DoD's $97M IT contract to Katmai Management Services shows concerning value and limited competition

Contract Overview

Contract Amount: $97,263,272 ($97.3M)

Contractor: Katmai Management Services LLC

Awarding Agency: Department of Defense

Start Date: 2020-12-09

End Date: 2024-12-08

Contract Duration: 1,460 days

Daily Burn Rate: $66.6K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: SINGLE POINT OF ENTRY (SPOE) TRANSFORMATION

Place of Performance

Location: ANCHORAGE, ANCHORAGE County, ALASKA, 99515

State: Alaska Government Spending

Plain-Language Summary

Department of Defense obligated $97.3 million to KATMAI MANAGEMENT SERVICES LLC for work described as: SINGLE POINT OF ENTRY (SPOE) TRANSFORMATION Key points: 1. The contract's cost-plus-fixed-fee structure, while flexible, can lead to cost overruns if not managed tightly. 2. Limited competition raises concerns about price discovery and potential overpayment. 3. The contract duration of four years suggests a long-term need for these services. 4. The geographic location in Alaska may present unique logistical and operational challenges. 5. The absence of a specific Product Service Code (PSC) makes direct benchmarking difficult. 6. The contractor, Katmai Management Services LLC, has a significant contract value, indicating substantial past performance.

Value Assessment

Rating: concerning

The contract's total value of $97.3 million over four years for computer systems design services is substantial. However, without a clear benchmark for similar services in Alaska or for the specific tasks performed, assessing value for money is challenging. The cost-plus-fixed-fee (CPFF) pricing type, while allowing for flexibility, can be prone to cost escalation if not rigorously overseen. The provided data does not offer enough detail to compare against market rates or similar contracts, making a definitive value assessment difficult, but the lack of competition suggests potential for suboptimal pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as 'NOT AVAILABLE FOR COMPETITION,' indicating a sole-source or limited competition scenario. This approach bypasses the standard competitive bidding process, which typically yields the best prices and innovative solutions. The lack of multiple bidders means the government did not benefit from a range of proposals and price points, potentially leading to higher costs than if the contract had been fully and openly competed.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without a competitive process, there is less incentive for the contractor to offer the most cost-effective solution.

Public Impact

The Department of Defense benefits from the provision of computer systems design services, crucial for its operational efficiency. The contract supports IT infrastructure and potentially advanced technological capabilities within the Navy. The geographic impact is concentrated in Alaska (ST: AK, SN: ALASKA), suggesting services are delivered locally or support operations in that region. The contract likely supports a workforce skilled in computer systems design and related IT fields, potentially creating or sustaining jobs in Alaska.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition may result in higher costs for taxpayers.
The CPFF contract type requires robust oversight to prevent cost overruns.
Lack of detailed service description hinders performance evaluation.
Sole-source awards can stifle innovation and reduce market responsiveness.

Positive Signals

The contract is with Katmai Management Services LLC, an established entity.
The contract duration indicates a stable, long-term need for the services.
The award is for a significant amount, suggesting the contractor can handle large-scale IT projects.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically focusing on computer systems design services. The IT services market is vast and highly competitive, with significant government spending. Contracts for system design and integration are critical for maintaining and modernizing defense infrastructure. Benchmarking this contract is difficult without a specific PSC, but IT services represent a substantial portion of federal procurement, with billions spent annually across various agencies.

Small Business Impact

The provided data indicates that small business participation (ss: false, sb: false) was not a primary consideration or set-aside for this contract. This suggests that the contract was not specifically targeted towards small businesses, and larger, established firms were likely the focus. There is no information on subcontracting plans, so the impact on the small business ecosystem is likely minimal unless Katmai Management Services LLC voluntarily engages small businesses as subcontractors.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy, a component of the Department of Defense. As a Cost Plus Fixed Fee contract, rigorous financial oversight and performance monitoring are essential to ensure funds are used appropriately and objectives are met. Transparency is moderate, as contract details are often publicly available, but the specifics of performance and cost justification may be less accessible. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Department of Defense IT Procurement
Computer Systems Design Services Contracts
Alaska Federal Contracts
Sole-Source IT Awards
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Limited Competition
Cost-Plus-Fixed-Fee Structure
Lack of Detailed Service Description
Potential for Cost Overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $97.3 million to KATMAI MANAGEMENT SERVICES LLC. SINGLE POINT OF ENTRY (SPOE) TRANSFORMATION

Who is the contractor on this award?

The obligated recipient is KATMAI MANAGEMENT SERVICES LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $97.3 million.

What is the period of performance?

Start: 2020-12-09. End: 2024-12-08.

What is the track record of Katmai Management Services LLC with the Department of Defense?

Katmai Management Services LLC has a significant contract history with the Department of Defense, as evidenced by this $97.3 million award. While specific details on past performance metrics, past issues, or other contract values are not provided in this data snippet, the size and duration of this definitive contract suggest a substantial working relationship. Further investigation into their contract portfolio, including past performance reviews and any documented disputes or awards, would be necessary for a comprehensive assessment of their track record. Their ability to secure such a large sole-source contract implies a level of trust or a specific capability deemed essential by the agency.

How does the pricing structure of this contract compare to industry standards for similar services?

This contract utilizes a Cost Plus Fixed Fee (CPFF) pricing structure. CPFF contracts reimburse the contractor for allowable costs incurred, plus a predetermined fixed fee representing profit. While this structure offers flexibility for projects with uncertain scopes, it carries a higher risk of cost overruns compared to fixed-price contracts. Benchmarking the 'value for money' is challenging without specific details on the services rendered and comparable market rates for computer systems design in Alaska. However, CPFF contracts generally require robust government oversight to ensure cost efficiency. The lack of competition further complicates direct price comparison, suggesting potential for less competitive pricing than if the contract were competed.

What are the primary risks associated with this sole-source contract award?

The primary risks associated with this sole-source award are related to cost and competition. Firstly, the 'NOT AVAILABLE FOR COMPETITION' status means the government did not benefit from a competitive bidding process, which typically drives down prices and encourages innovation. This can lead to taxpayers potentially paying more than necessary. Secondly, the Cost Plus Fixed Fee (CPFF) structure, while providing flexibility, increases the risk of cost escalation if not meticulously managed and overseen by the agency. Without competitive pressure, there's also a reduced incentive for the contractor to optimize efficiency or explore more cost-effective solutions. The long duration of the contract amplifies these risks over time.

How effective is the Department of the Navy in overseeing CPFF contracts to ensure value?

The effectiveness of the Department of the Navy (DoN) in overseeing CPFF contracts can vary significantly depending on the specific program, contracting office, and available resources. DoN, like other large federal agencies, has established policies and procedures for contract oversight, including requirements for detailed cost proposals, regular audits, and performance monitoring. However, the inherent nature of CPFF contracts requires constant vigilance to control costs and ensure that the fixed fee remains appropriate relative to the work performed. Challenges can arise from insufficient staffing for oversight, complex technical requirements, or inadequate contractor cost accounting systems. Inspector General reports and GAO audits periodically highlight areas where oversight could be improved across the federal government, including within the DoN.

What is the historical spending trend for computer systems design services by the Department of the Navy?

Historical spending trends for computer systems design services by the Department of the Navy (DoN) are substantial, reflecting the critical role of IT in modern naval operations. While specific figures for this contract alone ($97.3M over 4 years) are provided, the DoN consistently procures a wide array of IT services, including system design, integration, maintenance, and cybersecurity, often amounting to billions of dollars annually. Spending in this category can fluctuate based on modernization initiatives, new platform development, and evolving technological requirements. Analyzing broader DoN IT procurement data would reveal trends in contract types (e.g., CPFF vs. fixed-price), competition levels, and major service providers within this domain.

What are the implications of awarding a large IT contract in Alaska?

Awarding a large IT contract in Alaska, such as this $97.3 million contract to Katmai Management Services LLC, has several implications. Geographically, it may indicate a need to support specific military installations or operations within Alaska, potentially requiring specialized knowledge of the region's unique environmental and logistical challenges. It could also stimulate the local economy by creating or sustaining high-skilled IT jobs. However, operating in remote locations can sometimes lead to higher operational costs for contractors, which might be reflected in contract pricing. Furthermore, the pool of local IT talent might be smaller, potentially influencing competition dynamics or the need for contractors to bring in personnel from outside the state.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0003920R0103

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 11001 O'MALLEY CENTRE DRIVE, STE 204, ANCHORAGE, AK, 99515

Business Categories: 8(a) Program Participant, Alaskan Native Corporation Owned Firm, Category Business, Corporate Entity Not Tax Exempt, Limited Liability Corporation, Minority Owned Business, Native American Owned Business, Self-Certified Small Disadvantaged Business, Small Business, Special Designations, Tribally Owned Firm, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $102,298,724

Exercised Options: $102,298,724

Current Obligation: $97,263,272

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $32,688

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline