DoD's $101.5M Microsoft contract for IT services awarded via sole-source justification

Contract Overview

Contract Amount: $101,532,073 ($101.5M)

Contractor: Microsoft Corporation

Awarding Agency: Department of Defense

Start Date: 2018-06-07

End Date: 2023-06-14

Contract Duration: 1,833 days

Daily Burn Rate: $55.4K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: SE31&SE34 MCS LABOR

Place of Performance

Location: FORT GEORGE G MEADE, ANNE ARUNDEL County, MARYLAND, 20755

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $101.5 million to MICROSOFT CORPORATION for work described as: SE31&SE34 MCS LABOR Key points: 1. Contract awarded to a single vendor, raising questions about competitive pricing. 2. Significant spending on computer systems design services for the Defense Information Systems Agency. 3. Long contract duration of 1833 days suggests a sustained need for these services. 4. The contract type is Firm Fixed Price, which can offer cost certainty but may limit flexibility. 5. No small business set-aside was utilized, indicating potential missed opportunities for smaller firms. 6. The contract was awarded as a Delivery Order, suggesting it's part of a larger framework agreement.

Value Assessment

Rating: questionable

Benchmarking the value of this $101.5 million contract is challenging without comparable sole-source awards for similar Microsoft services. The firm fixed-price structure provides cost certainty for the government, but the lack of competition means there's no direct market comparison to assess if the pricing is optimal. Without competitive bids, it's difficult to determine if the government secured the best possible value 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 only one vendor, Microsoft Corporation, was solicited. This approach bypasses the standard competitive bidding process. While sole-source awards can be justified under specific circumstances (e.g., unique capabilities or urgent needs), they inherently limit price discovery and potentially lead to higher costs compared to a fully competed contract.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competition. Without multiple bids, there is less pressure on the contractor to offer the most competitive pricing, potentially resulting in less efficient use of public funds.

Public Impact

The Department of Defense benefits from specialized computer systems design services. Services are delivered to the Defense Information Systems Agency, supporting critical defense IT infrastructure. The contract's geographic impact is centered in Maryland, where the agency is located. This contract likely supports a workforce skilled in Microsoft technologies and IT systems design.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices.
Sole-source awards can reduce transparency in government spending.
Potential for vendor lock-in with proprietary Microsoft solutions.
Limited opportunities for other vendors to compete for this significant contract.

Positive Signals

Firm Fixed Price contract provides cost predictability.
Long-term award suggests a stable and ongoing need for services.
Award to a well-established vendor like Microsoft may ensure reliability.

Sector Analysis

This contract falls within the Information Technology sector, specifically Computer Systems Design Services. The market for IT services, particularly those supporting large government agencies, is substantial. This contract represents a significant portion of spending within this niche, focusing on solutions provided by a major technology vendor. Comparable spending benchmarks would typically involve analyzing IT service contracts awarded to large system integrators or software providers.

Small Business Impact

The contract was not set aside for small businesses, nor does it indicate any subcontracting requirements for small businesses. This means that opportunities for small businesses to participate in this significant IT services contract were likely minimal. The absence of small business involvement could limit the broader economic impact on the small business IT ecosystem that could benefit from subcontracting roles.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management offices, as well as the Defense Contract Audit Agency (DCAA) for financial audits. The Defense Information Systems Agency (DISA) would also have program oversight. Transparency is limited due to the sole-source nature, but contract award data is publicly available through federal procurement databases. Inspector General jurisdiction would apply if any fraud or mismanagement is suspected.

Related Government Programs

Defense Information Systems Agency IT Services
Microsoft Software and Services Contracts
Sole-Source IT Procurement
Computer Systems Design Services

Risk Flags

Sole-source award lacks competitive pricing.
Potential for vendor lock-in.
Limited small business participation.
Lack of transparency in justification for sole-source.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $101.5 million to MICROSOFT CORPORATION. SE31&SE34 MCS 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 $101.5 million.

What is the period of performance?

Start: 2018-06-07. End: 2023-06-14.

What is the justification for awarding this contract on a sole-source basis to Microsoft Corporation?

The provided data does not specify the exact justification for the sole-source award. Typically, sole-source contracts are justified under circumstances such as when only one responsible source can provide the required supplies or services, when there's a compelling urgency, or when specific technical capabilities are uniquely held by a single vendor. For a large technology provider like Microsoft, justifications might relate to proprietary software integration, existing infrastructure compatibility, or specialized support requirements that only Microsoft can fulfill. Further investigation into the contract's official justification documentation would be necessary to confirm the specific reasons.

How does the $101.5 million contract value compare to other IT service contracts awarded by the DoD?

The $101.5 million contract value is substantial, placing it among significant IT service procurements within the Department of Defense. However, the DoD awards thousands of contracts annually, many of which are in the hundreds of millions or even billions of dollars, particularly for major system acquisitions and long-term service agreements. To provide a precise comparison, one would need to analyze the distribution of IT service contract values awarded by the DoD over a similar period, looking at contracts for system design, integration, maintenance, and support. This contract's value is considerable but likely falls within the mid-to-large range for IT services, especially when considering sole-source awards which can sometimes be for specialized, high-value needs.

What are the potential risks associated with a sole-source contract of this magnitude?

The primary risk associated with a sole-source contract of this magnitude is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, the government has less leverage to negotiate the best possible price. Other risks include vendor lock-in, where the agency becomes heavily reliant on a single provider's technology and services, making future transitions difficult and potentially costly. There's also a reduced incentive for the contractor to innovate or improve service delivery beyond contractual minimums. Furthermore, sole-source awards can raise concerns about fairness and equal opportunity for other capable vendors.

What is the typical duration for IT service contracts of this nature, and how does this contract's duration compare?

The typical duration for IT service contracts can vary widely depending on the scope and nature of the services. Contracts for ongoing support, maintenance, and system design can often span several years. This contract, with a duration of 1833 days (approximately 5 years), is on the longer side but not uncommon for large-scale IT service agreements, especially those involving complex systems or strategic technology partnerships. Many government IT contracts include base periods and option periods, allowing for flexibility. A 5-year term suggests a sustained, long-term requirement for the services provided by Microsoft.

What does the 'Computer Systems Design Services' NAICS code (541512) typically encompass, and how does it apply here?

The North American Industry Classification System (NAICS) code 541512, 'Computer Systems Design Services,' encompasses establishments primarily engaged in planning and designing computer systems that integrate hardware, software, and communication technologies. This includes activities such as systems analysis, systems integration, implementation of software and hardware, and IT consulting. For this contract, it implies that Microsoft Corporation was providing services related to the design, integration, and potentially implementation of computer systems for the Department of Defense, likely involving their suite of software products and related hardware configurations to meet specific defense IT requirements.

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: $101,532,073

Exercised Options: $101,532,073

Current Obligation: $101,532,073

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HC102817D0001

IDV Type: IDC

Timeline