JA-22-0124B East West MCSC Extension Redacted 20221129.pdf

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FOR OFFICIAL USE ONLY - Source Selection Information – See FAR 2.101 and 3.104

Justification and Approval (J&A) for Federal Acquisition Regulation (FAR) Subpart 6.3

Other Than Full and Open Competition Title: T-17 Extension for East and West J&A Number: JA-22-0124B

Created By: Additional POCs: ZANCANELLA.MARGARET.A.

1. Identification of the agency and contracting activity:

Managed Care Contracting Division

2. Nature and/or Description of Action being Approved:

modification to an existing contract Individual

3. Description of Supplies/ Services:

JUSTIFICATION FOR OTHER THAN

FULL AND OPEN COMPETITION

CONTRACT NUMBER HT9402-16-C-0001

TRICARE MANAGED CARE SUPPORT CONTRACT, EAST REGION

CONTRACT NUMBER HT9402-16-C-0002

TRICARE MANAGED CARE SUPPORT CONTRACT, WEST REGION

1. Agency and Contracting Activity. The Office of the Assistant Secretary of Defense, Health Affairs (OASD/HA), Defense Health Agency (DHA), Contracting Activity, Managed Care Contracting Division, Aurora, Colorado, anticipates completing a bridge action to extend the current TRICARE Managed Care Support Contracts (MCSCs) for up to 2 years, 6 months. The 6-month extension pursuant to FAR Clause 52.217-8, Extension of Services, would be exercised as explained below.

2. Nature and/or Description of the Action Being Approved. The two Military Health System (MHS) TRICARE MCSCs represent $58 billion in annual health care and administrative expenditures. The DHA TRICARE MCSCs are divided into two regional contracts (East and West) and provide both health care and administrative support services for 9.6 million TRICARE beneficiaries. Services include the development, management, and credentialing of provider networks; support services for the referral of patients to and from the MHS direct care system; health care medical and clinical management services; call center services for customer support to TRICARE beneficiaries; health care quality management support; and, claims processing.

The DHA Managed Care Contracting Division issued a single request for proposal (RFP) for the next generation (T-5) MCSCs. However, the transformational nature of the requirements development phase included extensive market research and stakeholder engagement that negatively affected the acquisition schedule. As a result, the award of the contracts will not be in time to allow for contract transition. In addition, the DHA anticipates the contract awards may be delayed due to proposal evaluations and likely protests.

The following table summarizes the status of the current regional MCSCs:

Contract East Region West Region

Contract Number HT9402-16-C-0001 HT9402-16-C-0002

Contractor Humana Government Business Health Net Federal Services

Award Date 1 August 2016 1 August 2016

End Date 31 December 2022 31 December 2022

Total Value

The T-5 acquisition is behind schedule for several reasons including, delays in Program Management Office (PMO) staffing, delays in procurement direction, and the inability to obtain funding for critical demonstrations. In addition, the PMO led the effort for updating the TRICARE Manuals. The Manuals required a complete overhaul necessitating a new set of T-5 documents. The new Manuals will allow the implementation of new requirements without disruption to the other programs (TPharm 4/5, TRICARE Overseas Program, TRICARE Medicare Eligible Program, Uniformed Services Family Health Plan Designated Providers, and the TRICARE Dental contracts). The updated T-5 manual serves as major cost drivers in submitting a proposal for a requirement of this magnitude.

Several projects to support T-5 requirements development were cancelled, disapproved, delayed, or reduced in scope, which negatively impacted T-5 outcomes and placed the acquisition schedule at risk. Next, to facilitate the production of a "transformative" TRICARE contract, the Under Secretary of Defense for Health Affairs funded two contractors (Mercer, Inc. and Booze Allen Hamilton) in addition to the Defense Health Board to make recommendations for pre-planned product improvements to T-5. Subsequently, the 2018 National Defense Authorization Act (NDAA), Section 715, required the Principal Deputy Assistant Secretary of Defense (Acquisition) approve the T-5 acquisition strategy. The additional delays extended the T-5 requirements development process past a date when an acquisition could be accomplished to meet transition timelines. Finally, DHA had not reached agreements with the current contractors over the implementation of TRICARE Select in the first year of the contract. The negotiations took several years. The DHA could not start the extensions of the T-2017 MCSCs until these modifications were completed in early 2022.

The contract extension for HT9402-16-C-0001 (East Region MCSC) will consist of two 12-month option periods (IAW 52.217-9) and one 6-month option period (IAW 52.217-8) and increase the contract value

The contract extension for HT9402-16-C-0002 (West Region MCSC) will consist of two 12-month option periods (IAW 52.217-9) and one 6-month option period (IAW 52.217-8) and increase the contract value

The following table summarizes the anticipated bridge extensions.

Contract East Region MCS West Region MCS

Contract Number HT9402-16-C-0001 HT9402-16-C-0002

Contractor Humana Government Business Health Net Federal Services

Current Cost $40.2B $18.1B

Increase

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Revised Cost

3. Description of the Supplies/Services Required to Meet the Agency's Needs. The DoD through the DHA has a mission to provide health care services to eligible TRICARE beneficiaries.

These health care services are required by statute and regulation (Title 10 U.S.C., Chapter 55, Medical and Dental Care; and, Title 32 CFR Part 199, Civilian Health and Medical Program of the Uniformed Services (CHAMPUS)). In order to fulfill DHA's mission, the MCSCs provide comprehensive health care services and administrative support services for 9.6 million TRICARE beneficiaries. Services include, but are not limited to:

a. The development, operation and credentialing of an adequate, integrated managed health care Network of individual and institutional health providers that supplements the MHS direct care system and meets TRICARE statutory access standards for TRICARE Prime and Select beneficiaries in each large geographical region;

b. The development, management and operation of a Provider Education system that continually enhances provider's knowledge and awareness of the complex and dynamic TRICARE Program benefits;

c. All support services for an integrated referral management program to refer patients to and from the direct military health care system and within the health care network, considering unique TRICARE requirements such as the shift in Military Treatment Facilities' (MTFs') capacities, the referral of high value readiness cases to the MTFs, Prime Travel benefits and others, while ensuring that 95% of all enrolled beneficiaries have access to a network;

d. A full spectrum of health care medical and clinical management services that include case management programs for individuals with high cost conditions or specific diseases;

e. All management and operations necessary to perform beneficiary enrollments, re-enrollments, dis-enrollments, enrollment transfers and corrections; including the levy and collection of enrollment fees and proper allocation of enrollment fees to reduce contract costs;

f. A comprehensive customer service program consisting of multiple, contemporary avenues of access including customer call centers, e-mail, and website services for TRICARE beneficiaries;

g. All support services necessary for claims processing and adjudication for more than 25 million claims per year utilizing automated claims processing systems that are certified Capability and Maturity Model Integration Level 4 ; and

h. Integration with MHS GENESIS electronic health record system for the purposes of referrals and return of patient data to MTFs.

i. Other information:

1) Product Service Code: Q503 Medical-Dentistry Services

2) NAICS code: 524114, Direct Health and Medical Insurance Carrier

3) Small Business Size Standard: $41.5 million

4. Statutory Authority Cited. 10 USC 2304(c)(1), as implemented by FAR 6.302-1(a)(2)(iii)(A)), Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements.

5. Rationale Justifying Use of the Statutory Authority Cited.

6. Efforts to Obtain Competition.

7. Determination that Anticipated Cost to the Government will be Fair and Reasonable.

8. Market Research.

9. Other Facts

10. Interested Sources.

11. Actions to overcome barriers.

12. Technical/Functional Representative. As evidenced by signature, the technical and/or requirements personnel have certified that any supporting data contained herein, which is their responsibility and form a basis for the justification, are complete and accurate (FAR 6.303-2(c)).

13. Requirements Certification. I certify that the supporting data under my cognizance which are included in the justification is accurate and complete to the best of my knowledge and belief.

14. Contracting Officers' Certification. The Contracting Officers certify this document is accurate and complete to the best of their knowledge and belief (FAR 6.303-2(a)(12)).

15. Senior Procurement Executive (CPE): Based on the foregoing justification, I hereby approve the extension of the TRICARE MCSCs with a not-to-exceed an other-than-full-and-open-competition basis pursuant to the authority of 10 USC 2304(c)(1), subject to availability of funds, and provided that the services or property herein described have otherwise been authorized for acquisition.

TOTAL Contract Value

POP: From 1/1/2017 to 6/30/2025

Estimated Value

BASE

POP: From 1/1/2017 to 12/31/2022

Estimated Value

Type of Contract (Primary):

FAR 16.204 Fixed-Price Incentive

Options: Yes

Number of Options: 2

POP (All options): From 1/1/2023 to 12/31/2024

Estimated Value (all options):

Funding Type:

Department of Defense, Veterans Affairs, Joint Incentive-No Year (DoD/VA JIF-NY)

Extension of Services: Yes

Clause: FAR 52.217-8

Estimated Value:

Number of Months: 6

4. Statutory and Regulatory Authority Permitting Other Than Full and Open Competition (see FAR 6.302), or the Specification of the Statutory and Regulatory Provision Providing Exception to 8(a) Program Competitive Requirements (see FAR 19.805-1):

10 U.S.C. 2304(c)(1) 6.302-1 -- Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements

5. Rationale Justifying Use of the Statutory Authority Cited:

In accordance with FAR 6.302-1(a)(2)(iii)(A-B), for DoD components, services may be deemed to be available only from the original source in the case of follow on contracts for the continued provision of highly specialized services when it is likely that award to any other source would result in substantial duplication of cost to the Government that is not expected to be recovered through competition or unacceptable delays in fulfilling the DHA's requirements. The current regional MCSCs have the unique qualifications, such as there is no requirement for a new transition-in period or to build a network to provide the health care services, while the agency continues with the procurement of the next generation of MCS contracts.

In order to avoid the substantial duplication of costs, the incumbent contractors are the only responsible sources that can satisfy the program requirements for the period of time necessary to align with the new T-5 MCSCs' performance periods. Due to the nature of providing health care services to a diverse, mobile, and dynamic beneficiary population as described above, only current contractors have the resources and ability to continue to provide those mission critical services when time is of the essence.

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Due to the complexity and scope of the TRICARE MCSCs, 10 USC 1095c(b) requires a minimum of 9 months between contract award and the start of health care delivery unless the contractor receiving the award is an incumbent contractor. Award to other than an incumbent contractor in lieu of executing contract extensions will result in estimated transition costs of up er contract. The results of the next generation MCS acquisition will likely drive a second transition period (and associated costs) within a 1- to 3-year period. Additionally, multiple transitions and subsequent lack of continuity would negatively impact the effectiveness of the MCSC program. The incumbent contractors have the systems, personnel, processes, and networks required to deliver the required beneficiary services without interruption. Executing a separate competitive acquisition for the requested timeframe would duplicate the costs incurred for the consolidated T-5 MCSC acquisition. The government estimates 24 months to execute an acquisition for an interim contract in lieu of an extension. The DHA conservatively estimates conduct a source selection of this magnitude. The duplicate costs would be incurred concurrently with the costs of conducting the next generation T-5 MCSC source selection.

Additionally, the DHA has determined it is more effective in terms of contract performance, oversight, and costs, to exercise the FAR Clause 52.217-8, Extension of Services, after any sole source extension because various contract terms and conditions are based on 12-month option periods. For example, contractor reporting, contract incentives, and performance guarantees correspond to the option period, Furthermore, several Government systems are also constrained by the 12-month option periods. Any changes to the option periods would require programming changes and testing. The costs for these changes are unknown and not funded. Therefore, it is in DHA's best interests to postpone exercising FAR Clause 52.217-8 until the end of the sole source extension, if necessary.

Allowing the expiration of the existing contracts, without extending them, while conducting the consolidated T-5 MCSC source selection will result in a critical failure in DHA's mission to provide health care services to over 9.6 million beneficiaries as required by 10 USC Chapter 55, and codified in 32 CFR, Part 199, Civilian Health and Medical Program of the Uniformed Services.

6. Efforts to Obtain Competition:

The DHA MCCD is currently conducting a full and open competitive acquisition "T-5" Solicitation No HT9402-20-R-0005. Historically, only the incumbent contractors have responded to Request for Information (RFI) or Sources Sought posted pursuant to the DFARS PGI 206.302-1(d) requirement. The J&A will be posted to SAM as required in FAR 6.305(d)(1). Therefore, the MCSC Contracting Officers request the Senior Procurement Executive waive the requirement for publishing a request for information or sources sought notice on the System for Award Management (SAM.gov) website pursuant to DFARS PGI 206.302-1, Only one responsible source and no other supplies or services will satisfy agency requirements, which states:

(d) Limitations. When utilizing the authority at FAR 6.302-1, the contracting officer shall post a request for information or a sources sought notice, and shall include the results of this inquiry in the justification required by FAR 6.303. This requirement to post may be waived by the Head of the Contracting Activity, or designee. The waiver authority may not be delegated lower than a general or flag officer or a member of the Senior Executive Service.

7. Determination that Anticipated Cost to the Government will be Fair and Reasonable:

The DHA will ensure fair and reasonable pricing using the FAR 15 procedures and guidelines for negotiations of any MCSCs extensions. In accordance with FAR 15.403-4, Requiring Certified Cost or Pricing Data, the Contracting Officers will obtain certified cost or pricing data. Technical personnel familiar with the requirement and historical costs will also evaluate the proposals for appropriate labor mix, number of hours, and overall cost(s). The Contracting Officers may also request support from the Defense Contract Audit Agency to ensure accurate direct and indirect rates.

The Contracting Officers will negotiate any element of the proposed cost that is not reasonable based on the proposal analysis techniques in FAR 15.404, Proposal Analysis.

8. Market Research:

Market Research Conducted? Yes When was it conducted? 2/10/2020 to 9/9/2020 Description:

The Government conducted market research consisting of internet searches and industry days. Based on market research and historical information, there is insufficient time and resources for DHA to competitively award a contract to a non-incumbent and complete the required transition-in tasks to start health care delivery by December 31, 2022. The T-5 source selection is currently underway which will result in competitively awarded contracts.

9. Other Facts:

These contract actions are considered "bridge actions" in accordance with DHA PGI 206.3, Other Than Full and Open Competition, which defines a bridge action as "an out-of-scope extension to an existing contract beyond the period of performance (including option years), on a non-competitive basis to avoid a lapse in service due to delay in award of a follow-on contract."

10. Interested Sources:

Although there may be other potential sources, based on the urgent requirement, the timeframe to meet the immediate needs, and recent market research, the Contracting Officer determined these potential contractors were not capable to meet the urgent needs of this requirement without extensive lead time to establish their capabilities. It in the best interests of the public and the Government to issue a sole source bridge extension with the incumbents for this requirement.

11. Actions to overcome barriers:

DHA intends to procure the T-5 East and West Region MCSCs concurrently, as was done for the current T2017 MCSCs, utilizing full and open competition. Anticipated performance start date of the follow-on contracts is 1 January 2023. One year of transition is expected.

Coordination & Approval

12. Technical/Functional Representative:

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

Name: TROWBRIDGE.JEFFREY.CHARL Title: COR

Approved:

Comments:

13. Requirements Certification:

I certify that the information provided in this justification is accurate and complete to the best of my knowledge and belief

Name: MIRROW JOSEPH B CIV AFMSA/DHA/OCAE Title:

J-Directorate Office:

Approved:

Comments:

14. Fair and Reasonable Cost Determination:

I have determined that the anticipated cost to the Government for this contract action is fair and reasonable.

Name: FOSTER.PATRICK.O. Title: Contracting Officer, Managed Care Contracting Division

Approved:

Comments:

15. Legal Review:

I have reviewed this justification and have found it to be legally sufficient.

Name: Title: Office of General Counsel

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Approved: DYKE.DENNIS.ALLEN.1146613604 - 23 May 2022, 10:27:11

Comments:

16. Contracting Officer:

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

Name: FOSTER.PATRICK.O. Title: Contracting Officer, Managed Care Contracting Division

Approved:

Comments:

17. Competition Advocate: Based on the foregoing justification, I hereby approve the procurement of T-17 Extension for East and West on an other than full and open competition basis pursuant to the authority of 10 U.S.C. 2304(c)(1) 6.302-1 -- Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements, subject to availability of funds, and provided that the supplies and/or services herein described have otherwise been authorized for acquisition.

Name: Dr. Jake Lewis Title: Competition Advocate (DAD-P&C)

Approved:

Comments:

18. Head of Contracting Activity (or designee): Based on the foregoing justification, I hereby approve the procurement of T-17 Extension for East and West on an other than full and open competition basis pursuant to the authority of 10 U.S.C. 2304(c)(1) 6.302-1 -- Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements, subject to availability of funds, and provided that the supplies and/or services herein described have otherwise been authorized for acquisition.

Name: Dr. Barclay P. Butler Title: Head of the Contracting Activity (HCA) (DAD-P&C)

Approved:

Comments: Due to dollar value of sole source action Dr. Butler is the approval authority for this action. My approval constitutes coordination on this package.

19. Director of Defense Health Agency, Senior Procurement Executive: Based on the foregoing justification, I hereby approve the procurement of T-17 Extension for East and West on an other than full and open competition basis pursuant to the authority of 10 U.S.C. 2304(c)(1) 6.302-1 -- Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements, subject to availability of funds, and provided that the supplies and/or services herein described have otherwise been authorized for acquisition.

Name: Dr. Barclay P. Butler Title: Senior Procurement Executive (SPE)

Approved:

Comments:

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