DoD's $48.8M contract with FedEx for expedited delivery services faces scrutiny over limited competition and potential cost inefficiencies

Contract Overview

Contract Amount: $48,778,773 ($48.8M)

Contractor: Federal Express Corporation

Awarding Agency: Department of Defense

Start Date: 2024-10-01

End Date: 2024-10-31

Contract Duration: 30 days

Daily Burn Rate: $1.6M/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Transportation

Official Description: CONSOLIDATED TRANSPORTATION SHIPMENTS MADE BY DECENTRALIZED ORDERING OFFICERS.

Place of Performance

Location: MEMPHIS, SHELBY County, TENNESSEE, 38132

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $48.8 million to FEDERAL EXPRESS CORPORATION for work described as: CONSOLIDATED TRANSPORTATION SHIPMENTS MADE BY DECENTRALIZED ORDERING OFFICERS. Key points: 1. The contract leverages FedEx's established network for critical transportation needs. 2. Competition appears limited, raising questions about price discovery and potential overspending. 3. The firm fixed-price structure offers some cost certainty but may not reflect market lows. 4. The sector is essential for logistics but prone to price fluctuations and service demands.

Value Assessment

Rating: questionable

The contract's value of $48.8M for a single month of service is substantial. Without detailed performance metrics and comparison to similar expedited shipping contracts, it's difficult to definitively assess if the pricing is optimal or if it reflects a premium for speed and reliability.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES,' suggesting a limited competitive field. This method, while potentially efficient for specific needs, can restrict price discovery and may lead to higher costs compared to broader solicitations.

Taxpayer Impact: The limited competition raises concerns about whether taxpayers are receiving the best possible value for expedited shipping services, potentially leading to higher overall spending.

Public Impact

Ensures rapid delivery of critical goods for the Department of Defense, supporting operational readiness. Relies on a single, well-known private carrier, potentially impacting the diversity of service providers used by the government. The significant expenditure highlights the government's reliance on private logistics infrastructure for essential functions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition may inflate costs.
Lack of detailed cost breakdown for specific services.
Short contract duration might indicate a need for ongoing, potentially higher-cost arrangements.

Positive Signals

Utilizes a reputable and capable carrier for critical delivery needs.
Firm fixed-price contract provides budget predictability.
Supports essential defense logistics operations.

Sector Analysis

This contract falls within the Couriers and Express Delivery Services sector, a critical component of government logistics. Spending benchmarks in this area can vary widely based on service level agreements, urgency, and volume. The $48.8M for one month suggests a high volume of expedited or specialized shipments.

Small Business Impact

The data indicates the primary awardee is Federal Express Corporation, a large business. There is no explicit information on subcontracting opportunities for small businesses within this specific contract, suggesting potential missed opportunities for SMB participation.

Oversight & Accountability

The contract falls under USTRANSCOM, which has oversight responsibilities for defense transportation. However, the limited competition and substantial value warrant closer examination to ensure fair pricing and effective use of funds.

Related Government Programs

Couriers and Express Delivery Services
Department of Defense Contracting
USTRANSCOM Programs

Risk Flags

Limited competition raises cost concerns.
Lack of transparency in source exclusion justification.
Potential for premium pricing due to expedited nature.
High monthly expenditure requires rigorous justification.
No clear indication of small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $48.8 million to FEDERAL EXPRESS CORPORATION. CONSOLIDATED TRANSPORTATION SHIPMENTS MADE BY DECENTRALIZED ORDERING OFFICERS.

Who is the contractor on this award?

The obligated recipient is FEDERAL EXPRESS CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (USTRANSCOM).

What is the total obligated amount?

The obligated amount is $48.8 million.

What is the period of performance?

Start: 2024-10-01. End: 2024-10-31.

What specific factors justified the exclusion of other potential sources, and how were these factors weighed against the potential for cost savings through broader competition?

The justification for excluding other sources is not detailed in the provided data. Typically, such exclusions are based on factors like unique capabilities, urgent and compelling needs, or specific technical requirements. However, without this information, it's impossible to assess if these justifications were robust enough to outweigh the potential benefits of a wider competition, which could have driven down costs through increased market participation.

How does the per-unit cost of these expedited shipments compare to industry benchmarks for similar services, particularly considering the volume and urgency?

A direct per-unit cost benchmark is not available without knowing the exact services rendered (e.g., weight, destination, speed). However, given the $48.8M expenditure for a single month, it is crucial to compare this against average costs for expedited freight and courier services of similar scale and urgency. If the per-unit cost significantly exceeds established benchmarks, it indicates potential overspending or a lack of aggressive price negotiation.

What mechanisms are in place to ensure the effectiveness and efficiency of FedEx's delivery services under this contract, beyond basic delivery confirmation?

Effectiveness and efficiency are typically monitored through performance metrics outlined in the contract, such as on-time delivery rates, package condition upon arrival, and response times to issues. USTRANSCOM likely has reporting requirements from FedEx. However, the 'questionable' value rating suggests that a deeper dive into these metrics and their correlation with the contract's cost is warranted to ensure optimal taxpayer value.

Industry Classification

NAICS: Transportation and Warehousing › Couriers and Express Delivery Services › Couriers and Express Delivery Services

Product/Service Code: TRANSPORT, TRAVEL, RELOCATION › TRANSPORTATION OF THINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Fedex Corp

Address: 2003 CORPORATE PLZ, MEMPHIS, TN, 38132

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

Financial Breakdown

Contract Ceiling: $48,778,773

Exercised Options: $48,778,773

Current Obligation: $48,778,773

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HTC71123DC023

IDV Type: IDC

Timeline