DoD awards $2.5M for VPNs, with Verizon securing a fixed-price contract for wired telecommunications

Contract Overview

Contract Amount: $2,581,553 ($2.6M)

Contractor: Verizon Business Network Services LLC

Awarding Agency: Department of Defense

Start Date: 2020-09-04

End Date: 2026-08-31

Contract Duration: 2,187 days

Daily Burn Rate: $1.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: VPNS TRANSPORT SERVICES - 0 - 1300 MBPS

Place of Performance

Location: WASHINGTON NAVY YARD, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20388

State: District of Columbia Government Spending

Plain-Language Summary

Department of Defense obligated $2.6 million to VERIZON BUSINESS NETWORK SERVICES LLC for work described as: VPNS TRANSPORT SERVICES - 0 - 1300 MBPS Key points: 1. Contract value appears reasonable given the duration and service scope. 2. Full and open competition suggests a competitive bidding process. 3. Potential for price adjustments due to economic factors requires monitoring. 4. Contract duration extends over multiple years, indicating a long-term need. 5. Services are concentrated in the District of Columbia. 6. The contractor, Verizon, is a major player in the telecommunications sector.

Value Assessment

Rating: good

The contract value of $2.58 million over approximately 6 years for 1300 Mbps VPNs is within a reasonable range for enterprise-level telecommunications services. Benchmarking against similar large-scale government contracts for high-speed data transmission indicates that this pricing is competitive. The fixed-price with economic price adjustment structure allows for some flexibility while aiming to control overall costs. Further analysis would require detailed service level agreements and specific bandwidth requirements.

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 bids. The presence of 5 bids suggests a healthy level of competition for this telecommunications service. A competitive bidding process generally leads to better price discovery and potentially more favorable terms for the government.

Taxpayer Impact: The full and open competition ensures that taxpayer dollars are likely being used efficiently by driving down costs through multiple offers.

Public Impact

The Department of Defense benefits from secure and high-speed VPN services. Ensures reliable data transmission for critical defense operations. Services are primarily delivered within the District of Columbia. Supports the telecommunications infrastructure necessary for government functions in the capital.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause could lead to cost increases beyond initial projections.
Long contract duration may not fully account for rapid technological advancements in telecommunications.
Concentration of services in one geographic area could pose a risk if not adequately redundant.

Positive Signals

Awarded through full and open competition, indicating a competitive process.
Contractor is a well-established telecommunications provider with a strong track record.
Fixed-price component provides a baseline cost certainty.
Multiple bids received suggest a robust market response.

Sector Analysis

This contract falls within the Wired Telecommunications Carriers industry, a sector characterized by significant infrastructure investment and ongoing technological evolution. The market is dominated by a few large providers, including Verizon. Government spending in this area is crucial for maintaining secure and high-capacity communication networks, especially for agencies with national security responsibilities. Comparable spending benchmarks for enterprise-level VPN and data services can vary widely based on bandwidth, service level agreements, and geographic coverage.

Small Business Impact

This contract does not appear to have specific small business set-aside provisions, as indicated by 'sb': false. However, the prime contractor, Verizon Business Network Services LLC, is a large entity. Subcontracting opportunities for small businesses may exist within the broader scope of telecommunications services, but this contract itself does not prioritize them. The impact on the small business ecosystem is likely minimal unless significant subcontracting occurs.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Information Systems Agency (DISA) and the Department of Defense's contracting oversight mechanisms. Accountability is managed through performance metrics outlined in the contract and delivery orders. Transparency is facilitated by contract award databases, though detailed performance data may be less accessible. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Information Systems Agency (DISA) Contracts
Wired Telecommunications Services
Virtual Private Network (VPN) Services
Department of Defense IT Spending

Risk Flags

Economic Price Adjustment Clause
Long Contract Duration
Potential for Price Volatility

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.6 million to VERIZON BUSINESS NETWORK SERVICES LLC. VPNS TRANSPORT SERVICES - 0 - 1300 MBPS

Who is the contractor on this award?

The obligated recipient is VERIZON BUSINESS NETWORK SERVICES LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Information Systems Agency).

What is the total obligated amount?

The obligated amount is $2.6 million.

What is the period of performance?

Start: 2020-09-04. End: 2026-08-31.

What is the historical spending pattern for VPNs and similar telecommunications services by the Department of Defense?

The Department of Defense (DoD) is a significant consumer of telecommunications services, including VPNs, due to its vast and geographically dispersed operations. Historical spending data reveals a consistent and substantial investment in secure network infrastructure. Over the past decade, the DoD has allocated billions of dollars annually towards telecommunications, with a notable portion dedicated to high-speed data transmission, secure connectivity, and network modernization. This includes contracts for fiber optics, satellite communications, and various forms of secure data transport. The trend has been towards increasing bandwidth requirements and enhanced cybersecurity measures, driven by evolving threats and the need for real-time data processing. Specific spending on VPN services, while often bundled within larger network contracts, represents a critical component of this overall investment, ensuring secure communication channels for sensitive information.

How does the awarded price per Mbps compare to market rates for similar enterprise-grade VPN services?

Determining an exact price per Mbps for this specific contract is challenging without granular details on the service level agreements (SLAs), latency guarantees, and specific security features beyond standard VPN protocols. However, based on the total award of approximately $2.58 million over roughly 2187 days (approx. 6 years) for 1300 Mbps, the implied average cost is around $1,177 per Mbps per year, or roughly $98 per Mbps per month. For enterprise-grade, dedicated, and secure VPN services at this scale, especially those requiring high availability and reliability for a government agency, this rate appears competitive. Market rates for dedicated internet access or private lines with similar bandwidth and SLAs can range from $50 to $200+ per Mbps per month, depending heavily on the provider, location, and service guarantees. The 'economic price adjustment' clause also introduces variability. Therefore, while seemingly within a reasonable range, a definitive comparison requires a deeper dive into the specific service parameters.

What is Verizon Business Network Services LLC's track record with government contracts, particularly for telecommunications?

Verizon Business Network Services LLC, a subsidiary of Verizon Communications, has a substantial and long-standing track record of securing and performing on government contracts, including those with the Department of Defense and other federal agencies. They are a major telecommunications provider with extensive infrastructure and a wide range of services, including high-speed data, VPNs, and managed network solutions. Historically, Verizon has been a frequent awardee of large-scale federal contracts, often through competitive bidding processes. While specific performance metrics for individual contracts are not always publicly detailed, their continued success in winning significant government awards suggests a generally positive performance history and a strong understanding of government procurement requirements. As with any large contractor, there may be instances of contract disputes or performance issues on specific awards, but their overall presence indicates a reliable capability in delivering complex telecommunications solutions to the federal government.

What are the potential risks associated with a fixed-price contract with economic price adjustment for telecommunications services?

A fixed-price contract with economic price adjustment (EPA) aims to balance cost certainty for the government with the contractor's need to account for fluctuating input costs, particularly in long-term service agreements. The primary risk for the government is that the EPA clause can lead to price increases over the contract's duration, potentially exceeding initial budget projections or the cost that might have been achieved under a firm fixed-price contract without such adjustments. This is especially relevant in the telecommunications sector where component costs, labor, and energy prices can fluctuate. The government must carefully monitor the triggers and calculations for these adjustments to ensure they are justified and align with market realities. Conversely, if market prices decrease, the EPA might not offer a corresponding benefit to the government unless structured with downward adjustment provisions. Effective oversight is crucial to manage this risk and ensure fair pricing throughout the contract life.

How does the Defense Information Systems Agency (DISA) typically structure its telecommunications contracts?

DISA typically structures its telecommunications contracts to meet the diverse and demanding needs of the Department of Defense (DoD). These contracts often involve large-scale, complex requirements for secure data transmission, network infrastructure, and communication services across global operations. DISA frequently utilizes indefinite-delivery/indefinite-quantity (IDIQ) contracts, task orders, and delivery orders to provide flexibility and allow for evolving requirements. Competition strategies range from full and open competition for broad service needs to more specialized or sole-source awards when specific capabilities or existing infrastructure integration is paramount. Contract types vary, including firm-fixed-price, cost-plus, and fixed-price with economic price adjustment, depending on the nature of the service and market volatility. Emphasis is placed on robust performance metrics, security compliance (e.g., NIST, DoD cybersecurity standards), and reliability. DISA also plays a key role in consolidating and managing telecommunications spending across the DoD to achieve economies of scale and standardize services.

Industry Classification

NAICS: Information › Wired and Wireless Telecommunications (except Satellite) › Wired Telecommunications Carriers

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

Offers Received: 5

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Parent Company: Verizon Maryland LLC

Address: 22001 LOUDOUN COUNTY PKWY, ASHBURN, VA, 20147

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

Financial Breakdown

Contract Ceiling: $8,786,874

Exercised Options: $3,878,992

Current Obligation: $2,581,553

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS00Q17NSD3009

IDV Type: IDC

Timeline