JA KPMG Surge Support Final.pdf

UNITED STATES MARINE CORPS

MARINE CORPS INSTALLATIONS COMMAND

3000 MARINE CORPS PENTAGON

WASHINGTON, DC 20350-3000

MCICOM-JA-20-005

9 March 2020

Class Justification - Exception to Fair Opportunity

1. Identification of the Agency and Contracting Activity:

The Requiring Agency is Headquarters Marine Corps (HQMC), Deputy Commandant (DC), Installations and Logistics (I&L) located at Washington, D.C. The Contracting Activity is the Marine Corps Installation Command (MCICOM), HQ Contracting located at Arlington, VA.

2. Description of Action Being Approved:

The actions being approved are for the non-competitive award of modifications to Task Orders as described in Table 1.

Table 1. Estimated Award Increases by Task Order Number Task Order Number Estimated Increase M95494-19-F-0044 $4,023,465 M95494-19-F-0045 $9,798,753 M95494-19-F-0046 $595,623 M95494-19-F-0048 $1,571,004

Estimated Total $15,988,845

The Naval Supply Systems Command competed the aforementioned Task Orders for the Requiring Activity under its Financial Improvement and Audit Readiness (FIAR) Multiple Award Contract (MAC), resulting in the award of the four said Task Orders to KPMG LLP. KPMG LLP’s FIAR contract number is N00189-18-D-Z014. KPMG LLP is located at 8350 Broad St., Ste 900, McLean, VA 22102. Said four Task Orders were later transferred to the Contracting Activity to administer. All Task Orders are Time & Material with a period of performance of one Base Year (28 September 2018 – 27 September 2019) and One Option Year (28 September 2019 – 27 September 2020). Currently these Task Orders have a combined not-to-exceed value of $67,651,680. The combined total increase covered by this exception is $15,988,845.

The value of the increase is within the maximum value of the MAC contract of $579,961,390. The required work associated with this action is expected to be completed by September 2020.

Authority to act under this class exception to fair opportunity expires on 27 September 2020.

3. Description of Supplies and/or Services:

OMB Circular A-123 and federal law requires that federal agencies manage appropriate internal controls. Agency internal audits are used to assess and strengthen internal controls and improve federal financial information, which is critical in improving the Department of the Navy (DON) and United States Marine Corps’ (USMC) compliance with Federal Financial Accounting Standards. The four task orders issued by MCICOM HQ Contracting provide expertise in accounting, internal audit and/or audit remediation to HQMC DC I&L, as the lead business process owner for the majority of these audit activities. The outcomes of the current task order requirements include (a) successful remediation of material weaknesses, (b) significant reduced error rate of key property assessable units, among other areas, and (c) the execution of POAMs in order to achieve clean baselines to facilitate the goal of merging of the Navy and Marine Corps General Fund Agency Financial Reports (AFR) into one DON General Fund AFR. To significantly build on this progress, in December of 2019, the Deputy Commandant for Programs and Resources, Deputy Commandant for Installations and Logistics, and the Assistant Secretary of the Navy for Financial Management and Comptroller increased the priority of financial improvement for FY 2020; therefore, significant improvement is required regarding the quality of the organization’s financial information as measured by an external audit opinion. To achieve this end, additional in scope work is required across the Task Orders listed in Section 2. The below outlines the additional taskings required in order to meet the FY 2020 financial audit goals.

M95494-19-F-0044 Description of Required Work

Currently, under M95494-19-F-0044, the Contractor is:

(1) Supporting the Marine Corps Systems Command (SYSCOM) in addressing material weaknesses over the reporting of (a) operating materials and supplies, (b) construction work in process, (c) capital improvements, and (d) internal controls over quarterly financial reporting; and

(2) Supporting MCICOM in auditing physical inventory.

To meet the Department of Navy’s priority for significantly improved financial information and facilitate the goal of merging of the Navy and Marine Corps General Fund Agency Financial Reports (AFR) into one DON General Fund AFR, SYSCOM and MCICOM must complete additional financial improvement activities and/or at higher confidence levels; specifically, the following work activities are required:

(1) SYSCOM requires reviews of more locations (e.g., contractor facilities maintaining Government Furnished Property

(GFP)), larger samples sizes (e.g., incorporating capital improvement and army procured ammunition in development as part of internal validation activities), and more remediation activities (e.g., establishing effective monitoring procedures to timely and accurately report quarterly financial data) than originally planned. Across the existing and new work, 65 primary and 25 secondary milestones (i.e., work tasks). must be completed.

(2) MCICOM requires a 100% physical inventory of equipment assets instead of a sample physical inventory to establish a baseline. Across the existing and new work, 12 primary and eight secondary milestones must be completed. Specific work activities are (a) obtain/develop documentation allowable under Statement of Federal Financial Accounting Standard 50 to support assets; (b) reconcile documentation to Defense Property Accountability System, Property Accountability; (c) obtain planographs for installations; (d) complete asset inventory; (e) report monthly status/progress; (f) conduct quality control; (g) perform government internal quality assurance and control and complete and endorse inventory packages; and (h) provide training to USMC personnel regarding the proper procedures for inventory, as approved by the Government.

It is estimated that additional labor hours are required during the period of performance at an estimated cost of $4,023,465.

M95494-19-F-0045 Description of Required Work

Currently, under M95494-19-F-0045, the Contractor is supporting the HQMC, Installations and Logistics Compliance and Internal Control Section by providing independent remediation and validation testing of milestones completed by subordinate Commands and the Fleet Marine Forces.

To meet the Department of Navy’s priority for significantly improved financial information and facilitate the goal of merging of the Navy and Marine Corps General Fund Agency Financial Reports (AFR) into one DON General Fund AFR, HQMC, Installations and Logistics Compliance and Internal Control Section must successfully complete additional financial improvement activities and/or at higher confidence levels; specifically, under the Task Order, more validation testing activities related to USMC internal controls is required than originally planned. Currently (a) 225 Financial and IT milestones related to effective internal controls must be completed and (b) 74 Financial and IT milestones related to logistics validation testing must be completed. It is estimated that additional labor hours are required during the period of performance at an estimated cost of $9,798,753.

M95494-19-F-0046 Description of Required Work

Currently, under M95494-19-F-0046, the Contractor is supporting the Marine Corps Logistics Command’s (LOGCOM) wall-to-wall inventory activities to include validating FY results and conducting audit-relevant causative research. To meet USMC’s priority for significantly improved financial information, LOGCOM must successfully complete additional financial improvement activities with testing results at higher confidence levels; specifically, more causative research, property record adjudication, and data validation for purposes of endorsing and certifying the command inventory certification letter is needed. It is estimated that additional labor hours is required during the period of performance at an estimated cost of $595,623.

M95494-19-F-0048 Description of Required Work

Currently, under Task Order M95494-19-F-0048, the Contractor is supporting LOGCOM audit remediation and divestment strategy implementation. The organization has made significant progress in remediation activities and has been able to remove a previous audit-scope limitation (e.g. the auditor could not test a certain area) related to operating materials and supplies and increase the overall accuracy rate of findings by the DoD Inspector General’s Independent Auditor that performed existence and completeness testing during the Full Financial Statement Audit on the Marine Corps for FY 2019. In order to (a) maintain the low level error rate, (b) “right-size” the equipment and material population, (c) streamline internal control processes by 30 June 2020; and (d) facilitate the goal of merging of the Navy and Marine Corps General Fund Agency Financial Reports (AFR) into one DON General Fund AFR, LOGCOM requires additional Contractor support for these divestment efforts. In addition to the divestment efforts, the Command is responsible for the maintenance and repair of depot level reparable items and the management/oversight of the enterprise’s GFP, which is a current Office of the Secretary of Defense audit focus priority. The additional contractor support will map these processes and assist in implementation of reconciliation, accountability, and visibility procedures for GFP and ensure that depot processes are appropriately documented and mapped to ensure current year activity is appropriately captured in the financial statements and reported as either capitalized costs or expenses for the period. The estimated increase for divestment, depot, and GFP activities is additional labor hours during the period of performance at an estimated cost of $1,571,004.

4. Authority Permitting Exception to Fair Opportunity with Supporting Rationale:

The cited authority for exceptions to the fair opportunity process is 10 U.S.C. 2304(c)(1). In accordance with FAR 16.505(b)(2)(i)(C), the circumstance for limiting sources is that the order must be issued on a sole-source basis in the interest of economy and efficiency because the work is a logical follow-on to task orders that were competed using proper Fair Opportunity procedures for the original order. The basis for using the logical follow-on justification is that:

(1) the work that will be performed is a direct continuation of the existing work the Contractor is currently performing;

and (2) the current Contractor is the only available source for performing the work activities; more detailed rationale is provided as follows:

(1) Direct Continuation of Existing Work – The work required by this Justification is essentially the same from the current task-order requirements except now the USMC requires a more comprehensive coverage of remediation efforts related to audit findings within the financial and information technology areas for the FY 2020 audit cycle, including obtaining increased confidence levels and additional remediation efforts. Examples of additional remediation efforts include: (a) accountants, for the first time, will act as advisors to SYSCOM Program Managers that are validating construction work in progress, which increases their reporting capability and quality of work; (b) MCICOM’s will complete a 100% wall-to-wall inventory, which would not have been achieved until next fiscal year, increasing the confidence in this year’s inventory; and (c) LOGCOM will complete a 100% inventory of operating materials and supplies this year instead of next year now that it has additional support for a newly added inventory population (clothing and textiles), which increases the confidence in this year’s inventory.

a. Current Contractor Efficiencies - The current Contractor is the most economical and efficient option for the Government to satisfy this need based on their experience within HQMC DC, I&L (LP), SYSCOM, MCICOM, LOGCOM, and Fleet Marine Forces and their existing resources that are already fully phased in for this project. Having two Contractors perform the same scope of work (but different work assignments based on the portfolio assigned) would significantly reduce efficiencies as the Government would have to manage two Contractors instead of one Contractor for the same work and therefore perform twice as much management and monitoring of assigned work activities.

(2) Only Available Source – KPMG LLP is the only available source that can meet USMC’s requirements within the required period of performance.

a. Cleared and Qualified Staff – KPMG LLP is the only vendor that can provide cleared and qualified staff to perform the planned work within the required timeframe. The USMC estimates that it takes approximately two months for a new Contractor to recruit and complete the necessary background investigations for staff assigned for the proposed work effort in addition to conducting the on-boarding process and obtaining facility access approvals. If a new Contractor started on 15 March 2020, they would not be fully staffed until 14 May 2020, which would not allow the Contractor to meet or complete the preponderance of work required by the July 2020 milestone. KPMG has access to a workforce staff that already meet the qualifications necessary to support these efforts and the capability to execute a rapid on-boarding process.

b. Administrative Burden and Transition-In Period – Should a new Contractor also be hired to perform the added work, the current work would have to be segregated into portfolios by Contractor so that continuity and efficiency across current and future work assignments is maintained. USMC estimates a two-month transition-in period (i.e., from 15 March 2020 to 14 May 2020) would be needed to: (i) conduct knowledge-sharing and training activities with the existing (current) and new Contractor; (ii) allow projects to phase-out or be transferred to the new Contractor, (iii) allow new projects to start timely either by the current Contractor or the new Contractor depending on the transition-in plan approved by the Government.

Considering the information outlined in (1) and (2) above, the Government hereby determined that the work is a logical-follow to the aforementioned Task Orders.

5. Determination by the Contracting Officer that the Anticipated Cost to the Government will be Fair and Reasonable

The Contracting Officer has determined that the anticipated cost to the Government of the services covered by this Justification will be fair and reasonable. The fair and reasonableness of prices will be based on an analysis of the contractor’s price proposal using one or more price-analysis techniques (e.g., comparison with historical pricing paid, and/or to the independent government cost estimate). It is anticipated this analysis will be conducted using one or more experienced technical representatives, contract specialists, and field pricing support as needed.

6. Other Facts Supporting the Exception to Fair Opportunity:

There are no additional facts supporting this justification.

7. Actions Taken to Remove Barriers from Future Competition:

All of the aforementioned Task Orders have a period of performance end date of 27 September 2020. To ensure continuity of services, the USMC intends to issue a competitive solicitation to allow for the award of a new contract with a start date on or around 28 September 2020. No other limited-source extensions are anticipated.