DoD's $51.7M Verizon contract for emergency telecom services lacks competition, raising value concerns

Contract Overview

Contract Amount: $51,773,528 ($51.8M)

Contractor: Verizon Business Network Services LLC

Awarding Agency: Department of Defense

Start Date: 2024-05-01

End Date: 2027-03-31

Contract Duration: 1,064 days

Daily Burn Rate: $48.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: NATIONAL SECURITY EMERGENCY PREPAREDNESS PRIORITY SERVICE 2 CONTRACT WITH VERIZON FY24-FY34.

Place of Performance

Location: ASHBURN, LOUDOUN County, VIRGINIA, 20147

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $51.8 million to VERIZON BUSINESS NETWORK SERVICES LLC for work described as: NATIONAL SECURITY EMERGENCY PREPAREDNESS PRIORITY SERVICE 2 CONTRACT WITH VERIZON FY24-FY34. Key points: 1. The contract's value proposition is unclear due to the absence of competitive bidding. 2. Sole-source procurement limits price discovery and potentially inflates costs. 3. The fixed-price structure offers some cost certainty but doesn't guarantee optimal value. 4. Performance risks are moderate, given Verizon's established role in critical infrastructure. 5. This contract supports national security by ensuring priority telecommunications. 6. The duration of the contract (over 8 years) warrants close monitoring for continued necessity and value.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging without competitive data. The fixed price of approximately $51.7 million over its term suggests a significant investment. While Verizon is a major provider, the lack of competition means there's no direct comparison to assess if this pricing is optimal or if alternative providers could offer similar services at a lower cost. The government is relying on Verizon's standard pricing, which may not reflect the best possible deal achievable through a competitive process.

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. The Department of Defense likely justified this approach due to specific national security requirements or the unique capabilities of Verizon Business Network Services LLC. The absence of multiple bidders means there was no opportunity for price negotiation or comparison against other market offerings, potentially leading to a higher cost for taxpayers than if the contract had been open to competition.

Taxpayer Impact: Taxpayers may be paying a premium for these essential telecommunications services due to the lack of competitive pressure. Without a bidding process, there is less incentive for the contractor to offer the lowest possible price.

Public Impact

The primary beneficiaries are national security agencies requiring reliable and prioritized communication. Services delivered include wireless telecommunications for emergency preparedness and response. The geographic impact is national, supporting critical infrastructure across the United States. Workforce implications are likely minimal, as this contract leverages existing Verizon infrastructure and personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to above-market pricing.
Long contract duration (over 8 years) increases risk of price becoming uncompetitive over time.
Reliance on a single provider for critical national security communications could pose a risk if service is interrupted.

Positive Signals

Verizon is a well-established provider with a track record in supporting critical infrastructure.
The contract is for a priority service, indicating its essential nature for national security.
Fixed-price contract provides cost certainty for the government.

Sector Analysis

This contract falls within the telecommunications sector, specifically wireless services. The market for such services is dominated by a few large providers, including Verizon. The National Security Emergency Preparedness (NSEP) Priority Service ensures that designated users can obtain telecommunications services during national emergencies. This contract ensures that the Department of Defense has access to these prioritized services, fitting within the broader government spending on secure and reliable communication infrastructure.

Small Business Impact

This contract does not appear to involve small business set-asides, as indicated by the 'sb' field being false. The primary contractor is Verizon Business Network Services LLC, a large telecommunications company. There is no explicit information regarding subcontracting plans for small businesses within the provided data. Therefore, the direct impact on the small business ecosystem from this specific contract is likely limited.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense and the Defense Information Systems Agency (DISA). As a definitive contract, it is subject to standard federal procurement regulations and oversight. Transparency is generally maintained through contract databases like FPDS. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

National Security Emergency Preparedness (NSEP) Program
Department of Defense Telecommunications Services
Wireless Telecommunications Contracts
Critical Infrastructure Protection

Risk Flags

Sole-source procurement
Long contract duration
Lack of direct price competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $51.8 million to VERIZON BUSINESS NETWORK SERVICES LLC. NATIONAL SECURITY EMERGENCY PREPAREDNESS PRIORITY SERVICE 2 CONTRACT WITH VERIZON FY24-FY34.

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 $51.8 million.

What is the period of performance?

Start: 2024-05-01. End: 2027-03-31.

What is the historical spending pattern for similar National Security Emergency Preparedness Priority Service contracts with Verizon or other providers?

Historical spending data for NSEP Priority Service contracts is crucial for context. While specific figures for this contract with Verizon are provided ($51.7M over FY24-FY34), understanding past investments in similar services is key. For instance, if previous contracts for comparable priority telecom services were significantly lower or involved more competitive bidding, it would highlight potential value concerns with the current sole-source award. Conversely, if past spending has been consistently high and with limited competition, it might suggest a systemic issue within this niche procurement area. Analyzing trends in contract duration, pricing structures (fixed-price vs. cost-plus), and the number of bidders over time would offer a more comprehensive view of the government's approach to securing these critical services and whether current spending aligns with historical norms or represents a deviation.

How does the per-unit cost of this contract compare to commercial market rates for similar priority wireless telecommunications services?

Comparing the per-unit cost of this sole-source Department of Defense contract to commercial market rates is challenging due to the 'priority' nature of the service and the lack of direct competition. Commercial services typically do not offer the same level of guaranteed access and prioritization during national emergencies. However, an analysis could involve benchmarking the base service costs against comparable enterprise-level wireless plans offered by Verizon and its competitors. Factors such as data allowances, service level agreements (SLAs), and network coverage would need to be considered. If the government's per-unit cost, adjusted for the priority service premium, significantly exceeds what large commercial entities pay for robust, high-availability services, it would indicate potential overpayment. Without specific unit metrics (e.g., cost per line, cost per gigabyte of prioritized data), a precise comparison is difficult, but a qualitative assessment of the premium paid for guaranteed availability is warranted.

What specific risks are associated with relying solely on Verizon for critical national security communications, and what mitigation strategies are in place?

The primary risk of relying solely on Verizon for critical national security communications is vendor lock-in and the potential for service disruptions if Verizon experiences technical failures, cyberattacks, or changes its business strategy. A sole-source award inherently limits the government's leverage in negotiating terms and pricing. Mitigation strategies could include robust Service Level Agreements (SLAs) with significant penalties for non-performance, regular security audits of Verizon's infrastructure supporting the contract, and contingency planning that identifies alternative communication methods or providers, even if not formally contracted. The government might also invest in its own resilient communication networks that can serve as backups. Furthermore, maintaining open communication channels with Verizon to stay informed about potential issues and ensuring the contract includes provisions for transparency and rapid issue resolution are vital.

What is the track record of Verizon Business Network Services LLC in fulfilling similar government contracts, particularly those related to national security or emergency preparedness?

Verizon Business Network Services LLC has a substantial track record of serving government clients, including numerous contracts with the Department of Defense and other federal agencies. They are a major provider of telecommunications and network services, often involved in large-scale infrastructure projects and critical communication systems. For National Security Emergency Preparedness (NSEP) Priority Service, Verizon has historically been a key player, given its extensive network infrastructure and established relationships with government entities. Performance reviews and past performance evaluations from previous government contracts would provide specific insights into their reliability, responsiveness, and ability to meet stringent security and operational requirements. Agencies typically review this past performance data during the procurement process, even for sole-source awards, to ensure the selected contractor has the necessary capabilities and a history of successful delivery.

How does the duration of this contract (over 8 years) impact its overall value and the government's flexibility?

The extended duration of this contract, spanning over 8 years (from May 2024 to March 2027, with potential for extensions implied by the FY34 end date mentioned in the description, though the provided ed date is 2027), presents both potential benefits and significant risks. On the positive side, a longer-term commitment can provide stability and predictability for both the government and the contractor, potentially leading to better planning and resource allocation. It might also allow for more favorable pricing than shorter-term agreements if negotiated effectively. However, a long duration also locks the government into a specific provider and technology for an extended period. This reduces flexibility to adopt newer, potentially more cost-effective technologies or switch to different vendors if market conditions change or if Verizon's service quality declines. The risk of the fixed price becoming uncompetitive over time is also heightened, as technology evolves rapidly in the telecommunications sector.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HC101323R0005

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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: $186,868,206

Exercised Options: $60,210,853

Current Obligation: $51,773,528

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline