DoD awards $34M for Red Hat software, with 85% of contract value potentially going to small businesses

Contract Overview

Contract Amount: $34,001,775 ($34.0M)

Contractor: World Wide Technology LLC

Awarding Agency: Department of Defense

Start Date: 2024-12-27

End Date: 2026-01-30

Contract Duration: 399 days

Daily Burn Rate: $85.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 7

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: PROCUREMENT OF COMMERCIAL-OFF-THE-SHELF RED HAT SOFTWARE SUBSCRIPTIONS AND OPENSHIFT SERVICES.

Place of Performance

Location: ABERDEEN PROVING GROUND, HARFORD County, MARYLAND, 21005

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $34.0 million to WORLD WIDE TECHNOLOGY LLC for work described as: PROCUREMENT OF COMMERCIAL-OFF-THE-SHELF RED HAT SOFTWARE SUBSCRIPTIONS AND OPENSHIFT SERVICES. Key points: 1. The contract's value is substantial, indicating a significant need for Red Hat software and services within the Department of Defense. 2. The high number of bidders (8) suggests a competitive market for these types of software subscriptions and support. 3. The contract is a delivery order against a larger indefinite-delivery/indefinite-quantity (IDIQ) contract, allowing for flexibility in procurement. 4. The firm-fixed-price contract type helps to control costs and provides predictability for the government. 5. The duration of the contract (399 days) is relatively short, suggesting a need for ongoing, potentially recurring, procurement. 6. The primary service area is Maryland, indicating a specific geographic focus for the deployment or management of these services.

Value Assessment

Rating: good

The contract value of $34 million for commercial off-the-shelf Red Hat software subscriptions and OpenShift services appears reasonable given the nature of enterprise software licensing and support. Benchmarking against similar large-scale software procurements for government agencies suggests that pricing is generally in line with market rates, especially when considering the volume and duration. The firm-fixed-price structure further supports value by locking in costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with seven bids received. The presence of multiple bidders indicates a healthy competitive landscape for Red Hat software and related services. This level of competition is generally favorable for price discovery and ensures that the government has a range of options to choose from, potentially leading to better pricing and terms.

Taxpayer Impact: The full and open competition ensures that taxpayer dollars are being used efficiently by fostering a competitive environment that drives down prices and encourages innovation among vendors.

Public Impact

The Department of Defense benefits from access to up-to-date Red Hat software and OpenShift services, crucial for its IT infrastructure and operations. This contract supports the modernization and operational efficiency of critical defense systems. The primary geographic impact is in Maryland, suggesting that personnel and resources in that region will be directly involved or benefit from the services. The procurement may indirectly support a workforce skilled in Red Hat technologies and cloud-native development.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in if not managed carefully, despite competitive initial award.
Reliance on a single software vendor (Red Hat) can create long-term dependencies.
Ensuring continued competitive pricing for future renewals and expansions will be key.

Positive Signals

Awarded under full and open competition, indicating a robust bidding process.
Firm-fixed-price contract type provides cost certainty.
Potential for significant small business subcontracting opportunities, as indicated by the high percentage of contract value potentially flowing to them.

Sector Analysis

The market for enterprise software, particularly in the areas of Linux operating systems and containerization platforms like Red Hat's OpenShift, is a significant segment of the IT sector. Government agencies, including the Department of Defense, are increasingly adopting these technologies for their flexibility, scalability, and security features. Spending in this category is driven by the need for modernizing legacy systems, enabling cloud-native development, and enhancing cybersecurity postures. Comparable spending benchmarks for similar software subscriptions and support contracts can range from millions to tens of millions of dollars annually, depending on the scope and scale of deployment.

Small Business Impact

Although the contract was awarded to World Wide Technology LLC, the data indicates that 85% of the contract value is potentially subcontracted to small businesses. This suggests a strong commitment to supporting the small business ecosystem. It implies that smaller firms specializing in Red Hat services, software implementation, or support will likely receive a substantial portion of the funding, fostering growth and opportunities within the small business sector.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Army contracting officers and program managers. Accountability measures are embedded in the firm-fixed-price contract type, which obligates the contractor to deliver specified goods and services at an agreed-upon price. Transparency is facilitated through the Federal Procurement Data System (FPDS), where contract actions are recorded. Inspector General jurisdiction may apply in cases of fraud, waste, or abuse.

Related Government Programs

General Services Administration (GSA) IT Schedule Contracts
Department of Defense Enterprise Software Agreements (DESA)
Cloud Computing Services Contracts
Software Licensing and Maintenance Agreements

Risk Flags

Potential for cost increases upon renewal if not re-competed effectively.
Dependence on a single vendor's ecosystem.
Ensuring continued availability of skilled personnel for implementation and support.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.0 million to WORLD WIDE TECHNOLOGY LLC. PROCUREMENT OF COMMERCIAL-OFF-THE-SHELF RED HAT SOFTWARE SUBSCRIPTIONS AND OPENSHIFT SERVICES.

Who is the contractor on this award?

The obligated recipient is WORLD WIDE TECHNOLOGY LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $34.0 million.

What is the period of performance?

Start: 2024-12-27. End: 2026-01-30.

What is the track record of World Wide Technology LLC in fulfilling large federal IT contracts, particularly those involving Red Hat products?

World Wide Technology LLC (WWT) is a well-established federal contractor with a significant history of performance across various IT domains. They frequently secure large-scale contracts, including those involving software, hardware, and professional services for agencies like the Department of Defense. WWT has a strong partnership with Red Hat, often participating in procurements for Red Hat Enterprise Linux (RHEL) subscriptions, OpenShift, and associated support services. Their past performance data in FPDS generally indicates successful contract execution, though like any large contractor, specific contract details and performance reviews would need to be examined for a comprehensive understanding of their track record on similar Red Hat-focused awards.

How does the $34 million contract value compare to other recent Red Hat software procurements by the Department of Defense?

The $34 million value for this specific delivery order for Red Hat software subscriptions and OpenShift services is substantial but falls within the typical range for large enterprise software agreements within the Department of Defense. DoD agencies frequently issue multi-million dollar contracts for Red Hat products due to their widespread use in military IT infrastructure. Larger IDIQ vehicles or enterprise-wide agreements can reach hundreds of millions or even billions over their lifespan. This $34 million award represents a significant but likely discrete procurement action, possibly for a specific program, region, or set of users, and is comparable to other large, competitively awarded software deals seen across various DoD branches.

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

Key risks include potential cost overruns if the scope expands beyond the initial delivery order, vendor lock-in with Red Hat technologies, and performance issues with the software or services. Mitigation strategies are in place: the firm-fixed-price nature of the contract helps control costs for the defined scope. The full and open competition aims to ensure competitive pricing and vendor viability. The contract's defined duration and specific deliverables also provide clear boundaries. Furthermore, the government's ability to leverage multiple vendors through IDIQ vehicles and the potential for small business subcontracting can introduce flexibility and alternative support channels, reducing reliance on a single entity.

How effective is the firm-fixed-price contract type in ensuring value for money for this Red Hat software procurement?

The firm-fixed-price (FFP) contract type is generally effective in ensuring value for money for commercial off-the-shelf (COTS) software like Red Hat subscriptions and standard support services. FFP shifts the risk of cost overruns to the contractor, incentivizing them to manage their own costs efficiently to maintain profitability. For the government, it provides budget certainty, as the price is fixed regardless of the contractor's actual costs. This is particularly suitable for well-defined requirements like software licenses and established support packages where the scope is clear and unlikely to change significantly. It prevents scope creep from driving up costs unexpectedly.

What are the historical spending patterns for Red Hat software and OpenShift services within the Department of the Army?

Historical spending data within the Department of the Army for Red Hat software and OpenShift services shows a consistent and often increasing trend over the past decade. As the Army, like other DoD branches, has embraced open-source solutions and containerization for its IT modernization efforts, investments in Red Hat technologies have grown. This includes significant spending on Red Hat Enterprise Linux (RHEL) subscriptions for servers and workstations, as well as substantial investments in Red Hat OpenShift for building and managing containerized applications and private cloud infrastructure. The Army frequently utilizes IDIQ contracts and delivery orders to procure these solutions, often through competitive processes, reflecting a strategic adoption of these platforms.

What is the significance of the 85% potential small business subcontracting figure?

The 85% potential small business subcontracting figure is highly significant and indicates a strong emphasis on supporting small businesses within this contract. While the prime contractor, World Wide Technology LLC, is a large business, this figure suggests that the majority of the contract's value is intended to flow down to smaller enterprises. This could involve specialized services, implementation support, or distribution channels provided by small businesses. Such a high percentage demonstrates a commitment to federal small business goals and can foster innovation and competition among smaller players in the federal contracting space, potentially leading to more diverse solutions and economic benefits.

Industry Classification

NAICS: Information › Software Publishers › Software Publishers

Product/Service Code: IT AND TELECOM - APLLICATIONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 7

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1 WORLD WIDE WAY, SAINT LOUIS, MO, 63146

Business Categories: Category Business, Limited Liability Corporation, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $34,001,775

Exercised Options: $34,001,775

Current Obligation: $34,001,775

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NOT OBTAINED - WAIVED

Parent Contract

Parent Award PIID: W52P1J20D0069

IDV Type: IDC

Timeline