State Department's $34M Microsoft contract for IT technical support raises questions on value and competition

Contract Overview

Contract Amount: $34,265,890 ($34.3M)

Contractor: Microsoft Corporation

Awarding Agency: Department of State

Start Date: 2014-09-21

End Date: 2017-09-30

Contract Duration: 1,105 days

Daily Burn Rate: $31.0K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: IGF::OT::IGF IT TECHICAL SUPPORT

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20520

State: District of Columbia Government Spending

Plain-Language Summary

Department of State obligated $34.3 million to MICROSOFT CORPORATION for work described as: IGF::OT::IGF IT TECHICAL SUPPORT Key points: 1. The contract's value proposition is unclear due to a lack of competitive bidding. 2. Limited competition suggests potential for overpayment and reduced innovation. 3. The firm fixed-price contract type offers some cost certainty but may not reflect true market value. 4. Performance duration of over three years warrants scrutiny of ongoing service quality. 5. The contract's focus on IT technical support aligns with common government needs but lacks specific performance metrics. 6. The absence of small business set-asides is noted, with no indication of subcontracting plans.

Value Assessment

Rating: questionable

The $34.2 million awarded to Microsoft Corporation for IT technical support lacks sufficient comparative data to definitively assess value for money. As a sole-source award, it bypasses the typical competitive benchmarking that would allow for a robust price-to-performance analysis. Without competing this requirement, it is difficult to ascertain if the pricing reflects fair market value or if alternative solutions could have been procured at a lower cost. The duration of the contract (over three years) further emphasizes the need for strong justification of the awarded price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach significantly limits price discovery and the potential for obtaining the best value through market competition. The absence of a competitive process means that the government did not solicit bids from other qualified contractors, potentially missing out on more innovative or cost-effective solutions. The justification for a sole-source award would typically involve unique capabilities or circumstances that preclude competition.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as they eliminate the downward pressure on prices that competition provides. This can result in inefficient use of public funds.

Public Impact

Federal employees within the Department of State benefit from enhanced IT technical support services. The contract ensures the continuity of essential IT infrastructure and user support for the agency. Services are delivered within the District of Columbia, impacting the local federal workforce. The contract supports the operational efficiency of the State Department's digital services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices and reduced value for taxpayer dollars.
Sole-source awards can stifle innovation by not engaging a broader market of potential providers.
Absence of clear performance metrics in the provided data makes it difficult to assess service effectiveness.
The contract's significant value without competitive justification warrants further investigation into procurement processes.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
The contractor, Microsoft Corporation, is a well-established provider of IT services.
The contract addresses a critical government need for IT technical support.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically Custom Computer Programming Services. The IT services market is vast and highly competitive, with numerous vendors capable of providing technical support. Government spending in this area is substantial, often driven by the need for specialized software development, maintenance, and support. Benchmarking this contract against similar IT support contracts awarded through full and open competition would be necessary to assess its relative cost-effectiveness.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). There is no information provided regarding subcontracting plans. This suggests that the primary awardee, Microsoft Corporation, will likely perform the majority of the work, potentially limiting opportunities for small businesses to participate in this significant federal contract.

Oversight & Accountability

Oversight for this contract would typically reside with the Department of State's contracting officers and program managers. The Inspector General's office for the Department of State would have jurisdiction to investigate any potential fraud, waste, or abuse related to this award. Transparency is limited due to the sole-source nature of the award, making public scrutiny of the procurement process challenging.

Related Government Programs

IT Technical Support Services
Custom Computer Programming Services
Microsoft Software and Services Contracts
Department of State IT Modernization Efforts

Risk Flags

Sole-source award bypasses competitive process, potentially increasing costs.
Lack of detailed performance metrics hinders value assessment.
Significant contract value without clear competitive justification.

Frequently Asked Questions

What is this federal contract paying for?

Department of State awarded $34.3 million to MICROSOFT CORPORATION. IGF::OT::IGF IT TECHICAL SUPPORT

Who is the contractor on this award?

The obligated recipient is MICROSOFT CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of State (Department of State).

What is the total obligated amount?

The obligated amount is $34.3 million.

What is the period of performance?

Start: 2014-09-21. End: 2017-09-30.

What is the specific justification provided for awarding this contract on a sole-source basis to Microsoft Corporation?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source procurements are justified under circumstances such as urgent and compelling needs, unique capabilities possessed by only one source, or when only one responsible source is capable of meeting the requirement. Without this justification, it is impossible to independently verify the necessity of bypassing the competitive bidding process. Further review of the contract file and associated documentation would be required to understand the rationale behind this procurement decision.

How does the pricing of this contract compare to similar IT technical support contracts awarded competitively by the Department of State or other federal agencies?

Direct comparison of pricing is challenging due to the sole-source nature of this award. Competitive contracts provide a benchmark against which pricing can be evaluated. Without competitive bids, it's difficult to determine if the $34.2 million awarded to Microsoft represents a fair market price. To assess value, one would need to identify comparable contracts for similar IT technical support services, considering factors like scope of work, service levels, contract duration, and the specific technologies involved. Analyzing the unit costs or labor rates in those comparable contracts could offer insights, but the lack of competition here inherently limits the ability to make a definitive value assessment.

What are the key performance indicators (KPIs) or service level agreements (SLAs) associated with this contract, and how has Microsoft performed against them?

The provided data does not specify the key performance indicators (KPIs) or service level agreements (SLAs) for this contract. While the contract type is 'FIRM FIXED PRICE,' which implies defined deliverables and costs, the specifics of service quality and performance metrics are not detailed. Assessing contractor performance typically involves reviewing performance reports, user feedback, and adherence to contractual obligations. Without access to these performance details, it is not possible to evaluate the quality of IT technical support provided by Microsoft Corporation under this award or to determine if the agency received the expected level of service.

What is the historical spending pattern for IT technical support services by the Department of State, and how does this contract fit within that pattern?

The provided data focuses on a single contract award from 2014-2017. To understand the historical spending pattern, a broader analysis of the Department of State's IT expenditures over multiple fiscal years would be necessary. This would involve examining spending on similar IT technical support services, including contracts awarded through various procurement methods (competitive and non-competitive). This specific $34.2 million contract represents a significant investment in IT support during its performance period. Understanding if this amount is typical, higher, or lower than previous or subsequent spending on comparable services would provide valuable context for assessing its overall financial impact and strategic alignment.

Are there any known risks associated with Microsoft Corporation as a contractor, or with the specific IT technical support services being procured?

Microsoft Corporation is a large, established technology company with a long history of contracting with the U.S. government. Risks associated with such large contractors often relate to potential cost overruns (though mitigated by firm fixed-price contracts), cybersecurity vulnerabilities in their products or services, and dependency on a single vendor. For IT technical support services, risks can include service disruptions, data breaches, inadequate support response times, and the potential for vendor lock-in. The sole-source nature of this award itself presents a risk of reduced oversight and potentially higher costs than could be achieved through competition. Specific risks would depend on the detailed scope of work and the criticality of the systems supported.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: 1019420968

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: ONE MICROSOFT WAY, REDMOND, WA, 98052

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

Financial Breakdown

Contract Ceiling: $34,265,890

Exercised Options: $34,265,890

Current Obligation: $34,265,890

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SAQMMA12D0191

IDV Type: IDC

Timeline