DoD's $148M Microsoft contract for computer systems design services awarded via sole-source vehicle

Contract Overview

Contract Amount: $147,963,533 ($148.0M)

Contractor: Microsoft Corporation

Awarding Agency: Department of Defense

Start Date: 2017-09-20

End Date: 2022-09-22

Contract Duration: 1,828 days

Daily Burn Rate: $80.9K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: IGF::OT::IGF LABOR

Place of Performance

Location: ABERDEEN PROVING GROUND, HARFORD County, MARYLAND, 21005

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $148.0 million to MICROSOFT CORPORATION for work described as: IGF::OT::IGF LABOR Key points: 1. The contract's value of $148 million over five years represents a significant investment in IT infrastructure. 2. Sole-source award raises questions about potential lack of competition and its impact on pricing. 3. The fixed-price contract type suggests a defined scope, but potential for cost overruns remains. 4. Performance is in Maryland, indicating a concentration of IT services within a specific geographic region. 5. The contract falls under computer systems design services, a critical area for modern defense operations. 6. The absence of small business set-aside suggests larger prime contractors are likely involved.

Value Assessment

Rating: questionable

Benchmarking the value of this $148 million contract is challenging without more specific service details and comparable sole-source awards. However, the duration of five years for computer systems design services at this price point warrants scrutiny. Given the sole-source nature, it's difficult to assess if the pricing reflects competitive market rates or if there's an opportunity for better value through a more open competition. The contract's value per year is approximately $29.6 million, which needs to be evaluated against the specific deliverables and the complexity of the systems designed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Microsoft Corporation, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. While sole-source awards can be justified in specific circumstances, such as when only one vendor possesses the necessary capabilities or proprietary technology, they inherently limit price discovery and may lead to higher costs for the government.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the best possible price, as competition is a key driver for cost savings in government procurement.

Public Impact

The Department of Defense is the primary beneficiary, receiving essential computer systems design services. This contract supports the modernization and maintenance of critical IT infrastructure for defense operations. Services are delivered within Maryland, potentially impacting the local IT workforce and economy. The contract likely enables enhanced cybersecurity, data management, and operational efficiency for the DoD.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially inflating costs for taxpayers.
Lack of transparency in the sole-source justification process could mask inefficiencies.
Contract duration of five years may not align with rapidly evolving IT needs, risking obsolescence.
No small business set-aside indicates limited opportunities for smaller, innovative firms in this contract.
Performance in Maryland could indicate a geographic concentration of IT spending, potentially overlooking other regions.

Positive Signals

Firm Fixed Price contract type provides cost certainty for the government, assuming scope is well-defined.
Award to Microsoft Corporation suggests leveraging a vendor with established expertise in enterprise IT solutions.
The contract duration of five years allows for long-term planning and stability in IT service delivery.
The contract is for computer systems design services, a fundamental requirement for defense operations.

Sector Analysis

The IT services sector, particularly computer systems design, is a substantial component of federal spending. This contract for $148 million falls within the broader category of IT services, which includes software development, systems integration, and IT consulting. The federal government is a major consumer of these services, with significant spending allocated to modernizing and maintaining its vast IT infrastructure. Comparable spending benchmarks would typically involve analyzing other large-scale IT service contracts awarded by defense agencies or other federal entities for similar system design and integration work.

Small Business Impact

The absence of a small business set-aside on this contract indicates that it was not specifically designated for small business participation. This suggests that the prime contract was awarded to a large business, likely Microsoft Corporation. While there is no explicit requirement for small business subcontracting, large prime contractors often engage small businesses for specialized services. However, without a set-aside, the direct impact on the small business ecosystem is less certain, and opportunities may be limited to those that can compete for subcontracts.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the Defense Contract Management Agency (DCMA) or equivalent within the Defense Information Systems Agency (DISA). Accountability measures would be tied to the terms of the firm-fixed-price contract, focusing on timely delivery of defined milestones and adherence to specifications. Transparency is limited due to the sole-source nature of the award; however, contract award data is publicly available through federal procurement databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

General Services Administration (GSA) IT Schedule Contracts
Department of Defense IT Modernization Programs
Defense Information Systems Agency (DISA) IT Support Services
Enterprise Resource Planning (ERP) Systems Implementation

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $148.0 million to MICROSOFT CORPORATION. IGF::OT::IGF LABOR

Who is the contractor on this award?

The obligated recipient is MICROSOFT CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $148.0 million.

What is the period of performance?

Start: 2017-09-20. End: 2022-09-22.

What specific computer systems design services are covered under this $148 million contract?

The provided data indicates the contract is for 'Computer Systems Design Services' (NAICS code 541512) awarded to Microsoft Corporation. However, the specific details of the services rendered are not included in the abbreviated data. Typically, this category encompasses a wide range of activities such as designing computer hardware and software systems, integrating hardware and software, and providing technical consulting services. For this contract, it could involve the design and implementation of new IT systems, upgrades to existing infrastructure, network design, or the integration of various software solutions to meet the Department of Defense's operational requirements. Further details would be found in the contract's Statement of Work (SOW).

How does the $148 million value compare to similar sole-source IT contracts awarded by the DoD?

Comparing the $148 million value of this sole-source contract to similar DoD IT procurements requires access to a broader dataset of federal contracts, specifically those awarded on a sole-source basis for computer systems design services. Without this comparative data, it's difficult to definitively state whether this contract represents a high, low, or average value. However, $148 million over five years ($29.6 million annually) is a substantial sum, suggesting a significant scope of work. Sole-source awards, by their nature, often have higher price points than competitively bid contracts due to the lack of market pressure. A detailed analysis would involve identifying comparable contracts by agency, service type, and award type.

What are the primary risks associated with a sole-source award of this magnitude for IT services?

The primary risks associated with a sole-source award of this magnitude for IT services include: 1. **Higher Costs:** Without competition, the government may pay a premium compared to what could be achieved through a competitive bidding process. 2. **Limited Innovation:** Relying on a single vendor might stifle innovation, as there's less incentive for the contractor to propose novel or more cost-effective solutions. 3. **Vendor Lock-in:** The government could become heavily reliant on the sole-source provider, making it difficult and costly to switch vendors in the future. 4. **Potential for Scope Creep:** If the contract is not meticulously managed, the sole-source vendor might expand the scope of work without commensurate price adjustments. 5. **Reduced Transparency:** The justification for a sole-source award needs to be robust to ensure fairness and prevent potential conflicts of interest.

What is the track record of Microsoft Corporation in securing large sole-source federal IT contracts?

Microsoft Corporation is a major technology provider to the federal government and has a long history of securing significant contracts, including those awarded on a sole-source basis. Their extensive portfolio of software, cloud services (Azure), and hardware makes them a critical vendor for many government agencies. While specific data on their sole-source contract history isn't provided here, it is well-documented that large technology firms like Microsoft often receive sole-source awards when agencies require specific, proprietary solutions or when existing infrastructure heavily relies on their products. These awards are typically justified based on factors like existing infrastructure compatibility, unique capabilities, or urgent requirements where competition is not feasible.

How has federal spending on computer systems design services evolved over the past five years, and where does this contract fit?

Federal spending on computer systems design services (NAICS 541512) has generally seen a consistent increase over the past five years, driven by the ongoing need for digital transformation, cybersecurity enhancements, and modernization of legacy IT systems across various agencies. This $148 million contract awarded by the Department of Defense fits within this trend as a significant investment in IT infrastructure. While this specific contract represents a single large award, the overall federal expenditure in this category is much broader, encompassing numerous smaller contracts and task orders awarded through various vehicles, including competitive IDIQs and GSA schedules. Analyzing historical spending patterns would reveal the aggregate demand for these services and the government's reliance on both large prime contractors and smaller specialized firms.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HC102816R0024

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: ONE MICROSOFT WAY, REDMOND, WA, 98052

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

Financial Breakdown

Contract Ceiling: $149,150,529

Exercised Options: $149,150,529

Current Obligation: $147,963,533

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HC102817D0001

IDV Type: IDC

Timeline