DoD's $58M Microsoft Consulting Services contract awarded to Microsoft Corporation raises value and competition concerns

Contract Overview

Contract Amount: $58,271,806 ($58.3M)

Contractor: Microsoft Corporation

Awarding Agency: Department of Defense

Start Date: 2013-06-15

End Date: 2018-06-15

Contract Duration: 1,826 days

Daily Burn Rate: $31.9K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: IGF::CL,CT::IGF MICROSOFT CONSULTING SERVICES

Place of Performance

Location: FORT GEORGE G MEADE, ANNE ARUNDEL County, MARYLAND, 20755

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $58.3 million to MICROSOFT CORPORATION for work described as: IGF::CL,CT::IGF MICROSOFT CONSULTING SERVICES Key points: 1. The contract's value proposition is questionable given the sole-source award and lack of competitive bidding. 2. Competition dynamics are absent, as the contract was awarded directly to Microsoft Corporation. 3. Risk indicators include potential overpayment due to lack of competition and reliance on a single vendor. 4. Performance context is limited, with the contract spanning five years for computer systems design services. 5. Sector positioning is within IT services, specifically computer systems design, for the Department of Defense.

Value Assessment

Rating: questionable

The contract's value is difficult to assess without competitive benchmarks. Awarding $58 million to a single vendor for consulting services without competition suggests a potential lack of price discovery. Comparing this to similar, competitively bid IT consulting contracts would be necessary to determine if the pricing is fair market value. The absence of multiple bids raises concerns about whether the government secured the best possible price and terms.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach bypasses the standard procurement process designed to foster competition and identify the most advantageous offer. The lack of bidders means there was no opportunity to compare proposals or negotiate pricing based on market forces.

Taxpayer Impact: Taxpayers may have paid a premium for these services due to the absence of competitive pressure. Without a bidding process, there is less incentive for the contractor to offer the lowest possible price.

Public Impact

The Department of Defense benefits from specialized consulting services for its IT systems. Services delivered include computer systems design, crucial for maintaining and upgrading defense infrastructure. The geographic impact is primarily within Maryland, where the contract was administered. Workforce implications are tied to the specialized skills required for Microsoft systems integration and support.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
Lack of competition may reduce innovation incentives for the awarded contractor.
Extended contract duration without re-competition could lead to vendor lock-in.
Absence of small business participation noted, potentially missing opportunities for smaller IT firms.

Positive Signals

Award to a major vendor like Microsoft ensures access to specialized expertise for critical IT systems.
Firm Fixed Price contract type provides cost certainty for the government.
Contract duration aligns with the long-term nature of IT system development and maintenance.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically focusing on computer systems design services. The IT services market is vast and highly competitive, with numerous firms offering specialized solutions. However, for specific vendor platforms like Microsoft, specialized consulting is often required. The market size for IT consulting services globally is in the hundreds of billions of dollars annually. This contract represents a portion of the federal government's significant IT spending, aimed at maintaining and modernizing its complex technological infrastructure.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the award was made directly to Microsoft Corporation, a large business. This suggests that subcontracting opportunities for small businesses may be limited unless Microsoft voluntarily includes them in its delivery. The absence of a small business focus in this sole-source award means that the direct economic benefits to the small business IT ecosystem are likely minimal.

Oversight & Accountability

Oversight mechanisms for this contract would typically involve the Defense Contract Management Agency (DCMA) and the contracting officer's representative (COR) within the Defense Information Systems Agency (DISA). Accountability measures are inherent in the contract terms, particularly the Firm Fixed Price structure. Transparency is generally facilitated through contract databases like FPDS-NG, where award details are published. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Microsoft Enterprise Agreements
IT Professional Services
Defense Information Technology Modernization
Computer Systems Design and Related Services

Risk Flags

Sole-source award
Lack of competition
Potential for overpricing
Extended contract duration without re-competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $58.3 million to MICROSOFT CORPORATION. IGF::CL,CT::IGF MICROSOFT CONSULTING SERVICES

Who is the contractor on this award?

The obligated recipient is MICROSOFT CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Information Systems Agency).

What is the total obligated amount?

The obligated amount is $58.3 million.

What is the period of performance?

Start: 2013-06-15. End: 2018-06-15.

What is the track record of Microsoft Corporation in delivering similar IT consulting services to the Department of Defense?

Microsoft Corporation, as a primary vendor for many government IT systems, has a long-standing track record of providing a wide range of services, including consulting, software development, and support, to the Department of Defense and other federal agencies. Their expertise spans various domains, from cloud computing (Azure) to operating systems and productivity software. However, the specific nature and success of consulting engagements can vary. While Microsoft is a known entity, the effectiveness of this particular $58 million contract would depend on the specific deliverables, project management, and the quality of the consultants assigned. Without detailed performance reviews or independent assessments tied to this specific award, it's difficult to definitively gauge the success of their consulting track record in this instance beyond their general market presence.

How does the pricing of this contract compare to other similar IT consulting engagements within the federal government?

Direct price comparison for this $58 million contract is challenging due to its sole-source nature and the broad category of 'Computer Systems Design Services.' Typically, competitively solicited contracts provide a benchmark for pricing. Since this was not competed, there's no direct comparison of bids received. To assess value, one would need to benchmark against other sole-source or competitively awarded contracts for similar Microsoft-centric consulting services, considering factors like duration, scope of work, and specific expertise required. Without such comparative data, it's presumed that the pricing might be higher than if it had undergone a competitive bidding process, as market pressures to offer lower rates are absent.

What are the primary risks associated with awarding a large IT consulting contract on a sole-source basis?

The primary risks associated with awarding a large IT consulting contract on a sole-source basis include: 1. **Higher Costs:** Lack of competition can lead to inflated prices as the government does not benefit from the price discovery mechanism inherent in competitive bidding. 2. **Reduced Innovation:** The awarded contractor may have less incentive to innovate or offer cost-saving solutions if they are guaranteed the contract without facing rivals. 3. **Vendor Lock-in:** The agency may become overly reliant on a single vendor, making it difficult and costly to switch providers in the future. 4. **Potential for Lower Quality:** Without the pressure of competition, the quality of services delivered might not be as high as it could be under a competitive scenario. 5. **Limited Choice:** The agency is restricted to the capabilities and offerings of the single awarded vendor.

What is the historical spending pattern for Microsoft consulting services within the Department of Defense?

Historical spending patterns for Microsoft consulting services within the Department of Defense are substantial, reflecting Microsoft's dominant position in enterprise software and cloud services. The DoD, like many large organizations, relies heavily on Microsoft products (Windows, Office 365, Azure). Consequently, spending on Microsoft-related consulting, implementation, and support services has been a consistent and significant part of the DoD's IT budget over many years. This $58 million contract is one instance within a broader trend of significant investment in Microsoft technologies and associated professional services across various defense agencies. Analyzing aggregated spending data over multiple fiscal years would reveal the scale and consistency of this investment.

How does the contract's duration (5 years) impact its overall value and risk profile?

A five-year duration for an IT consulting contract can have mixed impacts on value and risk. On the positive side, it allows for long-term project planning, continuity of service, and potentially deeper integration of solutions, which can be valuable for complex IT systems. It also reduces the administrative burden and cost associated with frequent re-procurement. However, a long duration, especially when coupled with a sole-source award, increases the risk of vendor lock-in and potential price escalation over time if market rates decrease or better solutions emerge. It also means the government is committed to a specific vendor and approach for an extended period, potentially missing out on innovations or more cost-effective alternatives that might arise from competitors during that timeframe.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Computer Systems Design Services

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HC102813R0023

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: ONE MICROSOFT WAY, REDMOND, WA, 98052

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $58,271,806

Exercised Options: $58,271,806

Current Obligation: $58,271,806

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HC102813D0013

IDV Type: IDC

Timeline