JA_DBO_FIAR_PROGRAM_FBO.pdf

J&A Control Number – JA-15-0001

Justification and Approval for Other Than Full and

Open Competition

Authority: FAR 6.302-1(a)(2)

Amount: $12.514M

1. Contracting Activity: Defense Security Cooperation Agency

2. Description of Action: Award of a Firm-Fixed-priced sole source with a twelve month base and two (2) twelve month options for consulting management support for financial and audit improvement for DSCA Business Operations. Funding used will be Foreign Military Sales administrative funds.

3. Description of Supplies/Services: Achieving DSCA’s mission goals requires effective governance, including internal controls, and targeting focus areas for process and financial improvement that align with DSCA’s strategic goals. In order to strengthen internal controls and financial management practices, DSCA is working to institute sustainable business processes, develop guidance as required, and drive effective change throughout the Security Cooperation community. DSCA is working to improve and align its existing Managers’ Internal Control Program (MICP) and Financial Improvement and Audit Readiness (FIAR) programs. Building upon a strong MICP will allow DSCA to assess and control the organization’s mission-facing and mission-enabling risks. Leveraging the FIAR program will allow DSCA to assess and manage its risks related to DoD appropriated funds (e.g., Section 1206, Disaster and Humanitarian Relief, and Regional Centers), and this same framework will be applied to risks associated with security assistance funding (e.g., FMS, FMF, IMET) which reside outside the scope of the traditional FIAR guidance and requirements. By driving a larger mission-based approach to the entire portfolio of business processes that aligns with their strategic goals, DSCA can achieve greater transparency with customers, MILDEP stakeholders, industry, and Congress. The estimated value of the contract for the Base Year is $4,089,257, with two option years, $4,170,242 and $4,252,847, respectively for an estimated total of $12.514M.

The contractor currently assists with the MICP developing control testing procedures and plans and risk assessment protocols specific to DSCA organizational structure, data systems, business lines, conducting interviews with assessable unit managers, providing training, and supporting the dissemination and communication of program objectives. The contractor is fully engaged in ongoing financial readiness and audit readiness efforts, to include quarterly audit simulations, preparations for full audit of civilian pay (across all Agency organizations), development of documentation for each audit assessable unit, development and maintenance of information sharing through SharePoint, and review of audit readiness roadblocks. The DSCA has significantly tailored commercial standards and developed a strategy that provides integrated back-end information sharing and the creation of common data structures to allow for integration of FIAR and MICP support.

The contractor has used those same tailored systems, tools, and data sets to develop repeatable processes and procedures to facilitate ongoing assessments as well as progress metrics to deliver a consistent picture of the status of activities that can be provided to and integrated with Agency strategic goals and objectives, MICP, and FIAR. DSCA has also tailored commercial standards to develop processes that enable the identification and availability of complete and timely documentation to support FIAR, MICP, and strategic goals and objectives. DSCA intends to continue the maturation of existing oversight programs, such as FIAR and MICP, to include performance measures and initiatives related to the DSCA Vision 2020 strategic plan. This will allow DSCA to continue to improve its ability to meet mandatory FIAR and MICP requirements and deadlines.

In order to successfully implement the approach that aligns business processes with their strategic goals, DSCA requires support from a contractor with specialized knowledge of and proven implementation support of: DSCA Manual 5105.38-M, Security Assistance Management Manual, Security Cooperation and Foreign Military Sales, Management Consulting and Transformation Program Integration, Federal Managers Financial Integrity Act of 1982 (FMFIA), Office of Management and Budget (OMB) Circular A-123, DoD Directive 5010.38 and DoD Instruction 5010.40, Generally Accepted Accounting Principles (GAAP), Federal Accounting Standards Advisory Board (FASAB), Government Accountability Office (GAO) Financial Audit Manual (FAM), and the DoD Financial Management Regulation (FMR).

In addition to the specialized expertise in DoD and Federal financial management areas, the contractor should have a comprehensive understanding of the business processes that drive DSCA’s mission and strategic goals. This knowledge is critical to facilitate the investigation and root cause analysis necessary to document current-/future-state processes. Such knowledge is equally important when developing and executing targeted improvement/corrective actions related to FIAR and MICP.

4. Authority Cited: 10 U.S.C. 2304(c)(1) as implemented in FAR 6.302-1(a)(2) – Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements

5. Reason for Authority Cited: Pursuant to FAR 6.302-1(a)(2)(iii)(B) – This requirement is only available from the incumbent contractor for the services described above. Award to any other source would result in unacceptable delays in fulfilling the agency’s requirements.

In accordance with the National Defense Authorization Act (NDAA) for FY10, the financial statements for the Department of Defense must be validated as ready for audit no later than September 30, 2017. FY15 is the first year for audits on the Schedule of Budgetary Resources (SBR) and DoD is statutorily required to have full financial statement audits beginning in FY18. As part of that requirement, DSCA is required to meet well established goals and objectives to ensure the Department’s ability to obtain an unqualified opinion. DSCA began the process to meet the FY17 deadline in late 2010 and utilized on-hand, ad hoc contractor support in 2012. However, the Agency realized the need for support with the ability to address ‘audit’ from more than just a financial perspective – more pointedly with the ability to address the full breadth of support required to strategically manage and interconnect audit, accounting and finance, MICP, and strategic planning. In June 2013, Deloitte Consulting received award through a competitive process and began utilizing and tailoring commercial standards to officially guide the Agency toward full compliance. Deloitte Consulting has had access to DSCA’s unique organizational structure (Arlington, VA; Washington, DC, WPAFB, OH;

Mechanicsburg, PA; Newport, RI; Honolulu, HI; and Garmisch, GE), diverse set of appropriations (Defense and State), Agency Trust Funds, bifurcated Headquarter accounting and finance systems (WAAS and GAFS), as well as, Department-wide data systems. Further, the current contractor has access to centralized efforts by the Office of the Under Secretary of Defense (Comptroller) to manage, control, and direct Department-wide efforts for audit readiness, which assists the Agency stay updated in an ever shifting environment. Financial integrity and audit readiness efforts under the current contract (HQ0034-12-D-0023, 0003) have transitioned the Agency from a concept of interrelated functions (audit, management control, and strategic planning) to execution of specific tasks and schedules to meet the Department deadline of 30 September 2017. The current contract expires 16 December 2014. DSCA has significantly tailored commercial standards and practices over the last 18 months. Transition to a new contractor will be a regression and cause significant impact in meeting Department and Congressional deadlines. Due to the unique nature of DSCA financial integrity and audit readiness and the criticality of work to be performed over the next 36 months it is imperative that there is no break in service or transitional delay attributed to knowledge and data transference.

The current contractor, Deloitte, has detailed knowledge of the current status of DSCA audit efforts and is best suited to maintain Agency goals and objectives.

The amount of duplicative time and resources for a new contractor to become trained and familiar with DSCA unique accounting and finance policies and procedures, as well as, the overall tailored history, content, and Agency specific strategic planning supporting the assertion program is significant. It is estimated to take a minimum of 120-180 days to become conversant with the history of work already transpired, which would cause unacceptable delays in meeting Department and Congressional deadlines. The impact would stop forward progress with ongoing tasks as DSCA instructs and educates a new contractor with Agency customized analytic discovery of financial, budget, organizational processes, and performance measures; audit process control walkthroughs, documentation, audit control testing and records; Agency’s MICP framework and control testing approaches, execution of control testing, and reporting of results on key process areas; and FIAR/MICP training and communication plans and procedures. This delay would affect the Agency’s ability to maintain compliance with OUSD(C) schedule to:

validate DSCA’s overall audit readiness by 30 September 2015; support ongoing Mock Audit activity through Mar 15; Department mandated transitions to new audit compliant funds management and finance systems through 30 Sep 16 (e.g., Electronic Funds Distribution (EFD), Defense Agency Initiative (DAI); FY 2016 and FY 2017 Audits, to include implementation of corrective action plans, testing, and verification: timely conduct and reporting of Mock Audit results in FY15 and FY16; full audit and assertion in FY17; completion of ongoing MICP risk assessments, materiel weakness corrective action plans, process mapping and narratives for the FY15 Statement of Assurance.

The risk to DSCA of having another contractor start in December 2014 and try to educate them on the Agency's audit readiness approach - one that includes audit, internal controls, and strategic planning - and build toward a successful assertion package by 30 Sep 17 is extremely high and essentially guarantees the DSCA fails to meet all OSD(C) and Congressionally mandated timelines by more than six (6) months. The impact of missing milestones and timelines would be detrimental to the Agency. Specifically, the Agency would be in non-compliance of regulatory (OUSD(C) FIAR Guidance, 2013) and statutory (National Defense Authorization Act of Fiscal Year 2010, Section 1003) assertion requirements for the Department of Defense. DSCA financials are a component of the overall Department of Defense audit assertion and statutory compliance. Without an assertion by DSCA, the Department of Defense would be unable to fully assert its overall financials, thereby placing the Department as whole in noncompliance with the aforementioned statute and OSD(C) guidance. Each Agency within the Department of Defense is responsible to obtain an audit opinion of their financials, which is then consolidated as the Department of Defense assertion. The Agency's ability to control and manage its finances would be called in to question, which would create an immediate mission work stoppage, requiring the reprioritization and refocus of resources dedicated to other operational requirements. This may also affect the confidence our customers have in our management of their funds and case execution. Further, OUSD(C) would have to reprioritize scarce Department of Defense resources to re-assess issues, develop corrective action plans, and implement improvements. This action would have a profound impact on the Department's ability to execute programs, such as the Afghanistan Security Forces Fund (ASFF), the Combating Terrorism Fellowship Fund (CTFP), and various building partnership capacity efforts funded through Section 1206, Train and Equip Authority.

These programs are a national security priority, which are aimed at lessening U.S.

involvement in overseas contingencies. The programs provide necessary military equipment and training to build partnership capacity for "new and emerging" counter-terrorist operations or to participate in or support military and stability operations in which the US armed forces are a participant.

6. Efforts to Obtain Competition: The existing contract at DSCA was procured by Washington Headquarters Services (WHS) through an existing IDIQ contract vehicle.

The requirement was issued to four (4) contractors – two contractors’ submitted proposals. Deloitte Consulting received award under HQ0034-12-D-0023, Task Order 0003, awarded June 2013. The current period of performance expires December 16, 2014.

The Government issued a sources sought notice through FedBizOps to measure the capabilities of sources and encourage competition.

7. Actions to Increase Competition: Although the rationale above provides for a sole source there are opportunities to increase competition for post-assertion support by strategically breaking requirements into functional alignment. The agency is confident that competition is achievable after the Agency’s assertion in FY17.

8. FAR 6.303-2(7) FAR 6.303-2(7) applies and a determination has been made by the Contracting Officer under Section 14 that the anticipated cost to the Government will be fair and reasonable.

9. Market Research: The Government reviewed the services available through the General Services Administration (GSA) Management, Organizational and Business Improvement Services (MOBIS), Financial and Business Solutions (FABS), Performance Management/Continuous Process Improvement (PM/CPI) BPA, and One Acquisition Solution for Integrated Services (OASIS) Multiple Award Contract (MAC). Additionally, DSCA received 18 replies in response to the Agency’s Sources Sought – ten (10) small business and seven (7) large business firms.

10. Interested Sources: See Section 9. As stated in Section 5, the risk to DSCA of having another contractor start in December 2014 and try to educate them on the Agency’s audit readiness approach – one that includes audit, internal controls, and strategic planning – and build toward a successful assertion package by 30 Sep 17 is extremely high and essentially guarantees the DSCA fails to meet all OSD(C) and Congressionally mandated timelines by more than six (6) months.

11. Other Facts: Discuss any other facts supporting the use of other than full and open competition, such as the following:

a. Procurement history. Reasonable efforts to retrieve the following items from computer records, contract files, competition advocate office files or other sources are expected:

(1) Contract numbers and dates of the last awards: HQ0034-12-D-0023, Task Order 0003, awarded June 2013. The current period of performance expires December 16, 2014.

(2) Competitive status of these actions: Competed through an IDIQ.

(3) Authority previously used for less than full and open competition: N/A

(4) If a justification was prepared to support the procurement made before this one, a summary of the contents of Section 7 of the justification for that procurement and an explanation of the results: N/A

(5) If any prior award was accomplished by full and open competition, a detailed explanation of the changed circumstances: DSCA utilized an existing competitive Department of Defense IDIQ contract as a way to obtain required support. This contract is no longer available for DSCA use.

(6) An explanation of any unusual patterns which may be revealed by the history, e.g., several consecutive, urgent buys: N/A

(7) If a justification was prepared to support the procurement made before this one, briefly describe the circumstances justifying the buy and whether there have been any significant changes: N/A

b. Acquisition data availability. Explain why technical data packages, specifications, engineering descriptions, statements of work or purchase descriptions suitable for full and open competition have not been developed or are not available. Describe actions taken or planned to remedy this situation: N/A

c. Unusual and compelling urgency. N/A

d. Subcontracting competition. In single source situations, address efforts to be taken by the Government to assure that the prime contractor obtains as much competition as possible in its subcontracting:

In accordance with FAR 19.702, the contractor will be required to submit a subcontracting plan.