DoD's $771M contract for IT services awarded to Peraton Enterprise Solutions LLC shows potential value concerns

Contract Overview

Contract Amount: $771,509,663 ($771.5M)

Contractor: Peraton Enterprise Solutions LLC

Awarding Agency: Department of Defense

Start Date: 2008-09-30

End Date: 2008-09-30

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIXED PRICE

Sector: IT

Official Description: OTHER ADP & TELECOMMUNICATIONS SERVICES

Place of Performance

Location: NEW ORLEANS, ORLEANS County, LOUISIANA, 70146

State: Louisiana Government Spending

Plain-Language Summary

Department of Defense obligated $771.5 million to PERATON ENTERPRISE SOLUTIONS LLC for work described as: OTHER ADP & TELECOMMUNICATIONS SERVICES Key points: 1. The contract's significant value raises questions about cost-effectiveness over its lifespan. 2. Limited public data makes it challenging to assess the competitive landscape and its impact on pricing. 3. The duration and scope of the contract warrant scrutiny for potential performance risks. 4. Benchmarking this spending against similar IT services contracts is crucial for understanding value. 5. The contract's positioning within the broader IT services sector requires further analysis. 6. The absence of small business set-asides may limit opportunities for smaller firms.

Value Assessment

Rating: fair

With a total value of over $771 million, this contract represents a substantial investment in IT services. Without detailed breakdowns of services rendered and specific performance metrics, a precise value-for-money assessment is difficult. Comparing this to similar large-scale IT service contracts awarded by the Department of Defense or other federal agencies would be necessary to benchmark its cost-effectiveness. The fixed-price nature suggests a defined scope, but the sheer scale necessitates careful monitoring to ensure costs remain aligned with delivered value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely considered. However, the number of actual bidders and the specific details of the bidding process are not publicly available. A robust competition typically drives down prices and encourages innovation. The fact that it was competed fully is a positive sign, but the ultimate impact on price discovery depends on the intensity of the competition.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a market where contractors vie for the best price and quality, potentially leading to cost savings.

Public Impact

The Department of the Navy benefits from access to essential IT and telecommunications services. This contract supports the operational readiness and technological infrastructure of naval forces. The services delivered likely encompass a wide range of IT support, maintenance, and potentially development. The geographic impact is primarily within the Department of the Navy's operational areas, potentially nationwide or global. Workforce implications could include direct employment by the contractor and indirect support for military and civilian personnel relying on these IT services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if not managed tightly due to the large contract value.
Risk of vendor lock-in if the contractor's solutions become deeply integrated.
Dependence on a single contractor for critical IT infrastructure could pose a risk.
Ensuring continued innovation and adaptation to new technologies over the contract's life.

Positive Signals

Awarded through full and open competition, suggesting a competitive bidding process.
Fixed-price contract type can provide cost certainty if scope is well-defined.
The contractor, Peraton Enterprise Solutions LLC, likely has a track record in government contracting.
The contract supports essential IT services for a major federal agency.

Sector Analysis

This contract falls within the broader Information Technology (IT) services sector, specifically under 'Other Computer Related Services.' This sector is characterized by high demand from government agencies for a wide array of services, including network management, cybersecurity, cloud computing, and software development. The market size for federal IT services is substantial, with agencies consistently investing billions annually to modernize systems and maintain operational capabilities. This contract represents a significant portion of spending within this sub-category, likely supporting critical infrastructure for the Department of the Navy.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). This means that large businesses were eligible to compete and likely dominated the bidding process. While this contract doesn't directly involve small business set-asides, it's important to consider subcontracting opportunities. If Peraton Enterprise Solutions LLC engages in subcontracting, there could be avenues for small businesses to participate. However, the absence of a specific small business focus in the primary award suggests a limited direct impact on the small business ecosystem for this particular contract.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officers and program managers within the Department of the Navy. Accountability measures are inherent in the fixed-price contract structure, requiring the contractor to deliver specified services within agreed-upon terms. Transparency is often limited for specific contract details post-award, but agencies are subject to reporting requirements. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense-wide IT Services
Naval IT Modernization Programs
Other Computer Related Services Contracts
Federal Telecommunications Services

Risk Flags

Potential for cost creep if scope is not tightly managed.
Risk of vendor lock-in due to extensive IT integration.
Ensuring long-term technological relevance and adaptability.
Adequacy of competition for such a large-scale requirement.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $771.5 million to PERATON ENTERPRISE SOLUTIONS LLC. OTHER ADP & TELECOMMUNICATIONS SERVICES

Who is the contractor on this award?

The obligated recipient is PERATON ENTERPRISE SOLUTIONS 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 $771.5 million.

What is the period of performance?

Start: 2008-09-30. End: 2008-09-30.

What is Peraton Enterprise Solutions LLC's track record with large federal IT contracts?

Peraton Enterprise Solutions LLC, and its parent company Peraton, have a significant history of securing and performing on large federal IT contracts across various agencies, including the Department of Defense. They are known for providing a range of services from enterprise IT to mission-critical solutions. Analyzing their past performance on similar-sized contracts, including any reported issues or successes, would provide valuable context for assessing the risk and potential effectiveness of this specific award. Their experience suggests a capacity to handle complex requirements, but also highlights the importance of robust oversight due to the scale of their engagements.

How does the $771 million value compare to similar IT services contracts awarded by the Navy or DoD?

The $771 million total value is substantial and places this contract among significant IT service procurements. To benchmark its value, one would compare it to other large, multi-year IT support or telecommunications services contracts awarded by the Department of the Navy or the broader Department of Defense. Factors like contract duration, scope of services (e.g., infrastructure management, cybersecurity, software development), and the specific IT needs addressed would be key comparison points. Contracts of this magnitude often span several years and are critical for maintaining agency operations, but they also represent a considerable financial commitment that requires justification against market rates and alternative solutions.

What are the primary risks associated with a fixed-price contract of this magnitude for IT services?

For a fixed-price contract valued at $771 million, the primary risks revolve around scope definition and management. If the scope of work is not precisely defined and managed, the government risks paying for services that are not fully needed or are inefficiently delivered. Conversely, the contractor bears the risk of cost overruns if their estimates are inaccurate or unforeseen technical challenges arise. Other risks include potential for reduced flexibility to adapt to evolving technological needs during the contract's term, and the possibility of the contractor prioritizing profit over optimal service delivery if margins are tight. Robust oversight and change control processes are essential to mitigate these risks.

How effective are 'full and open competition' awards in ensuring competitive pricing for large IT contracts?

Full and open competition is designed to maximize the number of potential bidders, thereby fostering a competitive environment that ideally leads to better pricing and quality for the government. For large IT contracts like this one, the effectiveness depends heavily on the number of capable bidders and the clarity of the solicitation. If only a few companies can realistically bid on such a complex and high-value requirement, the competition may be less intense than intended. However, it remains the preferred method as it provides the greatest opportunity for price discovery and ensures that taxpayers benefit from a market-driven process, rather than a restricted or sole-source award.

What historical spending patterns exist for 'Other Computer Related Services' within the Department of the Navy?

Historical spending patterns for 'Other Computer Related Services' (NAICS code 541519) within the Department of the Navy typically show consistent investment in maintaining and upgrading IT infrastructure. This category often includes services not elsewhere classified, such as IT consulting, system integration, and specialized technical support. Annual spending can fluctuate based on major modernization initiatives, cybersecurity upgrades, or shifts in technology requirements. Analyzing past spending trends for this NAICS code would reveal the typical contract sizes, durations, and the prevalence of full and open competition versus other award types, providing context for the $771 million award.

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

Offers Received: 4

Pricing Type: FIXED PRICE (J)

Contractor Details

Parent Company: HP, Inc.

Address: 13600 EDS DRIVE, HERNDON, VA, 20171

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $771,509,663

Exercised Options: $771,509,663

Current Obligation: $771,509,663

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0002400D6000

IDV Type: IDC

Timeline