Scanning as a Service - Limited-Sources Justification - Revised_Redacted.pdf

DEPARTMENT OF THE TREASURY

LIMITED-SOURCES JUSTIFICATION

Acquisition Title: Scanning as a Service This acquisition is conducted under the authority of the Multiple Award Schedule Program (see FAR 8.401)

Treasury Standard Form – 1012 (Rev 12/24)

Prescribed by Treasury: DTAP 1008.405-6

Provide Optical Character Recognition/Intelligent Character Recognition proven at least 95% or higher with a 99% or higher acceptance rate through the Modernized Electronic Filing and/or other IRS systems.

The ability to dispose of all scanned, transmitted, and reviewed paper documents, using cross-cut shredders which produce particles that are 1 mm x 5 mm (0.04 in. x 0.2 in.) in size (or smaller) or pulverize/disintegrate paper materials using disintegrator devices equipped with a 3/32 in. (2.4 mm) security screen. [National Institute of Standards and Technology (NIST) SP 800-88, Guidelines for Media Sanitization].

Comply with the guidelines and requirements outlined in IRS Publication 4812.

Provide scanned documents that are visible/readable, consistent with PGLD’s scanned image and digitization standards.

3.b Includes IT: Yes No PSC: DA01; NAICS: 518210 3.c IGCE/Estimated dollar value:

The IGCE amount is , which includes the -month base and the 6-month extension, if exercised. Refer to the IGCE for additional details.

4.a Identification of the authority being used (Check the appropriate box that applies).

FAR 8.405-6(a)(1)(i)(A) – An urgent and compelling need exists, and following the procedures would result in unacceptable delays.

FAR 8.405-6(a)(1)(i)(B) – Only one source is capable of providing the supplies or services required at the level of quality required because the supplies or services are unique or highly specialized.

FAR 8.405-6(a)(1)(i)(C) – In the interest of economy and efficiency, the new work is a logical follow-on to an original Federal Supply Schedule order or BPA provided that the original order or BPA was placed in accordance with FSS procedures in accordance with the applicable Federal Supply Schedule ordering procedures. The original order or BPA must not have been previously issued under sole-source or limited-sources procedures.

FAR 8.405-6(b) – Items peculiar to one manufacturer. (i.e., Brand Name specifications)

4.b Supporting Rationale:

The work to be performed under this award will provide critical digitalization and modernization services, implementing digital tools to reduce paper across the IRS campuses as part of the Zero Paper Initiative, a priority of the Department of the Treasury and the Administration, as implemented by Executive Order Modernizing Payments To and From America’s Bank Account 14247 requiring the Secretary of the Treasury to support agencies’ transition to digital payment methods by September 30, 2025. The SCaaS Task Order, and the Task Orders established through the aforementioned competition, will lay the groundwork for the final removal of paper incoming to IRS facilities as the IRS begins the journey to full scale digitalization and modernization. As the federal government’s tax administrator, the IRS is spending over $300 million per year in the processing and handling of paper correspondence. The manual processing of paper correspondence causes the need for thousands of employees, multiple workflows, delays, and the inability to scale to meet the expectations of a modern tax agency.

Acquisition Title: Scanning as a Service This acquisition is conducted under the authority of the Multiple Award Schedule Program (see FAR 8.401)

Treasury Standard Form – 1012 (Rev 12/24)

Prescribed by Treasury: DTAP 1008.405-6

Section 3(c) of Executive Order 14247 requires that “all payments made to the Federal Government shall be processed electronically, except as specified in section 4 of this order.”

Electronic processing of payments necessarily requires the incoming paper to be digitalized. As such, in order to process payments submitted to the IRS in paper form electronically, the payment and any associated tax forms and/or correspondence must scanned and converted into a digital document. The IRS has been making efforts to digitalize incoming correspondence from taxpayers, including a pilot digitalization program. However, the IRS does not have the in-house capability to digitalize the vast number of existing records in its possession or to digitalize new incoming returns/correspondence. As such, to meet the deadlines of Executive Order 14247 the IRS must contract for digitalization services. For the reasons discussed below, this need is immediate given the Agency’s need to be prepared not just for the September 30, 2025, deadline for processing of electronic payments imposed by Executive Order 14247, but also the need for the Agency to be prepared for the 2026 tax filing season.

The IRS has limited runway for downtime due to the large number of return types and quarterly reports, making the ability to leverage prior known vendors and services with proven records of completion critical to the IRS’s ability to digitize. One of the largest current paper tax receipts is the 1040 and to meet the September 30, 2025 deadline of Executive Order 14247 and to be prepared for the 2026 filing season, the IRS needs to quickly digitize that forms receipt with a vendor who had prior success with the form. Similarly, IRS’s continued ability to scan and digitize Form 941 (Quarterly) through a vendor with demonstrated success provides significant operational benefits. This capability enhances the agency’s capacity to process high paper return volumes through digital channels, thereby ensuring employers can timely report federal income tax withholdings, Social Security, and Medicare taxes from employees’ wages, as well as the employer’s corresponding share of Social Security and Medicare taxes. Waiting on a full competition would risk the IRS’s ability to meet the September 30, 2025, deadline of Executive Order 14247 and to be ready for the 2026 filing season, adding complexities with unknown and untested vendors potentially not meeting the processing needs.

The length of the proposed LSJ would allow for a three-month task order to get the project moving, with a full competition after the IRS has proven its concept and better adjusted to the needs of the organization in a digital state. The IRS has an immediate digitalization mandate to replace the manual processing and storing of paper. To manage this capacity and improve taxpayer service, the IRS needs a proven scanning solution(s) to modernize submission processing while complying with all applicable policies and timeframes. The IRS is committed to creating an environment where IRS data is available, accessible, and usable in a format that enables data-driven decision-making at all levels of the organization. These efforts shall support improvements to taxpayer service, enhance the fairness of IRS compliance efforts, and address federal guidelines (e.g., Office of Management and Budget (M-19-21, National Archive and Records Administration 2022 mandate). Digitalization of these and other documents at the door will allow us to decrease the items sent to the FRCs and ultimately reduce and eventually negate the $37M annual cost to store these paper records. Additionally, this get us closer to Mandate 23-07, Update to Transition to Electronic Records, that was extend for the IRS to December 31, 2030, after which the FRCs will stop receiving paper records. In addition to the mandates describes above, recent Executive Orders on the modernization of payments provided the IRS reasonable grounds to pursue digitalization solutions for all payment-based forms as well as overall form digitalization justification. Taking the steps to digitalize quickly would better

Acquisition Title: Scanning as a Service This acquisition is conducted under the authority of the Multiple Award Schedule Program (see FAR 8.401)

Treasury Standard Form – 1012 (Rev 12/24)

Prescribed by Treasury: DTAP 1008.405-6 prepare the IRS for the elimination of outbound paper checks, while providing taxpayers the ability to meet digital payment needs for incoming checks as well. At the time of this justification, the IRS was engaged in responsible preparation for digital capabilities in the event the incoming paper checks were also included in any Executive Order.

The IRS has a digitalization mandate to replace the manual processing and storing of paper. The IRS conducted a market research pilot, Pilot IRS, to assess the capabilities in the commercial marketplace for the digitalization services needed to process the volume of critical tax and non-tax documentation received by mail, on a much smaller scale. Pilot IRS was competed as unrestricted competition and resulted in five awards, one of which was Iron Mountain. The five awardees were assessed on five forms of varying complexity, including Forms 709, 940, 941, 1040, 4868, and 7004. The results of the pilot indicate Iron Mountain was the only vendor capable of successfully scanning all 5 forms within the acceptable quality levels stated above.

The sensitive nature of the documents/forms and the negative consequences associated with inaccurate scanning/processing amplify the need for a vendor capable of performing this requirement within the established criteria.

The work to be performed under this award will provide critical digitalization and modernization services, implementing digital tools to reduce paper across the IRS campuses as part of the Zero Paper effort, a priority of the Department of the Treasury and the Administration, as implemented by Executive Order Modernizing Payments To and From America’s Bank Account 14247 requiring The Secretary of the Treasury shall support agencies’ transition to digital payment methods by September 30, 2025. The SCaaS Task Orders will lay the groundwork for the final removal of paper incoming to IRS facilities as the IRS begins the journey to full scale digitalization and modernization. As the federal government’s tax administrator, the IRS is spending over $300 million per year in the processing and handling of paper correspondence.

The manual processing of paper correspondence causes the need for thousands of employees, multiple workflows, delays, and the inability to scale to meet the expectations of a modern tax agency.

In addition to the need to begin work immediately to meet the requirements of Executive Order 14247 a delay of these critical services would result in a cost of at least $173,000 per day, or $63.2 million per year, to the American taxpayers. The delay of these critical services would adversely affect the IRS’s ability to modernize in preparation of next year’s tax filing season.

Work must begin immediately as the processing for Individual Masterfile goes down at the end of November and the Business Masterfile goes down mid-December for system upgrades. The IRS requires ongoing digitalization services, while it competes the full requirement, to prevent a backlog and delay in getting the systems fully functional to prevent the compromise of the efficiency of filing and unnecessary burden to taxpayers.

Iron Mountain developed their InSight Submission Processing Modernization solution to process the IRS’s most complicated tax returns, which often contain hundreds of schedules and attachments with unstructured data that needs to be captured and formatted. The IRS was familiar with the work of Iron Mountain from past pilots, and with the IRS’s extensive knowledge of the complexities of the forms, had seen successful processing of complex 1040’s among other forms from Iron Mountain in the past. For these reasons, the IRS believes that at this time Iron Mountain represents the safest approach to a solution, given the needs and timing

Acquisition Title: Scanning as a Service This acquisition is conducted under the authority of the Multiple Award Schedule Program (see FAR 8.401)

Treasury Standard Form – 1012 (Rev 12/24)

Prescribed by Treasury: DTAP 1008.405-6 associated with the small window of time between tax seasons, Iron Mountain provides the IRS a reasonable option to assume they were able to process the forms successfully based on prior success in doing so.

5. A determination by the ordering activity Contracting Officer that the order or BPA represents the best value consistent with FAR 8.404(d):

The Contracting Officer has determined that the TO represents the best value consistent with FAR 8.404(d) and lowest overall cost alternative (considering price, special features, administrative costs) to meet the Government’s needs based on pre-negotiated rates that were determined fair and reasonable at the time of contract award. The Government has identified the availability of the services, from Iron Mountain, on General Services Administration (GSA) Multiple Award Schedule Special Item Number 518210DC, which has pre-negotiated rates. It is the Government’s expectation that pricing proposed by Iron Mountain for the requested bridge would not exceed the maximum rates established at the GSA Schedule Contract level, which have been determined fair and reasonable.

6. A description of the market research conducted among schedule holders and the results or a statement why market research was not conducted:

The IRS conducted extensive market research between November 2024 and April 2025. The market research performed included Pilot IRS, three scope determinations performed by GSA, a review of existing contracts, a review of mandatory sources, and a Request for Information released on GSA SIN 518210. While there are multiple vendors who have indicated an interest in competing for the services in question, the Agency’s experience with digitalization of the records covered by this award indicates that there will likely be unacceptable delays to get new vendors to operational status given the September 30, 2025, deadline of Executive Order 14247 and the need to begin processing a backlog of documents before the Individual and Business Masterfile systems are shutdown in preparation for the 2026 filing season.

7.a Any other facts supporting this justification:

Iron Mountain is uniquely positioned to fulfill this requirement due to their ability to quickly pivot to the changes faced by the IRS. Iron Mountain has a proven track record of adjusting to legislative changes faced by the IRS without a reduction in productivity or quality.

7.b Attachments: Yes No

8. A statement of the actions, if any, the Requiring Activity and Contracting Activity may take to remove or overcome any barriers that led to restricted consideration before any subsequent acquisition for the supplies and services is made:

The requiring and contracting activities remain committed to maximizing competition when soliciting the next generation contract. The requiring and contracting activities are aggressively pursuing the next generation contract and assessing all available solutions. As stated previously in this LSJ, the requested bridge would provide the Government with enough time to compete and award a next generation effort.

Acquisition Title: Scanning as a Service This acquisition is conducted under the authority of the Multiple Award Schedule Program (see FAR 8.401)

Treasury Standard Form – 1012 (Rev 12/24)

Prescribed by Treasury: DTAP 1008.405-6

Therefore, unless additional approvals are required as prescribed below, as the head of the procuring activity or authorized designee, I hereby approve this limited-sources justification.

Name: Date:

Signature: