Treasury's $25.9M annual financial statement audit contract awarded to KPMG LLP shows fair value with limited competition

Contract Overview

Contract Amount: $25,916,126 ($25.9M)

Contractor: Kpmg LLP

Awarding Agency: Department of the Treasury

Start Date: 2013-04-01

End Date: 2018-02-28

Contract Duration: 1,794 days

Daily Burn Rate: $14.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: IGF::OT::IGF - ANNUAL TREASURY FINANCIAL STATEMENT AUDITS

Place of Performance

Location: MCLEAN, FAIRFAX County, VIRGINIA, 22102

State: Virginia Government Spending

Plain-Language Summary

Department of the Treasury obligated $25.9 million to KPMG LLP for work described as: IGF::OT::IGF - ANNUAL TREASURY FINANCIAL STATEMENT AUDITS Key points: 1. The contract represents a significant investment in ensuring the integrity of Treasury's financial reporting. 2. KPMG LLP, a major accounting firm, was selected, indicating a reliance on established expertise. 3. The fixed-price nature of the contract provides cost certainty for the government. 4. The duration of the contract suggests a long-term need for these audit services. 5. The limited competition raises questions about potential cost efficiencies and market responsiveness. 6. Performance context is crucial to assess if the audit quality meets the office's needs.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific service details and comparable audit fees. However, the total award of $25.9 million over approximately five years suggests an average annual cost of $5.18 million. This figure needs to be compared against similar large-scale financial statement audits for federal agencies of comparable size and complexity. The fixed-price contract type generally offers good value by capping costs, but the absence of robust competition could mean the government is not achieving the lowest possible price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is a positive indicator for price discovery. However, the data indicates only two bids were received (no: 2). This limited number of bidders, despite full and open competition, suggests that the market for such specialized and large-scale audits may be concentrated among a few major firms. While competition was sought, the low number of responses could imply barriers to entry or a lack of broader interest, potentially impacting the competitive pressure on pricing.

Taxpayer Impact: While competition was sought, only two bids were received. This limited number of bidders may have resulted in a higher price than if more firms had participated. Taxpayers may not be receiving the full benefit of a highly competitive bidding process.

Public Impact

The primary beneficiaries are the Department of the Treasury and its Office of Inspector General, ensuring accurate financial reporting and accountability. The services delivered are critical for maintaining public trust in the government's financial management. The geographic impact is primarily within the federal government's financial operations, with no direct public service delivery. Workforce implications are mainly for the contractor, KPMG LLP, and the Treasury OIG staff overseeing the audit.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited number of bidders in a full and open competition could indicate market concentration or high barriers to entry, potentially leading to suboptimal pricing.
The long contract duration (1794 days) might reduce flexibility to adapt to changing audit requirements or market conditions.
Lack of specific performance metrics in the provided data makes it difficult to assess the quality and effectiveness of the audit services delivered.

Positive Signals

Awarded under full and open competition, adhering to principles of fair opportunity.
The contract is firm fixed-price, providing cost certainty and mitigating the risk of cost overruns for the government.
KPMG LLP is a reputable firm with extensive experience in government and private sector audits, suggesting a high likelihood of competent service delivery.

Sector Analysis

This contract falls within the professional services sector, specifically accounting and auditing services for government entities. The market for large-scale federal financial statement audits is dominated by a few 'Big Four' accounting firms and other large audit providers. Spending in this area is driven by regulatory requirements and the need for independent verification of financial integrity. Comparable spending benchmarks would involve analyzing the cost of similar audits for agencies like the Department of Defense or other large cabinet-level departments.

Small Business Impact

The provided data indicates that small business participation (sb: false) and set-asides were not applicable to this contract. This suggests that the scale and specialized nature of the audit services required were likely beyond the capacity or scope typically addressed by small business set-aside programs. Consequently, there are no direct subcontracting implications for small businesses stemming from this specific award.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Treasury's Office of Inspector General (OIG), which is the contracting activity. The OIG is responsible for ensuring the contractor meets the terms of the contract and delivers high-quality audit services. Transparency is facilitated through contract award databases, but detailed performance reports and specific audit findings are typically internal documents. The IG's jurisdiction covers the performance and integrity of the contracted services.

Related Government Programs

Federal Financial Management
Government Auditing Services
Inspector General Audits
Treasury Department Financial Operations
Annual Financial Statement Audits

Risk Flags

Limited competition despite full and open solicitation.
Potential for high cost due to concentrated market.
Long contract duration may reduce flexibility.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $25.9 million to KPMG LLP. IGF::OT::IGF - ANNUAL TREASURY FINANCIAL STATEMENT AUDITS

Who is the contractor on this award?

The obligated recipient is KPMG LLP.

Which agency awarded this contract?

Awarding agency: Department of the Treasury (Office of Inspector General).

What is the total obligated amount?

The obligated amount is $25.9 million.

What is the period of performance?

Start: 2013-04-01. End: 2018-02-28.

What is the track record of KPMG LLP in performing similar federal financial statement audits?

KPMG LLP is one of the largest and most reputable accounting firms globally, with extensive experience in auditing both public and private sector entities, including numerous federal agencies. They are known for their expertise in complex financial environments and regulatory compliance. While specific details on past performance for this exact Treasury contract are not provided, KPMG's general track record suggests a high capability to perform large-scale financial statement audits. Their history includes audits for various government bodies, often involving significant financial volumes and intricate accounting standards. Assessing their performance on this specific contract would require reviewing past audit reports, client feedback, and any documented performance evaluations from the Treasury OIG.

How does the annual cost of this audit compare to similar federal contracts?

The approximate annual cost for this contract is $5.18 million ($25.9M / ~5 years). Comparing this to similar federal contracts requires identifying audits for agencies of comparable size and financial complexity, such as the Department of Defense's financial statement audits or those for other large cabinet departments. These large-scale federal audits are inherently expensive due to the scope, volume of transactions, and rigorous standards. Without access to specific contract details and pricing structures for comparable audits, a precise benchmark is difficult. However, the annual cost appears within a plausible range for a comprehensive audit of a major federal department's financial statements, though the limited competition warrants scrutiny for potential cost efficiencies.

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

Key risks include potential for audit quality issues if the contractor's resources are strained or if there's a lack of independence, and the risk of paying a non-competitive price due to limited bidder participation. Mitigation strategies involve the Treasury OIG's oversight role, which includes monitoring performance, ensuring adherence to audit standards, and potentially conducting quality reviews. The firm-fixed-price contract type mitigates financial risk for the government by capping costs. However, the risk of paying too much due to limited competition is harder to mitigate post-award without renegotiation or re-competition, highlighting the importance of robust pre-award market research and solicitation strategies.

How effective has this contract been in achieving its objective of ensuring accurate financial reporting for the Treasury?

The effectiveness of this contract in ensuring accurate financial reporting is primarily measured by the quality and findings of the annual audits conducted by KPMG LLP. The provided data does not include specific audit outcomes, such as the number or significance of audit opinions issued, identified deficiencies, or corrective actions taken. The Office of Inspector General (OIG) would be the primary entity to assess the effectiveness based on their review of the audit workpapers and reports. Generally, the continued award of such contracts suggests a perceived level of effectiveness, but a definitive assessment would require access to detailed performance evaluations and audit results over the contract's life.

What are the historical spending patterns for Treasury financial statement audits, and how does this contract fit?

Historical spending on Treasury financial statement audits would likely show a consistent need for these services, driven by federal mandates and the sheer scale of Treasury's financial operations. Prior to this $25.9 million contract, there would have been previous contracts for similar audit services, potentially awarded to different firms or the same incumbent. The spending pattern would likely reflect the increasing complexity of financial regulations and the growing volume of financial data. This contract represents a significant, multi-year investment that aligns with the ongoing requirement for independent verification of Treasury's financial health and compliance, fitting into a pattern of substantial, long-term federal audit expenditures.

What is the impact of the limited competition (2 bidders) on the overall value for taxpayers?

The fact that only two bids were received for this contract, despite being awarded under full and open competition, raises concerns about the value for taxpayers. A limited number of bidders suggests that the market for these specialized, high-value audit services may be concentrated among a few large firms, potentially leading to less aggressive pricing. If more firms were capable and willing to bid, the competition could have driven the price down. While the contract is firm fixed-price, which provides cost certainty, the initial price negotiated might be higher than it would have been in a more robustly competitive environment. This could mean taxpayers are paying a premium for these essential audit services.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Accounting, Tax Preparation, Bookkeeping, and Payroll Services › Offices of Certified Public Accountants

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: RFQ-OIG-12-0022

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Kpmg L.L.P. (UEI: 001667906)

Address: 1801 K ST NW STE 12000, WASHINGTON, DC, 20006

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $325,730,079

Exercised Options: $246,204,699

Current Obligation: $25,916,126

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS23F8127H

IDV Type: FSS

Timeline