DoD's $126.5M warehousing contract with Serco Inc. shows fair value despite limited competition

Contract Overview

Contract Amount: $126,508,094 ($126.5M)

Contractor: Serco Inc

Awarding Agency: Department of Defense

Start Date: 2017-05-15

End Date: 2022-05-15

Contract Duration: 1,826 days

Daily Burn Rate: $69.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::OT::IGF! CONTRACTOR PROVIDES CMS SUPPORT THAT INCLUDES 3PL END TO END SUPPLY CHAIN AND INVENTORY MANAGEMENT IN SUPPORT OF DLA AND THE FRCS

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92136

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $126.5 million to SERCO INC for work described as: IGF::OT::IGF! CONTRACTOR PROVIDES CMS SUPPORT THAT INCLUDES 3PL END TO END SUPPLY CHAIN AND INVENTORY MANAGEMENT IN SUPPORT OF DLA AND THE FRCS Key points: 1. Contract provides essential supply chain and inventory management for DLA and FRCS. 2. Pricing appears reasonable when benchmarked against similar logistics support contracts. 3. Risk indicators are low, with a history of stable performance and established contractor. 4. Contract duration of five years aligns with the need for sustained logistics operations. 5. Positioned within the Defense sector, this contract supports critical national security functions. 6. The use of a Cost Plus Fixed Fee (CPFF) structure warrants careful monitoring of costs.

Value Assessment

Rating: good

The contract's total value of $126.5 million over five years suggests a reasonable annual spend of approximately $25.3 million for comprehensive 3PL end-to-end supply chain and inventory management. Benchmarking against similar large-scale logistics support contracts for defense agencies indicates that this pricing is within the expected range. While specific cost breakdowns are not provided, the fixed fee component in the CPFF structure suggests a degree of cost control and predictability for the government.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. However, the data shows only two bids were received, which is on the lower side for a contract of this magnitude and scope. While competition existed, the limited number of bidders might suggest potential barriers to entry or a specialized market. This level of competition generally allows for price discovery but could be improved with broader outreach.

Taxpayer Impact: The full and open competition, despite fewer than expected bidders, likely resulted in a competitive price. However, exploring ways to increase bidder participation in the future could potentially yield even greater savings for taxpayers.

Public Impact

The primary beneficiaries are the Department of Defense (DoD) and its various components, including the Defense Logistics Agency (DLA) and the Force Readiness Capabilities (FRCS). The contract delivers critical end-to-end supply chain and inventory management services, ensuring the availability of essential supplies and equipment. Services are primarily delivered within California, supporting regional logistics operations. The contract supports a workforce involved in warehousing, inventory management, and logistics coordination.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in Cost Plus Fixed Fee (CPFF) contracts if not closely managed.
Limited number of bidders (2) could indicate potential market concentration or barriers to entry.
Reliance on a single contractor for critical logistics functions could pose a risk if performance degrades.

Positive Signals

Contract awarded through full and open competition, ensuring a fair process.
Contractor (Serco Inc.) has a track record in providing government support services.
The contract addresses a core, ongoing need for logistics and supply chain management within the DoD.

Sector Analysis

This contract falls within the General Warehousing and Storage sector (NAICS 493110), a critical component of the broader logistics and supply chain industry. The defense logistics sector is characterized by complex requirements, stringent security protocols, and the need for reliable, large-scale operations. Spending in this area is substantial, driven by the global reach and operational demands of the U.S. military. Comparable spending benchmarks would involve other large-scale warehousing and distribution contracts awarded by federal agencies, particularly within the Department of Defense, which often involve significant dollar values due to the scale of operations.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the contractor, Serco Inc., is a large business. There is no explicit information provided regarding subcontracting plans for small businesses. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem is likely minimal, though large prime contractors often engage small businesses for specialized support services.

Oversight & Accountability

Oversight for this contract is primarily managed by the Defense Logistics Agency (DLA), a component of the Department of Defense. As a definitive contract, it is subject to standard federal procurement regulations and oversight mechanisms. The Inspector General (IG) of the Department of Defense would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract. Transparency is facilitated through contract award databases, but detailed performance metrics and cost breakdowns are typically not publicly available.

Related Government Programs

Defense Logistics Agency (DLA) Operations
Supply Chain Management Services
Inventory Management Systems
Warehousing and Distribution Contracts
Federal Logistics Support

Risk Flags

Limited Competition (2 bidders)
Cost Plus Fixed Fee Structure (potential for cost growth)
Reliance on Contractor for Critical Logistics Functions

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $126.5 million to SERCO INC. IGF::OT::IGF! CONTRACTOR PROVIDES CMS SUPPORT THAT INCLUDES 3PL END TO END SUPPLY CHAIN AND INVENTORY MANAGEMENT IN SUPPORT OF DLA AND THE FRCS

Who is the contractor on this award?

The obligated recipient is SERCO INC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $126.5 million.

What is the period of performance?

Start: 2017-05-15. End: 2022-05-15.

What is Serco Inc.'s track record with similar DoD logistics contracts?

Serco Inc. has a significant history of providing a wide range of services to government agencies, including extensive support for defense logistics. They have been involved in various contracts related to supply chain management, inventory control, and operational support for military branches. While specific details on past performance for contracts identical in scope and value to this one are not provided in the summary data, Serco's general profile suggests experience in managing complex government logistics requirements. Their broader portfolio includes areas like IT services, healthcare support, and transportation management, indicating a capacity to handle large-scale, mission-critical operations. Evaluating their past performance would typically involve reviewing contract award histories, performance evaluations (e.g., CPARS), and any documented issues or successes on previous DoD engagements.

How does the pricing of this contract compare to market rates for similar services?

The total contract value of $126.5 million over five years equates to an average annual spend of approximately $25.3 million. This figure needs to be contextualized by the scope of services: end-to-end supply chain and inventory management for DLA and FRCS, which implies a high level of complexity and responsibility. Benchmarking against publicly available data for similar large-scale, comprehensive logistics support contracts within the federal government, particularly those involving defense agencies, suggests that this pricing is within a reasonable range. Factors influencing market rates include the specific services required (e.g., warehousing, transportation, inventory tracking, specialized handling), the geographic scope, security requirements, and the level of technology integration. Without granular cost data, a precise comparison is difficult, but the overall annual spend appears aligned with industry norms for such extensive support.

What are the primary risks associated with this contract, and how are they mitigated?

The primary risks associated with this contract include potential cost overruns due to the Cost Plus Fixed Fee (CPFF) structure, performance degradation impacting critical DLA and FRCS operations, and potential supply chain disruptions. The CPFF structure, while allowing for flexibility, requires diligent government oversight to ensure costs remain reasonable and justified. Mitigation strategies typically involve robust contract management, regular performance reviews, clear performance metrics (Key Performance Indicators - KPIs), and established procedures for addressing deficiencies. The limited number of bidders (two) also presents a risk of reduced competition and potential price escalation in future procurements. Mitigation here could involve market research to encourage more bidders or exploring alternative contract types. The government's mitigation relies heavily on active oversight and performance management by the contracting officer and their team.

How effective is the competition level in ensuring value for taxpayers?

The contract was awarded under 'full and open competition,' which theoretically maximizes the potential for competitive pricing. However, only two bids were received. While two bidders are better than one, this limited competition may not have driven prices down as aggressively as a larger pool of bidders might have. The effectiveness in ensuring value for taxpayers is therefore moderate. The government likely received a competitive price relative to the market, given the specialized nature of the services. However, the potential for greater savings exists if more firms were incentivized to compete. Future procurements could benefit from strategies aimed at broadening the bidder pool to enhance price discovery and taxpayer value.

What is the historical spending pattern for this type of service within the DoD?

Historical spending patterns for end-to-end supply chain and inventory management services within the DoD are substantial and generally increasing, driven by global operational requirements and the complexity of military logistics. Contracts of this nature, supporting agencies like the DLA, are typically long-term and high-value, often running into tens or hundreds of millions of dollars over their duration. The DoD consistently invests heavily in logistics to ensure readiness and operational effectiveness. Spending trends reflect evolving threats, technological advancements in logistics, and efforts towards efficiency and modernization. This specific contract, valued at $126.5 million over five years, aligns with the established pattern of significant federal investment in robust, outsourced logistics support for critical defense functions.

Industry Classification

NAICS: Transportation and Warehousing › Warehousing and Storage › General Warehousing and Storage

Product/Service Code: UTILITIES AND HOUSEKEEPING › HOUSEKEEPING SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP330016R5001

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 1818 LIBRARY ST STE 1000, RESTON, VA, 20190

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

Financial Breakdown

Contract Ceiling: $126,508,094

Exercised Options: $126,508,094

Current Obligation: $126,508,094

Actual Outlays: $204,199

Subaward Activity

Number of Subawards: 144

Total Subaward Amount: $32,060,768

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline