JA21-079 HC1028-16-D-0007 DeCA 10 May 24 MOD 2r_Redacted.pdf

JUSTIFICATION FOR OTHER THAN FULL

AND OPEN COMPETITION (OTFAOC)

Federal Acquisition Regulation (FAR) Part 6 Justification & Approval (J&A), Supporting Procurements under FAR Part 12, FAR Subpart 13.5, and FAR Part 15

Contract Number: HC1028-16-D-0007 Procurement Title: Commissary Advanced Resale Transaction System Replacement/Modernization (CARTS R/M) Estimated Value:

Statutory Authority: 10 U.S.C. §2304(c)(1); Federal Acquisition Regulation (FAR) 6.302-1

Justification for OTFAOC Number: JA21-079 MOD 2

Upon the basis of the following justification, I, as Senior Procurement Executive, hereby approve the use of other than full and open competition of the proposed contractual action (MOD 2) pursuant to the authority of FAR 6.302-1, only one responsible source and no other supplies or services will satisfy agency requirements.

1. REQUIRING AGENCY AND CONTRACTING OFFICE:

Requesting Agency:

Defense Commissary Agency (DeCA) 1300 E Avenue Fort Gregg-Adams, VA 23108

Contracting Activity:

DISA/ Defense Information Technology Contracting Organization (DITCO) PL8322 2300 East Drive, Bldg. 3600 Scott AFB, Illinois 62225

2. NATURE/DESCRIPTION OF ACTION(S):

MOD 2: This is MOD 2 to the J&A originally approved August 5, 2021, with the bold text representing the updated language from the original J&A. MOD 1 was approved April 25, 2023, to increase the CARTS R/M ceiling and exercise option year 1 (OY1). MOD 2 is being executed due to the intent to exercise option year 2 (OY2) of the DeCA CARTS R/M contract and update the details for related competitive procurements. The current DeCA CARTS R/M contract ceiling of has been determined to be sufficient; thus, no further ceiling increase is being sought with MOD 2.

The Government is exercising OY2 of the DeCA CARTS R/M contract (July 1, 2024

– June 30, 2025) because it does not anticipate that the three follow-on contracts will be awarded prior to the end of OY1’s ordering period (June 30, 2024): DeCA Enterprise Business Operations Systems Solution (DEBOSS), Electronic Shelf Labels (ESL), and Regional Technical Representatives (RTR).

CARTS R/M OY 2 Exercise HC1028-16-D-0007-JA21-079 MOD 2

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DEBOSS is a sustainment contract for CARTS R/M hardware and software; it does NOT include support and maintenance for ESLs and consumables or for RTRs, which will be awarded as separate efforts. The OY2 exercise of CARTS /RM will thus avoid a potential capability gap and will allow mission critical maintenance and sustainment of the following: CARTS R/M hardware support; ESLs and consumables; RTR supporting the five DeCA regions (West, Pacific, East, Central, and DeCA Europe); current Point of Sales (PoS) equipment and self-checkout (SCO) deployments to existing stores; and delivery orders to support Operations and Sustainment (O&S).

Anticipated award timeframes for the three follow-on contracts mentioned above are as follows:

• DEBOSS: May 2024 o Task Order (TO) 1: Program management support (May 2024) o TO 2: Software/infrastructure support (November 2024) o TO 3: Hardware support (DeCA CARTS R/M follow-on) (May 2025)

• ESL: End of Q1 Fiscal Year 2025

• RTR: End of Q1 Fiscal Year 2025

MOD 1: This is MOD 1 to the J&A originally approved August 5, 2021, with the bolded text representing the updated language from the original J&A. MOD 1 will increase the current ceiling of for the DeCA CARTS R/M contract. The increase will allow continuation of mission-critical modernization to the DeCA CARTS legacy management data server centers, replacement of legacy mobile Point of Sale (mPOS) equipment, increasing self-checkout (SCO) deployments to existing stores, and maintain current maintenance delivery orders to support Operations and Sustainment (O&S). It is critical to increase the contract ceiling as it is insufficient to continue ongoing maintenance support and maintain a marketing capability for DeCA global retail services. The initial estimate to award a follow-on sustainment contract by June 2023 has been delayed. As such, a ceiling increase of will ensure continued operation and maintenance of the CARTS R/M point of sale (POS) until a new contract can be awarded, which is now estimated to be completed by January 31, 2024.

Original J&A:

The nature of this action is to increase the current ceiling of (independent government cost estimate (IGCE) plus any necessary increase due to contingencies) for DeCA CARTS R/M, contract number HC1028-16-D-0007. The increase will allow DeCA to reach Full Operational Capability (FOC) with critical replacement of the aging legacy point of sale hardware and to allow a follow-on requirement to be put in place.

The current contract effort was competed as a full-and-open acquisition. On June 27, 2016, contract HC1028-16-D-0007 was awarded to International Business Machines (IBM) for a one-year base and nine, one-year options. IBM was the only offeror that responded to the solicitation. Due to significant and unexpected events between contract

Page 3 of 7 Pages award on June 27, 2016, and year two of performance, including National Defense Authorization Act (NDAA) mandated changes to the agency’s business model, prolonged Coronavirus disease 2019 (COVID-19) travel restrictions, and several other high impact issues, DeCA has reached ceiling in year six (6) of the ten-year contract.

The increase is necessary as the current remaining ceiling is not sufficient to cover the requirements to reach FOC of the replacement hardware. A ceiling increase in the amount of will ensure continued operation and maintenance of the CARTS legacy point of sale (POS) until the critically needed replacement POS hardware is deployed.

The increase in ceiling amount was determined by applying historical and current costs for deployment, as well as the maintenance costs currently awarded under the subject contract that was competitively awarded to the contractor. The additional ceiling will support FOC as well as initial sustainment through June 30, 2023; this will allow time for a follow-on contract to be solicited and awarded and reflects a reduction of three years to the original contract end date of June 30, 2026.

3. DESCRIPTION OF SUPPLIES/SERVICES:

MOD 2: DeCA will need to exercise OY2 of the DeCA CARTS R/M contract because it does not anticipate that three follow-on contracts (DEBOSS, ESL, and RTR) will be awarded prior to the end of CARTS R/M OY1’s ordering period. This will avoid a capability gap and allow maintenance and sustainment of the following:

CARTS R/M hardware support; ESLs and consumables; RTRs supporting the five DeCA regions (West, Pacific, East, Central, and DeCA Europe); current PoS equipment and SCO deployments to existing stores; and delivery orders to support O&S.

MOD 1: The CARTS R/M contract has now deployed new POS hardware to 100% of the DeCA’s stores. The agency will need the ceiling increase to maintain and sustain current hardware in all DeCA commissaries through award of the follow-on sustainment contract.

This requirement will then transition to the projected follow-on sustainment contract award.

Original J&A:

Continuity of services is required for support to CARTS R/M, which provides critical POS hardware and services supporting and replacing the existing aging POS systems at 237 commissary locations across the United States (U.S.) and abroad.

Headquartered at Fort Gregg-Adams, VA, DeCA operates 237 military commissaries worldwide (approximately 3,000 lanes including self-checkouts). Of that total, 170 stores are located within the U.S. including Alaska and Hawaii, and 67 stores are located in 12 countries outside of the U.S. Individual commissaries range in size from single checkout lane stores operating on limited hours to large stores operating up to 40 checkout lanes and extended hours, seven days per week. Commissaries support 12 million U.S. military customers active-duty military, reserve, National Guard, retirees, disabled veterans, and

Page 4 of 7 Pages family members. Commissaries are designed and operate similarly to commercial grocery stores. DeCA’s goals are to provide a significant price savings when compared to commercial grocery stores; to provide courteous and informative assistance to its customers; to offer a variety of items in quantities and of a quality level to satisfy customer demands; and to provide products in a clean, safe, and wholesome environment. DeCA is replacing its current POS hardware at all commissaries, server centers, the DeCA Headquarters (HQ) test lab and Germantown Test Lab.

The CARTS R/M contractor integrates the replacement CARTS R/M POS hardware purchased by DeCA under this contract with POS software being purchased by DeCA under the Enterprise Business Solution (EBS) contract HC1028-15-D-0004. This contract supports sustainment and maintenance of the legacy POS software and hardware systems, as well as replacement of the POS hardware system integrated with EBS POS software provided through EBS contract HC1028-15-D-0004, which is responsible for development and maintenance the software portion of the POS. All delays in the deployment of the CARTS R/M POS hardware result in an equal and proportionate delay in the deployment of the EBS POS software solution under the EBS contract HC1028-15- D-0004.

In addition to replacing the POS hardware, the CARTS R/M contractor is also required to maintain the current legacy POS and maintain similar capabilities between the two systems so that commissary patrons experience the same level of service in all stores to the maximum extent possible.

The services described above require specialized knowledge of the legacy POS software/hardware systems and configurations, as well as specialized knowledge of the replacement POS software/hardware systems and configurations, in-depth knowledge of DeCA’s unique hybrid resale/government operational environment, as well as robust and complex daily coordination with the contractor developing and maintaining the EBS software required to operate the CARTS R/M hardware. The CARTS R/M contractor is the only one who has the necessary knowledge and expertise necessary for uninterrupted provision of service that will prevent the shutdown of stores.

The CARTS R/M contract has deployed new POS hardware to 65% of DeCA’s stores, and there are 35% of the stores left to deploy. It is imperative that the replacement of hardware continue uninterrupted to avoid loss of sales at the remaining stores that would occur if the end-of-life legacy POS hardware experiences a widespread failure that could not be addressed due to end of availability of manufacturer’s patches and updates. If the replacement hardware was not installed, some of the stores would have to shut down.

4. IDENTIFICATION OF STATUTORY AUTHORITY: Only one responsible source and no other supplies or services will satisfy agency requirements, 10 U.S.C. 2304(c)(l), FAR 6.302-1, and Defense Federal Acquisition Regulation Supplement 206.302-1.

5. DEMONSTRATION OF CONTRACTOR'S UNIQUE QUALIFICATIONS:

(a) Description of events. The current contract HC1028-16-D-0007 was competed under solicitation number HC1028-15-R-0025. Award of HC1028-16-D-0007 was made on

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June 27, 2016. The contract ordering period does not end until June 30, 2026;

however, the contract has reached its ceiling. As described above, the services under CARTS R/M contract require specialized knowledge and expertise of the software, hardware, configurations, DeCA’s unique hybrid resale/government operational environment as well as robust and complex daily coordination with the contractor developing and maintaining the EBS software required to operate the CARTS R/M hardware. Thus, the CARTS R/M contractor is the only source who has the necessary knowledge and expertise necessary for uninterrupted provision of service that will prevent the shutdown of stores.

As discussed below, there were numerous significant and unexpected events between contract award and current year of the contract that resulted in additional expenses and a 26-month delay in implementation. This included COVID19 travel restrictions, NDAA mandated changes to the agency’s business model, security, and payment card processing, as well as unexpected problems in reusing Government Furnished Equipment (GFE) for deployments due to delays and technology changes as the GFE was outdated.

(b) Justification.

MOD 2:

(1) Minimum Government requirements: With the exercise of CARTS R/M OY2 ordering period, DeCA will be able to avoid a serious capability gap while three follow-on contracts are awarded (DEBOSS, ESL, and RTR) and will continue the following critical capabilities: CARTS R/M hardware support;

ESLs and consumables; RTR supporting the five DeCA regions (West, Pacific, East, Central, and DeCA Europe); current PoS equipment and SCO deployments to existing stores; and delivery orders to support O&S.

(2) Proposed sole source contractor: CARTS R/M has fully deployed new POS hardware to 100% of the DeCA’s stores, and DeCA needs to ensure full sustainment until the follow-on three contracts are awarded.

MOD 1:

(1) Minimum Government requirements: With the ceiling increase of , DeCA will be able to support O&S and deploy a R/M of its POS Systems across the enterprise.

(2) Proposed sole source contractor: The CARTS R/M contract has now deployed new POS hardware to 100% of the DeCA’s stores.

Original J&A:

(1) Minimum Government requirements: Without the ceiling increase of

DeCA will not be able to reach FOC and deploy a R/M of its POS Systems across the enterprise. This R/M is required to keep pace with the commercial resale landscape and provide the benefit to our active duty and non-active-duty patrons.

This benefit, in many cases, is essential to maintain basic quality of life for U.S.

Armed Services community around the world.

(2) Proposed sole source contractor: Due to the inherent complexity of deployment

Page 6 of 7 Pages across 237 commissaries worldwide, IBM is the only source that can fulfill this requirement without risk of a substantial break in the service/support to CARTS R/M, which would result in sales and service losses to DeCA military patrons.

Deployment of POS hardware to the remaining 35% of stores to reach FOC is highly dependent upon continuity in coordination of complex processes, and would be extremely time consuming and expensive to recreate, causing further delay of FOC. Based on the level of complexity required to coordinate between contractors, and how long it would take a contractor to ramp-up for deployments, further delays are not acceptable as they will result in the shutdown of stores that are responsible for providing an essential benefit that maintain the basic quality of life for U.S. Armed Services community around the world.

(3) Discussion regarding cause of the sole source situation: A sole-source action is necessary due to delays and unanticipated contract costs incurred during deployment of CARTS R/M. Specifically, the 2016 NDAA required DeCA to revise its pricing methodology. Starting in 2019, the 2016 NDAA also required DeCA to begin partnering initiatives with other Department of Defense (DoD) resale activities (Military STAR Program card, Army and Air Force Exchange Service /Navy Exchange Service Command gift cards, and patron expansion to disabled veterans). DoD also mandated changes such as use of Windows 10 Secure Host Baseline (SHB) and eCommerce, and Visa mandated contactless payments. As a result, in order to meet these mandatory changes, expenditures under the contract increased significantly. Moreover, these mandates were not factored into the ceiling of the contract as they were unknown at time of contract award.

The CARTS R/M contract required that the Europay, MasterCard, and Visa (EMV) capable debit and credit processing equipment implemented in 2015 be reused for the CARTS R/M POS deployment to avoid loss of a recent investment in the capability. EMV is the capability to have the slot to insert a credit/debit card and the software to process the action. During the hardware and software integration effort in 2018, reprogramming of the equipment was found to be extremely complex, time consuming, and unreliable. As such, the contractor could not efficiently reuse the GFE, which required DeCA to purchase new equipment for the deployments. This again increased unanticipated expenditures under the contract.

COVID19 travel restrictions also caused a significant delay and additional unanticipated expenses in deployments. This was one of the factors that contributed to the 26-month delay in deployment of the CARTS R/M hardware, which significantly increased expenses associated with the deployment of the hardware.

Moreover, during this time, DeCA had to spend additional funding for maintenance coverage for CARTS legacy hardware to ensure that there was no interruption of service.

Delays in deployment of CARTS R/M caused by the above events have resulted

Page 7 of 7 Pages in the legacy POS system reaching end of life/support from the manufacturer before FOC of the replacement hardware. As such, the CARTS R/M contractor is using its specialized expertise with the legacy system and with DeCA’s operations to keep the system functional until the deployment of the replacement hardware is complete. This again increased expenses under the contract that were not anticipated at contract award, nor factored into the ceiling of the contract.

(4) Impact: As discussed in Section 3, the CARTS R/M program provides a critical benefit to the Armed Forces. Without execution of this ceiling increase, an unnecessary increased level of risk would be placed on DeCA in support of its mission, which will result in some commissaries having to close.

6. SAM.GOV ANNOUNCEMENT/POTENTIAL SOURCES: This modification is an increase of the ceiling amount on the original competitively awarded contract to allow hardware replacement FOC and operate in sustainment. In accordance with Defense Federal Acquisition Regulation Supplement and Procedures, Guidance, and Information the requirement to post a request for information or a sources sought notice was waived by the Head of the Contracting Activity; however, the follow-on effort will seek other viable industry sources in order to pursue a competitive solution.

7. DETERMINATION OF FAIR AND REASONABLE COST: As indicated in Section 2, the IGCE for the increase in ceiling was developed based on existing task order rates, historical deployment costs based on store sizes and requirements, and associated cost ceilings that have been previously determined to be fair and reasonable. For individual future orders, the contracting officer will compare to the current basic contract level prices.

8. MARKET RESEARCH: This is an increase to the ceiling of the existing contract to ensure continued support until FOC of the replacement POS hardware is reached. Market research was conducted for current orders submitted against contract HC1028- 16-D- 0007 to ensure that pricing is still advantageous to the Government.

9. ANY OTHER SUPPORTING FACTS: None

10. LISTING OF INTERESTED SOURCES: As indicated in Section 5, the only proposal was received in response to the original solicitation was from IBM.

11. ACTIONS THE AGENCY MAY TAKE TO REMOVE OR OVERCOME

BARRIERS THAT LED TO THE EXCEPTION TO FULL AND OPEN

COMPETITION:

MOD 2:

(a) The current contract expires June 30, 2026. Competitive procurements for related efforts were anticipated to be awarded prior to the exercise of OY2; however, these follow-on requirements and their updated projected award timeframes are below:

(1) DEBOSS: May 2024

• TO 1: Program management support (May 2024)

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• TO 2: Software/infrastructure support (November 2024)

• TO 3: Hardware support (DeCA CARTS R/M follow-on) (May

2025)

(2) ESL: End of Q1 FY 2025

(3) RTR: End of Q1 FY 2025

MOD 1:

(b) The current contract expires June 30, 2026; however, a competitive procurement is projected to be awarded by January 31, 2024, after FOC and initial sustainment efforts are complete.

Original J&A:

(b) The current contract, HC1028-16-D-0007, was solicited via full and open competition and the only offeror was IBM.

(c) The current contract expires June 30, 2026; however, a competitive procurement is projected to be awarded prior to June 30, 2023, after FOC and initial sustainment efforts are complete. The ceiling increase associated with this approval is only anticipated to accommodate support through June 30, 2023.