DoD's $33M financial services contract with KPMG LLP shows fair value despite limited competition

Contract Overview

Contract Amount: $32,957,064 ($33.0M)

Contractor: Kpmg LLP

Awarding Agency: Department of Defense

Start Date: 2014-01-15

End Date: 2014-10-31

Contract Duration: 289 days

Daily Burn Rate: $114.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: IGF::OT::IGF 8500573670!FINANCIAL SVCS INC CRCARD SVC

Place of Performance

Location: MCLEAN, FAIRFAX County, VIRGINIA, 22102, UNITED STATES OF AMERICA

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $33.0 million to KPMG LLP for work described as: IGF::OT::IGF 8500573670!FINANCIAL SVCS INC CRCARD SVC Key points: 1. Contract awarded to KPMG LLP for financial services, indicating a focus on specialized accounting expertise. 2. The contract's duration of 289 days suggests a project-based or short-term need for these services. 3. With 3 bidders, competition was present but not extensive, potentially impacting price optimization. 4. The firm-fixed-price contract type shifts risk to the contractor, encouraging cost control. 5. The contract falls under the Offices of Certified Public Accountants NAICS code, aligning with its service nature. 6. The BPA award type suggests a framework agreement for recurring financial services needs.

Value Assessment

Rating: fair

The contract value of $32.96 million for financial services over approximately 9.5 months appears reasonable given the specialized nature of accounting services. Benchmarking against similar contracts for large-scale financial audits or consulting within the Department of Defense is challenging without more specific service details. However, the price per day is approximately $114,000, which, while substantial, is not inherently indicative of overpayment without a detailed scope of work comparison. The firm-fixed-price structure suggests the government secured a defined cost for the services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with three bidders participating. While three bidders indicate some level of competition, it is not as robust as typically seen in larger, more broadly defined procurements. This level of competition suggests that while multiple firms were aware of and able to bid on the requirement, the specialized nature of the services or specific pre-qualification criteria may have limited the pool of potential offerors. This could lead to a price that reflects the capabilities of the top few bidders rather than the absolute lowest possible price achievable in a wider market.

Taxpayer Impact: For taxpayers, three bidders mean that the government received multiple proposals and had a choice, which generally helps in achieving a fair price. However, a more competitive environment with a larger number of bidders could have potentially driven the price down further.

Public Impact

The Department of Defense benefits from specialized financial services, likely enhancing financial reporting accuracy and compliance. Services delivered are expected to support critical financial operations within the Defense Logistics Agency. The geographic impact is primarily within the agency's operational areas, though the exact locations are not specified. Workforce implications are minimal for the government, as the services are contracted out to a private firm.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition with only three bidders could have resulted in a higher price than a more robustly competed contract.
The contract duration is relatively short (289 days), which might indicate a need for more long-term financial service solutions.
The specific nature of the financial services is not detailed, making it difficult to fully assess value for money.
The BPA award type, while efficient, can sometimes lead to less granular price scrutiny compared to individual task orders.

Positive Signals

Awarded under full and open competition, ensuring a broad initial outreach for potential bidders.
The firm-fixed-price contract type effectively transfers cost overrun risk to the contractor.
KPMG LLP is a well-established firm with a strong reputation in financial services and auditing.
The contract supports critical financial operations within a major federal agency (Department of Defense).

Sector Analysis

The financial services sector for the federal government is substantial, encompassing auditing, accounting, tax preparation, and management consulting. This contract falls within the professional services category, specifically accounting and auditing, which is a mature market with many established players. The Department of Defense, as a massive entity, frequently procures such services to manage its complex financial operations and ensure compliance with various regulations. Comparable spending benchmarks are difficult to establish without knowing the precise scope, but large federal agencies often award multi-million dollar contracts for these types of specialized financial expertise.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the prime contractor, KPMG LLP, is a large, established firm, making it unlikely to be a small business. There is no explicit information regarding subcontracting plans for small businesses within the provided data. Therefore, the direct impact on the small business ecosystem from this specific prime contract is likely minimal, though large prime contractors are often encouraged or required to have small business subcontracting goals on other types of contracts.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the contract administration office within the Defense Logistics Agency. As a firm-fixed-price contract, oversight would focus on ensuring the contractor meets the defined deliverables and performance standards. Transparency is facilitated by contract databases like FPDS, which record award details. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected related to the contract's execution or billing.

Related Government Programs

Financial Audit Services
Accounting and Auditing Services
Management and Financial Consulting
Defense Contract Audit Agency (DCAA) Services
Federal Financial Management Systems

Risk Flags

Limited Competition
Potential for Price Inflation
Lack of Detailed Scope Information

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $33.0 million to KPMG LLP. IGF::OT::IGF 8500573670!FINANCIAL SVCS INC CRCARD SVC

Who is the contractor on this award?

The obligated recipient is KPMG LLP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $33.0 million.

What is the period of performance?

Start: 2014-01-15. End: 2014-10-31.

What is the specific scope of financial services provided under this contract?

The provided data indicates the contract is for financial services under NAICS code 541211 (Offices of Certified Public Accountants) and was awarded to KPMG LLP by the Defense Logistics Agency. However, the specific scope of services is not detailed. Typically, contracts under this NAICS code can include a wide range of services such as financial statement audits, accounting system reviews, tax preparation and advisory, internal control assessments, and financial consulting. Given the large contract value and the client being the Department of Defense, it is likely these services are complex and critical, potentially involving large-scale financial statement audits, forensic accounting, or advisory on financial regulations and compliance.

How does the $32.96 million contract value compare to similar financial services contracts awarded by the DoD?

Comparing the $32.96 million contract value requires context on the duration and specific services. This contract lasted approximately 9.5 months (289 days). The average daily cost is roughly $114,000. The Department of Defense procures a vast array of financial services, ranging from routine accounting support to complex audits and consulting engagements. While $33 million is a significant sum, it is not unusual for major federal agencies to award contracts of this magnitude for specialized, high-level financial expertise, especially for large-scale audits or advisory services. Without knowing the exact deliverables, a precise comparison is difficult, but it falls within the expected range for substantial financial service engagements within a large federal organization.

What are the key risks associated with this contract for the government?

The primary risks for the government in this contract revolve around the potential for the contractor (KPMG LLP) to not fully meet the performance expectations or deliver the required quality of financial services. Although it's a firm-fixed-price contract, which shifts cost overrun risk to the contractor, there's still a risk of schedule delays or inadequate service delivery impacting the DoD's financial operations. Another risk is the potential for insufficient competition, as only three bidders participated, which might have led to a less competitive price than could have been achieved in a broader market. Finally, ensuring the contractor maintains objectivity and independence, particularly in auditing or advisory roles, is a perpetual risk in financial services contracts.

What is KPMG LLP's track record with federal contracts, particularly with the Department of Defense?

KPMG LLP is a major global professional services firm with a long history of contracting with the U.S. federal government, including the Department of Defense. Publicly available contract data (like FPDS) shows numerous awards to KPMG across various agencies for a wide range of services, including financial auditing, consulting, and advisory. Their track record generally reflects their status as one of the 'Big Four' accounting firms, indicating significant experience and capability in handling large, complex government contracts. While specific performance metrics for every contract are not always public, their continued success in winning federal bids suggests a generally positive performance history and a strong understanding of government procurement requirements.

How does the 'full and open competition' award method impact the value received by taxpayers?

Awarding a contract through 'full and open competition' means that all responsible sources were permitted to submit a bid. This method is generally considered the best practice for maximizing competition and achieving the best value for taxpayers. By allowing a wide range of potential contractors to compete, the government increases the likelihood of receiving multiple proposals, which drives down prices through competitive bidding. It also encourages innovation and efficiency as contractors strive to offer the most attractive terms. In this specific case, with three bidders, the competition was present, suggesting taxpayers benefited from at least some price pressure compared to a sole-source award. However, the extent of the benefit depends on how many other qualified firms might have been interested but did not bid.

What is the historical spending pattern for financial services by the Defense Logistics Agency?

The provided data is for a single contract awarded in 2014. To understand historical spending patterns for financial services by the Defense Logistics Agency (DLA), a broader analysis of contract awards over several fiscal years would be necessary. DLA, as a major logistics and support agency within the DoD, likely procures a consistent volume of financial services, including auditing, accounting, and financial management support, to manage its extensive operations. Spending can fluctuate based on specific needs, such as major system implementations, audit cycles, or changes in regulatory requirements. Analyzing historical data would reveal trends in contract types, service providers, and overall expenditure levels for these services within DLA.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Accounting, Tax Preparation, Bookkeeping, and Payroll Services › Offices of Certified Public Accountants

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Kpmg L.L.P. (UEI: 001667906)

Address: 2001 M ST NW, WASHINGTON, DC, 20036

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $32,957,064

Exercised Options: $32,957,064

Current Obligation: $32,957,064

Subaward Activity

Number of Subawards: 10

Total Subaward Amount: $2,319,851

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP470311A0017

IDV Type: BPA

Timeline