Redacted Tab 1 - ERP Prototype LSJ Contains CUI.pdf

CUI

Controlled Unclassified Information Source Selection Information -- See FAR 2.101 and 3.104

DEFENSE LOGISTICS AGENCY (DLA)

DLA CONTRACTING SERVICES OFFICE

PHILADELPHIA

700 ROBBINS AVENUE

PHILADELPHIA, PA 19111-5092

LIMITED SOURCE JUSTIFICATION

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

1. IDENTIFICATION OF THE AGENCY AND THE CONTRACTING ACTIVITY:

Agency Requiring Activity:

Defense Logistics Agency (DLA) Information Operations J62 8725 John J. Kingman Rd Fort Belvoir, VA 22060

Contracting Activity:

DLA Contracting Service Office-Philadelphia (DCSO-P) 700 Robbins Avenue Philadelphia, PA 19111-5092

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 licenses and services from an authorized SAP reseller in support of the Enterprise Resource Planning (ERP) Program. This action is for the development of the Prototype Environment, facilitation of the Business Process Reengineering, and development of requirements for the S/4 HANA transformation from a highly customized Suite 7 environment. The SAP software licenses will support the development of the Prototype Environment. 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.

Controlled by: DLA DCSO Philadelphia

CUI Category: General Procurement and Acquisition/ Source Selection Information see FAR 2.101 & 3.104

Distribution/Dissemination Controls: DISPLAY ONLY

3. A DESCRIPTION OF THE SUPPLIES OR SERVICES REQUIRED TO MEET THE

AGENCY'S NEEDS/ESTIMATED DOLLAR AMOUNT:

DLA’s ERP solution is a cohesive SAP business environment with multiple integrations and customizations that enable DLA to establish end-to-end processes to fulfill logistics and financial reporting requirements, streamline and use data sources effectively, reduce inefficient or non-value-added operations, and audit its resources so that it can monitor and make decisions about how the resources are allocated and utilized for the benefit of the warfighter and the US taxpayer. There are integrations with some Non-SAP software, however the predominance is SAP.

DLA currently has a requirement to procure SAP Services to create prototypes of SAP S/4 HANA solutions in order to drive the change to migrate all DLA ERP business processes from SAP Suite 7 to S4 HANA. The DLA ERP Platform version is supported by SAP Suite 7; however, by FY27 this version will no longer be supported by SAP, and DLA will upgrade to SAP’s new platform known as SAP S/4 HANA. Due to this upgrade and via this requirement, the contractor will create the SAP S/4 HANA Prototype Environment, which will allow DLA Stakeholders to review the to-be solution and determine if the industry standard is acceptable or if Business Process Reengineering (BPR) is needed.

If industry standard is not acceptable to the DLA Stakeholders, the contractor will conduct BPR and perform requirements gathering needed to meet DLA’s requirements and satisfy Laws Regulations and Policies (LRPs). The SAP S/4 HANA Prototype Environment will provide BPR teams the opportunity to better understand the to-be solution, improve the ability for the Government to challenge the LRPs, and identify subsequent product configuration requirements should changes need to be made to standard functionality. Lastly, this requirement will also procure SAP subscription licenses to support the SAP S/4 HANA Prototype Environment.

The Task

Order will be issued on a Firm-Fixed-Price basis and all Travel CLINs will be on a Time and Materials basis with a not-to-exceed ceiling amount.

Base Period (April 1, 2022 through March 31, 2023)

CLIN Description

TASK 1: Program Management and Administration Services PoP: 12 months

0002 TASK 2: S4 Prototype PoP: 12 months

0003 TASK 7: Prototype Subscription Licenses PoP: 12 months

0004 TRAVEL

Option Period 1 (April 1, 2023 through March 31, 2024)

TASK 1: Program Management and Administration Services PoP: 12 months

1002 Task 5: Analysis - New Scope

1003 Task 6: Non-Energy Planning Assessment

1004 TASK 7: Prototype Subscription Licenses PoP: April 1, 2023 – September 28, 2023

1005 TRAVEL

Option Period 2 (April 1, 2024 through March 31, 2025)

TASK 1: Program Management and Administration Services PoP: 12 months

2002 TASK 2: S4 Prototype

2003 TRAVEL

OPTIONAL CLINs

OPTIONAL TASK 3: Business Process Reengineering and Requirements Gathering and Approval PoP: 7 months

OPTIONAL TASK 3: Business Process Reengineering and Requirements Gathering and Approval PoP: 9 months

OPTIONAL TASK 4: Business Process Reengineering and Requirements Gathering and Approval for Phase 2, Procurement / Oil and Gas PoP: 6 months

FAR 52.217-8 - OPTION TO EXTEND SERVICES (April 1, 2025 - September 29, 2025)

CLIN Description

TASK 1: Program Management and Administration Services PoP: 6 months

OPTIONAL TASK 4: Business Process Reengineering and Requirements Gathering and Approval for Phase 2, Procurement / Oil and Gas PoP: 6 months

4. THE AUTHORITY AND SUPPORTING RATIONALE AND, IF APPLICABLE, A DEMONSTRATION

OF THE PROPOSED CONTRACTOR'S UNIQUE QUALIFICATIONS TO PROVIDE THE

REQUIRED SUPPLY OR SERVICE:

The authority permitting other than full and open competition is FAR 8.405-6(a)(1)(B), only one source is capable of providing the required services, and FAR 8.405-6(b)(1), items peculiar to one manufacturer. A brand name item, whether available on one or more schedule contracts, is an item peculiar to one manufacturer, SAP Public Services, Inc.

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 include the SAP services and subscription licenses required for the Prototype Environment. SAP S/4 HANA is a new proprietary system that will replace SAP Suite 7 and requires certified SAP resellers who are authorized to demonstrate what the S/4 HANA Business Processes are and how they compare to the Suite 7 Business Processes. 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.

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 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., Oakland Consulting Group, Inc.) who offer SAP services on their ESI BPAs against their General Services Administration (GSA) Schedules.

Market research was conducted in December 2021 by reviewing the current DoD ESI agreements for SAP Public Services and by issuing an RFI via email to the three ESI BPA holders for SAP Public Services Inc. All three BPA holders confirmed their ability to fulfill the requirement. 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.

SAP Public Services Inc.

ESI BPA Holders

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.

This procurement will afford DLA the opportunity to address the upcoming 2027 end of life for the current SAP Suite 7 by upgrading to SAP’s new S/4 HANA platform. In order to receive the same support beyond FY 2027, DLA would have to pay for an expensive extended maintenance effort that would only be available until FY2030. Thus, the upgrade to SAP S/4 HANA will facilitate affordable maintenance costs for DLA.

The below chart demonstrates the cost of a custom configuration versus a standard configuration for each of the ERP RICE (reports, implementations, changes, upgrades, interfaces, etc.) objects. By converting custom RICE objects to standard RICE objects, the cost of maintaining the ERP will be significantly less due to fewer customizations. The RICE objects that DLA currently maintains under the standard SAP Suite 7 platform cost significantly less than a DLA-customized object. DLA will realize more cost savings by standardizing on the SAP S/4 HANA platform and reducing the number of custom objects. In addition, moving from customization to a standard SAP S/4 HANA will allow for additional benefits such as an easier to sustain environment, improved processing capability, more security, and earlier receipt of software updates.

Type of RICE Object # of RICE Objects Cost per RICE Object

Total Cost

Standard SAP Platform

26,796 $4,172.02 $111,793,401.91

Custom SAP Platform 16,245 $13,611.54 $221,051,371.23

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 imbedded in DLA’s systems that this barrier to competition cannot be removed absent an overhaul of the current IT infrastructure. At this time, DLA requires SAP expertise who have the detailed knowledge of S/4 HANA Business Processes and how SAP ultimately makes the solutions all come together on S/4. 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 8.405-1(c)(2), the Limited Source Justification and the RFQ will be posted on GSA e-Buy.

9. CERTIFICATIONS

Requirements/Technical Certification:

I hereby certify that the data provided for which I am responsible, and which form a basis for this justification is complete and accurate to the best of my knowledge and belief.

Contracting Officer's Certifications and Approval:

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

I have reviewed and concur with this justification.

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

Date

Defense Logistics Agency

In accordance with FAR 8.405-6(c)(2)(xi), I have determined that FAR 8.405-6(b)(1) applies and I hereby approve this justification.

DLA Acquisition