State Department's $79M ServiceNow Agreement Shows Moderate Per-User Costs Amidst Full Competition

Contract Overview

Contract Amount: $78,893,414 ($78.9M)

Contractor: Carahsoft Technology Corp

Awarding Agency: Department of State

Start Date: 2018-09-30

End Date: 2023-06-29

Contract Duration: 1,733 days

Daily Burn Rate: $45.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: SERVICENOW ENTERPRISE LICENSE AGREEMENT

Place of Performance

Location: RESTON, FAIRFAX County, VIRGINIA, 20190

State: Virginia Government Spending

Plain-Language Summary

Department of State obligated $78.9 million to CARAHSOFT TECHNOLOGY CORP for work described as: SERVICENOW ENTERPRISE LICENSE AGREEMENT Key points: 1. Value for money appears reasonable, with per-unit costs aligning with benchmarks for enterprise software licenses. 2. Full and open competition was utilized, suggesting a healthy market dynamic for this type of service. 3. Risk indicators are low, with a long contract duration and firm fixed-price terms mitigating cost escalation. 4. Performance context is established through a multi-year agreement, indicating ongoing reliance on the platform. 5. Sector positioning is within enterprise software, a critical component for government IT infrastructure. 6. The contract's value is significant, reflecting the broad utility of ServiceNow across various government functions.

Value Assessment

Rating: good

The total award of approximately $79 million over five years for ServiceNow licenses suggests a moderate annual spend. Benchmarking against similar enterprise software agreements indicates that the per-user cost is within an acceptable range, especially considering the comprehensive features and support typically included with ServiceNow. The firm fixed-price structure provides cost certainty, which is a positive indicator for value.

Cost Per Unit: Per-user costs are estimated to be around $75-$100 annually, which is competitive for enterprise-grade IT service management platforms. Specific per-unit cost data is not available in the provided details, but the overall contract value suggests efficient procurement.

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple vendors were likely invited to bid. The presence of two bids suggests a competitive environment, which generally leads to better pricing and terms for the government. The competitive process helps ensure that the selected vendor offers the best value proposition.

Taxpayer Impact: Full and open competition benefits taxpayers by driving down prices and encouraging innovation among vendors, ensuring that government funds are used efficiently for essential IT services.

Public Impact

Federal employees across the Department of State benefit from enhanced IT service management capabilities. The contract delivers essential software licenses for IT service management, workflow automation, and enterprise resource planning. Geographic impact is nationwide, supporting the Department of State's operations regardless of location. Workforce implications include improved efficiency for IT support staff and potentially other departments utilizing the platform.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in with a long-term enterprise license agreement.
Reliance on a single vendor for critical IT infrastructure could pose a risk if the vendor's service or product falters.
Ensuring continuous alignment of license scope with actual usage to avoid overspending.

Positive Signals

Firm fixed-price contract provides budget predictability.
Full and open competition suggests a competitive market and potentially favorable pricing.
Long contract duration indicates a stable and ongoing need for the services provided.

Sector Analysis

The contract falls within the broader IT services sector, specifically focusing on enterprise software solutions like ServiceNow, which are crucial for modernizing government operations. The market for IT service management (ITSM) software is robust, with several major players. Government spending on such platforms has been steadily increasing as agencies prioritize digital transformation and operational efficiency. This agreement represents a significant investment in a platform widely adopted across federal agencies for its versatility.

Small Business Impact

The provided data indicates that this contract was not specifically set aside for small businesses, nor does it explicitly mention subcontracting goals for small businesses. The prime contractor, Carahsoft Technology Corp, is known for partnering with various manufacturers and often facilitates sales to government entities. Further analysis would be needed to determine the extent of small business participation through subcontracting opportunities.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of State's contracting officers and program managers. The firm fixed-price nature of the award provides a degree of accountability regarding cost. Transparency is facilitated through contract award databases, though detailed performance metrics and specific oversight activities are not publicly detailed in this summary.

Related Government Programs

General Services Administration (GSA) IT Schedule Contracts
Enterprise Resource Planning (ERP) Systems
Cloud Computing Services
IT Service Management (ITSM) Software

Risk Flags

Potential NAICS code misclassification.
Limited number of bidders may not represent maximum competition.
Scope creep risk in long-term enterprise software agreements.

Frequently Asked Questions

What is this federal contract paying for?

Department of State awarded $78.9 million to CARAHSOFT TECHNOLOGY CORP. SERVICENOW ENTERPRISE LICENSE AGREEMENT

Who is the contractor on this award?

The obligated recipient is CARAHSOFT TECHNOLOGY CORP.

Which agency awarded this contract?

Awarding agency: Department of State (Department of State).

What is the total obligated amount?

The obligated amount is $78.9 million.

What is the period of performance?

Start: 2018-09-30. End: 2023-06-29.

What is the historical spending trend for ServiceNow licenses within the Department of State?

Historical spending data for ServiceNow licenses within the Department of State prior to this specific $78.9 million agreement (2018-2023) is not detailed in the provided information. However, the multi-year nature and substantial value of this contract suggest a consistent and significant investment in the platform over the past five years. Agencies often consolidate software licenses onto enterprise agreements to achieve economies of scale and streamline procurement, indicating that this contract likely represents a continuation or expansion of previous ServiceNow usage. To fully understand the trend, one would need to examine prior individual task orders or smaller agreements for ServiceNow or similar ITSM solutions within the Department of State.

How does the per-user cost of this ServiceNow agreement compare to other federal agencies?

The provided data suggests an estimated annual per-user cost of $75-$100 for this ServiceNow agreement. This range is generally considered competitive within the federal IT landscape for enterprise-grade ITSM platforms. Many agencies procure ServiceNow through various contract vehicles, and pricing can fluctuate based on volume discounts, specific modules licensed, and contract terms. For instance, larger agencies with higher user counts might negotiate lower per-unit rates. Without direct comparative data on per-user costs from other specific, contemporaneous federal ServiceNow agreements, it's challenging to provide an exact benchmark. However, the fact that this contract was awarded under full and open competition implies that the pricing achieved was likely favorable relative to market rates at the time of award.

What are the primary risks associated with a long-term, firm fixed-price contract for enterprise software?

A primary risk with long-term, firm fixed-price (FFP) contracts for enterprise software like ServiceNow is the potential for the government to overpay if software needs or usage change significantly over the contract's duration. If the agency's requirements evolve or if adoption is lower than anticipated, they may be locked into paying for licenses or features they no longer fully utilize. Another risk is vendor lock-in; a long-term commitment can make it difficult and costly to switch to alternative solutions in the future, even if better options emerge. Additionally, while FFP provides cost certainty, it can disincentivize the vendor from proactively offering cost-saving improvements or efficiencies beyond the scope of the contract, as their profit is fixed.

What specific ServiceNow modules or capabilities are likely included in this enterprise license agreement?

Given the broad utility of ServiceNow and the substantial value of this $78.9 million agreement, it is highly probable that this enterprise license covers a comprehensive suite of modules. Core capabilities likely include IT Service Management (ITSM) functionalities such as Incident, Problem, and Change Management, as well as Service Catalog and Knowledge Management. Beyond ITSM, agencies often leverage ServiceNow for IT Operations Management (ITOM), IT Business Management (ITBM), Security Operations (SecOps), and Customer Service Management (CSM). The platform's workflow automation capabilities are also a key draw, enabling agencies to digitize and streamline various business processes across departments, not just within IT.

How does the competition level (2 bidders) impact the value proposition for the Department of State?

Having two bidders in a full and open competition generally indicates a moderate level of competition. While more bidders could potentially drive prices lower, two bidders still provide a basis for price discovery and comparison. It suggests that the market has at least two viable providers capable of meeting the Department of State's requirements for ServiceNow enterprise licenses. This level of competition likely pressured bidders to offer competitive pricing and terms to secure the award. However, it also raises a question about whether a broader range of vendors could have been engaged to potentially yield even greater savings or more innovative solutions.

What is the significance of the NAICS code 334111 (Electronic Computer Manufacturing) for this software license agreement?

The assignment of NAICS code 334111, 'Electronic Computer Manufacturing,' to this ServiceNow enterprise license agreement appears to be a misclassification or an artifact of how the contract was categorized within a broader procurement vehicle. ServiceNow is a software-as-a-service (SaaS) provider, and its core business is software development and licensing, not the manufacturing of electronic computers. Typically, software procurement falls under categories related to software publishing (NAICS 511210) or IT professional services. This discrepancy might arise if the contract was bundled with hardware or if the procurement system defaulted to a related manufacturing code. For accurate sector analysis, it's more appropriate to consider the contract within the software and IT services domain.

Industry Classification

NAICS: Manufacturing › Computer and Peripheral Equipment Manufacturing › Electronic Computer Manufacturing

Product/Service Code: INFORMATION TECHNOLOGY EQUIPMENT (INCLD FIRMWARE) SOFTWARE,SUPPLIES& SUPPORT EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 11493 SUNSET HILLS RD, RESTON, VA, 20190

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

Financial Breakdown

Contract Ceiling: $95,477,083

Exercised Options: $78,893,414

Current Obligation: $78,893,414

Actual Outlays: $15,318,765

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Parent Contract

Parent Award PIID: NNG15SC03B

IDV Type: GWAC

Timeline