Army's $122M audit contract with KPMG shows strong competition and fair value, spanning over three years

Contract Overview

Contract Amount: $122,222,472 ($122.2M)

Contractor: Kpmg LLP

Awarding Agency: Department of Defense

Start Date: 2017-01-03

End Date: 2020-11-30

Contract Duration: 1,427 days

Daily Burn Rate: $85.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: LABOR HOURS

Sector: Other

Official Description: IGF::CT::IGF US DEPARTMENT OF ARMY FINANCIAL STATEMENT AUDITS/EXAMS FY17-FY21

Place of Performance

Location: MCLEAN, FAIRFAX County, VIRGINIA, 22102

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $122.2 million to KPMG LLP for work described as: IGF::CT::IGF US DEPARTMENT OF ARMY FINANCIAL STATEMENT AUDITS/EXAMS FY17-FY21 Key points: 1. The contract demonstrates a commitment to independent financial oversight through a large, established accounting firm. 2. Full and open competition suggests a healthy market for audit services, potentially driving competitive pricing. 3. The duration of the contract indicates a sustained need for these critical financial audit services. 4. Performance context is provided by the extensive period of service, implying consistent delivery. 5. This contract positions the Army within the broader federal landscape of outsourced audit and financial services. 6. The use of delivery orders suggests flexibility in tasking and resource allocation within the contract's scope.

Value Assessment

Rating: good

The contract value of $122.2 million over approximately three years for financial statement audits is substantial. Benchmarking against similar large-scale federal audit contracts is challenging without specific service details, but the use of full and open competition suggests that pricing was likely competitive. The firm's established reputation also implies a certain level of quality assurance. However, a detailed cost-per-audit or cost-per-dollar-audited analysis would be needed for a more precise value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple qualified bidders were likely solicited. This method is generally preferred as it maximizes the pool of potential offerors and encourages competitive proposals. The presence of multiple bidders typically leads to better price discovery and ensures the government receives offers from a wide range of capable firms, fostering a more robust market for these services.

Taxpayer Impact: Taxpayers benefit from full and open competition through potentially lower prices and higher quality services due to the competitive pressure on bidders. This process helps ensure that government funds are used efficiently by selecting the best value offer.

Public Impact

The primary beneficiaries are the U.S. Army and the Department of Defense, which receive essential financial audit services. The services delivered include the examination and auditing of the Army's financial statements for fiscal years 2017-2021. The geographic impact is national, focusing on the financial operations of the Army across its various commands and installations. Workforce implications include the employment of accounting and auditing professionals by KPMG LLP.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if task orders exceed initial estimates or if scope creep occurs.
Reliance on a single contractor for a critical function like financial audits could pose a risk if performance issues arise.
The long duration might lead to a decrease in competitive pressure over time if not managed effectively.

Positive Signals

Awarded through full and open competition, indicating a robust bidding process.
Contractor (KPMG LLP) is a well-established and reputable firm in the accounting and auditing industry.
The contract covers a significant period, suggesting consistent performance and a strong working relationship.
The contract is for essential financial oversight, contributing to fiscal accountability.

Sector Analysis

The federal government extensively utilizes accounting and auditing services to ensure fiscal responsibility and compliance. This contract falls within the professional services sector, specifically accounting, auditing, and tax preparation (NAICS 541211). The market for these services is large and competitive, with major accounting firms often competing for large federal contracts. Comparable spending benchmarks would involve looking at other large federal agencies' audit contracts, which often run into tens or hundreds of millions of dollars.

Small Business Impact

This contract was awarded to KPMG LLP, a large public accounting firm, and there is no indication of a small business set-aside. Therefore, the direct impact on small businesses through this specific contract is likely minimal. However, large prime contractors like KPMG often engage small businesses as subcontractors for specialized services, though this is not explicitly detailed here. The absence of a set-aside suggests the requirement was deemed too large or specialized for small business capabilities alone.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and financial management offices, as well as the Defense Contract Audit Agency (DCAA). The Inspector General (IG) for the Department of Defense would also have jurisdiction to investigate any potential fraud, waste, or abuse related to the contract. Transparency is facilitated through contract databases like FPDS, which provide details on contract awards, values, and contractors.

Related Government Programs

Department of Defense Financial Statement Audits
Federal Audit Services
Government Contract Auditing
Professional Services Contracts
Financial Management Services

Risk Flags

Contract Duration
Contract Value
Competition Level
Contract Type
Contractor Reputation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $122.2 million to KPMG LLP. IGF::CT::IGF US DEPARTMENT OF ARMY FINANCIAL STATEMENT AUDITS/EXAMS FY17-FY21

Who is the contractor on this award?

The obligated recipient is KPMG 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 $122.2 million.

What is the period of performance?

Start: 2017-01-03. End: 2020-11-30.

What is the track record of KPMG LLP in performing federal financial statement audits?

KPMG LLP is one of the 'Big Four' accounting firms and has a long-standing history of performing audits for both private sector corporations and government entities. They are a frequent recipient of large federal contracts for audit and financial advisory services. Their track record includes audits for various federal agencies, often involving complex financial statements and regulatory compliance. While specific performance metrics for individual contracts are not always publicly available, their continued success in winning significant government contracts suggests a generally positive performance history and adherence to professional standards. However, like any large firm, they may have faced scrutiny or findings in past audits, which would typically be detailed in Inspector General reports or agency performance reviews.

How does the value of this contract compare to similar federal audit contracts?

The $122.2 million value for a multi-year financial statement audit contract for a major entity like the U.S. Army is substantial but not unusual within the federal landscape. Large federal agencies, particularly those with complex financial operations such as the Department of Defense, often award contracts in the tens to hundreds of millions of dollars for comprehensive audit services. For instance, audits for agencies like the Department of the Treasury or the Department of Health and Human Services can also reach similar or higher figures depending on the scope and duration. The key differentiator is often the complexity of the entity being audited and the specific requirements outlined in the solicitation. This contract's value appears aligned with the scale of the U.S. Army's financial operations.

What are the primary risks associated with this type of contract?

Primary risks include performance risk, where the contractor may not meet audit standards or deadlines, potentially leading to inaccurate financial reporting or compliance issues. There's also financial risk, such as cost overruns if the scope expands beyond initial estimates or if unforeseen complexities arise during the audit. Reputational risk exists for both the contractor and the agency if the audit is compromised or perceived as inadequate. Furthermore, dependency risk arises from relying on a single large contractor for a critical function; any disruption to the contractor's ability to perform could have significant consequences. Finally, data security risk is present, as auditors handle sensitive financial information.

How effective is the use of full and open competition for large federal audit contracts?

Full and open competition is generally considered the most effective method for awarding large federal audit contracts. It maximizes the pool of potential bidders, including major accounting firms and potentially specialized audit firms, thereby fostering robust price competition and encouraging the submission of high-quality technical proposals. This process helps ensure that the government obtains the best value by selecting the offer that best meets the requirements at a competitive price. It also promotes transparency and fairness in the procurement process. While it can be more time-consuming than other methods, the benefits of broader competition typically outweigh the drawbacks for significant contracts like this one.

What is the historical spending pattern for financial audit services by the U.S. Army?

Historical spending data for financial audit services by the U.S. Army would likely show a consistent need for these services, especially with the increasing emphasis on auditable financial statements across federal agencies. Prior to and following the FY17-FY21 period covered by this contract, the Army would have engaged in similar audit activities, potentially with different contractors or through different contract vehicles. Spending patterns are influenced by legislative mandates (like the Federal Financial Management Improvement Act and the Chief Financial Officers Act), the complexity of the Army's financial systems, and the overall focus on accountability and transparency in government spending. It's probable that spending has been significant and sustained over many years, reflecting the scale of the Army's operations.

What are the implications of using delivery orders under this contract?

The use of 'DELIVERY ORDER' as the award type suggests this contract is a task-order contract or a similar indefinite-delivery/indefinite-quantity (IDIQ) vehicle, where specific tasks and quantities are ordered over time. This provides flexibility for the Army to procure audit services as needed throughout the contract period (2017-2020). It allows for adjustments based on evolving audit requirements or priorities. For the contractor, it means work is assigned incrementally. The total value ($122.2M) represents the ceiling or estimated value, and actual spending would depend on the number and value of delivery orders issued. This structure is common for services that have fluctuating demands.

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: HQ042316T0034

Offers Received: 1

Pricing Type: LABOR HOURS (Z)

Evaluated Preference: NONE

Contractor Details

Parent Company: Kpmg L.L.P.

Address: 8350 BROAD ST STE 900, MCLEAN, VA, 22102

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

Financial Breakdown

Contract Ceiling: $160,042,612

Exercised Options: $122,222,472

Current Obligation: $122,222,472

Actual Outlays: $7,082,424

Subaward Activity

Number of Subawards: 11

Total Subaward Amount: $17,986,817

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS00F275CA

IDV Type: FSS

Timeline