DoD's $46M DHP Audit Contract Awarded to Kearney & Company Shows Fair Value Amidst Limited Competition

Contract Overview

Contract Amount: $46,195,869 ($46.2M)

Contractor: Kearney & Company, P.C.

Awarding Agency: Department of Defense

Start Date: 2017-07-07

End Date: 2021-12-31

Contract Duration: 1,638 days

Daily Burn Rate: $28.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: LABOR HOURS

Sector: Other

Official Description: IGF::CT::IGF DEFENSE HEALTH PROGRAM (DHP) FINANCIAL STATEMENT AUDIT AND EXAMINATION

Place of Performance

Location: ALEXANDRIA, ALEXANDRIA CITY County, VIRGINIA, 22314

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $46.2 million to KEARNEY & COMPANY, P.C. for work described as: IGF::CT::IGF DEFENSE HEALTH PROGRAM (DHP) FINANCIAL STATEMENT AUDIT AND EXAMINATION Key points: 1. The contract's value appears reasonable when benchmarked against similar large-scale financial audit services. 2. While awarded under full and open competition, the relatively low number of bids suggests potential for improved price discovery. 3. Performance risk appears moderate, given the contractor's experience with government audits. 4. The contract duration and delivery order structure indicate a phased approach to a complex audit. 5. This contract falls within the broader IT and professional services sector, supporting critical defense financial operations. 6. The absence of small business set-asides means direct impact on this segment is limited, though subcontracting opportunities may exist.

Value Assessment

Rating: good

The contract value of approximately $46.2 million over its period of performance (2017-2021) for financial statement audit and examination services for the DoD's Defense Health Program (DHP) appears to be within a reasonable range. Benchmarking against similar large-scale government audit contracts suggests that the pricing is competitive, especially considering the complexity and scope of auditing a program like DHP. The contract was awarded via delivery order, indicating a structured approach to service delivery and cost management.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is a positive indicator for taxpayer value. However, only two bids were received. This limited number of bidders, while still competitive, may suggest that the market for such specialized and large-scale audit services is concentrated, or that the solicitation requirements were highly specific. A higher number of bidders typically leads to more robust price competition and potentially lower costs for the government.

Taxpayer Impact: While the competition was full and open, the low number of bids means taxpayers may not have benefited from the most aggressive pricing possible. However, the presence of at least one competitor ensures some level of price discipline.

Public Impact

The primary beneficiaries are the Department of Defense and its Defense Health Program, which receives assurance of financial integrity. The services delivered are critical for the accurate auditing and examination of financial statements, ensuring accountability and compliance. The geographic impact is national, supporting the financial oversight of a program with widespread operations. Workforce implications include the employment of auditors and financial professionals by the contractor, Kearney & Company.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for limited price competition due to only two bids received.
Complexity of auditing a large federal health program could introduce performance challenges.
Reliance on a single contractor for a critical audit function over several years.

Positive Signals

Awarded through full and open competition, maximizing potential bidder pool.
Contractor, Kearney & Company, has experience with government financial audits.
Clear contract structure with defined delivery orders and performance period.

Sector Analysis

This contract falls within the professional, scientific, and technical services sector, specifically accounting and auditing services. The market for large-scale federal financial statement audits is often dominated by a few large, specialized firms. The total addressable market for such services within the federal government is substantial, encompassing audits for numerous agencies and programs. This contract represents a significant portion of spending within the niche of defense health program financial audits.

Small Business Impact

The contract was not awarded as a small business set-aside, and the data indicates the prime contractor is not a small business. Therefore, there is no direct set-aside benefit for small businesses. Subcontracting opportunities may exist, but the extent to which small businesses will participate is not detailed in the provided data. The overall impact on the small business ecosystem is likely minimal unless significant subcontracting occurs.

Oversight & Accountability

Oversight is likely managed by the Defense Finance and Accounting Service (DFAS), the contracting agency. Accountability measures are embedded in the contract terms, including performance standards and delivery schedules. Transparency is facilitated through federal contract databases, though detailed audit findings are typically internal or subject to specific reporting requirements. Inspector General jurisdiction would apply to any potential fraud, waste, or abuse related to the contract.

Related Government Programs

DoD Financial Statement Audits
Defense Health Program Operations
Federal Audit Services Contracts
Government Accountability Office (GAO) Audits
Professional Services Contracts

Risk Flags

Limited number of bidders received.
Potential for contractor performance issues on complex federal audits.
Data security and privacy concerns with sensitive financial information.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $46.2 million to KEARNEY & COMPANY, P.C.. IGF::CT::IGF DEFENSE HEALTH PROGRAM (DHP) FINANCIAL STATEMENT AUDIT AND EXAMINATION

Who is the contractor on this award?

The obligated recipient is KEARNEY & COMPANY, P.C..

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 $46.2 million.

What is the period of performance?

Start: 2017-07-07. End: 2021-12-31.

What is Kearney & Company's track record with federal audit contracts?

Kearney & Company, P.C. has a significant track record in performing audits for federal agencies. They are a prominent accounting firm specializing in government audits, including financial statement audits, compliance audits, and examinations. Their experience often includes work with large, complex organizations like those within the Department of Defense. This specific contract with DFAS for the DHP audit builds upon their established expertise in navigating the intricacies of federal financial regulations and reporting requirements. Their history suggests a capability to handle the scope and demands of such engagements, though specific performance metrics on past contracts would provide a more granular view.

How does the $46.2 million contract value compare to similar DoD or federal audit contracts?

The $46.2 million contract value for the DHP financial statement audit and examination services appears to be within the expected range for large-scale federal audit engagements. Contracts for auditing major federal programs, especially within defense or health sectors, often run into tens of millions of dollars due to the complexity, volume of transactions, and regulatory scrutiny involved. For instance, similar multi-year audit contracts for other large federal agencies or components can range from $10 million to over $100 million depending on the scope and duration. The value here suggests a substantial but not outlier-level investment for ensuring the financial integrity of a program as significant as the Defense Health Program.

What are the primary risks associated with this type of contract, and how are they mitigated?

Primary risks include performance risk (failure to conduct a thorough and accurate audit), schedule risk (delays in audit completion impacting reporting deadlines), and data security risk (handling sensitive financial and health information). Mitigation strategies typically involve robust contract oversight by the contracting agency (DFAS), clearly defined audit standards and deliverables, performance metrics, and requirements for qualified personnel. The contractor's established expertise and the phased approach through delivery orders also help manage risk by breaking down the complex audit into manageable stages. Furthermore, government audit regulations and the potential for Inspector General reviews provide an accountability framework.

How effective is the 'full and open competition' with only two bidders in ensuring optimal value for taxpayers?

While 'full and open competition' is the preferred method for maximizing the potential bidder pool, receiving only two bids raises questions about the effectiveness in this specific instance. Optimal value for taxpayers is typically achieved when competition is robust, driving down prices through multiple offers. With only two bidders, the government might not be leveraging the full competitive landscape. This could be due to the specialized nature of the requirement, high barriers to entry for potential bidders, or the specific terms of the solicitation. While two bidders still provide a competitive dynamic, it's less ideal than a scenario with numerous proposals, which could have potentially led to even more favorable pricing or innovative solutions.

What is the historical spending trend for DHP financial statement audits?

The provided data focuses on a single contract award from 2017 to 2021 totaling $46.2 million. To understand historical spending trends, one would need to examine prior contracts for DHP financial statement audits, potentially including contracts awarded before 2017 and after 2021. Analyzing these past awards would reveal whether spending has increased, decreased, or remained relatively stable over time. It would also indicate if the number of bidders or the contracting approach has changed. Without this broader historical context, it's difficult to ascertain long-term spending patterns or identify significant shifts in the cost or procurement of these essential audit services.

What are the implications of this contract being awarded as a Delivery Order?

Awarding this contract as a Delivery Order (DO) under a larger contract vehicle (potentially an Indefinite-Delivery/Indefinite-Quantity or IDIQ contract, though not explicitly stated) implies a flexible approach to acquiring audit services. Delivery Orders allow the government to order specific services and quantities as needed over the contract period. For a multi-year audit like this, it suggests the work was likely broken down into phases or specific audit tasks, with each DO representing a discrete period or scope of work. This structure enables better management of funds, allows for adjustments based on evolving program needs, and provides a mechanism for oversight and performance evaluation at different stages of the audit process.

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: HQ042317T0005

Offers Received: 2

Pricing Type: LABOR HOURS (Z)

Evaluated Preference: NONE

Contractor Details

Address: 1701 DUKE ST STE 500, ALEXANDRIA, VA, 22314

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

Financial Breakdown

Contract Ceiling: $46,195,869

Exercised Options: $46,195,869

Current Obligation: $46,195,869

Actual Outlays: $3,295,857

Subaward Activity

Number of Subawards: 22

Total Subaward Amount: $21,894,646

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS00F031DA

IDV Type: FSS

Timeline