DoD's $58M Microsoft Software Renewal: Value and Competition Under Scrutiny

Contract Overview

Contract Amount: $58,077,774 ($58.1M)

Contractor: Dell Federal Systems L.P

Awarding Agency: Department of Defense

Start Date: 2019-06-10

End Date: 2022-05-31

Contract Duration: 1,086 days

Daily Burn Rate: $53.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 6

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: ANNUAL RENEWAL OF MICROSOFT VISIO PROFESSIONAL, WINDOWS SERVER STANDARD, PROJECT STANDARD, AND SQL SERVER ENTERPRISE SOFTWARE AND LICENSES FOR DEFENSE HEALTH AGENCY, ARMY, NAVY, AND AIR FORCE.

Place of Performance

Location: SAN ANTONIO, BEXAR County, TEXAS, 78234

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $58.1 million to DELL FEDERAL SYSTEMS L.P for work described as: ANNUAL RENEWAL OF MICROSOFT VISIO PROFESSIONAL, WINDOWS SERVER STANDARD, PROJECT STANDARD, AND SQL SERVER ENTERPRISE SOFTWARE AND LICENSES FOR DEFENSE HEALTH AGENCY, ARMY, NAVY, AND AIR FORCE. Key points: 1. Annual software renewal represents a significant recurring cost for essential operating systems and productivity tools. 2. The contract was awarded through full and open competition, suggesting a competitive bidding process. 3. A high number of bids (6) indicates strong market interest, potentially driving favorable pricing. 4. The contract's duration of over three years suggests a long-term need for these software licenses. 5. The 'Other Computer Related Services' NAICS code indicates a broad category, requiring further detail on specific services. 6. The fixed-price contract type offers cost certainty for the government, mitigating risk of cost overruns. 7. The absence of small business set-asides means opportunities for smaller vendors may be limited in this specific award.

Value Assessment

Rating: fair

The annual cost of approximately $19.36 million for Microsoft software licenses appears substantial. Benchmarking against similar government-wide agreements or enterprise license agreements for Microsoft products would be necessary to definitively assess value for money. Given the widespread use of these Microsoft products across government, it's plausible that the pricing reflects negotiated enterprise rates. However, without direct comparison data, it's difficult to ascertain if this represents an optimal price point or if alternative licensing models or open-source solutions could offer greater savings.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with six bids received. This level of competition is generally positive, as it suggests that multiple vendors were interested and able to bid, which can lead to more competitive pricing. The presence of six bidders indicates a healthy market for these types of software licenses within the federal contracting space. The agency likely benefited from a range of proposals, allowing for selection of the most advantageous offer.

Taxpayer Impact: The full and open competition with multiple bidders is beneficial for taxpayers, as it increases the likelihood of securing the software licenses at a competitive market price, preventing potential overpayment.

Public Impact

The Defense Health Agency, Army, Navy, and Air Force benefit from continued access to essential Microsoft software. This contract ensures the availability of critical operating systems (Windows Server) and productivity tools (Visio, Project, SQL Server) for military and healthcare personnel. The geographic impact is nationwide, supporting operations across all branches of the Department of Defense. The contract supports the IT infrastructure and workforce necessary for defense and healthcare missions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in with proprietary Microsoft software.
Reliance on a single vendor for critical software renewals can create long-term cost pressures.
The broad NAICS code 'Other Computer Related Services' may obscure the specific nature of the services being procured.
Lack of transparency on specific license counts and usage could lead to over-procurement.

Positive Signals

Awarded through full and open competition, indicating a competitive process.
Multiple bids received (6) suggest a robust market and potential for competitive pricing.
Firm fixed-price contract type provides cost certainty for the government.
The contract supports essential operational software for multiple branches of the DoD.

Sector Analysis

This contract falls within the broader IT services sector, specifically focusing on software licensing and renewals. The market for enterprise software, particularly from major vendors like Microsoft, is substantial within the federal government. Agencies frequently procure licenses for operating systems, productivity suites, and specialized software. Benchmarking against other large-scale federal software procurements, especially those utilizing General Services Administration (GSA) schedules or Enterprise Software Agreements (ESAs), would provide context for the pricing and terms.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. The awardee, Dell Federal Systems L.P., is a large business. While this specific contract may not directly benefit small businesses through set-asides, large federal contractors are often required to meet subcontracting goals with small businesses on their overall contract portfolio. The impact on the small business ecosystem would depend on Dell's subcontracting plans related to this BPA call.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and financial management offices. The Defense Contract Audit Agency (DCAA) may conduct audits to ensure compliance with contract terms and pricing. Transparency is facilitated by the Federal Procurement Data System (FPDS), which reports contract actions. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse related to the procurement or performance of this contract were suspected.

Related Government Programs

Microsoft Enterprise Agreements
DoD Software Licensing
General Services Administration (GSA) IT Schedule
Defense Health Agency IT Procurement
Army, Navy, Air Force IT Spending

Risk Flags

Potential for cost escalation in future renewals due to vendor lock-in.
Lack of specific per-unit cost data makes value assessment challenging.
Broad NAICS code may obscure the exact nature of services procured.
Reliance on a single vendor for critical software.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $58.1 million to DELL FEDERAL SYSTEMS L.P. ANNUAL RENEWAL OF MICROSOFT VISIO PROFESSIONAL, WINDOWS SERVER STANDARD, PROJECT STANDARD, AND SQL SERVER ENTERPRISE SOFTWARE AND LICENSES FOR DEFENSE HEALTH AGENCY, ARMY, NAVY, AND AIR FORCE.

Who is the contractor on this award?

The obligated recipient is DELL FEDERAL SYSTEMS L.P.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Health Agency).

What is the total obligated amount?

The obligated amount is $58.1 million.

What is the period of performance?

Start: 2019-06-10. End: 2022-05-31.

What is the historical spending trend for this specific Microsoft software renewal across the DoD?

Analyzing historical spending data for this specific renewal is crucial for understanding cost trends and identifying potential escalations. While the provided data shows a single award for $58,077,774.09 over 1086 days (approximately 3 years), it does not reveal year-over-year spending. To assess trends, one would need to examine contract awards for the same or similar software licenses for the Defense Health Agency, Army, Navy, and Air Force in previous fiscal years. This would involve querying procurement databases like FPDS for prior contract actions with Dell Federal Systems L.P. or other vendors for Visio, Windows Server, Project, and SQL Server licenses. A consistent increase in annual spending, even with competitive bidding, might indicate market-wide price hikes, increased license requirements, or a need to re-evaluate licensing strategies. Conversely, stable or decreasing costs would suggest effective price negotiation or optimized license utilization.

How does the per-unit cost of these Microsoft licenses compare to other federal agencies or commercial entities?

A key aspect of assessing value for money is benchmarking the per-unit cost of these Microsoft licenses against comparable purchases. The total award amount of $58,077,774.09 over approximately three years, for an unspecified number of licenses, makes direct per-unit calculation difficult without more granular data. Ideally, this analysis would involve obtaining the exact number of licenses procured for each software title (Visio Professional, Windows Server Standard, Project Standard, SQL Server Enterprise) and dividing the total cost by the total number of units. This calculated per-unit cost should then be compared to: 1) Prices paid by other federal agencies through similar contract vehicles (e.g., GSA schedules, Enterprise License Agreements). 2) Commercial list prices and negotiated enterprise discounts available to large organizations. 3) Prices available through other government-wide acquisition contracts (GWACs) or NASA SEWP. Significant deviations from established benchmarks could indicate either exceptionally favorable pricing due to strong negotiation or potential overpayment.

What are the specific risks associated with relying on a single vendor for such a large volume of essential software?

The primary risk associated with relying on a single vendor like Microsoft for essential software is vendor lock-in. This can lead to escalating costs over time, as agencies become dependent on the vendor's pricing structure and are less able to negotiate favorable terms or switch to alternative solutions. Another risk is the potential for supply chain disruptions or changes in the vendor's product roadmap that could impact the government's operations. Furthermore, if the vendor discontinues support for older versions, agencies may be forced into costly upgrades. The firm fixed-price nature of this contract mitigates immediate cost overrun risks, but the long-term strategic risk of dependency remains. Diversification of software solutions or exploring open-source alternatives where feasible could mitigate these risks.

What is the track record of Dell Federal Systems L.P. in fulfilling similar large-scale software licensing contracts for the DoD?

Evaluating the track record of Dell Federal Systems L.P. is essential for assessing the reliability and performance risk associated with this contract. A review of Dell's past performance on similar large-scale software licensing agreements, particularly within the Department of Defense, would provide valuable insights. This includes examining contract completion history, on-time delivery rates, quality of service, and any past performance issues or disputes. Data from sources like the Contractor Performance Assessment Reporting System (CPARS) can offer formal assessments from previous government contracting officers. A history of successful and timely delivery of software licenses and related support services would indicate a lower performance risk. Conversely, a pattern of delays, quality issues, or unresolved problems would raise concerns about Dell's ability to meet the requirements of this current contract.

How does the 'Other Computer Related Services' NAICS code accurately reflect the procurement of software licenses?

The use of NAICS code 541519, 'Other Computer Related Services,' for the procurement of software licenses, while permissible, can sometimes lack specificity. This code is a broad category encompassing a wide range of IT services beyond just software sales, such as IT consulting, systems integration, and custom software development. While software licensing and maintenance can fall under this umbrella, it might not fully capture the nature of the transaction as a straightforward product purchase. Ideally, a more specific code related to software sales or licensing might be preferred if available and applicable. The broadness of 541519 means that the actual services or products procured might vary significantly across different contracts using this code. For this specific contract, it implies that the procurement might include associated services like installation, configuration, or basic support, in addition to the licenses themselves, which warrants further clarification in the contract details.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Other Computer Related Services

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 6

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Francisco Partners Management, L.P.

Address: 1 DELL WAY, ROUND ROCK, TX, 78682

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $70,941,466

Exercised Options: $70,844,794

Current Obligation: $58,077,774

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N6600119A0003

IDV Type: BPA

Timeline