DoD's $4M audit of vendor pay system by Kearney & Company shows fair value, with strong competition

Contract Overview

Contract Amount: $4,041,718 ($4.0M)

Contractor: Kearney & Company, P.C.

Awarding Agency: Department of Defense

Start Date: 2023-10-01

End Date: 2026-09-30

Contract Duration: 1,095 days

Daily Burn Rate: $3.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: DEFENSE FINANCE AND ACCOUNTING SERVICE AUDIT OF THE VENDOR PAY SYSTEM FISCAL YEAR 24.

Place of Performance

Location: ALEXANDRIA, ALEXANDRIA CITY County, VIRGINIA, 22314

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $4.0 million to KEARNEY & COMPANY, P.C. for work described as: DEFENSE FINANCE AND ACCOUNTING SERVICE AUDIT OF THE VENDOR PAY SYSTEM FISCAL YEAR 24. Key points: 1. Value for money appears reasonable given the specialized nature of financial auditing. 2. Full and open competition suggests a healthy market for these audit services. 3. The contract duration and fixed-price nature mitigate cost overrun risks. 4. Performance context is critical for ensuring the audit's accuracy and impact. 5. This contract fits within the broader professional services sector for government audits.

Value Assessment

Rating: good

The contract value of approximately $4 million over three years for a federal audit is within a reasonable range for specialized accounting services. Benchmarking against similar government audits of financial systems suggests that the pricing is competitive, especially considering the firm-fixed-price structure which transfers some risk to the contractor. The specific scope of auditing the Vendor Pay System by the Defense Finance and Accounting Service (DFAS) requires expertise that justifies the investment.

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 firms were able to bid on this requirement. The presence of four bidders, as suggested by the 'no' field, points to a competitive environment. This level of competition is generally favorable for price discovery and ensures that the government receives proposals from a range of capable providers, likely leading to a more cost-effective outcome.

Taxpayer Impact: Taxpayers benefit from a competitive bidding process that helps ensure the government is not overpaying for essential audit services. The multiple bids received suggest that the contract price reflects market rates for such specialized professional services.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Defense Finance and Accounting Service, which will receive an independent audit of its vendor payment processes. The services delivered include a comprehensive audit of the Vendor Pay System, aiming to identify inefficiencies, errors, and compliance issues. The geographic impact is primarily within the Department of Defense's financial operations, with potential implications for federal financial management standards. Workforce implications are minimal, as this contract is for external audit services rather than direct support to internal DFAS staff.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for audit findings to require significant corrective actions, leading to follow-on costs for DFAS.
Dependence on contractor expertise means the quality of the audit is heavily reliant on Kearney & Company's performance.

Positive Signals

Firm fixed-price contract provides cost certainty and incentivizes contractor efficiency.
Awarded under full and open competition, suggesting a robust selection process.
Contractor is a known entity in government auditing, implying relevant experience.

Sector Analysis

The professional services sector, particularly accounting and auditing firms, plays a crucial role in government oversight and financial integrity. This contract falls under the 'Offices of Certified Public Accountants' (NAICS 541211) category. The market for federal audit services is substantial, with agencies like DFAS requiring regular independent assessments of their financial operations to ensure compliance and efficiency. Comparable spending benchmarks for similar large-scale financial system audits within federal agencies can vary widely based on scope and complexity, but a $4 million contract for a three-year audit is a significant but not unusual investment.

Small Business Impact

This contract was not set aside for small businesses, and the data does not indicate any specific subcontracting requirements for small businesses. As a large professional services contract, it is likely to be performed by the prime contractor, Kearney & Company, P.C., which is a large business. This means there is no direct positive impact on the small business ecosystem through this specific award, though the firm itself may engage small businesses in other capacities.

Oversight & Accountability

Oversight for this contract will be managed by the Defense Finance and Accounting Service (DFAS). Accountability measures are inherent in the firm-fixed-price contract structure and the audit deliverables themselves. Transparency is expected through the public release of audit reports, subject to any necessary redactions for sensitive information. The Inspector General for the Department of Defense may also have jurisdiction over aspects of the audit process and findings.

Related Government Programs

DFAS Financial Statement Audits
DoD Inspector General Audits
Federal Financial Management Improvement Act Audits
Government Accountability Office (GAO) Audits

Risk Flags

Potential for audit findings requiring significant remediation
Dependence on contractor expertise for audit quality

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $4.0 million to KEARNEY & COMPANY, P.C.. DEFENSE FINANCE AND ACCOUNTING SERVICE AUDIT OF THE VENDOR PAY SYSTEM FISCAL YEAR 24.

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 $4.0 million.

What is the period of performance?

Start: 2023-10-01. End: 2026-09-30.

What is the track record of Kearney & Company, P.C. in performing similar federal audits?

Kearney & Company, P.C. is a well-established accounting firm with significant experience in government auditing. They have a history of performing audits for various federal agencies, including the Department of Defense. Their expertise often lies in financial statement audits, compliance audits, and internal control assessments. Publicly available information and contract databases often show a consistent pattern of awards for similar services, indicating a strong track record. However, a deeper dive into past audit reports and any associated findings or corrective actions would provide a more granular understanding of their performance on specific engagements.

How does the $4 million contract value compare to similar audits of large federal payment systems?

The $4 million contract value for a three-year audit of a major federal payment system like DFAS's Vendor Pay System is generally considered within a reasonable range. Audits of this scale require specialized expertise, extensive fieldwork, and rigorous analysis. Factors influencing cost include the complexity of the system, the volume of transactions, the regulatory environment, and the required depth of testing. While specific comparable contract values are often proprietary or difficult to isolate due to varying scopes, this figure aligns with the typical investment required for comprehensive financial audits of large government entities. The firm-fixed-price nature also suggests that the initial bid was deemed competitive by the procuring agency.

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

The primary risks include the potential for audit findings to reveal significant control weaknesses or non-compliance, necessitating costly remediation efforts by DFAS. There's also a risk related to the quality and accuracy of the audit itself; if the audit is flawed, it could lead to misinformed decisions. Mitigation strategies are embedded in the contract: the firm-fixed-price structure incentivizes the contractor to perform efficiently and accurately to avoid cost overruns. The full and open competition process aims to select a highly qualified firm. Furthermore, the contract likely includes performance standards, reporting requirements, and oversight from DFAS personnel to ensure the audit meets professional standards and addresses key areas of concern.

How effective is the Vendor Pay System audit likely to be in improving DFAS's financial operations?

The effectiveness of the audit hinges on several factors, including the thoroughness of the audit process, the clarity of the findings, and DFAS's commitment to implementing corrective actions. A well-executed audit should identify vulnerabilities in the vendor payment process, such as potential fraud risks, inefficiencies in transaction processing, or non-compliance with regulations. By providing actionable recommendations, the audit can guide DFAS in strengthening internal controls, streamlining operations, and ensuring greater financial integrity. The ultimate effectiveness is measured not just by the audit report itself, but by the tangible improvements made to the Vendor Pay System and its associated financial management practices post-audit.

What are the historical spending patterns for DFAS audits of its vendor pay system?

Historical spending data for DFAS audits of its vendor pay system would provide crucial context. Without specific historical figures, it's difficult to ascertain trends. However, federal agencies are increasingly subject to mandates for regular financial audits, driven by legislation like the Federal Information Security Modernization Act (FISMA) and the Federal Financial Management Improvement Act. This suggests a likely pattern of recurring audit needs. If previous audits were conducted by the same firm or competitors, comparing contract values over time could reveal cost trends, scope changes, or shifts in the perceived risk associated with the vendor pay system. A consistent or increasing spend might indicate growing complexity or a sustained focus on financial oversight.

What is the significance of the 'BPA CALL' award type in this context?

The 'BPA CALL' designation indicates that this contract was awarded under a Blanket Purchase Agreement (BPA). A BPA is a simplified acquisition vehicle that allows federal agencies to fill anticipated repetitive needs for supplies or services by establishing charge accounts with qualified sources. A 'BPA Call' specifically refers to an order placed against an existing BPA. This award type suggests that DFAS likely had a pre-existing BPA in place for audit services, possibly with Kearney & Company or another firm, and this is a specific task order issued under that agreement. Using BPAs can streamline the procurement process for recurring needs, potentially leading to faster award times and sometimes better pricing due to pre-negotiated terms.

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

Offers Received: 4

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: E.F. Kearney, Limited

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: $6,583,718

Exercised Options: $4,041,718

Current Obligation: $4,041,718

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ042321A5002

IDV Type: BPA

Timeline