DHS paid $69.7M for Microsoft licenses via Dell Marketing, highlighting significant software licensing costs
Contract Overview
Contract Amount: $61,812,343 ($61.8M)
Contractor: Dell Marketing L.P.
Awarding Agency: Department of Homeland Security
Start Date: 2014-06-26
End Date: 2015-06-26
Contract Duration: 365 days
Daily Burn Rate: $169.3K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 1
Pricing Type: FIRM FIXED PRICE
Sector: IT
Official Description: THE PURPOSE OF THIS PURCHASE REQUEST IS TO FUND THE ANNUAL PAYMENT FOR THE MICROSOFT LICENSES PROVIDED BY DELL MARKETING, LLC THAT IS PAID THROUGH THE DEPARTMENT OF HOMELAND SECURITY S WORKING CAPITAL FUND. THIS PAYMENT COVERS THE PERIOD OF PERFORMANCE OF 6/27/2014 6/26/2015 THE TOTAL FUNDING AMOUNT IS $69,691,259.02
Place of Performance
Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20528
Plain-Language Summary
Department of Homeland Security obligated $61.8 million to DELL MARKETING L.P. for work described as: THE PURPOSE OF THIS PURCHASE REQUEST IS TO FUND THE ANNUAL PAYMENT FOR THE MICROSOFT LICENSES PROVIDED BY DELL MARKETING, LLC THAT IS PAID THROUGH THE DEPARTMENT OF HOMELAND SECURITY S WORKING CAPITAL FUND. THIS PAYMENT COVERS THE PERIOD OF PERFORMANCE OF 6/27/2014 6/26/2015 THE … Key points: 1. The contract represents a substantial investment in essential software, underscoring the reliance on commercial off-the-shelf (COTS) products for government operations. 2. While the contract is for annual payments, the total value suggests a long-term commitment to Microsoft software, potentially indicating a lack of cost-saving alternatives. 3. The use of a Blanket Purchase Agreement (BPA) Call indicates a pre-negotiated agreement, which can offer some efficiencies but may limit price flexibility. 4. The contract's performance period is one year, suggesting a need for annual re-evaluation of software needs and pricing. 5. The funding mechanism through the Department of Homeland Security's Working Capital Fund points to an internal financial management approach for recurring software expenses. 6. The specific NAICS code (334111) relates to Electronic Computer Manufacturing, which is an indirect link to software licensing but indicates the broader IT hardware and software ecosystem.
Value Assessment
Rating: fair
The total funding amount of $69.7 million for a one-year period for Microsoft licenses appears high, especially when considering potential volume discounts or alternative licensing models. Benchmarking against similar large-scale government software procurements would be necessary to definitively assess value for money. The fixed-price nature of the contract provides cost certainty but may not reflect the most competitive pricing achievable.
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 achieving competitive pricing. However, the specific mechanism used (BPA Call) suggests that the underlying competition may have occurred at an earlier stage when the BPA was established. The number of bidders for this specific call is not provided, which limits the assessment of the current competition's intensity.
Taxpayer Impact: Full and open competition generally benefits taxpayers by encouraging multiple vendors to offer their best prices, leading to potentially lower costs for government software. However, the effectiveness of this competition for this specific BPA call requires further detail on bidder participation.
Public Impact
Federal employees across the Department of Homeland Security benefit from access to essential Microsoft software for their daily operations. The services delivered are the provision of annual licenses for Microsoft software, crucial for productivity and data management. The geographic impact is primarily within the District of Columbia, where the agency is headquartered, but likely extends to DHS operations nationwide. The contract supports the IT workforce within DHS by ensuring they have the necessary tools to perform their duties.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Potential for overpayment if more cost-effective licensing alternatives or volume discounts were not fully explored during the initial BPA competition.
- Lack of transparency regarding the specific number of bidders for this BPA Call makes it difficult to assess the current level of price pressure.
- The fixed-price contract may not allow for adjustments if Microsoft's pricing strategies change or if usage patterns decrease.
Positive Signals
- Awarded under full and open competition, suggesting an effort to ensure a competitive marketplace.
- The use of a BPA Call can streamline the procurement process for recurring needs, potentially leading to faster delivery of essential software.
- The contract clearly defines the period of performance, providing a defined timeframe for the services and associated costs.
Sector Analysis
This contract falls within the broader Information Technology sector, specifically focusing on software licensing. The market for enterprise software licenses, particularly for major vendors like Microsoft, is characterized by high demand and significant market concentration. Government agencies are major consumers of such software, often relying on large-scale agreements to meet their operational needs. Comparable spending benchmarks would involve analyzing other federal agencies' expenditures on similar Microsoft enterprise agreements.
Small Business Impact
The provided data does not indicate any specific small business set-aside provisions for this contract. As a large-scale software licensing agreement, it is unlikely to be directly set aside for small businesses. However, the prime contractor, Dell Marketing, L.P., may engage small businesses for subcontracting opportunities related to support or implementation, though this is not specified.
Oversight & Accountability
Oversight for this contract would fall under the Department of Homeland Security's procurement and financial management offices. The use of the Working Capital Fund suggests internal financial controls are in place. Transparency is facilitated by contract databases, but detailed justifications for pricing and competition specifics for BPA calls are not always readily available to the public.
Related Government Programs
- Microsoft Enterprise Agreements
- Software Licensing Procurements
- Department of Homeland Security IT Spending
- Blanket Purchase Agreements (BPAs)
Risk Flags
- High Annual Cost
- Single Vendor Reliance
- Limited Competition Detail for BPA Call
Tags
it, software-licensing, department-of-homeland-security, dell-marketing-lp, microsoft, enterprise-agreement, bpa-call, firm-fixed-price, full-and-open-competition, district-of-columbia, annual-payment, working-capital-fund
Frequently Asked Questions
What is this federal contract paying for?
Department of Homeland Security awarded $61.8 million to DELL MARKETING L.P.. THE PURPOSE OF THIS PURCHASE REQUEST IS TO FUND THE ANNUAL PAYMENT FOR THE MICROSOFT LICENSES PROVIDED BY DELL MARKETING, LLC THAT IS PAID THROUGH THE DEPARTMENT OF HOMELAND SECURITY S WORKING CAPITAL FUND. THIS PAYMENT COVERS THE PERIOD OF PERFORMANCE OF 6/27/2014 6/26/2015 THE TOTAL FUNDING AMOUNT IS $69,691,259.02
Who is the contractor on this award?
The obligated recipient is DELL MARKETING L.P..
Which agency awarded this contract?
Awarding agency: Department of Homeland Security (Office of Procurement Operations).
What is the total obligated amount?
The obligated amount is $61.8 million.
What is the period of performance?
Start: 2014-06-26. End: 2015-06-26.
What is the track record of Dell Marketing, L.P. in fulfilling similar large-scale software licensing contracts for federal agencies?
Dell Marketing, L.P. is a significant federal contractor with a history of providing IT hardware, software, and related services to various government agencies. Their experience with large enterprise software licensing, including Microsoft products, is extensive. Analyzing past performance on similar contracts would involve reviewing contract awards, past performance evaluations, and any reported issues or successes. This specific contract represents a substantial annual expenditure, indicating a level of trust and capability in managing such agreements. However, a deeper dive into their specific performance metrics for software licensing, beyond just fulfilling orders, would be beneficial for a comprehensive assessment.
How does the $69.7 million annual cost compare to other federal agencies' spending on similar Microsoft enterprise licenses?
Benchmarking this $69.7 million annual cost against other federal agencies' spending on comparable Microsoft enterprise licenses is crucial for assessing value. Government-wide agreements, such as NASA SEWP or NIH CIO-SP3, often provide aggregated pricing that can be more favorable than individual agency procurements. Without access to specific details on the exact Microsoft products and user counts covered by this DHS contract, a precise comparison is difficult. However, large agencies often negotiate significant discounts due to volume. If this figure represents a standard enterprise-wide agreement for a large number of users, it might be within a reasonable range, but a detailed comparison with publicly available data on similar large agency agreements would be necessary to confirm.
What are the primary risks associated with relying on a single vendor, Microsoft, for such a significant portion of software needs?
The primary risks associated with relying heavily on a single vendor like Microsoft include vendor lock-in, potential price increases, and limited flexibility in adopting alternative technologies. Vendor lock-in can make it difficult and costly to switch to different software solutions in the future, even if better or cheaper alternatives emerge. Microsoft's pricing power is also a concern; as a dominant provider, they may have leverage to increase license costs over time. Furthermore, a sole-vendor strategy can stifle innovation by limiting the exploration and adoption of diverse technological solutions that might better suit specific agency needs or improve interoperability with non-Microsoft systems. This concentration of risk necessitates robust contract management and continuous market analysis.
How effective is the BPA Call mechanism in ensuring competitive pricing for recurring software needs like Microsoft licenses?
The Blanket Purchase Agreement (BPA) Call mechanism is designed to streamline the procurement of recurring needs by establishing pre-negotiated terms and conditions, often with a preferred vendor or through a competitive process at the BPA creation stage. For recurring software licenses, it can offer efficiency and potentially better pricing than ad-hoc purchases. However, the effectiveness in ensuring *current* competitive pricing depends heavily on how the initial BPA was competed and whether regular reviews or re-competitions are built into the BPA's lifecycle. If the BPA itself was awarded through robust full and open competition, subsequent calls can be efficient. If the BPA was awarded with limited competition or if market conditions have significantly changed since its inception, the calls might not reflect the most competitive pricing available today.
What are the historical spending patterns for Microsoft licenses within the Department of Homeland Security?
Analyzing historical spending patterns for Microsoft licenses within DHS is essential to understand trends, identify potential cost escalations, and assess the overall IT budget allocation. This $69.7 million figure represents a single year's payment. To understand the pattern, one would need to examine spending over several preceding years, noting any significant increases or decreases. Factors influencing these patterns could include changes in user base, adoption of new software versions, shifts in licensing models (e.g., from perpetual to subscription), or the consolidation of software contracts. A consistent or increasing expenditure might indicate growing reliance or rising costs, while a decrease could suggest efficiency gains or a shift towards alternative solutions.
What is the potential impact of this contract on the broader IT services market, particularly concerning software resellers and integrators?
This contract, awarded to Dell Marketing, L.P., highlights the significant role of large IT resellers and integrators in the federal market. Such contracts represent substantial revenue streams for these companies. The impact on the broader IT services market includes reinforcing the dominance of major players who can manage complex enterprise agreements and provide bundled hardware and software solutions. For smaller resellers or specialized software integrators, it might mean fewer direct opportunities for large-scale Microsoft license sales, pushing them towards niche services, support, or integration work that complements these master agreements. The reliance on established channels like Dell also influences how software vendors reach government customers.
Industry Classification
NAICS: Manufacturing › Computer and Peripheral Equipment Manufacturing › Electronic Computer Manufacturing
Product/Service Code: INFORMATION TECHNOLOGY EQUIPMENT (INCLD FIRMWARE) SOFTWARE,SUPPLIES& SUPPORT EQUIPMENT
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY
Offers Received: 1
Pricing Type: FIRM FIXED PRICE (J)
Evaluated Preference: NONE
Contractor Details
Parent Company: Dell Technologies Inc. (UEI: 601839660)
Address: ONE DELL WAY, ROUND ROCK, TX, 78682
Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $61,812,343
Exercised Options: $61,812,343
Current Obligation: $61,812,343
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Parent Contract
Parent Award PIID: HSHQDC09A00032
IDV Type: BPA
Timeline
Start Date: 2014-06-26
Current End Date: 2015-06-26
Potential End Date: 2015-06-26 00:00:00
Last Modified: 2017-01-23
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