DoD's $318M IT contract with Peraton Enterprise Solutions shows fair value, but limited competition raises concerns

Contract Overview

Contract Amount: $318,108,897 ($318.1M)

Contractor: Peraton Enterprise Solutions LLC

Awarding Agency: Department of Defense

Start Date: 2016-08-10

End Date: 2021-06-30

Contract Duration: 1,785 days

Daily Burn Rate: $178.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: COST NO FEE

Sector: IT

Official Description: IGF::CT::IGF INFORMATION TECHNOLOGY CAPABILITIES

Place of Performance

Location: OFFUTT AFB, SARPY County, NEBRASKA, 68113

State: Nebraska Government Spending

Plain-Language Summary

Department of Defense obligated $318.1 million to PERATON ENTERPRISE SOLUTIONS LLC for work described as: IGF::CT::IGF INFORMATION TECHNOLOGY CAPABILITIES Key points: 1. Contract value of $318.1 million over 5 years suggests a significant investment in IT capabilities. 2. The award was made under full and open competition, indicating a broad initial search for vendors. 3. However, the relatively low number of bids received (5) warrants further investigation into market dynamics. 4. The contract type (Cost No Fee) can sometimes lead to cost overruns if not managed tightly. 5. Performance context is crucial, as the success of these IT services directly impacts Air Force operations. 6. This contract falls within the broader IT services sector, a critical area for government operations.

Value Assessment

Rating: fair

The contract's total value of $318.1 million over approximately five years averages around $63.6 million annually. Benchmarking this against similar large-scale IT service contracts for defense agencies is challenging without more specific service details. However, the Cost No Fee (Cost-Plus-Fixed-Fee or CPFF is more common) contract type, while allowing flexibility, can sometimes be less cost-effective than fixed-price arrangements if not meticulously managed. The absence of a specific fee structure in the provided data makes a precise value-for-money assessment difficult, but the overall spend is substantial.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting that the government sought proposals from all responsible sources. However, only five bids were received. This number, while not extremely low, is on the lower side for a contract of this magnitude and duration, especially within the competitive IT services market. A limited number of bidders could indicate potential barriers to entry, consolidation within the market, or a lack of awareness among potential vendors. This could impact price discovery and potentially lead to less competitive pricing than if more vendors had participated.

Taxpayer Impact: For taxpayers, a limited number of bidders can mean less downward pressure on prices, potentially resulting in higher costs for the government and, by extension, the taxpayer. It also raises questions about whether the full spectrum of innovative solutions and competitive pricing was explored.

Public Impact

The primary beneficiaries are the Department of the Air Force, which receives essential IT support services. These services likely encompass a range of IT functions critical to military operations and administrative tasks. The geographic impact is primarily within the Department of the Air Force's operational footprint, potentially worldwide. The contract supports a workforce of IT professionals, both within the contractor's organization and potentially indirectly within the government agency.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited number of bidders (5) for a large contract may indicate reduced competition and potentially higher costs.
Cost No Fee contract type requires robust oversight to prevent cost overruns and ensure efficiency.
Lack of specific performance metrics or outcome data makes it difficult to assess the true value delivered.
The contractor's track record on similar large-scale IT contracts would provide further insight into performance risks.

Positive Signals

Awarded under full and open competition, ensuring a broad initial search for qualified vendors.
The contract duration of nearly 5 years suggests a stable, long-term need for these IT services.
The significant contract value indicates a critical role for these IT services within the Air Force.

Sector Analysis

This contract falls within the broader Information Technology (IT) services sector, a multi-billion dollar industry supporting government operations. The market for IT services is highly competitive, with numerous large and small businesses offering a wide array of solutions. Contracts like this, focused on computer systems design, are essential for maintaining and modernizing government IT infrastructure. Comparable spending benchmarks would depend heavily on the specific services rendered, but annual spending in the tens of millions is common for large federal IT support contracts.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications for small businesses stemming from a small business set-aside. However, the prime contractor, Peraton Enterprise Solutions LLC, may choose to subcontract portions of this work to small businesses as part of their overall business strategy or to meet broader socioeconomic goals, though this is not mandated by the contract type or set-aside status.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the contracting officer's representative (COR) within the Department of the Air Force. The Cost No Fee structure necessitates close monitoring of expenditures and performance to ensure that costs are reasonable and that the services delivered meet the government's requirements. Transparency is generally maintained through contract reporting mechanisms, though specific details of ongoing oversight activities are not publicly detailed. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

DoD IT Modernization Programs
Air Force Cloud Computing Initiatives
Federal Civilian IT Services Contracts
Defense Information Systems Agency (DISA) Contracts

Risk Flags

Limited competition
Unusual contract type (Cost No Fee)
Lack of detailed performance metrics
Potential for cost overruns without strong oversight

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $318.1 million to PERATON ENTERPRISE SOLUTIONS LLC. IGF::CT::IGF INFORMATION TECHNOLOGY CAPABILITIES

Who is the contractor on this award?

The obligated recipient is PERATON ENTERPRISE SOLUTIONS LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $318.1 million.

What is the period of performance?

Start: 2016-08-10. End: 2021-06-30.

What specific IT services are covered under this $318 million contract, and how do they align with the Air Force's strategic IT goals?

The contract is classified under NAICS code 541512 for Computer Systems Design Services. This broad category typically includes services such as designing, developing, and integrating hardware and software systems; IT consulting; network design; and IT infrastructure management. For the Air Force, these services are likely crucial for maintaining operational command and control systems, supporting administrative functions, enabling data analytics, and potentially contributing to modernization efforts like cloud migration or cybersecurity enhancements. Without specific task orders or statements of work, the precise alignment with strategic goals remains general, but robust IT infrastructure is foundational to all modern military operations.

How does the pricing structure (Cost No Fee) compare to industry standards for similar IT system design services, and what are the associated risks?

The 'Cost No Fee' (CNF) contract type is unusual; typically, cost-reimbursement contracts include a fee (e.g., Cost-Plus-Fixed-Fee or CPFF) to incentivize contractor performance and profit. A CNF contract means the contractor is reimbursed for allowable costs but receives no additional profit. This can be used in situations where the scope is highly uncertain or when the government wants to minimize contractor profit. However, it can reduce contractor motivation to control costs, as their profit isn't tied to efficiency. Risks include potential for inflated costs if oversight is lax, as the contractor has less financial incentive to be efficient. Industry standards often favor fixed-price or CPFF contracts for IT services where scope can be reasonably defined, as they offer better cost control and performance incentives.

What was the competitive landscape like for this specific contract, and why might only five bids have been submitted?

The contract was awarded under 'Full and Open Competition,' meaning all responsible sources were encouraged to bid. Receiving only five bids for a contract valued at over $300 million suggests several possibilities. The market for large-scale, complex IT system design services may be consolidating, with fewer large prime contractors capable of undertaking such work. Alternatively, the specific requirements of the solicitation, the security clearances needed, or the geographic location might have limited the pool of interested and qualified bidders. High barriers to entry, such as significant pre-qualification requirements or the need for specialized expertise, could also play a role. This limited competition warrants scrutiny to ensure the government secured the best possible value.

What is Peraton Enterprise Solutions LLC's track record with large federal IT contracts, particularly within the Department of Defense?

Peraton has a significant presence in the federal IT contracting space, particularly within the defense sector. The company has been awarded numerous large contracts across various agencies, including the DoD, Intelligence Community, and civilian agencies, often focusing on complex IT modernization, mission support, and cybersecurity. Their history includes both prime contract awards and significant subcontracting roles. Analyzing Peraton's past performance on similar-sized contracts, including any past performance issues, contract modifications, or successful project completions, would provide valuable context for assessing the risk and potential success of this specific Air Force contract.

How has federal spending on computer systems design services (NAICS 541512) trended over the past five years, and where does this contract fit within that trend?

Federal spending on Computer Systems Design Services (NAICS 541512) has generally been robust and increasing over the past five years, driven by the government's continuous need to modernize IT infrastructure, enhance cybersecurity, and adopt new technologies like cloud computing and artificial intelligence. This $318 million contract, awarded between 2016 and 2021, represents a substantial single award within this category. Its value aligns with the trend of large, multi-year IT service contracts awarded to major defense contractors to support critical mission requirements. The overall spending trend indicates a sustained demand for these services across the federal government.

Industry Classification

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

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: FA460014R0017

Offers Received: 5

Pricing Type: COST NO FEE (S)

Evaluated Preference: NONE

Contractor Details

Parent Company: Peraton Solutions Inc. (UEI: 081218565)

Address: 13600 EDS DR A3S, HERNDON, VA, 20171

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

Financial Breakdown

Contract Ceiling: $575,261,770

Exercised Options: $347,368,270

Current Obligation: $318,108,897

Actual Outlays: $3,030

Subaward Activity

Number of Subawards: 161

Total Subaward Amount: $50,462,267

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline