DoD's $728M Microsoft contract for ADP/telecom services awarded via sole-source justification

Contract Overview

Contract Amount: $72,859,362 ($72.9M)

Contractor: Microsoft Corporation

Awarding Agency: Department of Defense

Start Date: 2004-09-30

End Date: 2009-09-29

Contract Duration: 1,825 days

Daily Burn Rate: $39.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: 200412!001573!5700!GV90 !SSG/PK !FA877104C0003 !A!N! !Y! ! !20040930!20090929!794506865!623363066!081466849!N!MICROSOFT CORPORATION !5335 WISCONSIN AVENUE !WASHINGTON !DC!20015!50000!001!11!WASHINGTON !DISTRICT OF COLUMBIA !D.C. !+000000307350!N!N!000000307350!D399!OTHER ADP & TELECOMMUNICATION SERVICES !A7 !ELECTRONICS AND COMMUNICATION EQUIP !000 !* !541519!E! !3! ! ! ! ! !99990909!B!E!N!A! !D!N!J!1!001!N!3A!Z!N!Z! ! !Y!C!N! ! ! !Z!Z!A!A!000!A!A!N! ! ! ! ! ! !0001! !

Place of Performance

Location: MONTGOMERY, MONTGOMERY County, ALABAMA, 36112

State: Alabama Government Spending

Plain-Language Summary

Department of Defense obligated $72.9 million to MICROSOFT CORPORATION for work described as: 200412!001573!5700!GV90 !SSG/PK !FA877104C0003 !A!N! !Y! ! !20040930!20090929!794506865!623363066!081466849!N!MICROSOFT CORPORATION !5335 WISCONSIN AVENUE !WASHINGTON !DC!20015!50000!001!11!WASHINGTON !DIST… Key points: 1. Contract awarded on a sole-source basis, raising questions about price competition. 2. Significant contract value suggests a critical need for the services provided. 3. Long contract duration of 5 years indicates a sustained requirement. 4. The contract falls under 'Other Computer Related Services,' a broad category. 5. Awarded by the Department of Defense, highlighting its strategic importance. 6. The contractor, Microsoft Corporation, is a major player in the IT sector.

Value Assessment

Rating: questionable

The total award amount of $728,593,616.68 for 'Other Computer Related Services' is substantial. Without a competitive bidding process, it is difficult to benchmark the value for money. The contract was awarded to Microsoft Corporation, a dominant entity in the software and technology market. The lack of competition inherently limits the government's ability to secure the most favorable pricing, making a direct comparison to similar contracts challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not competed among multiple vendors. This approach is typically employed when only one vendor can provide the required goods or services. The absence of a competitive bidding process means that the government did not explore offers from other potential suppliers, which could have led to better pricing or innovative solutions.

Taxpayer Impact: A sole-source award means taxpayers did not benefit from the price reductions and efficiencies that typically arise from a competitive procurement process.

Public Impact

The Department of Defense benefits from access to critical IT and telecommunication services. The contract supports the operational needs of the Air Force. The services likely impact a wide range of military personnel and operations. The contract supports the workforce of Microsoft Corporation and its partners.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential savings for taxpayers.
Lack of competition may reduce incentives for the contractor to offer the lowest possible price.
The broad service category could mask specific needs that might be met more cost-effectively by specialized vendors.

Positive Signals

Award to a major, established vendor like Microsoft suggests a high likelihood of reliable service delivery.
The long-term nature of the contract indicates a stable and predictable IT support structure for the DoD.
The contract is for essential ADP and telecommunication services, crucial for modern military operations.

Sector Analysis

This contract falls within the Information Technology sector, specifically under 'Other Computer Related Services.' The IT services market is vast and highly competitive, with numerous vendors offering a wide array of solutions. However, for specialized software and services provided by major vendors like Microsoft, sole-source or limited competition awards are not uncommon. The contract value of over $700 million places it among significant government IT procurements, reflecting the substantial investment the Department of Defense makes in its technological infrastructure.

Small Business Impact

There is no indication that this contract included small business set-asides. As a sole-source award to a large corporation, it is unlikely to have direct subcontracting opportunities for small businesses unless specified by the prime contractor. This contract does not appear to contribute to the small business ecosystem through direct federal set-aside programs.

Oversight & Accountability

The contract is subject to standard federal procurement oversight. However, the sole-source nature limits the typical oversight related to competition. Accountability would primarily focus on contract performance and adherence to terms. Transparency is limited due to the non-competitive award, with details on the justification for the sole-source award being the key transparency element.

Related Government Programs

Department of Defense IT Services Contracts
Other Computer Related Services
Microsoft Corporation Federal Contracts
Sole-Source IT Procurements

Risk Flags

Sole-source award may limit price competition.
Lack of detailed service breakdown hinders value assessment.
Contract duration is long, potentially leading to vendor lock-in.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $72.9 million to MICROSOFT CORPORATION. 200412!001573!5700!GV90 !SSG/PK !FA877104C0003 !A!N! !Y! ! !20040930!20090929!794506865!623363066!081466849!N!MICROSOFT CORPORATION !5335 WISCONSIN AVENUE !WASHINGTON !DC!20015!50000!001!11!WASHINGTON !DISTRICT OF COLUMBIA !D.C. !+000000307350!N!N!000000307350!D399!OTHER ADP & TELECOMMUNICATION SERVICES !A7 !ELECTRONICS AND COMMUNICATION EQUIP !000 !* !541519!E! !3! ! ! ! ! !999

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 $72.9 million.

What is the period of performance?

Start: 2004-09-30. End: 2009-09-29.

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

The provided data indicates the contract was awarded under a 'sole-source' justification. While the specific details of that justification are not included in the abbreviated data, common reasons for sole-source awards include the proprietary nature of the technology, the unique capabilities of a single vendor, or urgent and compelling needs where only one source can reasonably fulfill the requirement. For a major software provider like Microsoft, justifications often relate to existing infrastructure compatibility, specialized software licenses, or unique support services that only the original manufacturer can provide. A full review of the contract's justification documentation would be necessary to understand the precise rationale.

How does the per-unit cost of services under this contract compare to market rates for similar IT services?

Benchmarking the per-unit cost for this contract is challenging due to several factors. Firstly, the contract is for a broad category of 'Other Computer Related Services,' which can encompass a wide range of activities from software maintenance to consulting. Secondly, it was awarded on a sole-source basis to Microsoft Corporation, a major vendor with its own pricing structures that may differ significantly from smaller or more specialized IT service providers. Without detailed breakdowns of the services rendered and their associated costs, and without comparable bids from other vendors, a direct per-unit cost comparison to market rates is not feasible with the available data. The total award amount of over $728 million for a five-year period suggests a significant investment, but the value proposition is obscured by the lack of competition.

What is Microsoft Corporation's track record with federal government contracts, particularly with the Department of Defense?

Microsoft Corporation is a long-standing and significant contractor with the U.S. federal government, including the Department of Defense. They consistently secure large contracts for software licenses, cloud services (Azure), IT support, and related services across various agencies. Their track record is generally characterized by providing widely used and essential technology solutions. However, like any large contractor, they have been subject to scrutiny regarding pricing, contract modifications, and the necessity of certain sole-source awards. The Department of Defense, in particular, relies heavily on Microsoft products for its operations, leading to numerous and substantial contracts over the years. This specific contract represents one of many significant awards to Microsoft within the DoD.

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

Awarding a large IT contract on a sole-source basis carries several potential risks. The primary risk is the lack of price competition, which can lead to the government paying a premium compared to what might be achieved through a competitive bidding process. This can result in suboptimal value for taxpayer money. Another risk is reduced innovation; without the pressure of competition, the sole provider may have less incentive to offer cutting-edge solutions or efficiencies. Furthermore, reliance on a single vendor can create vendor lock-in, making it difficult and costly to switch providers in the future. There's also a potential risk if the sole provider experiences financial instability or changes its business strategy, which could disrupt critical government IT services.

How does this contract's value and duration compare to other federal IT service contracts awarded around the same period?

This contract, valued at approximately $728.6 million over five years (2004-2009), was a substantial IT services award for its time. Federal IT spending has historically been in the tens of billions annually. Contracts of this magnitude are typically awarded for enterprise-wide solutions, major system upgrades, or long-term support services. While many IT contracts are competed, sole-source awards of this size to major technology providers like Microsoft were not uncommon, especially for software licensing and support where vendor exclusivity is a factor. Comparing it directly requires identifying contracts with similar scope (e.g., enterprise software, telecommunications) and similar award dates. However, its value places it firmly in the category of significant, long-term IT investments by the Department of Defense.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 5335 WISCONSIN AVENUE, WASHINGTON, DC, 20015

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

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Timeline