DoD's $18.7M Verizon lease for Europe-SW Asia comms faces scrutiny over value and competition

Contract Overview

Contract Amount: $18,742,096 ($18.7M)

Contractor: Verizon Business Network Services LLC

Awarding Agency: Department of Defense

Start Date: 2025-11-22

End Date: 2032-07-30

Contract Duration: 2,442 days

Daily Burn Rate: $7.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: EIVN000008EBM - OTU-2 (10.709GB) COMMERCIAL LEASE BETWEEN EUROPE AND SOUTHWEST ASIA.

Plain-Language Summary

Department of Defense obligated $18.7 million to VERIZON BUSINESS NETWORK SERVICES LLC for work described as: EIVN000008EBM - OTU-2 (10.709GB) COMMERCIAL LEASE BETWEEN EUROPE AND SOUTHWEST ASIA. Key points: 1. Lease value appears high relative to typical telecommunications service contracts. 2. Limited competition may have inflated costs for taxpayers. 3. Long contract duration presents potential for price escalation and reduced flexibility. 4. Fixed-price with economic price adjustment terms introduce cost uncertainty. 5. Contractor's extensive experience in telecommunications may not fully justify the premium paid. 6. Lack of small business participation raises questions about equitable opportunity.

Value Assessment

Rating: questionable

The $18.7 million contract for a commercial lease between Europe and Southwest Asia, awarded to Verizon Business Network Services LLC, warrants scrutiny. While specific benchmarking data for this unique geographic scope is unavailable, the per-year cost of approximately $2.34 million for a telecommunications lease appears elevated compared to standard enterprise network service agreements. The fixed-price with economic price adjustment structure further introduces risk, as it allows for cost increases over the contract's substantial duration, potentially exceeding initial value expectations. Without more granular data on service levels and bandwidth, a definitive value assessment is challenging, but the current figures suggest a potential overpayment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. However, the fact that only one award was made (indicated by 'no': 4, likely referring to the number of bids received or proposals evaluated) suggests that either the requirements were highly specialized, or the market for such extensive international telecommunications infrastructure is concentrated among a few large providers. This level of competition, while technically open, may not have been sufficient to drive down prices to the lowest possible point.

Taxpayer Impact: While the competition was open, the limited number of responsive bidders may have resulted in a higher price than could have been achieved in a more robustly contested market, potentially costing taxpayers more than necessary.

Public Impact

The Department of Defense (DoD) benefits from this contract through enhanced communication capabilities between Europe and Southwest Asia. This lease supports critical command and control, intelligence, and operational communications for military forces in these regions. The service ensures reliable data transmission for various defense applications, impacting mission effectiveness. Geographic impact is significant, bridging communication gaps across continents for strategic military operations. While not directly creating new jobs, it sustains employment within Verizon's network operations and support teams.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to economic price adjustment clauses.
Limited competition may have led to suboptimal pricing.
Long contract duration (over 6 years) reduces flexibility and opportunity for market-driven cost savings.
Lack of small business involvement limits broader economic participation.

Positive Signals

Awarded under full and open competition, theoretically allowing for broad market participation.
Contractor (Verizon) is a well-established provider with extensive experience in global telecommunications.
Clear delivery order structure within a larger contract framework.

Sector Analysis

This contract falls within the Wired Telecommunications Carriers sector, a mature industry characterized by significant infrastructure investment and consolidation. The market is dominated by a few large players like Verizon, AT&T, and Lumen Technologies, who possess the global reach and technical expertise to service complex government requirements. Government spending in this sector often involves long-term leases for dedicated circuits and network services to support secure and reliable communications. Benchmarking is difficult due to the specific geographic scope and specialized nature of military communications, but typical enterprise leased line costs can range from hundreds to thousands of dollars per mile per month, depending on bandwidth and service level agreements.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, there is no mention of subcontracting plans specifically targeting small businesses. This suggests that the primary contractor, Verizon, will likely handle the majority of the service delivery, potentially limiting opportunities for small businesses to participate in this significant federal spending. The absence of small business subcontracting goals could mean a missed opportunity to foster innovation and economic growth within the small business ecosystem.

Oversight & Accountability

Oversight for this contract likely resides with the Defense Information Systems Agency (DISA), the contracting activity, and the Department of Defense (DoD) as the end-user agency. As a delivery order under a larger contract, it inherits the oversight mechanisms of the parent award. Transparency is generally maintained through contract databases like FPDS. Accountability measures would involve performance monitoring against the terms of the delivery order and the underlying contract. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Defense Information Systems Agency (DISA) Telecommunications Contracts
Global Communication Services for DoD
Wired Telecommunications Carrier Services
Network Infrastructure Leases

Risk Flags

Potential for cost overruns
Limited competition
Technological obsolescence risk
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $18.7 million to VERIZON BUSINESS NETWORK SERVICES LLC. EIVN000008EBM - OTU-2 (10.709GB) COMMERCIAL LEASE BETWEEN EUROPE AND SOUTHWEST ASIA.

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 $18.7 million.

What is the period of performance?

Start: 2025-11-22. End: 2032-07-30.

What is the specific bandwidth and service level agreement (SLA) associated with this $18.7 million lease, and how does it compare to market rates for similar international circuits?

The provided data does not specify the exact bandwidth or Service Level Agreement (SLA) for this $18.7 million lease between Europe and Southwest Asia. This information is crucial for a precise value-for-money assessment. Typically, higher bandwidth and more stringent SLAs (e.g., guaranteed uptime, low latency) command higher prices. Without these details, it's difficult to benchmark against market rates. However, international dedicated circuits, especially those spanning continents and requiring high reliability for military operations, are inherently expensive due to infrastructure costs, maintenance, and redundancy requirements. A rough estimate for comparable enterprise-grade international dedicated circuits can range from tens of thousands to hundreds of thousands of dollars per month, depending heavily on the factors mentioned. The annual cost here ($2.34M) suggests a substantial service offering, but the lack of specifics prevents a definitive comparison.

Given the 'full and open competition' award, why were there only 4 bids received, and what does this imply about the market concentration for this type of service?

The receipt of only 4 bids under a 'full and open competition' for this telecommunications lease suggests a highly concentrated market for specialized international network services required by the Department of Defense. This concentration could stem from several factors: the need for extensive global infrastructure, specific security clearances and compliance requirements, the sheer scale of the required service, or the high barrier to entry in terms of capital investment for network providers. While technically open, this limited number of bidders implies that the competitive pressure may not have been as intense as in a market with numerous qualified vendors. Consequently, the government might not have achieved the lowest possible price, as the incumbent or dominant players may have had significant advantages in bidding.

How does the 'Fixed Price with Economic Price Adjustment' (FPFP/EPA) contract type potentially impact the total cost to the government over the contract's duration?

The 'Fixed Price with Economic Price Adjustment' (FPFP/EPA) contract type introduces a degree of cost uncertainty for the government over the lease's duration. While the base price is fixed, the EPA clause allows for adjustments based on specific economic factors, typically related to inflation or changes in input costs (e.g., labor, materials, fuel). For a long-duration contract like this (over 6 years), these adjustments can lead to a significant increase in the total cost compared to the initially awarded price. The government bears the risk of these upward adjustments. The specific indices and caps defined in the EPA clause are critical; without them, it's difficult to quantify the potential cost overrun, but it inherently means the final expenditure could exceed the $18.7 million figure.

What is Verizon Business Network Services LLC's track record with large-scale federal telecommunications contracts, particularly those involving international deployments?

Verizon Business Network Services LLC has a substantial track record of securing and performing on large-scale federal telecommunications contracts, including those with international components. As one of the major telecommunications providers in the United States, Verizon frequently wins contracts for network services, dedicated circuits, and managed network solutions for various government agencies, including the Department of Defense. Their experience often includes building and managing complex global networks that require adherence to stringent security protocols and performance standards. While specific details on past international deployments of this exact nature are not provided in the summary data, Verizon's overall presence and history in the federal market indicate a capability to handle such requirements. However, past performance does not guarantee future value, and each contract must be assessed on its own merits regarding pricing and service delivery.

Are there any comparable DoD contracts for international leased telecommunications services that could serve as a benchmark for this $18.7 million award?

Identifying directly comparable DoD contracts for international leased telecommunications services is challenging due to the unique geographic scope (Europe and Southwest Asia) and the specific requirements of military communications. Most publicly available contract data focuses on domestic services or broader global support contracts without granular detail on specific routes or bandwidth. However, general benchmarks for international dedicated circuits suggest that costs can vary widely based on factors like bandwidth, latency requirements, redundancy, and the specific countries involved. Contracts awarded under full and open competition for similar large-scale enterprise network services, even outside the DoD, might offer some comparative insights, but the specialized nature of military needs often commands a premium. Without access to detailed pricing structures of other classified or less specific international DoD contracts, a precise benchmark is difficult to establish.

What are the potential risks associated with the long duration (over 6 years) of this contract, beyond just price adjustments?

Beyond potential price adjustments due to economic factors, the long duration of this contract (over 6 years, from late 2025 to mid-2032) presents several other risks. Technological obsolescence is a significant concern; telecommunications technology evolves rapidly, and a 6+ year commitment could lock the DoD into outdated infrastructure or services, potentially hindering the adoption of more efficient or capable solutions. Vendor lock-in is another risk, making it difficult and costly to switch providers even if performance issues arise or better market alternatives emerge. Furthermore, the extended period reduces the government's agility to adapt its communication strategy in response to changing geopolitical landscapes or evolving mission requirements. Finally, long-term contracts can sometimes lead to complacency from the contractor if competitive pressures are not consistently maintained throughout the period of performance.

Industry Classification

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

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 4

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: $18,742,096

Exercised Options: $18,742,096

Current Obligation: $18,742,096

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