DoD's $80M IT contract with Serco Inc. for computer systems design services shows fair value despite limited competition

Contract Overview

Contract Amount: $80,346,367 ($80.3M)

Contractor: Serco Inc

Awarding Agency: Department of Defense

Start Date: 2019-03-13

End Date: 2024-03-12

Contract Duration: 1,826 days

Daily Burn Rate: $44.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: NEXGEN CE SERVICES

Place of Performance

Location: HERNDON, FAIRFAX County, VIRGINIA, 20170

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $80.3 million to SERCO INC for work described as: NEXGEN CE SERVICES Key points: 1. The contract's value appears reasonable when benchmarked against similar IT services contracts. 2. Competition was limited, potentially impacting price discovery and overall value for taxpayers. 3. The contractor, Serco Inc., has a substantial track record with government contracts. 4. This contract supports critical IT infrastructure for the Department of the Air Force. 5. The cost-plus-fixed-fee structure requires careful monitoring of performance and costs. 6. The contract duration of five years suggests a long-term need for these services.

Value Assessment

Rating: fair

The contract's total value of approximately $80.3 million over five years for computer systems design services appears to be within a reasonable range when compared to similar IT support contracts awarded by the Department of Defense. While the cost-plus-fixed-fee (CPFF) pricing structure can lead to cost overruns if not managed diligently, the fixed fee component provides some predictability. Benchmarking against industry standards for IT systems design and integration services suggests that the overall pricing is not excessively high, though a more granular analysis of labor rates and overhead would be beneficial.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. However, the data indicates only two offers were received. While full and open competition is the preferred method, a low number of bids can sometimes suggest barriers to entry or a lack of market interest, which could indirectly affect price competitiveness. The contracting agency should ensure that the solicitation was structured to encourage broader participation.

Taxpayer Impact: While full and open competition was utilized, the low number of bids received warrants attention. Taxpayers benefit from the agency's effort to solicit broadly, but the limited response may have prevented a more robust price competition, potentially leading to a higher-than-necessary cost.

Public Impact

The primary beneficiaries are the Department of the Air Force and its personnel, who receive enhanced IT systems and support. Services delivered include computer systems design, integration, and potentially ongoing maintenance and support. The geographic impact is likely concentrated within the Air Force's operational locations, primarily in Virginia. This contract supports a workforce of IT professionals, potentially including both government employees and contractor personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the Cost Plus Fixed Fee (CPFF) contract type if not closely monitored.
Limited number of bidders (2) in a full and open competition may indicate potential market concentration or barriers.
The contract's significant value requires robust oversight to ensure continued value for money.

Positive Signals

Awarded under full and open competition, maximizing the potential pool of offerors.
The contractor, Serco Inc., has extensive experience with federal contracts, suggesting a lower performance risk.
The contract duration indicates a stable, long-term requirement, allowing for efficient planning and resource allocation.

Sector Analysis

This contract falls within the broader Information Technology (IT) services sector, specifically focusing on computer systems design and integration. This sector is characterized by rapid technological advancements and a high demand for specialized expertise. The market size for government IT services is substantial, with agencies increasingly relying on external contractors for complex system development and support. This contract represents a typical engagement for IT modernization and sustainment efforts within the defense sector.

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 or specific benefits for the small business ecosystem stemming from this particular award. The primary focus is on large business prime contractors. Future contract actions or related procurements may offer opportunities for small business participation as subcontractors.

Oversight & Accountability

Oversight for this contract is primarily the responsibility of the Department of the Air Force contracting and program management offices. Given the CPFF structure, rigorous monitoring of costs, performance, and adherence to the Statement of Work is crucial. Transparency is facilitated through contract reporting mechanisms. While specific Inspector General (IG) jurisdiction isn't detailed, the DoD IG typically oversees major defense contracts for waste, fraud, and abuse.

Related Government Programs

IT Systems Modernization
Computer Systems Design Services
Defense Information Technology Services
Air Force IT Support Contracts

Risk Flags

Cost Overrun Risk (CPFF)
Limited Competition (2 Bidders)
Performance Monitoring Required

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $80.3 million to SERCO INC. NEXGEN CE SERVICES

Who is the contractor on this award?

The obligated recipient is SERCO INC.

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 $80.3 million.

What is the period of performance?

Start: 2019-03-13. End: 2024-03-12.

What is Serco Inc.'s track record with Department of Defense contracts, particularly in IT services?

Serco Inc. has a significant history of performing contracts for the Department of Defense and other federal agencies, including extensive work in IT services, logistics, and operational support. Their experience often involves large-scale, complex projects similar to computer systems design and integration. While specific performance metrics for this particular contract are not detailed here, Serco's general track record suggests a familiarity with government contracting requirements and a capacity to manage substantial programs. A deeper dive into past performance reviews and any documented issues on prior DoD contracts would provide a more complete picture of their reliability and effectiveness in this domain.

How does the pricing structure (Cost Plus Fixed Fee) compare to other IT services contracts of similar scope?

The Cost Plus Fixed Fee (CPFF) structure is common for IT services contracts, especially those involving research, development, or complex system integration where the full scope may evolve. It allows for flexibility but places a premium on robust oversight to control costs. Compared to fixed-price contracts, CPFF can be more expensive if costs escalate significantly. However, for services where requirements are not fully defined upfront, it can be more appropriate than a firm-fixed-price approach. Benchmarking the fixed fee percentage against industry norms for similar services would be a key indicator of value. Without specific details on labor rates and overhead, a definitive value assessment is challenging, but the overall contract value appears reasonable for the duration and scope.

What are the primary risks associated with this contract, and how are they being mitigated?

Key risks include potential cost overruns inherent in the CPFF structure, scope creep if requirements are not tightly managed, and performance issues if the contractor fails to deliver as expected. Mitigation strategies typically involve strong program management by the Air Force, detailed performance work statements, regular progress reviews, and audits of contractor costs. The fixed fee provides some incentive for the contractor to manage costs efficiently, as exceeding the estimated cost does not proportionally increase their fee. Furthermore, the contractor's established presence and experience with DoD contracts may reduce performance risk.

What is the historical spending trend for computer systems design services within the Department of the Air Force?

Historical spending on computer systems design services within the Department of the Air Force has generally been substantial and increasing, reflecting the continuous need for IT modernization, cybersecurity enhancements, and system sustainment. Agencies like the Air Force rely heavily on external expertise for these complex tasks. Spending patterns are influenced by evolving threats, technological advancements, and strategic priorities. While this specific $80 million contract is a significant award, it represents a portion of the overall Air Force IT budget, which often runs into billions of dollars annually across various IT service categories. Analyzing trends over the past 5-10 years would reveal the growth trajectory and key drivers of this spending.

How does the limited number of bidders (2) impact the potential for price discovery and overall value for taxpayers?

A limited number of bidders, even in a full and open competition, can reduce the intensity of price competition. When only two offers are received, there is less pressure on each bidder to offer the lowest possible price compared to a scenario with five or more competitive bids. This can potentially lead to higher prices than might be achieved in a more robustly contested market. For taxpayers, this means there is a greater risk that the government may not be securing the absolute best value. Agencies should analyze the reasons for limited competition, such as market size, technical requirements, or solicitation complexity, to ensure future procurements are structured to attract more bidders.

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: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: FA877119R0001

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 12930 WORLDGATE DR STE 600, HERNDON, VA, 20170

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

Financial Breakdown

Contract Ceiling: $91,333,772

Exercised Options: $82,119,854

Current Obligation: $80,346,367

Actual Outlays: $35,355,236

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $13,190,893

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 47QTCK18D0041

IDV Type: GWAC

Timeline