DoD's $52M accounting services contract with KPMG shows fair value, but limited competition raises concerns

Contract Overview

Contract Amount: $52,019,481 ($52.0M)

Contractor: Kpmg LLP

Awarding Agency: Department of Defense

Start Date: 2017-04-01

End Date: 2018-10-31

Contract Duration: 578 days

Daily Burn Rate: $90.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: IGF::OT::IGF ACCOUNTING AND FINANCIAL SERVICES

Place of Performance

Location: WASHINGTON NAVY YARD, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20374

State: District of Columbia Government Spending

Plain-Language Summary

Department of Defense obligated $52.0 million to KPMG LLP for work described as: IGF::OT::IGF ACCOUNTING AND FINANCIAL SERVICES Key points: 1. Value for money appears reasonable given the scope of services provided. 2. Competition was limited, potentially impacting price discovery and overall value. 3. Risk indicators are moderate, with a focus on financial integrity and performance. 4. Performance context suggests a need for robust oversight due to the nature of accounting services. 5. Sector positioning places this contract within the broader professional services landscape for government agencies.

Value Assessment

Rating: fair

The contract value of approximately $52 million for accounting and financial services appears to be within a reasonable range for the services rendered by a large firm like KPMG. Benchmarking against similar contracts for comprehensive accounting support to a major agency like the Department of Defense suggests that the pricing is competitive, though the lack of robust competition makes definitive value assessment challenging. The cost-plus-fixed-fee structure necessitates careful monitoring of costs to ensure efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. However, the data shows only one award was made, which could suggest that while the opportunity was broadly advertised, only one firm met the stringent requirements or submitted a competitive proposal. The level of competition, while technically open, resulted in a single awardee, which warrants further examination of the bidding process and qualification criteria.

Taxpayer Impact: Taxpayers benefit from the potential for competitive pricing inherent in full and open competition, even if only one award was made. This process aims to ensure that the government secures the best possible value by considering multiple offers.

Public Impact

The Department of Defense benefits from enhanced financial management and accounting services. Services delivered include critical financial reporting, auditing support, and accounting operations. Geographic impact is primarily within the District of Columbia, where the contract is managed. Workforce implications include support for military and civilian personnel through accurate financial stewardship.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the cost-plus-fixed-fee contract type.
Reliance on a single contractor for critical financial services could pose a risk if performance falters.
Ensuring adequate oversight and quality control for complex accounting services is paramount.

Positive Signals

Award to a reputable firm with extensive experience in government contracting.
Contract duration provides stability for essential financial operations.
Full and open competition, in principle, allows for a wide range of potential bidders.

Sector Analysis

This contract falls within the professional, scientific, and technical services sector, specifically accounting services. The government procurement of such services is substantial, driven by the need for financial integrity and compliance across all agencies. Comparable spending benchmarks for accounting and auditing services for large federal departments often run into tens or hundreds of millions of dollars annually, reflecting the complexity and scale of government financial operations.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, nor does it appear to have significant subcontracting implications for small businesses based on the provided information. The primary awardee, KPMG LLP, is a large professional services firm. Therefore, the direct impact on the small business ecosystem is likely minimal, with no specific provisions for small business participation evident in the summary data.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer's representative (COR) within the Department of the Navy, ensuring compliance with contract terms and performance standards. Accountability measures are embedded in the cost-plus-fixed-fee structure, requiring detailed reporting and justification of costs. Transparency is facilitated through contract databases and reporting requirements, though specific performance metrics and audit findings would require deeper investigation.

Related Government Programs

Department of Defense Financial Management
Federal Accounting Standards Advisory Board (FASAB)
Government Accountability Office (GAO) Audits
Defense Contract Audit Agency (DCAA)

Risk Flags

Cost-Plus-Fixed-Fee contract type requires diligent cost oversight.
Single award under full and open competition may indicate barriers to entry or limited market response.
Reliance on external contractors for core financial functions necessitates strong government oversight.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $52.0 million to KPMG LLP. IGF::OT::IGF ACCOUNTING AND FINANCIAL SERVICES

Who is the contractor on this award?

The obligated recipient is KPMG LLP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $52.0 million.

What is the period of performance?

Start: 2017-04-01. End: 2018-10-31.

What is KPMG LLP's track record with the Department of Defense for similar accounting services?

KPMG LLP has a long-standing history of providing professional services, including accounting, auditing, and consulting, to various branches of the U.S. government, including the Department of Defense. Their track record typically involves large-scale engagements requiring expertise in complex financial regulations and reporting standards. While specific performance details for this particular contract are not detailed here, KPMG's general reputation as a 'Big Four' accounting firm suggests a capacity to handle significant government contracts. However, like any large contractor, past performance reviews and any documented issues or commendations would be crucial for a complete assessment. Accessing past performance evaluations and any contract disputes or resolutions would provide a more granular understanding of their specific history with DoD.

How does the value of this contract compare to other federal accounting service contracts?

The approximate $52 million value for this contract over its period of performance (roughly 1.5 years) places it as a significant, but not exceptionally large, federal accounting services contract. Large federal agencies, particularly the Department of Defense, often award contracts in the hundreds of millions or even billions for comprehensive financial management and audit support over multiple years. For instance, contracts for enterprise resource planning (ERP) system implementation or large-scale audit support can far exceed this amount. However, when compared to contracts for more specialized or localized accounting needs, $52 million represents a substantial investment, indicating a broad scope of services or a high level of complexity.

What are the primary risks associated with this cost-plus-fixed-fee contract?

The primary risks associated with a Cost-Plus-Fixed-Fee (CPFF) contract, like this one, revolve around cost control and contractor incentives. For the government, the risk is that the contractor may not be sufficiently incentivized to control costs, as the fee is fixed regardless of the actual costs incurred (within reason and subject to audit). This can lead to potential cost overruns if not managed diligently. The contractor bears the risk of costs exceeding the estimate, but the fixed fee provides a guaranteed profit margin. Effective oversight, detailed cost tracking, and robust auditing by the government are critical to mitigate these risks and ensure the government pays a fair price for the services rendered.

How effective are the oversight mechanisms for ensuring performance and value?

The effectiveness of oversight mechanisms for this contract depends heavily on the diligence of the Contracting Officer's Representative (COR) and the Defense Contract Audit Agency (DCAA). CPFF contracts require rigorous monitoring of expenditures, progress reports, and adherence to the Statement of Work (SOW). Regular audits by DCAA are essential to verify the allowability, allocability, and reasonableness of costs. Performance metrics, if defined in the SOW, must be consistently tracked and evaluated. The success of these mechanisms hinges on adequate staffing, expertise, and timely action by government personnel to address any deviations from the contract requirements or performance standards.

What are the historical spending patterns for accounting services within the Department of the Navy?

Historical spending patterns for accounting services within the Department of the Navy (DoN) are substantial, reflecting the vast financial operations of the naval services. The DoN consistently procures a wide array of financial management, accounting, auditing, and financial advisory services. Annual spending can range from tens of millions to hundreds of millions of dollars, depending on specific needs such as system modernizations, audit support, financial statement preparation, and operational accounting. This particular $52 million contract represents a portion of that broader spending, likely addressing specific functional areas or project requirements within a given fiscal period.

What is the significance of the 'Other Accounting Services' NAICS code (541219)?

The North American Industry Classification System (NAICS) code 541219, 'Other Accounting Services,' signifies that the services procured under this contract fall outside the more specific categories like 'Offices of Certified Public Accountants' (541211) or 'Tax Preparation Services' (541213). This typically encompasses a broader range of accounting-related activities, such as forensic accounting, accounting system design and implementation, financial analysis, and general accounting consulting that doesn't fit neatly into other predefined categories. For the Department of Defense, this code suggests the contract likely involves a diverse set of financial support functions critical to managing its complex budget and operations.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Accounting, Tax Preparation, Bookkeeping, and Payroll Services › Other Accounting Services

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

Solicitation ID: N0018909RZ056

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Kpmg L.L.P.

Address: 1676 INTERNATIONAL DR STE 7000, MCLEAN, VA, 22102

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

Financial Breakdown

Contract Ceiling: $63,745,660

Exercised Options: $63,745,660

Current Obligation: $52,019,481

Subaward Activity

Number of Subawards: 21

Total Subaward Amount: $18,610,396

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0018910DZ028

IDV Type: IDC

Timeline