DoD's $30M Microsoft contract for custom programming services raises value and competition concerns

Contract Overview

Contract Amount: $29,988,078 ($30.0M)

Contractor: Microsoft Corporation

Awarding Agency: Department of Defense

Start Date: 2023-04-29

End Date: 2024-04-28

Contract Duration: 365 days

Daily Burn Rate: $82.2K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: MS UNIFIED SERVICES

Place of Performance

Location: HAMPTON, HAMPTON CITY County, VIRGINIA, 23666

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $30.0 million to MICROSOFT CORPORATION for work described as: MS UNIFIED SERVICES Key points: 1. The contract's value for custom computer programming services appears high relative to the duration. 2. Lack of competition suggests potential for overpayment and reduced innovation. 3. The sole-source nature limits opportunities for small businesses and diverse vendor participation. 4. Performance context is limited due to the 'not competed' status, making value assessment difficult. 5. This contract falls within the IT services sector, a common area for significant federal spending. 6. The firm-fixed-price structure aims to control costs, but without competition, its effectiveness is questionable.

Value Assessment

Rating: questionable

Benchmarking this contract is challenging due to the lack of publicly available comparable sole-source custom programming services. The price per day is approximately $82,159, which seems high for standard IT services without specific justification. Without a competitive bidding process, it's difficult to ascertain if the government received fair market value or if the pricing reflects a premium due to limited options.

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. This indicates that only one vendor, Microsoft Corporation, was considered for this requirement. The lack of competition limits the government's ability to explore alternative solutions or leverage market dynamics to achieve better pricing and terms.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to drive down prices. It also bypasses opportunities to support a wider range of businesses.

Public Impact

The Department of Defense benefits from custom computer programming services tailored to its specific needs. This contract supports the operational readiness and technological infrastructure of the Air Force. The services are likely to have a broad impact within the defense sector, potentially affecting multiple units or programs. While not explicitly stated, such contracts can indirectly support a specialized IT workforce within the government or contractor ecosystem.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and suboptimal service delivery.
Sole-source awards can stifle innovation by not exploring alternative solutions from the broader market.
Limited transparency into the justification for a sole-source award makes value assessment difficult.
The high dollar value without competitive vetting warrants scrutiny.
Potential for vendor lock-in with a single provider for critical services.

Positive Signals

Firm-fixed-price contract type helps to establish cost certainty.
Awarded to a well-established technology provider (Microsoft Corporation).
Contract duration is clearly defined, allowing for planning.
Services are for custom programming, suggesting a specific need is being met.

Sector Analysis

The Information Technology (IT) sector is a critical component of federal spending, encompassing a wide range of services from software development to cloud computing. Federal agencies rely heavily on IT services to maintain operations, enhance cybersecurity, and modernize infrastructure. Spending in this sector is often characterized by complex requirements and a mix of large prime contractors and specialized subcontractors. Comparable spending benchmarks for custom programming services can vary widely based on complexity, duration, and the specific technologies involved.

Small Business Impact

This contract was not competed and does not appear to have a small business set-aside. The sole-source award to Microsoft Corporation means that small businesses were not given an opportunity to compete for this work directly. There is no indication of subcontracting plans for small businesses within the provided data, suggesting a limited direct impact on the small business IT ecosystem for this specific contract.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Air Force's contracting and program management offices. Accountability measures are inherent in the firm-fixed-price structure, which obligates the contractor to deliver specific services within the agreed-upon price. Transparency is limited due to the sole-source nature of the award; the justification for not competing the contract would be a key document for assessing transparency.

Related Government Programs

Custom Computer Programming Services
Information Technology Professional Services
Department of Defense IT Contracts
Sole Source IT Procurements
Microsoft Federal Contracts

Risk Flags

Sole Source Award
High Value Contract
Lack of Competition
Limited Transparency
Potential for Overpricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $30.0 million to MICROSOFT CORPORATION. MS UNIFIED SERVICES

Who is the contractor on this award?

The obligated recipient is MICROSOFT CORPORATION.

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 $30.0 million.

What is the period of performance?

Start: 2023-04-29. End: 2024-04-28.

What is the specific justification for awarding this contract on a sole-source basis to Microsoft Corporation?

The provided data indicates the contract was 'NOT COMPETED' and awarded to 'MICROSOFT CORPORATION' under NAICS code 541511 (Custom Computer Programming Services). Without the specific justification document (e.g., Justification for Other Than Full and Open Competition - JOFOC), it is impossible to determine the precise reasons. Common justifications for sole-source awards include unique capabilities, urgent and compelling needs where only one source can fulfill the requirement, or specific government-unique technical data or compatibility issues. The high dollar value and the nature of custom programming suggest a potentially complex or specialized requirement that the agency may have deemed only Microsoft could fulfill, possibly due to existing infrastructure integration, proprietary technology, or specific expertise.

How does the cost of this contract compare to similar custom programming services procured by the federal government?

Direct comparison is difficult without knowing the exact scope of work and specific deliverables. However, the contract value of $29,988,078 over 365 days results in a daily burn rate of approximately $82,159. This rate appears high for general custom programming services. Federal procurement data often shows a wide range for such services, influenced by factors like security clearances, specialized skills (e.g., AI, cybersecurity), and the complexity of the software being developed. Sole-source awards, by their nature, often lack the price discovery that competition provides, potentially leading to higher costs than if multiple vendors had bid. Further analysis would require comparing against contracts with similar technical requirements and service levels.

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

The primary risks of sole-source IT contracts include higher costs due to the absence of competitive pressure, potential for vendor lock-in limiting future flexibility, reduced innovation as alternative solutions aren't explored, and a lack of transparency in the procurement process. Taxpayers may bear a higher financial burden. Furthermore, reliance on a single vendor can create vulnerabilities if that vendor experiences financial instability, changes strategic direction, or faces cybersecurity breaches. It also limits opportunities for other qualified vendors, including small businesses, to participate in government contracting.

What is the track record of Microsoft Corporation in fulfilling federal IT contracts, particularly custom programming services?

Microsoft Corporation is a major technology provider with a long history of serving the federal government across various agencies and contract types. They are known for providing a wide array of IT products and services, including software licenses, cloud solutions (Azure), and professional services. While they are a reputable company, the specific track record for 'custom computer programming services' under contracts similar to this one would need detailed examination. Federal contract databases often show extensive award histories for Microsoft, but the performance quality and value for money on specific custom development projects can vary. Reviewing past performance evaluations and contract close-out reports for similar engagements would provide a clearer picture.

How does this contract fit into the broader spending patterns for custom computer programming services within the Department of Defense?

The Department of Defense (DoD) is a significant spender on IT services, including custom programming, to support its complex mission requirements. Contracts for custom programming are essential for developing specialized software, integrating disparate systems, and maintaining legacy applications. The DoD often procures these services through various contract vehicles, including competitive solicitations, task orders under larger indefinite-delivery/indefinite-quantity (IDIQ) contracts, and, as seen here, sole-source awards. The $30 million value for a single delivery order is substantial, indicating a significant project. Understanding this contract's place requires analyzing historical DoD spending trends for NAICS 541511, the prevalence of sole-source awards in this category, and the specific program or system this development supports.

Are there any specific performance metrics or deliverables outlined in this contract that can be used to assess its effectiveness?

The provided data does not include specific performance metrics or deliverables for this contract. It only specifies the contract type ('FIRM FIXED PRICE'), award date, and period of performance. A firm-fixed-price contract implies that the contractor is obligated to deliver the agreed-upon scope of work for a set price. However, to assess effectiveness, one would need access to the contract's Statement of Work (SOW), which details the specific tasks, milestones, acceptance criteria, and performance standards. Without the SOW and subsequent performance reports, evaluating the contract's success in meeting its objectives and delivering value is not possible from the given information.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1 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: $29,988,078

Exercised Options: $29,988,078

Current Obligation: $29,988,078

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N6600119D0019

IDV Type: IDC

Timeline