DoD's $105M Army General Fund Audit Readiness Services contract awarded to Ernst & Young LLP shows fair value

Contract Overview

Contract Amount: $104,755,580 ($104.8M)

Contractor: Ernst & Young LLP

Awarding Agency: Department of Defense

Start Date: 2014-05-22

End Date: 2018-10-27

Contract Duration: 1,619 days

Daily Burn Rate: $64.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: TIME AND MATERIALS

Sector: Other

Official Description: IGF::OT::IGF ARMY GENERAL FUND AUDIT READINESS SERVICES

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20005

State: District of Columbia Government Spending

Plain-Language Summary

Department of Defense obligated $104.8 million to ERNST & YOUNG LLP for work described as: IGF::OT::IGF ARMY GENERAL FUND AUDIT READINESS SERVICES Key points: 1. The contract was awarded using full and open competition, suggesting a competitive pricing environment. 2. The delivery order structure indicates flexibility in tasking and potential for phased execution. 3. The Time and Materials pricing model, while common, requires careful monitoring to control costs. 4. The contract duration of over 1600 days suggests a long-term need for audit readiness services. 5. The geographic location in Washington D.C. aligns with the concentration of federal agencies. 6. The contract's focus on audit readiness is critical for financial accountability within the Army.

Value Assessment

Rating: fair

The contract's total value of approximately $105 million over its period of performance suggests a significant investment in audit readiness. Benchmarking this against similar large-scale audit support contracts for federal agencies is challenging without more granular data on the specific services rendered and the complexity of the Army's financial systems. However, the use of Time and Materials pricing, while offering flexibility, can sometimes lead to higher costs if not managed diligently. The value proposition hinges on the successful achievement of audit readiness goals, which is a complex and often lengthy process.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit offers. This typically leads to a more robust bidding process with multiple proposals, fostering price discovery and potentially driving down costs. The presence of multiple bidders, as suggested by the 'no' field indicating 3 bids, further supports the notion of a competitive environment. The level of competition is a positive indicator for achieving fair market value.

Taxpayer Impact: Taxpayers benefit from full and open competition as it generally leads to more competitive pricing and a wider pool of qualified contractors, ensuring the government receives the best value for its investment.

Public Impact

The primary beneficiaries are the Department of the Army and the Department of Defense, who receive critical support in achieving financial audit readiness. The services delivered are essential for improving financial management, accountability, and transparency within the federal government. The contract's impact is concentrated in Washington D.C., the administrative hub for many federal agencies. The contract supports a specialized workforce of auditors, financial analysts, and consultants.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The Time and Materials (T&M) pricing structure, while flexible, carries inherent risks of cost overruns if not closely monitored and managed.
The long duration of the contract (over 4 years) necessitates continuous oversight to ensure performance remains aligned with objectives and market conditions.

Positive Signals

Awarded through full and open competition, indicating a robust and competitive bidding process.
The contract addresses a critical government requirement for financial audit readiness, contributing to fiscal responsibility.

Sector Analysis

The federal government, particularly defense agencies, invests heavily in professional services, including accounting and auditing. The market for audit readiness services is driven by legislative mandates and the increasing focus on financial accountability. This contract fits within the broader professional services sector, specifically targeting the niche of government financial audit support. Comparable spending benchmarks would involve looking at other large contracts for audit, financial advisory, and management consulting services awarded to major accounting firms by various federal agencies.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. The prime contractor, Ernst & Young LLP, is a large public accounting firm. There is no explicit information provided regarding subcontracting plans or performance related to small businesses. Therefore, the direct impact on the small business ecosystem is likely minimal unless significant subcontracting opportunities were pursued independently by the prime.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Department of the Army's contracting and financial management offices. Given the nature of audit readiness services, there may also be oversight from the Department of Defense Inspector General's office, particularly concerning financial reporting and compliance. Transparency is facilitated through contract award databases and reporting requirements, though detailed performance metrics are often internal.

Related Government Programs

DoD Financial Improvement and Audit Readiness (FIAR) Program
Federal Financial Management
Government Auditing Services
Defense Contract Audit Agency (DCAA) Support

Risk Flags

Potential for cost overruns due to Time and Materials pricing model.
Complexity of achieving full audit readiness for a large organization like the Army.
Dependence on contractor expertise for critical financial processes.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $104.8 million to ERNST & YOUNG LLP. IGF::OT::IGF ARMY GENERAL FUND AUDIT READINESS SERVICES

Who is the contractor on this award?

The obligated recipient is ERNST & YOUNG LLP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $104.8 million.

What is the period of performance?

Start: 2014-05-22. End: 2018-10-27.

What was the specific scope of work for Ernst & Young LLP under this contract?

The contract was for 'ARMY GENERAL FUND AUDIT READINESS SERVICES.' This typically involves assisting the Army in preparing its financial statements to meet audit requirements. Services likely included assessing internal controls, identifying financial statement risks, developing remediation plans, supporting the audit process by providing documentation and explanations, and ensuring compliance with federal accounting standards and audit protocols. The exact deliverables and specific tasks would be detailed in the Statement of Work (SOW) attached to the delivery order, which is not publicly available in this data snippet.

How does the $105 million contract value compare to other similar federal audit readiness contracts?

Direct comparison is difficult without knowing the precise scope and duration of other contracts. However, $105 million over approximately 4.5 years represents a significant investment, averaging around $23 million annually. Large federal agencies often award multi-year contracts in the tens to hundreds of millions for comprehensive audit readiness and financial system modernization. For instance, other branches of the military or large civilian agencies have awarded similar-sized contracts for financial statement audits and remediation. The value appears commensurate with the complexity and scale of supporting a major component of the U.S. Army's financial operations.

What are the primary risks associated with a Time and Materials (T&M) contract for audit readiness services?

The primary risk with T&M contracts is the potential for cost overruns, as the contractor is reimbursed for actual labor hours and materials used, plus a fee. If the scope is not well-defined or if project management is weak, the contractor may incur more hours than anticipated, driving up the total cost. For audit readiness, this could manifest as extended timelines for analysis, documentation, or remediation efforts. Effective oversight, clear task definitions, and robust progress monitoring by the government are crucial to mitigate these risks and ensure the project stays within budget and achieves its objectives efficiently.

What is the track record of Ernst & Young LLP in performing similar federal contracts?

Ernst & Young LLP (EY) is one of the 'Big Four' accounting firms and has a long history of performing large-scale professional services contracts for the U.S. federal government. They routinely win contracts for audit, tax, consulting, and advisory services across various agencies, including the Department of Defense. Their track record generally includes supporting complex financial operations, system implementations, and audit preparations. While specific performance details for every contract are not always public, their continued success in winning significant government contracts suggests a generally positive performance history and capability in meeting federal requirements.

How has spending on Army audit readiness services evolved over time?

Spending on Army audit readiness services has significantly increased over the past decade, driven by legislative mandates like the Federal Financial Management Improvement Act and the National Defense Authorization Acts, which require federal agencies to produce auditable financial statements. Prior to these mandates gaining traction, dedicated spending on comprehensive audit readiness was less pronounced. The Army, like other branches of the DoD, has faced challenges in achieving auditability, leading to substantial investments in systems, processes, and external support services like those provided under this contract. This trend reflects a broader government-wide push for greater financial transparency and accountability.

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) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: W91CRB13R0034

Offers Received: 3

Pricing Type: TIME AND MATERIALS (Y)

Evaluated Preference: NONE

Contractor Details

Address: 1101 NEW YORK AVENUE, NW, WASHINGTON, DC, 20005

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

Financial Breakdown

Contract Ceiling: $109,315,291

Exercised Options: $108,977,394

Current Obligation: $104,755,580

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS23F8152H

IDV Type: FSS

Timeline