DoD's $160.7M contract for IT services to Microsoft Corporation shows questionable value and limited competition

Contract Overview

Contract Amount: $160,728,593 ($160.7M)

Contractor: Microsoft Corporation

Awarding Agency: Department of Defense

Start Date: 2017-09-29

End Date: 2022-09-29

Contract Duration: 1,826 days

Daily Burn Rate: $88.0K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: IGF::OT::IGF - METSS FOR USMC

Place of Performance

Location: QUANTICO, PRINCE WILLIAM County, VIRGINIA, 22134

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $160.7 million to MICROSOFT CORPORATION for work described as: IGF::OT::IGF - METSS FOR USMC Key points: 1. The contract's value proposition is unclear given the lack of competitive bidding. 2. Limited competition raises concerns about potential overpricing and reduced innovation. 3. The contract duration of five years presents a long-term commitment with potential for cost escalation. 4. Performance context is limited, making it difficult to assess the effectiveness of services rendered. 5. This contract positions Microsoft as a key IT service provider within the Defense sector. 6. The absence of small business set-asides warrants further investigation into subcontracting opportunities.

Value Assessment

Rating: questionable

Benchmarking the value of this $160.7 million contract is challenging due to the lack of competitive data. As a sole-source award, there's no direct comparison to similar contracts or market rates to assess if the pricing is optimal. The extended five-year duration further complicates value assessment, as market conditions and technological needs can change significantly over this period. Without a competitive process, it's difficult to ascertain if the government secured the best possible price and quality for these computer systems design services.

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. This approach bypasses the standard procurement process designed to foster competition and ensure the government receives the best value. The lack of bidders means there was no opportunity for multiple companies to propose solutions and prices, potentially leading to higher costs for the government and limiting the range of innovative solutions considered.

Taxpayer Impact: Sole-source awards limit taxpayer value by removing the downward pressure on prices that competition provides. This can result in higher overall spending for the services rendered.

Public Impact

The primary beneficiary is the Department of Defense, which receives IT services crucial for its operations. Services delivered include computer systems design, supporting the military's technological infrastructure. The geographic impact is likely concentrated within areas where the USMC operates, primarily Virginia. Workforce implications may include the direct employment of individuals by Microsoft and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs for taxpayers.
Sole-source nature limits opportunities for other vendors, including small businesses.
Long contract duration could result in outdated technology or services if not managed proactively.
Performance metrics and value for money are difficult to ascertain without competitive benchmarks.

Positive Signals

Awarded to a well-established technology provider, Microsoft Corporation, suggesting potential for reliable service delivery.
The contract supports critical IT infrastructure for the US Marine Corps, indicating strategic importance.
Firm Fixed Price contract type can provide cost certainty if the scope is well-defined.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically Computer Systems Design Services. The IT services market for the federal government is substantial, with agencies increasingly relying on technology for operations and defense. Contracts like this, especially those for large agencies like the Department of Defense, represent significant portions of federal IT spending. Benchmarking against similar large-scale IT service contracts within the defense sector would be necessary for a comprehensive value assessment.

Small Business Impact

This contract was not set aside for small businesses, and the data indicates no explicit subcontracting requirements were mandated. This means that opportunities for small businesses to participate in delivering these services are likely limited unless they are directly subcontracted by Microsoft. The absence of a small business focus in a contract of this magnitude could represent a missed opportunity to foster growth and innovation within the small business technology ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. The Defense Contract Management Agency (DCMA) often provides contract administration. Inspector General oversight is also a standard mechanism for investigating fraud, waste, and abuse within federal contracts. Transparency is enhanced through contract databases like FPDS, though detailed performance reports may not always be publicly accessible.

Related Government Programs

Defense Information Systems Agency (DISA) IT Services
US Marine Corps IT Modernization Programs
Federal Civilian IT Services Contracts
Large-Scale Technology Support Contracts

Risk Flags

Sole-source award lacks competitive justification.
Potential for overpricing due to lack of competition.
Long contract duration increases risk of obsolescence or cost escalation.
Limited transparency on performance metrics and value assessment.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $160.7 million to MICROSOFT CORPORATION. IGF::OT::IGF - METSS FOR USMC

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 $160.7 million.

What is the period of performance?

Start: 2017-09-29. End: 2022-09-29.

What is Microsoft Corporation's track record with similar sole-source IT contracts within the Department of Defense?

Microsoft Corporation has a long history of providing IT products and services to the federal government, including the Department of Defense. While this specific contract is a sole-source award for computer systems design services, Microsoft frequently secures contracts through various procurement methods. Analyzing their past performance on sole-source awards within DoD can reveal patterns in pricing, delivery, and overall value. However, without specific data on comparable sole-source IT service contracts, it's difficult to definitively assess their track record in this precise context. Generally, large technology providers like Microsoft are expected to deliver reliable services, but the lack of competition in sole-source awards always raises questions about whether the government achieved the most advantageous terms possible compared to a competitive scenario.

How does the $160.7 million value of this contract compare to similar IT service contracts awarded competitively by the DoD?

Direct comparison of this $160.7 million contract's value to competitively awarded IT service contracts by the DoD is challenging due to its sole-source nature. Competitive bidding typically drives prices down, meaning a similar scope of work procured through open competition might have resulted in a lower overall cost. To benchmark effectively, one would need to identify competitively awarded contracts for 'Computer Systems Design Services' (NAICS 541512) of comparable duration and complexity within the DoD. Analyzing the price per service hour, or price per deliverable, across multiple competitive bids would provide a clearer picture of whether this sole-source award represents fair market value. Without such comparative data, the $160.7 million figure remains an isolated number, making it difficult to assess its efficiency.

What are the primary risks associated with a five-year, sole-source IT contract of this magnitude?

The primary risks associated with a five-year, sole-source IT contract of this magnitude include potential cost overruns, technological obsolescence, and vendor lock-in. Since the contract was not competed, there's a risk that the government is paying a premium compared to what could have been achieved through competition. Over a five-year period, technology evolves rapidly; there's a risk that the services or systems provided become outdated, requiring costly upgrades or replacements. Furthermore, a sole-source award can lead to vendor lock-in, making it difficult and expensive to switch providers in the future, even if performance or pricing becomes unsatisfactory. The lack of competitive pressure also reduces the incentive for the contractor to innovate or proactively seek cost efficiencies.

What specific IT services are encompassed by 'Computer Systems Design Services' in the context of this USMC contract?

In the context of this USMC contract, 'Computer Systems Design Services' (NAICS 541512) likely encompasses a broad range of activities related to the planning, design, development, and integration of computer systems. This could include requirements analysis, system architecture design, software development and integration, network design, hardware configuration, and potentially project management for IT initiatives. Given the client is the US Marine Corps, these services are likely critical for supporting command and control systems, logistics, intelligence, or other operational and administrative functions. The specific deliverables and scope would be detailed in the contract's Statement of Work (SOW), which is not provided here but would clarify the precise nature of the design and development work undertaken by Microsoft.

What is the historical spending trend for Computer Systems Design Services by the Department of Defense?

The Department of Defense (DoD) is a significant spender on Information Technology (IT) services, including Computer Systems Design Services. Historical spending data indicates a consistent and often increasing reliance on external contractors for these services as the military modernizes its technological infrastructure. Factors such as evolving threats, the need for advanced communication and intelligence capabilities, and the drive for digital transformation contribute to this trend. While specific figures fluctuate year-to-year based on budgetary allocations and strategic priorities, the overall trend for the DoD has been substantial investment in IT services, making contracts like the one awarded to Microsoft a recurring feature of federal procurement.

Are there any specific performance metrics or Key Performance Indicators (KPIs) associated with this contract that are publicly available?

Publicly available information on specific performance metrics or Key Performance Indicators (KPIs) for this particular contract is limited. Federal contract databases typically provide details on award amounts, dates, contractor, and basic service descriptions, but granular performance data is often considered internal government information or is detailed in less accessible contract documentation. For a sole-source contract, the government would still establish performance standards and monitoring mechanisms. However, without a competitive baseline, assessing whether these KPIs were met efficiently or if they represent the best possible outcomes is difficult. Accessing such details would likely require a Freedom of Information Act (FOIA) request or specific reporting from the contracting agency.

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: $160,728,593

Exercised Options: $160,728,593

Current Obligation: $160,728,593

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HC102817D0001

IDV Type: IDC

Timeline