DLA Audits FY21-25 Awarded to Ernst & Young LLP for $107.1M, Utilizing Full and Open Competition

Contract Overview

Contract Amount: $107,136,187 ($107.1M)

Contractor: Ernst & Young LLP

Awarding Agency: Department of Defense

Start Date: 2021-01-01

End Date: 2026-03-02

Contract Duration: 1,886 days

Daily Burn Rate: $56.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: LABOR HOURS

Sector: Other

Official Description: DEFENSE LOGISTICS AGENCY AUDITS FISCAL YEARS 2021 THROUGH 2025.

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 $107.1 million to ERNST & YOUNG LLP for work described as: DEFENSE LOGISTICS AGENCY AUDITS FISCAL YEARS 2021 THROUGH 2025. Key points: 1. Value for money assessed through competitive bidding process. 2. Competition dynamics indicate a robust market for audit services. 3. Risk indicators are moderate, given the nature of audit services. 4. Performance context is tied to ensuring financial integrity of DLA. 5. Sector positioning within professional services for government agencies. 6. Contract type is a delivery order under a larger contract vehicle.

Value Assessment

Rating: good

The contract value of $107.1 million for a multi-year audit engagement appears reasonable given the scope and duration. Benchmarking against similar large-scale government audit contracts suggests that pricing is competitive, especially considering the full and open competition utilized. The number of bids received (2) provides some indication of market interest, though further analysis of bid specifics would refine this assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under a full and open competition, indicating that all responsible sources were permitted to submit a bid. Two bids were received, suggesting a moderate level of competition for this specific engagement. While two bidders is not a high number, the 'full and open' nature ensures a baseline of market exploration.

Taxpayer Impact: A full and open competition generally leads to better price discovery and potentially lower costs for taxpayers compared to sole-source or limited competitions.

Public Impact

Taxpayers benefit from increased financial accountability and oversight of defense spending. Services delivered include comprehensive audits of the Defense Logistics Agency's financial operations. Geographic impact is national, supporting the DLA's operations across various locations. Workforce implications include the engagement of specialized audit professionals.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for scope creep in multi-year audit contracts.
Reliance on a single contractor for critical audit functions.
Ensuring adequate contractor performance and quality control over the contract duration.

Positive Signals

Awarded through full and open competition, maximizing market reach.
Contract duration allows for in-depth understanding of DLA's financial systems.
Experienced contractor selected, implying a higher likelihood of successful performance.

Sector Analysis

The federal government procures a significant volume of professional services, including auditing and accounting, to ensure accountability and compliance. This contract falls within the professional services sector, specifically accounting and auditing, which is a mature market with established players. Comparable spending benchmarks for large federal audit contracts can vary widely based on agency size and complexity, but $107.1 million for a multi-year DLA audit is substantial.

Small Business Impact

The contract was awarded to Ernst & Young LLP, a large public accounting firm. There is no indication of a small business set-aside for this specific contract. Subcontracting opportunities for small businesses are not explicitly detailed but are possible within the scope of such a large audit engagement, particularly for specialized support services.

Oversight & Accountability

Oversight is typically managed by the contracting officer and the agency's program management office. The Inspector General's office for the Department of Defense would also have oversight jurisdiction. Transparency is facilitated through contract award databases and public reporting requirements.

Related Government Programs

Defense Logistics Agency Financial Statement Audits
Department of Defense Audit Services
Federal Government Professional Services Contracts
Government Accountability Office (GAO) Audits

Risk Flags

Potential for findings of material weakness or significant deficiencies.
Contract duration may present challenges in maintaining consistent oversight.
Dependence on contractor expertise for critical audit functions.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $107.1 million to ERNST & YOUNG LLP. DEFENSE LOGISTICS AGENCY AUDITS FISCAL YEARS 2021 THROUGH 2025.

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 $107.1 million.

What is the period of performance?

Start: 2021-01-01. End: 2026-03-02.

What is the track record of Ernst & Young LLP in performing large-scale federal government audits?

Ernst & Young LLP (EY) has a long-standing and extensive track record of performing audits for federal government agencies. As one of the 'Big Four' accounting firms, EY possesses the resources, expertise, and established methodologies required for complex governmental audits. They regularly audit financial statements, internal controls, and compliance for various departments and agencies, including defense entities. Their experience typically encompasses adherence to government auditing standards (GAGAS), specific agency regulations, and federal accounting principles. While specific performance metrics for individual contracts are often not publicly detailed, their continued selection for significant federal engagements suggests a generally positive performance history and a strong understanding of the federal audit landscape.

How does the $107.1 million contract value compare to similar DLA audit contracts or other large federal agency audits?

The $107.1 million contract value for the Defense Logistics Agency (DLA) audits over approximately five years (FY21-25) represents a significant investment in financial oversight. Comparing this directly to other federal audits requires careful consideration of scope, duration, and agency complexity. For instance, audits of the Department of Defense's overall financial statements, which are vastly more complex than a single agency's, can run into hundreds of millions of dollars annually. Audits for agencies like the IRS or Social Security Administration might have different cost structures due to their specific operational and data environments. However, for a single agency audit of DLA's scale, $107.1 million is within the expected range for a comprehensive, multi-year engagement performed by a major accounting firm under full and open competition. The value reflects the extensive work involved in auditing financial statements, internal controls, and compliance across a large and complex logistics organization.

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

The primary risks associated with this contract revolve around ensuring the quality and timeliness of the audit work, managing potential cost overruns (though less common in fixed-price or labor-hour contracts with caps), and maintaining auditor independence. A key risk is the potential for audit findings to reveal significant financial control weaknesses or material misstatements, which could have broader implications for DLA's operations and accountability. Mitigation strategies typically include robust contract oversight by the government contracting officer and technical representatives, clear performance standards and deliverables outlined in the contract, and regular progress reviews. For auditor independence, strict ethical guidelines and regulations govern the relationship between the auditor and the audited entity. The contractor's own internal quality control processes are also a critical mitigation factor.

What is the expected impact of these audits on the Defense Logistics Agency's financial management and operational efficiency?

The expected impact of these audits on the Defense Logistics Agency (DLA) is significant, primarily focused on enhancing financial transparency, accountability, and the reliability of financial reporting. By conducting comprehensive audits for fiscal years 2021 through 2025, the audits aim to identify and assess the effectiveness of internal controls over financial reporting, pinpoint areas of non-compliance with laws and regulations, and validate the accuracy of the DLA's financial statements. This process can lead to recommendations for improving financial processes, strengthening internal controls, and optimizing resource management. Ultimately, the audits contribute to building greater public trust in the DLA's stewardship of taxpayer funds and can drive improvements in operational efficiency by highlighting areas where financial processes may be hindering mission accomplishment.

How has federal spending on audit and accounting services for defense agencies evolved over the past five years?

Federal spending on audit and accounting services for defense agencies has generally remained substantial, reflecting the immense scale and complexity of defense operations and the stringent accountability requirements. While specific year-over-year figures fluctuate based on agency needs, contract renewals, and audit cycles, the overall trend indicates a consistent demand for these services. Agencies like the Department of Defense (DoD) and its components, including the DLA, face ongoing mandates for financial statement audits and audits of internal controls. Spending in this area is influenced by legislative requirements (e.g., the Federal Information Security Modernization Act, DoD's auditability initiatives), the complexity of defense supply chains and financial systems, and the need for independent assurance on the use of taxpayer funds. The trend often involves shifts towards more integrated audits and increased scrutiny of financial reporting accuracy and compliance.

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: HQ042320Q0007

Offers Received: 2

Pricing Type: LABOR HOURS (Z)

Evaluated Preference: NONE

Contractor Details

Address: 1 MANHATTAN WEST, NEW YORK, NY, 10001

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

Financial Breakdown

Contract Ceiling: $109,618,274

Exercised Options: $107,136,187

Current Obligation: $107,136,187

Actual Outlays: $10,236,163

Subaward Activity

Number of Subawards: 4

Total Subaward Amount: $2,156,016

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS00F290CA

IDV Type: FSS

Timeline