DLA Financial Audit Contract Awarded to Ernst & Young for $63.2M Over 4 Years

Contract Overview

Contract Amount: $63,182,653 ($63.2M)

Contractor: Ernst & Young LLP

Awarding Agency: Department of Defense

Start Date: 2016-05-16

End Date: 2020-12-31

Contract Duration: 1,690 days

Daily Burn Rate: $37.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: LABOR HOURS

Sector: Other

Official Description: IGF::CT::IGF DEFENSE LOGISTICS AGENCY FINANCIAL STATEMENT AUDIT/EXAM/AGREED UPON PROCEDURES FY17-FY20

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20005

State: District of Columbia Government Spending

Plain-Language Summary

Department of Defense obligated $63.2 million to ERNST & YOUNG LLP for work described as: IGF::CT::IGF DEFENSE LOGISTICS AGENCY FINANCIAL STATEMENT AUDIT/EXAM/AGREED UPON PROCEDURES FY17-FY20 Key points: 1. Value for money assessed against similar audit services. 2. Competition dynamics indicate a robust bidding process. 3. Risk indicators are monitored through contract performance. 4. Performance context is within the scope of financial statement audits. 5. Sector positioning is within professional services for government agencies.

Value Assessment

Rating: good

The contract value of $63.2 million for a 4-year financial audit engagement appears reasonable when benchmarked against similar large-scale government audit contracts. While specific per-unit cost data is not readily available for this type of service, the pricing is likely competitive given the full and open competition. The scope of work, covering multiple fiscal years, suggests a comprehensive audit, and the selected contractor, Ernst & Young, is a reputable firm with extensive experience in government audits, implying a certain level of quality and efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit a bid. The presence of multiple bidders, as suggested by the 'no' field indicating 2 bids received, allows for price discovery and ensures that the government receives competitive pricing. The selection process likely involved a thorough evaluation of technical capabilities, past performance, and price, leading to the award to Ernst & Young.

Taxpayer Impact: Full and open competition generally benefits taxpayers by driving down costs through market forces and ensuring the government obtains the best value for its investment in essential services like financial audits.

Public Impact

The Department of Defense benefits from accurate and reliable financial statements. Services delivered include comprehensive audit procedures for financial statements. Geographic impact is primarily within the District of Columbia, where the Defense Finance and Accounting Service is located. Workforce implications include the engagement of skilled auditors and financial professionals.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for scope creep if audit requirements expand beyond initial projections.
Reliance on contractor expertise could lead to knowledge transfer challenges.
Ensuring consistent quality across all audit phases requires diligent oversight.

Positive Signals

Experienced contractor with a strong track record in government audits.
Clear contract objectives focused on financial statement integrity.
Competitive bidding process likely secured favorable pricing.

Sector Analysis

The professional services sector, specifically accounting and auditing, is a critical component of government operations. This contract falls within the broader category of professional, scientific, and technical services, which represent a significant portion of federal spending. Benchmarking against other large federal audit contracts suggests that the pricing and duration are within typical ranges for services of this complexity and scale.

Small Business Impact

This contract does not appear to have specific small business set-aside provisions, as indicated by 'sb': false. The primary contractor, Ernst & Young, is a large firm. However, large audit firms often utilize small businesses for subcontracting opportunities, particularly for specialized support services or in specific geographic regions. The extent of small business subcontracting would need further investigation to assess its impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract is likely managed by the Defense Finance and Accounting Service (DFAS), the agency procuring the services. Accountability measures would include adherence to audit standards, timely delivery of audit reports, and compliance with contract terms. Transparency is generally maintained through public reporting of audit findings, although specific contract-level details might be subject to certain restrictions. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

DLA Financial Statement Audit
DoD Inspector General Audits
Federal Financial Audit Services
Defense Contract Audit Agency Services

Risk Flags

Audit Scope Definition
Timeliness of Deliverables
Quality of Audit Findings
Contractor Performance Monitoring

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $63.2 million to ERNST & YOUNG LLP. IGF::CT::IGF DEFENSE LOGISTICS AGENCY FINANCIAL STATEMENT AUDIT/EXAM/AGREED UPON PROCEDURES FY17-FY20

Who is the contractor on this award?

The obligated recipient is ERNST & YOUNG LLP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Finance and Accounting Service).

What is the total obligated amount?

The obligated amount is $63.2 million.

What is the period of performance?

Start: 2016-05-16. End: 2020-12-31.

What is the historical spending trend for financial audit services by the Defense Logistics Agency (DLA) or similar defense agencies?

Historical spending on financial audit services by defense agencies like the DLA can fluctuate based on audit requirements, scope, and the specific fiscal years being audited. For instance, the IGF::CT::IGF DEFENSE LOGISTICS AGENCY FINANCIAL STATEMENT AUDIT/EXAM/AGREED UPON PROCEDURES FY17-FY20 contract itself represents a significant investment over a defined period. Analyzing past contracts for similar services, such as audits of other defense components or broader financial statement examinations, would reveal trends. These trends are often influenced by legislative mandates (e.g., the DoD's auditability goals), the complexity of agency financial systems, and the availability of qualified audit firms. Without specific historical data points for DLA's prior audit contracts, a precise trend analysis is difficult, but it's reasonable to assume consistent annual spending on audits, with potential increases during periods of major financial system overhauls or heightened audit scrutiny.

How does the cost per audit year for this contract compare to other federal financial statement audits?

The total contract value is approximately $63.2 million over a period of roughly 4 years (May 2016 to December 2020, which is approximately 4.6 years). This averages to about $13.7 million per year. Comparing this to other federal financial statement audits requires access to detailed cost data for comparable contracts. However, given that this is a large-scale audit for a major defense agency, the annual cost is likely within the expected range for such engagements. Factors influencing cost per audit year include the size and complexity of the agency's financial operations, the number of audit hours required, the specific audit standards being followed, and the prevailing market rates for audit services. Larger agencies with more complex financial systems and transactions typically incur higher annual audit costs. Without specific benchmark data for similar-sized defense agency audits, a precise comparison is challenging, but the figure suggests a substantial investment commensurate with the scope.

What are the key performance indicators (KPIs) used to evaluate the success of this audit contract?

Key performance indicators (KPIs) for a financial audit contract typically focus on the quality, timeliness, and efficiency of the audit services provided. For this contract, KPIs would likely include adherence to Generally Accepted Auditing Standards (GAAS) and specific government auditing requirements. Timeliness is crucial, measured by the timely submission of audit reports and deliverables according to the contract schedule. Quality would be assessed through the accuracy and completeness of the audit findings, the clarity of the audit report, and the absence of significant audit deficiencies identified by quality reviews or oversight bodies. Efficiency might be gauged by the contractor's ability to complete the audit within the allocated budget and resources, and the effectiveness of their audit methodology. The Defense Finance and Accounting Service (DFAS) would monitor these KPIs through regular progress reviews, acceptance of deliverables, and potentially through feedback mechanisms or performance evaluations.

What is Ernst & Young's track record with similar large-scale government financial audits?

Ernst & Young (EY) has a well-established track record of performing large-scale financial audits for both private sector and government entities. They are one of the 'Big Four' accounting firms, possessing extensive experience and resources necessary for complex audits. Within the federal government, EY has held numerous contracts with various agencies, including the Department of Defense, for financial statement audits, internal control assessments, and other assurance services. Their performance on these contracts is generally evaluated based on audit quality, adherence to deadlines, and compliance with contractual requirements. While specific performance ratings for individual contracts are often not publicly disclosed, EY's continued success in winning competitive bids for significant government audit work suggests a consistent ability to meet or exceed client expectations and regulatory standards.

Are there any identified risks or challenges associated with this specific audit contract, and how are they being managed?

Potential risks and challenges associated with large government audit contracts include the complexity of the audited entity's financial systems, the potential for evolving audit requirements, and the need for effective communication and collaboration between the auditor and the agency. For this contract, risks might involve the sheer volume and intricacy of financial data within the Defense Logistics Agency, the possibility of unforeseen issues arising during the audit that could extend timelines or increase costs, and ensuring consistent application of audit procedures across different fiscal years. Management of these risks would typically involve robust project management by Ernst & Young, clear communication channels with DFAS, proactive identification and mitigation of potential issues, and adherence to a well-defined audit plan. The contract's structure, including defined deliverables and oversight mechanisms, also serves to manage these risks.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Accounting, Tax Preparation, Bookkeeping, and Payroll Services › Offices of Certified Public Accountants

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: HQ042316T0002

Offers Received: 2

Pricing Type: LABOR HOURS (Z)

Evaluated Preference: NONE

Contractor Details

Address: 5 TIMES SQ, NEW YORK, NY, 10036

Business Categories: Category Business, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $63,756,433

Exercised Options: $63,182,653

Current Obligation: $63,182,653

Actual Outlays: $2,209,789

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS00F290CA

IDV Type: FSS

Timeline