LSJ Addendum 2 - ERP Cloud Hosting_Redacted.pdf

CUI

Source Selection Information -- See FAR 2.101 and 3.104

DEFENSE LOGISTICS AGENCY

CONTRACTING SERVICES OFFICE -PHILADELPHIA

700 ROBBINS AVENUE

PHILADELPHIA, PA 19111-5092

LIMITED SOURCE JUSTIFICATION ADDENDUM 2

(For Acquisition Conducted Under the Authority of the Multiple Award Schedule Program)

1. IDENTIFICATION OF THE AGENCY AND THE CONTRACTING ACTIVITY:

2. NATURE AND/OR DESCRIPTION OF THE ACTION BEING APPROVED:

In accordance with FAR 8.405-6, this limited source justification authorizes and approves the procurement of brand name SAP Cloud Hosting and Subscription Licenses with Managed Services from an authorized SAP reseller in support of the Enterprise Resource Planning (ERP) Transformation Program. The resultant firm-fixed price order will be placed against a General Services Administration (GSA) Federal Supply Schedule (FSS) Multiple Award Schedule contract and may use Department of Defense (DOD) Enterprise Software Initiative (ESI) agreements.

2003 TASK 1: Cloud Hosting & Subscription Licenses (S/4 HANA for FLIS) Firm-Fixed Price

MO 12

2004 TASK 1: Cloud Hosting & Subscription Licenses Firm-Fixed Price

MO 12

2005 TASK 1: Cloud Hosting & Subscription Licenses (S/4 HANA for EBS) Firm-Fixed Price

MO 9

Total OPTIONAL CLINs

CLIN Description Unit of Issue

Quantity Unit Price Total

TASK 2 (OPTIONAL):

Additional Cloud Hosting for Modernization Capabilities Firm-Fixed Price

MO 12

TASK 2 (OPTIONAL):

Additional Cloud Hosting for Modernization Capabilities Firm-Fixed Price

MO 12

TASK 3 (OPTIONAL):

Prototype Subscription Licenses Firm-Fixed Price

MO 11

TASK 3 (OPTIONAL):

Prototype Subscription Licenses Firm-Fixed Price

MO 6

TASK 2 (OPTIONAL):

Additional Cloud Hosting for Modernization Capabilities Firm-Fixed Price

MO 9

TASK 2 (OPTIONAL):

Additional Cloud Hosting for Modernization Capabilities Firm-Fixed Price

MO 12

TASK 4 (OPTIONAL):

Integrated Business Planning Licenses Firm-Fixed Price

MO 3

In accordance with FAR 8.405-6(b)(1), the SAP brand name is essential to the Government’s requirements, and market research indicates that other companies’ similar products, or products lacking the particular feature, do not meet, or cannot be modified to meet, the agency’s needs.

The SAP software that has been integrated within DLA’s ERP is proprietary software developed by SAP and DLA has established Business Processes and Laws, Regulations and Policies (LRP) around those Business Processes. This task order will procure SAP subscription licenses, cloud hosting, and cloud managed services to support DLA’s ERP, which resides in the cloud. The contractor will provide subscription licenses and cloud managed services for SAP and non-SAP applications. SAP Public Services Inc. and its resellers are the only authorized service providers for these services. Any company other than an authorized service provider would not have the necessary access to current SAP system details required to perform this effort.

The SAP software licenses currently in use by DLA must seamlessly interact with any new software licenses acquired for use in the DLA ERP. SAP owns the proprietary data of the software licenses currently in use. Only SAP software is capable of operating fully within the current ERP infrastructure due to the current implementation of SAP software throughout the system, which cannot seamlessly interact with any other company's software. An alternate company's software cannot be modified by the Government, nor can another offeror operate acceptably in the current ERP infrastructure since SAP owns the proprietary data needed to modify any other company's software for functional use within the ERP environment. A complete revamp of the ERP infrastructure would be required in order to use another company's software in this environment. This would result in multiple issues such as the need for extensive retraining of the administrative staff, extensive recoding of software by the application staff, and extensive application and database downtime to implement the new database solution. Non-SAP software licenses cannot be modified to enable integration into the existing SAP ERP operation;

therefore, it has been concluded that SAP software licenses are the only currently compatible products that will meet DLA’s needs, and therefore the required services relate solely to SAP software.

Services provided by any source other than SAP Public Services, Inc. or its authorized service providers will not satisfy this requirement due to the proprietary nature of the SAP software currently utilized by DLA and the proprietary nature of the services necessary to maintain DLA’s existing environment. Moreover, no alternate company has the authority to provide the proprietary SAP services necessary to meet this requirement. Consequently, only SAP Public Services, Inc., and its authorized resellers/service providers can fulfill this brand name requirement.

ADDENDUM 1

In accordance with FAR 8.405-6(a)(1)(i)(A) the proposed bridge contract modification must be issued on a sole-source basis to the incumbent, Advantage Solutions Inc. (ASI), because the agency’s need for the services is so urgent that providing a fair opportunity would result in unacceptable delays and cause a break-in-service. Given that ASI is currently carrying out these duties, it is essential that the bridge contract modification be executed without delay. Without a bridge contract, the government faces a significant risk to its ability to provide operational support to the Armed Forces.

If the contract extension is not awarded, there will be a gap in services for the ERP hosted systems, which includes core DLA financial systems. Enterprise Business Systems (EBS), Enterprise Advanced Analytics (EA2), Center of Planning Excellence (CoPE) and Governance, Risk and Compliance (GRC) applications provide key services across multiple DLA portfolios, which will stop if no services and capabilities are available, impacting DLA and multiple DoD entities including military branches.

For EBS, this would impact vendor access to solicitation and award information and vendor quote submissions. Customer order and return processing, Material Release Order (MRO) generation and transmission to the Accountable Property System of Record (APSR) would not occur. Procurement award generation, vendor invoice payment, disposal, and recoupment functionality would not occur, impacting procurement efforts for DLA and DOD entities. SAP CRM availability impacts DLA CRM marketing support activities, DLA Customer Interaction Center (CIC) ticket processing, and web auction creation and award for Disposal items available to the general public. Multiple core business functions which generate key acquisitions, procurement and funding within DLA would cease to operate.

For EA2 systems this will impact users’ ability to perform SQL queries against EA2 HANA and other systems. This allows them to gauge supply chain/demand chain performance and conduct historical trend analysis for educated decision-making by providing the ability to examine large data sets and return actionable data within a reasonable timeframe. Reoccurring reports, operations research, and ad hoc requests are required for daily tasks such as prioritization of Buyer and CAS workloads throughout the Enterprise.

For CoPE this would prevent key batch processes from running. Planning systems will not be able to complete their Forecasts; generate Retail Stock Transfer Orders (RTSOs); Stock Transfer Orders (STOs); generate Planned Orders; generate their Disposals or process nightly batch jobs.

A bridge is required to extend this requirement. If a bridge is not awarded, ERP Transformation efforts will be delayed, potentially disrupting other planned activities and timelines to migrate ERP to the next generation platform (which includes transition from SAP ERP Central Component (ECC) to SAP S/4 HANA) as well as adopt standard SAP capabilities to the maximum extent possible. DLA will also not be able to fulfill one of its core missions, to deliver IT capabilities that enable DLA’s success as the Nation’s Logistics Combat Support Agency.

Therefore, in accordance with FAR 8.405-6(a)(1)(i)(A), the proposed bridge modification will be made under the terms of ASI’s existing task order, SP4701-22-F-0180.

ADDENDUM 2

In accordance with FAR 8.405-6(b)(1), and as stated above the SAP brand name is essential to the Government’s requirements, and market research indicates that other companies’ similar products, or products lacking the particular feature, do not meet, or cannot be modified to meet, the agency’s needs. Also, in accordance with FAR 8.405-6(a)(1)(i)(A), additional brand name SAP licenses: PPS, BTP SAP Work Zone, and BW/4 must be issued via in-scope modification to the incumbent, Advantage Solutions Inc. (ASI), because the agency’s need for the SAP licenses is so urgent that providing a fair opportunity among all ESI holders for SAP services would result in unacceptable delays in the migration efforts that are currently on a strict timeline. Given that ASI is currently carrying out SAP Support Services and providing related licenses, it is essential that these licenses be added to the current contract so that migration efforts are not delayed.

SAP Portal, the front-end interface for EBS used to access data, is being phased out and replaced by Business Technology Platform (BTP) SAP Work Zone. BTP Workzone will serve approximately 25,000 users across DLA and external agencies. SAP Portal is scheduled for end-of-life (EOL) in

December 2027, and Workzone has been designated as its successor. It offers native integration with all backend SAP systems. These licenses allow for installation, configuration, and testing prior to upgrading in production. If these licenses are not procured under the current contract, the result will be that this upgrade process will be delayed, and DLA will potentially run on outdated front-end software that is no longer supported by SAP and if any errors are experienced can create a system errors that will not be able to be fixed; resulting in the work stoppages as multiple core business functions generate key acquisitions, procurements, and funding within DLA.

Public Procurement Solution (PPS) is a specialized add-on for SAP Supplier Relationship Management (SRM), developed to meet the distinct procurement requirements of public sector organizations. As the next-generation acquisition platform from SAP, PPS will replace SRM and enhance its standard functionality to align with international procurement standards and public sector regulations. It introduces features specifically designed for government procurement workflows. This software supports the modernization of the acquisition community in DLA. By not having this software, J7 will continue to use SAP’s SRM (Supplier Relationship Management), which has known capability gaps affecting efficiency over the long-term as SAP phases out SRM.

SAP Business Warehouse (BW/4) is SAP’s modern data warehousing solution for on-premises or private cloud environments, succeeding SAP BW. It delivers a comprehensive, integrated platform with predefined content, tools, and processes to support end-to-end enterprise data warehouse operations. BW/4HANA licenses are essential to facilitate both the BW upgrade and the S/4HANA migration initiatives. This upgrade will improve efficiency of work process by reducing outages and simultaneously reduce licensing costs due to the reduction in licensing fees.

As stated above, these licenses must integrate seamlessly with the existing SAP-based ERP infrastructure. SAP retains proprietary control over the software currently in use, and only SAP products can function fully within this environment. Due to the proprietary nature of SAP’s data, third-party software cannot be modified or adapted by the Government to operate within the current system. Moreover, no alternative company can offer a solution that is compatible without a complete overhaul of the ERP infrastructure. These additional licenses are necessary for successful completion of the ERP migration and transformation efforts. Failure to add these licenses to this contract will impede the progress of the ERP transformation initiative, directly jeopardizing DLA’s ability to fulfill its core mission of delivering essential IT capabilities that underpin its role as the Nation’s Logistics Combat Support Agency. The current vendor, ASI, has specific knowledge and experience with the ERP infrastructure and is a SAP authorized service provider and current ESI holder of SAP Services, and therefore is the only vendor capable of providing the required licenses with no delay.

Therefore, in accordance with FAR 8.405-6(a)(1)(i)(A), task order SP4701-22-F-0180 with ASI will be modified to include PPS, BTP SAP Work Zone, and BW/4 licenses.

5. DETERMINATION BY THE ORDERING ACTIVITY CONTRACTING OFFICER

THAT THE ORDER REPRESENTS THE BEST VALUE CONSISTENT WITH 8.404(d):

SAP products and services are available under established ESI agreements. These agreements were issued against GSA FSSs and the terms and usage of these agreements are in accordance with DFARS 208.74. Pricing under the ESI agreements has been determined fair and reasonable and has included negotiated discounts to GSA FSS pricing.

The Contracting Officer will determine that the order represents the best value to the Government, using Lowest Price Technically Acceptable (LPTA), consistent with FAR 8.404(d). In making this best value determination, the Contracting Officer will perform a price reasonableness analysis utilizing the techniques found at FAR 15.404-1, including, but not limited to: (1) Comparison of proposed prices received in response to the solicitation (FAR 15.404-1(b)(2)(i)); (2) Comparison of proposed prices to historical prices paid, whether by the Government or other than the Government, for the same or similar items (FAR 15.404-1(b)(2)(ii)); (3) Comparison of proposed prices with competitive published price lists, published market prices of commodities, similar indexes, and discount or rebate arrangements (FAR 15.404-1(b)(2)(iv)); and (4) Comparison of proposed prices with the Independent Government Cost Estimate (FAR 15.404-1(b)(2)(v)).

6. A DESCRIPTION OF THE MARKET RESEARCH CONDUCTED AMONG SCHEDULE

HOLDERS AND THE RESULTS OR A STATEMENT OF THE REASON MARKET

RESEARCH WAS NOT CONDUCTED:

In accordance with DFARS 208.7402, departments and agencies shall fulfill requirements for commercial software and related services in accordance with the DoD ESI. ESI promotes the use of enterprise software agreements with contractors that allow DoD to obtain the most favorable terms and pricing for software and information technology support services. In accordance with DFARS 208.7402, PGI 208.7403, DLAD 39.9001 (h), the DoD ESI service agreements were reviewed, and it was determined that there are three ESI BPA holders for SAP Public Services Inc. (Advantaged Solutions Inc., Carahsoft Technology Corp., and Oakland Consulting Group, Inc.) who offer SAP services on their ESI BPAs against their General Services Administration (GSA) Schedules.

Market research was conducted in February 2022 by reviewing the current DoD ESI agreements for SAP Public Services. Based upon the findings of the market research, a determination has been made to issue this solicitation on an unrestricted basis via a Request for Quotation (RFQ) posted to the GSA e-Buy System (www.ebuy.gsa.gov). It is anticipated that by solicitating this requirement on GSA e- Buy, multiple proposals from authorized resellers will be received. It is anticipated that the SAP ESI agreement holders will provide the best value to the government.

7. ANY OTHER FACTS SUPPORTING THE USE OF OTHER THAN FULL AND OPEN

COMPETITION:

DLA has utilized SAP products over 10 years and has invested over $1 billion dollars in SAP software, maintenance, and training. In order to re-compete this requirement with another software product, DLA would have to be willing to invest at least $1B more to accomplish the current requirements.

8. A STATEMENT OF THE ACTIONS, IF ANY, THE AGENCY MAY TAKE TO REMOVE OR

OVERCOME ANY BARRIERS THAT LED TO THE RESTRICTED CONSIDERATION

BEFORE ANY SUBSEQUENT ACQUISITION FOR THE SUPPLIES OR SERVICES IS

MADE.

SAP software is so embedded in DLA’s systems that this barrier to competition cannot be removed absent an overhaul of the current IT infrastructure. SAP Public Services, Inc. and its authorized resellers/service providers are the only sources that can support DLA’s existing software and meet the Government’s needs.

However, DLA has and continue to exercise competition as often as possible and is required to conduct ongoing reviews to keep abreast of new technology, both in industry and in the Government as a continuing effort within DLA. DLA uses a variety of vendors, manufacturers, and contracts to fulfill its requirements and will continue its practice of surveying the market to ensure full and open competition whenever possible.

In accordance with FAR Part 8.405-6(b)(3)(B), the Limited Source Justification and the RFQ will be posted on GSA e-Buy.