDT efforts through reassessing the requirements after presumably passing audit by 2028. At that point, it is anticipated that contractor support will transition to ensure that the unmodified audit opinion is sustainable in subsequent financial statement audit engagements. This shift in scope should result in future competition. As this effort proceeds, barriers to future competition will be sought to be reduced or removed. Any subsequent follow-on requirements to the ones covered by this J&A will be handled on a case-by-case basis and market research will be conducted for any future requirements to determine if there are any potential sources for competition.

8. CONTRACTING POINT OF CONTACT.

The point of contact at NAVSUP Fleet Logistics Center Norfolk Contracting Department, BUMED/FM&C Directorate is Stephanie Murphy Code 244.1, who may be reached at (771) 229-3283 or by e-mail at Stephanie.m.murphy28.civ@us.navy.mil.