Justification and Approval Apptio Opportunities.pdf

Control Number VA-21-00046309

JUSTIFICATION

FOR AN EXCEPTION TO FAIR OPPORTUNITY

1. Contracting Activity: Department of Veterans Affairs (VA) Office of Procurement, Acquisition, and Logistics Technology Acquisition Center 23 Christopher Way

Eatontown, NJ 07724

2. Description of Action: The proposed action is for a firm-fixed price Delivery Order issued under the National Aeronautics and Space Administration (NASA) Solutions for

Enterprise-Wide Procurement (SEWP) V Government-Wide Acquisition Contract (GWAC) for existing brand name Apptio Software as a Service (SaaS) subscriptions and support.

3. Description of the Supplies or Services: VA, Office of Information & Technology (OIT), Information Technology Resource Management Office (ITRM) has a requirement to renew and expand upon existing Apptio SaaS subscriptions and support currently in production, and to purchase additional quantities. Apptio’s pricing model is based on information technology (IT) dollars under management with each unit/quantity based on one billion of IT dollars. VA requires an increase in the IT dollars under management in the Apptio tool from four billion dollars annually to nine billion dollars annually as a result of an increasing OIT base appropriation, additional Corona Virus Disease (COVID) emergency funding, and to incorporate the Office of Electronic Health Records Modernization (OEHRM) dollars. Apptio is a multi-instance architecture Platform-as-a- Service with software delivered via the internet through a subscription service delivery model, commonly referred to as SaaS. The integrated suite of brand name Apptio modules have been purpose-built for Technology Business Management (TBM) cost transparency, and are used to help VA OIT to comply with the Office of Management and Budget (OMB) mandate for Federal agencies to fully report OMB Investment dollars by TBM Towers and Cost Pools through the Capital Planning and Investment Control

(CPIC) process. VA has leveraged Apptio as VA’s cost transparency model, configured to map and allocate VA’s IT obligations, expenditures, and expenses against all four layers of the TBM taxonomy (Cost Pools, IT Towers, Products & Services, and Business Units/Business Capabilities) using a combination of financial coding and operational data to indicate cost drivers and resource consumption. The mapping of current year budget and execution in the Apptio Cost Transparency module informs the future year programming and budget formulation efforts that are represented in the Apptio IT Planning module. Simultaneously, the Franchise Fund Business Office has implemented the Apptio Cost Transparency module and the Apptio Bill of IT module to categorize their costs through all four layers of the TBM taxonomy; to collect revenue and issue customer statements; and to provide a breakout of its bill to OIT against the standard IT Towers and against OIT’s Products and Services. Finally, the Enterprise

Cloud Solutions Office (ECSO) has implemented the Apptio Hybrid Cloud Business Management module and the Apptio Bill of IT module to support the optimization of the VA Enterprise Cloud (VAEC) environment and to generate VAEC customer statements.

The Apptio modules managed by the Franchise Fund and ECSO are connected to

ITRM’s Cost Transparency module through Apptio’s proprietary Datalink feature.

Apptio 2021 Control Number VA-21-00046309

All out-of-the-box Apptio modules have been heavily configured by the business owners and custom reports have been created in the software to support OIT’s reporting requirements using the TBM taxonomy.

OIT plans to integrate the OEHRM dollars into its ITRM TBM Cost Transparency module under the new order, given the requirement to report IT spend according to the TBM taxonomy and the plan for OEHRM to be absorbed into OIT in future fiscal years.

OIT was unable to include OEHRM dollars in its current order as the order ceiling had been reached as a result of unanticipated increases in OIT’s base appropriation, in addition to the $2.15 billion in COVID emergency funding OIT received in March 2020.

ITRM has a requirement to renew its annual subscription for the Apptio SaaS application to support VA’s execution and continued operationalization of the TBM discipline; to meet the OMB mandate; and to support its revenue collection, customer reporting, optimization of the cloud environment, and business process integration.

VA’s IT appropriation is approximately between six to seven billion dollars annually and VA’s OEHRM appropriation is approximately between two to three billion dollars annually. The period of performance for this proposed action will consist of a 12-month base period and two, 12-month option periods and eight optional tasks to allow for continued access and support of the software products. Optional quantities to include additional benchmarking capabilities, further integration of OEHRM into OIT programming and budget formulation activities, training for future model TBM administrators via the Apptio All Access Education Passes (AAEPs), and to incorporate the current ECSO capability of Hybrid Cloud Business Management, Bill of IT and Apptio wrap-around services (Managed Services and Premier Services), which were originally purchased in August 2020 using cloud credits.

4. Statutory Authority: Pursuant to Federal Acquisition Regulation (FAR) 16.505(a)(4), the following brand name requirement is being justified and approved as an exception to fair opportunity under the statutory authority of Section 41 U.S.C. 4106(c)(2) as implemented by FAR 16.505(b)(2)(i)(B), entitled “Only one awardee is capable of providing the supplies or services required at the level of quality required because the supplies or services ordered are unique or highly specialized”.

5. Rationale Supporting Use of Authority Cited Above: The required solution is highly complex. Therefore, beyond the direct cost of any acquisition to acquire the solution itself, the Government will incur significant labor costs to operate, utilize and technically sustain the solution. A stand-alone solution decouples the solution from other third party products which minimizes complexity by eliminating any technical cross system configurations and the associated sustainment. It also eliminates technical dependencies and costs associated with third party products that must be available, and remain compatible, throughout the period of performance in order for the solution to function and meet all VA requirements. A stand-alone solution also eliminates business risks related to dependencies on the availability, features, support and pricing of third party products already in use at VA under other VA contracts. These contracts may have differences (such as periods of performance, service level agreement requirements, support terms, and included features) that could negatively impact the operation of the solution and introduce unacceptable risk. Even if all of the third party bundled products were all available under the solution contract, risk is still increased in that one or more of the vendors may cease operations, be acquired, or change their product in a way that breaks compatibility with the solution so that it is no longer able to meet all of the requirements. Furthermore, from a technical perspective, the Government requires a stand-alone solution for ease of ongoing configuration. The calculation engine and reporting visualizations that comprise the TBM modeling capability require a tight integration between financial and operational data. The value of TBM is that it provides cost in the context of operational consumption, and if the financial and operational data are housed in different elements of a bundled system comprised of more than one third party product, then this design will result in more complicated configuration at best or, at worst, impose serious limitations on the

Government’s ability to configure reports as needed. Therefore, this solution must stand alone and not have any dependency or requirement that VA purchases or has in operation another solution or tool for it to operate. The Apptio SaaS Subscriptions and Support was selected via a competitive, brand name or equal procurement under the

NASA SEWP V GWAC in April of 2018 and is comprised of an integrated suite of Apptio modules that are built upon Apptio’s proprietary platform. VA’s existing TBM cost modeling and reporting capability represents nearly three years of continuous configuration and implementation work for the Apptio modules to operate within VA’s production environment costing over $24M to date.

As stated in section three, the existing suite of Apptio modules that comprise VA’s TBM cost modeling and reporting capability provides a new level of cost transparency by combining cost with resource consumption to enable VA OIT to meet the OMB mandate for CPIC reporting using the TBM taxonomy, support IT investment planning, automate the revenue collection and issuance of customer statements for the Franchise Fund Business Office and ECSO and optimize VAEC’s environment. VA requires an annual renewal of its subscription to support growth to align with OIT’s base appropriation with optional quantities to include additional benchmarking capabilities, further integration of OEHRM into OIT programming and budget formulation activities, training for future model TBM administrators via the AAEPs, and to incorporate the current ECSO capability of Hybrid Cloud Business Management, Bill of IT and Apptio wrap-around services (Managed Services and Premier Services), which were originally purchased in August 2020 using cloud credits. With the Hybrid Cloud Business Management and Bill of IT, the ECSO is able to accurately forecast and track cloud spend, accurately allocate all cloud costs to ensure a full showback of cloud costs to the business, and to leverage rightsizing capabilities across cloud services to reduce operating expenses and fund future investments.

Replacing the existing suite of software modules with any other brand software would require a complete replacement of VA’s existing platform with a patchwork of other tools that would contrive to replicate Apptio’s functionality as a calculation engine, a visualization tool, a cloud optimization machine, and a tool that can automate customer billing workflows. While market research has not identified another product that can meet all of the Government’s technical requirements, even if another product did exist, it is estimated that the configuration would take approximately 36 months and the software would cost an estimated $15-$20 million. This estimate is based on historical cost and implementation timeframe of the current platform in addition to costs obtained by the Government via market research. Replacing the existing suite of software modules with any other brand software would require dedicated system administrators to keep multiple software tools seamlessly connected. In the event an alternate brand name SaaS software subscription and support existed that was able to meet the Government’s requirement, it would need to be completely configured to meet the

Government’s requirement. In addition, the Government would have to maintain the current Apptio SaaS software subscription and support in tandem while configuration work was being performed in order to continue operations. The Government’s technical experts have not found a single software tool other than the Apptio SaaS subscriptions and support that can meet all of the aforementioned requirements, as described in section eight of this justification.

Aside from the software cost, implementing any other brand cost modeling tools to operate in VA’s production environment would involve extensive configuration, human centered design and testing to support VA workflows, dashboards and reporting requirements, as well as the need to train system administrators and end users while also updating existing process documentation, standard operating procedures and knowledge documents. This would lead to duplicated costs that would not be recovered or justified through competition as the same functionality would have to be reconfigured on the new platform all while still retaining the critical functionality provided through VA’s existing Apptio-based TBM cost modeling and reporting tool at an additional cost of $5M annually or $15M in labor over the course of 36 months until the new platform is fully operational. The additional estimate is based on historical data for the labor required to configure and maintain the Apptio tool. This would also lead to extensive delivery delays of ongoing and planned functionality releases that are necessary to enhance

VA’s existing tool to provide additional critical capabilities that will enable VA to more accurately capture the total cost of ownership for its products and services, support the modernization of OIT’s IT investment planning, and evolve VA’s cloud migration and optimization strategy. A failure to renew and expand upon the existing cost transparency tool will bring VA’s automated revenue collection capabilities, cloud optimization activities, and VA TBM cost modeling and reporting efforts to an immediate halt thereby negatively impacting VA’s ability to meet the OMB mandate for TBM reporting outlined in the annual Capital Planning and Investment Control Guidance, VA’s opportunity to optimize the use of cloud resources in the VAEC, and the Franchise Fund’s ability to fund its operations due to a disruption in its revenue collection processes.

6. Efforts to Obtain Competition: Market research was conducted, details of which are in section 8 of this justification. This effort did not yield any additional sources that can meet all of the Government's requirements as a stand-alone solution. However, the undersigned VA technical representative determined that limited competition is available among authorized resellers for the required brand name Apptio module subscriptions, as well as software maintenance and support. In accordance with FAR

16.505(a)(4)(iii)(A)(1), this justification will be provided with the solicitation to all appropriate NASA SEWP V GWAC holders. Furthermore, in accordance with FAR 5.301, 16.505(b)(2)(ii)(D), and 16.505(a)(4)(iii), the award notice for this action will be synopsized on the Contracting Opportunities website and this justification will be made publicly available within 14 days of award.

7. Actions to Increase Competition: The Government will continue to conduct market research to ascertain if there are changes in the marketplace that would enable future actions to be competed. Specifically, OIT will continue to monitor market trends, new and emerging products, looking for compatible and more advanced technologies to meet VA needs.

8. Market Research: The Government’s technical experts have conducted market research by reviewing similar SaaS and IT financial management software and associated support services, with a focus on products that are purpose-built for TBM.

This market research is an ongoing process starting in 2017 and is continuously being conducted. In May 2020, VA received a demo from CostPerform. Based upon the demo VA received, CostPerform is a calculation engine that could be made to partially meet OIT’s requirements for financial management, but without the robust visualizations that overlay the calculation engine, without the ability to optimize the cloud environment, and without the same functionality to automate customer billing statements that the Government’s current Apptio tool provides. The demo did not show that CostPerform has anything equivalent of the Apptio IT Planning module, as it does not appear to support multiple budget scenario analysis or budget versioning. CostPerform does provide predictive unit cost based on actual consumption and allows users to run scenario analysis based on increased unit consumption, but it is not designed to support the budgeting process build up required for Budget Formulation or Multi-Year Programming.

The Government’s strategic sourcing experts, in coordination with VA’s Program Manager, conducted additional market research in September 2020 via NASA SEWP GWAC. The Government’s technical experts reviewed the capability statements from the four resellers that responded. The first three proposed Apptio, which meets the Government’s requirements.

The fourth, submitted by All Points Logistics, proposed Proven Optics, a suite of applications that are integrated with the ServiceNow platform. Proven Optics’ product requires VA to own and operate ServiceNow, a third party product and it does not meet the technical requirement to provide a stand-alone solution. After the Government conducted its market research in September 2020, VA decided to include the ITRM and

ECSO via one OIT requirement for cloud optimization. Since these cloud requirements were added as optional tasks after the Government conducted its market research, the updated All Points Logistics response attempted to address these requirements. It provided over simplified explanations of how broad features could be used to meet many of the requirements without enough detail for the Government to verify if it actually could meet the Government’s requirements. Furthermore, for several other features All

Points Logistics clearly states there is a reliance on a third party product, ServiceNow, to meet the requirement which does not meet the stand-alone system requirement for this solution.

Based on the review of these similar products by the Government’s technical experts, it was determined that none of these other products or associated services can meet all of the Government’s technical requirements previously discussed in section five of this justification. Based on the Government’s market research, it was determined that only brand name Apptio SaaS subscriptions and support can meet all of VA’s requirements, which sustains and expands upon VA’s extensive existing TBM cost modeling and reporting capability.

The market research conducted via NASA SEWP in September 2020 helped the Government’s strategic sourcing experts to understand potential resellers and the current pricing for subscriptions to brand name Apptio SaaS subscriptions and support.

The results of the market research and additional discussions confirmed multiple NASA

SEWP GWAC holders are capable of reselling the required Apptio SaaS subscriptions and support including multiple Service Disabled Veteran-Owned Small Business (SDVOSB) concerns in Group B(2). Therefore, adequate competition among SDVOSBs is anticipated.

9. Other Facts: None.