IRS spent $52.7M on courier services via UPS, raising questions about value and competition

Contract Overview

Contract Amount: $52,713,081 ($52.7M)

Contractor: United Parcel Service, Inc.

Awarding Agency: Department of the Treasury

Start Date: 2010-05-09

End Date: 2015-03-31

Contract Duration: 1,787 days

Daily Burn Rate: $29.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: FSSI-DDS2 COURIER SERVICE

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20003

State: District of Columbia Government Spending

Plain-Language Summary

Department of the Treasury obligated $52.7 million to UNITED PARCEL SERVICE, INC. for work described as: FSSI-DDS2 COURIER SERVICE Key points: 1. The contract awarded to United Parcel Service, Inc. for courier services appears to be a significant expenditure for the IRS. 2. While the contract was awarded under full and open competition, the number of bidders (3) warrants further examination for price discovery. 3. The fixed-firm price structure suggests a predictable cost, but value for money needs to be assessed against market benchmarks. 4. The duration of the contract (over 4 years) indicates a long-term need for these services. 5. The specific services provided under this contract are essential for the IRS's operational efficiency. 6. The contract's performance context and potential risks are not detailed, requiring further analysis.

Value Assessment

Rating: fair

The total contract value of $52.7 million over approximately 4.75 years averages to about $11.1 million annually. Benchmarking this against similar federal contracts for courier and express delivery services is crucial. Without specific performance metrics or detailed service level agreements, assessing the true value for money is challenging. The fixed-firm price provides cost certainty, but it doesn't inherently guarantee competitive pricing or optimal service delivery compared to market alternatives.

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 offers. However, with only three bidders, the level of competition may have been limited. A higher number of bidders typically leads to more robust price discovery and potentially lower prices for the government. Further investigation into the bidding process and the reasons for limited participation would be beneficial.

Taxpayer Impact: While full and open competition is generally favorable for taxpayers, the limited number of bidders suggests that taxpayers may not have received the most competitive pricing possible.

Public Impact

The Internal Revenue Service (IRS) benefits from reliable and efficient mail and package delivery services, crucial for its operations. The contract ensures the timely delivery of sensitive documents, tax forms, and other critical mail. The geographic impact is national, covering the extensive operational needs of the IRS across the United States. The contract supports jobs within the courier and logistics sector, primarily through the prime contractor, UPS.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for higher costs due to limited competition (3 bidders).
Lack of detailed performance metrics makes value assessment difficult.
Long contract duration may not reflect evolving market prices or service needs.

Positive Signals

Awarded under full and open competition, allowing broad participation.
Fixed-firm price contract provides cost predictability.
Established contractor (UPS) likely has robust infrastructure for service delivery.

Sector Analysis

The courier and express delivery services sector is a vital component of the logistics industry, supporting government and commercial operations. Federal spending in this area is consistent, driven by the need for secure and timely movement of documents and goods. This contract falls under the NAICS code 492110 (Couriers and Express Delivery Services). Benchmarking against other federal agencies' spending on similar services would provide further context on the $52.7 million expenditure.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. There is no explicit information regarding subcontracting plans for small businesses. Therefore, the direct impact on the small business ecosystem is likely minimal, with the primary benefit accruing to the large prime contractor, UPS.

Oversight & Accountability

Oversight for this contract would typically reside with the contracting officer and program managers within the IRS. The fixed-firm price contract structure inherently places some cost risk on the contractor. Transparency regarding performance metrics and any disputes or modifications would be subject to federal procurement regulations and agency policies. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

General Services Administration (GSA) Schedules for Shipping and Distribution
US Postal Service Contracts
Department of Defense Mail and Logistics Services

Risk Flags

Limited competition despite full and open award.
Lack of detailed performance metrics for value assessment.
Potential for uncompetitive pricing due to low bidder count.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $52.7 million to UNITED PARCEL SERVICE, INC.. FSSI-DDS2 COURIER SERVICE

Who is the contractor on this award?

The obligated recipient is UNITED PARCEL SERVICE, INC..

Which agency awarded this contract?

Awarding agency: Department of the Treasury (Internal Revenue Service).

What is the total obligated amount?

The obligated amount is $52.7 million.

What is the period of performance?

Start: 2010-05-09. End: 2015-03-31.

What was the specific scope of services provided under this FSSI-DDS2 contract?

The FSSI-DDS2 (Federal Strategic Sourcing Initiative - Delivery Services) contract was designed to provide comprehensive courier and express delivery services. This typically includes the pickup, transportation, and delivery of mail, packages, and documents of various sizes and weights. Services could range from standard ground delivery to expedited air freight, depending on the IRS's specific needs at the time. The contract likely covered both domestic and potentially international shipments, ensuring the timely and secure movement of critical IRS correspondence and operational materials across the nation.

How does the $52.7 million contract value compare to historical IRS spending on courier services?

To accurately compare, historical IRS spending data on courier services would be needed. However, $52.7 million over nearly five years represents an average annual expenditure of approximately $11.1 million. This figure needs to be contextualized against the IRS's overall budget and the volume and criticality of its mail and package needs. If the IRS handles a significant volume of sensitive and time-critical documents, this expenditure might be justified. A trend analysis of past contracts would reveal if this represents an increase, decrease, or stable spending pattern for these essential services.

What were the key performance indicators (KPIs) and service level agreements (SLAs) for this contract?

The provided data does not detail the specific Key Performance Indicators (KPIs) or Service Level Agreements (SLAs) for this contract. Typically, such contracts would include metrics related to on-time delivery rates, package integrity (damage/loss rates), tracking accuracy, customer service responsiveness, and billing accuracy. The absence of this information makes it difficult to objectively assess the contractor's performance and the overall value delivered to the IRS. A thorough review would require access to the contract's statement of work and performance reports.

What is the significance of the 'FSSI-DDS2' designation?

FSSI-DDS2 stands for Federal Strategic Sourcing Initiative - Delivery Services 2. This designation indicates that the contract was part of a broader government-wide initiative aimed at consolidating and strategically sourcing common services, such as delivery and logistics. The goal of such initiatives is to leverage the government's purchasing power to achieve better pricing, standardize services, and improve efficiency across agencies. FSSI-DDS2 specifically focused on optimizing federal spending on courier and express delivery services.

Were there any performance issues or contract disputes during the life of this contract?

The provided summary data does not contain information regarding performance issues or contract disputes. To ascertain this, one would need to consult contract performance reports, modification histories, or any official records of disputes or claims filed during the contract period (May 9, 2010, to March 31, 2015). The absence of readily available negative information does not guarantee flawless performance, but it suggests no major, publicly documented issues arose.

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

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: United Parcel Service Inc (UEI: 006991681)

Address: 316 PENNSYLVANIA AVE SE STE 300, WASHINGTON, DC, 98

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $111,179,394

Exercised Options: $52,713,081

Current Obligation: $52,713,081

Parent Contract

Parent Award PIID: GS23F0282L

IDV Type: FSS

Timeline