WF3_CTO5_JA_Approved_REDACTED.pdf

CUI

Control Number: FY26-0796

Controlled by: Defense Health Agency (DHA) Controlled by: DHMS-CD CUI Category(ies): Source Selection Limited Dissemination Control: SSEL

(Source Selection Information - See FAR 2.101 and 3.104-4)

1 JUL 2026

Justification for an Exception to Fair Opportunity

Federal Acquisition Regulation (FAR)16.505 (b)(2)(i)(C)

1. Identification of the Agency and Contracting Activity: The Defense Health Agency, Contracting Division Defense Healthcare Management Systems (DHMS-CD) on behalf of Program Executive Office Defense Healthcare Management Systems (PEO DHMS) intends to award a task order contract, on an exception to fair opportunity basis, based on the statutory exception and supporting rationale provided herein.

2. Nature and/or Description of Action being Approved: This Justification for an Exception to Fair Opportunity (hereinafter "this Justification") supports award of a noncompetitive firm fixed price (FFP) task order, under the multiple award contract (MAC) HT003822D0001 referred to as "Workforce 3.0" (WF3), to Boston Consulting Group, Federal (BCG). The task order will be issued on a sole source basis in the interest of economy and efficiency because it is a logical follow-on to BCG's Year 5 Design to Outcome (DTO) task order approach.

The solicitation, and resulting contract, contain FAR Clause 52.212-4 - Addendum 1, which states, "Attachment 1, Scope and Ordering Guide provides the rules of engagement for issuance of task orders that supplement any ordering clauses and provides contract-wide terms and conditions that will be applicable across all task orders."

This Justification pertains to Section 4.1.2 of the Scope and Ordering Guide, "Lot 1 Linked Design-to-Outcome Task Orders". Section 4.1.2 establishes that, if the conditions of FAR 16.505(b )(2)(i)(C) are satisfied, a logical follow-on Core Task Order (CTO) may be awarded to execute the proposed Design-to-Outcome (DTO) approach if the Government and contractor agree on the various necessary terms for CTO. This Justification also pertains to Sections 4.1.3 and 4.1.4 of the Scope and Ordering Guide, as discussed in detail below. This Justification documents the Government's determination that these conditions are satisfied.

3. Description of Supplies/Services and Estimated Value: WF3 is a fully managed end-to-end solution for executing DHMS mid-office and back-office functions to support the full spectrum of the PEO DHMS product portfolio. As described in the WF3 contract, the Government requires a managed solution (i.e., a stack of capabilities) to cover the full breadth of digital workforce capabilities from technical, administrative, and organizational, across its subordinate and full partner organizations. In this manner, a managed solution will enable one seamless workforce where an individual's Agency or employment status does not affect the individual's experience at

Source Selection Information - See FAR 2.101 and 3.104-4

2 JUL 2026

work and where this condition can easily scale and accommodate fluctuations in demand rapidly. WF3 designates a high-performing contractor team to execute a unified, long-term PEO

3.0 strategy to achieve year-over-year growth through a cohesive, organization-wide approach.

The Year 5 Core Task Order (CTO5) is a logical follow-on and the design execution of the agreed upon Year 5 Design-to-Outcome (DTO5) task order. The DTO5 task order builds upon and is a logical follow-on to the Year 4 Design-to-Outcome (DTO4) and Year 4 Core Task Order (CTO4) design execution. The DTO4 and CTO4 are logical follow-ons to the Year 3 Design-to- Outcome (DTO3) and Year 3 Core Task Order (CTO3) design execution. The DTO3 and CTO3 are logical follow-ons to the Year 2 Design-to-Outcome (DTO2) task order and the Year 2 Core Task Order (CTO2) design execution. The DTO2 and CTO2 are logical follow-ons to the competitively awarded Year 1 Design-to-Outcome (DTO1) task order and the Year 1 Core Task Order (CTO1) design execution, to continue progressing towards the transformation outcomes identified in Section 1.3 of the Scope and Ordering Guide:

When the transformation efforts are complete, the PEO will:

• Manage a portfolio of product teams and products that prioritize the experience of those using the products.

• Have a culture that prioritizes continuous improvement, rapid decision-making, and streamlining business priorities by maximally leveraging policy and regulatory flexibilities to adopt the very best practices in each area of its business.

• Be a center of excellence for dynamic, multifaceted technologies, platforms, applications, and cybersecurity compliance.

• Adopt effective communications with internal and external stakeholders.

• Employ technology operations that reduce redundancies across the organization to achieve cost savings and improve agility.

• Drive collaboration between the federal government, industry, and academia to improve the nation's health.

• Expertly manage the portfolio to rapidly deliver capabilities across the organization.

• Recruit high-performing, innovative personnel who are accountable to the organization's mission by making PEO DHMS an employer and business partner of choice.

• Follow efficient and accountable processes that support corporate operations and audit readiness

It is during the DTO5 task order that the contractor-specific approach, objectives, outcomes, and measures are negotiated and agreed upon with the Government. Collectively, this is the design for CTO5 to make progress against the above overarching outcomes.

Over the past eight weeks BCG and the Government refined a set of activities that measurably contribute to targeted transformational outcomes for DHMS mid-and back-office functions. To support those outcomes and maintain mid- and back-office functions the following key capabilities will be delivered as part of the commercial managed solution:

1. Program & Product Management

2. Architecture and Integration Management

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already issued under the contract, & all awardees were given fair opportunity for the original order.

5. Rationale Supporting the Exception to Fair Opportunity: To issue a non-competitive order under the authority of FAR 16.505(b )(2)(i)(C), three essential criteria must be met; 1) the new work must be a logical follow-on to an order already issued under the contract; 2) all awardees were given a fair opportunity to be considered for the original order; and 3) the order must be issued on a sole-source basis in the interest of economy and efficiency.

Logical Follow-On to an Order Already Issued Under the Contract

PEO DHMS launched the PEO 3.0 transformation initiative in Fiscal Year 2022 with the award of the WF3 contract to perform mid- and back-office functions, transforming the organization.

WF3 must enable PEO DHMS to drive patient-centered healthcare through modem solutions to meet ambitious goals pertaining to the organizational maturity of PEO DHMS.

WF3 MAC awards were made in two (2) lots. This Fair Opportunity Exception applies to WF3 Lot 1.

WF3 Lot 1 consists of Task Orders necessary to establish one, seamless team accountable for achieving the specified transformation and growth metrics over a specified length of time to be continuously evaluated against the overarching outcomes specified in WF3 Attachment 1, Scope and Ordering Guide, Section 1.3 (as established by FAR Clause 52.212-4 – Addendum 1). This includes work necessary to ensure all function necessary for operation of the “world class technology” organization are performed in accordance with the agreed upon designs.

The Government awarded the first DTO task order to BCG on January 22, 2022, simultaneously with the award of the IDIQ contracts. The contract requires the DTO awardee to observe, plan, and propose a set of objectives, outcomes, and measures for the performance of its approach, that measurably contribute to targeted transformational outcomes.

Crucially, through extensive market research and partner interactions, the Government concluded that most digital transformation efforts of even moderate scale fail, and that even in the private sector, success is difficult to achieve. Further, without multiple awardees, the Government is often "stuck" in a failed transformation for longer than necessary which further burdens its ability to deliver capabilities as efficiently and effectively as required in the modem near-peer competition with other major technology states. Accordingly, the Government developed a methodology for WF3 that allowed for the continuation of successful transformations, which market research indicates, often can take 3-5 years, while having the ability to quickly pivot away if the transformation fails. This mechanism is enabled by the Scope and Ordering Guide, an attachment to the contract.

As stated in the Scope and Ordering Guide in Section 4.1.3, PEO DHMS will assess the overall performance of the contractor against the performance metrics that were agreed upon for that particular task order. If PEO DHMS determines the contractor's performance meets or

5 JUL 2026

exceeds all performance metrics, the PEO DHMS will have a strong basis to develop a justification for using the logical follow-on exception to Fair Opportunity process, in the interest of "economy and efficiency" for the next cycle of Task Orders (linked Design to Outcome and Core). Furthermore, as stated in the Scope and Ordering Guide at Section 4.1 .4, if the awardee meets performance to a sufficient level determined by the Government Board of Directors (GBoD), PEO DHMS may use a logical follow-on (exception to the Fair Opportunity process) for the next cycle of Lot 1 Task Orders if it can establish that the value achieved against the agreed metrics, taken into account with other necessary factors, satisfies the "in the interests of economy and efficiency" standard under FAR 16.505(b )(2)(i)(C).

The Government determined BCG's performance met all performance metrics agreed upon during DTO4 and executed during CTO4. It was established that the value achieved against these agreed-upon metrics, considering other necessary factors, satisfied the "in the interests of economy and efficiency" standard. The logical follow-on DTO5 task order was awarded to BCG on May 18, 2026. Based upon the successful completion of CTO4 PEO DHMS and BCG finalized the set of outcomes and objectives that will be accomplished during the execution of

CTO5.

Fair Opportunity to be Considered for the Original Order

Section 1.0 of provision 52.212-2, in the WF3 solicitation advised offerors that, "In addition, this evaluation will result in the concurrent award of the first "Design-To-Outcome" task order.

The "Design-To-Outcome" task order was issued concurrently with the award of the three contracts to the offer determined to provide the "Best Value" of the three awardees. Other awardees will be issued "Incubator" task orders concurrently with contract award to satisfy the "minimum guarantee." The Source Selection Decision Document completed a comparative analysis and determined BCG was the best value. Accordingly, DTO1, the original order, was issued to BCG on a competitive fair opportunity basis.

DTO5 was the logical follow-on to DTO4 and CTO4, DTO4 was the logical follow-on to DTO3 and CTO3, DTO3 was the logical follow-on to DTO2 and CTO2, and DTO2 was the logical follow-on to DTO1 and CTO1. DTO1, the original order, was the base design, agreed upon to start transforming PEO DHMS, its subordinate program offices, and the FEHRM into a world class technology organization. CTO 1 was issued as a logical follow-on to DTO 1, to begin executing on that design. As explained in the previous justification for CTO1 (JA-22-0236), DTO2 (JA-23-0134), CTO2 (JA-23-0241), DTO3 (JA-24-0105), CTO3 (JA-24-0173), DTO4

(JA-25-0022), CTO4 (JA-25-0170), DTO5 (JA-26-0691) and this Justification, the Government's WF3 acquisition strategy anticipated and expressly outlined this Fair Opportunity Exception in the Solicitation.

Economy and Efficiency

Disruption of service: As part of the DTO task order, the awardee must design the outcomes for the CTO. BCG was awarded DTO1 in FY22 and DTO2 in FY23 and during this time has worked with the PEO DHMS on efforts to transform PEO DHMS into a world class technology

6 JUL 2026

organization and to maintain continuity of mission. DTO3 was issued as a logical follow-on to the DTO2 and CTO2 task orders. DTO4 was issued as a logical follow-on to the DTO3 and CTO3 task orders. DTO5 was issued as a logical follow-on to the DTO4 and CTO4 task orders.

If CTO5 is not issued as a logical follow-on, the current transformation efforts would halt, and mission continuity would be adversely impacted.

Duplication of efforts: Over the course of DTO1, DTO2, DTO3, DTO4, and DTO5, BCG and the Government have worked together to document work efforts, create the foundation for transformational design, implement the transformational design, and maintain mission continuity. The Government and BCG have finalized a design for year 5 of WF3 and must start execution of CTO5. If the Government does not award the follow-on CTO5 to BCG, the significant efforts already expended by the contractor and Government would need to be accomplished by another contractor, which would require a minimum of three additional months to design its Core Task Order and accomplish transition.

Increased cost: If CTO5 is not issued as a logical follow-on, the PEO DHMS would have to unnecessarily expend funds for the following:

New DTO5 with Transition:

• A six-month extension for the current CTO4 would be approximately based upon current CTO4 rates. This six-month period includes 3 months to accomplish a DTO fair opportunity competition and another 3 months to execute the DTO with Transition.

This would be in addition to the new CTO awarded amount in Fiscal Year 2026.

For the reasons delineated above, awarding the logical follow-on CTO5 is determined to be in the interest of efficiency and economy.

As all three criteria are satisfied, it is in the Government's best interest to utilize the exception at FAR 16.505(b)(2)(i)(C).

6. Other Facts:

a. Procurement History:

(1) Is this a new requirement? No.

(2) If 6.a.(1) is No, was the action just prior to this one competed? No. The action just prior to this one was also awarded as a Logical follow-on.

(3) If 6.a.(2) is Yes, what has changed where this action cannot be competed? Not applicable.

b. Additional Information: There is no additional information.

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7. Actions to Remove or Overcome any Barriers to Competition: The concept of a “linked” DTO and CTO supported by Fair Opportunity exception is fundamental to the Government’s PEO 3.0 acquisition strategy and the resulting WF3 contract. The Government carefully considered performance under CTO4 in accordance with its Scope and Ordering Guide, incentive plans, and outcomes in making the decision to issue DTO5 as a logical follow-on on a sole source basis in the interest of economy and efficiency.

In accordance with DFARS PGI 216.505(b)(2)(A), a copy of the previous justification for CTO4 is provided to assist the approval authority in determining whether the actions to remove or overcome any barriers that led to the exception to fair opportunity cited on the previous justification were completed. As explained above, the Government’s WF3 acquisition strategy anticipated and expressly outlined this Fair Opportunity Exception in the Solicitation.

8. Market Research: WF3 required extensive market research to both inform and shape requirements. Market research consisted of office calls, Requests for Information, Draft Requests for Proposal, Industry Days, internet research, organizational analyses, and many other methodologies.

Findings from market research indicated that substantive transformation takes, at a minimum, 24-36 months and accordingly, the Government acquisition strategy anticipated and expressly outlined this Fair Opportunity Exception in the Solicitation.

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9. Technical Certification:

I certify the supporting data under my cognizance, which are included in the justification, are accurate and complete to the best of my knowledge and belief.

PEO DHMS

10. Requirements Certification:

I certify the supporting data under my cognizance, which are included in the justification, are accurate and complete to the best of my knowledge and belief.

Acting Program Executive Officer

PEO DHMS

9 JUL 2026

11. Fair and Reasonable Cost Determination:

I hereby determine the anticipated cost to the Government for this contract action will be fair and reasonable.

Basis for Determination: The price was already evaluated as part of the solicitation. Per 52.212-2 evaluation – Commercial Items (OCT 2014) the Government used adequate price competition as a basis for establishing reasonableness of the proposed price by comparing the prices proposed by all Offerors. In addition, the solicitation stated in 52.216-18 Ordering (AUG 2020) orders for line items “0001, 0x01, 0x03, and 1001 shall be placed unilaterally at the price agreed upon at the time of contract award, as identified in the schedule, and incorporated as a “catalog” price in accordance with Attachment 1, Scope and Ordering Guide”.

Contracting Officer

CD-DHMS

12. Legal Review:

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

Office of General Counsel Defense Health Agency

13. Contracting Officer Certification: I certify this justification is accurate and complete to the best of my knowledge and belief.

Contracting Officer

CD-DHMS

Review

10 JUL 2026

I have reviewed this justification and find it adequate to support the exception to fair opportunity.

Concurrence

Chief of the Contracting Office

DHMS-CD

Competition Advocate

USAMRAA

11 JUL 2026

Approval

Based on the foregoing justification, I hereby approve the procurement of WF3 CTO5 an exception to fair opportunity basis pursuant to the authority of FAR 16.505(b)(2)(i)(C) – Order must be issued on a sole-source basis in the interest of economy & efficiency because it is a logical follow-on to an order already issued under the contract), subject to availability of funds, and provided that the supplies or services herein described have otherwise been authorized for acquisition.

Head of the Contracting Activity Defense Health Agency