DoD's $33.8M Verizon contract for managed network services shows fair value but limited competition
Contract Overview
Contract Amount: $33,814,348 ($33.8M)
Contractor: Verizon Business Network Services LLC
Awarding Agency: Department of Defense
Start Date: 2009-07-17
End Date: 2014-08-31
Contract Duration: 1,871 days
Daily Burn Rate: $18.1K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 2
Pricing Type: FIRM FIXED PRICE
Sector: IT
Official Description: USARC MANAGED NETWORK SERVICES
Place of Performance
Location: ASHBURN, LOUDOUN County, VIRGINIA, 20147
State: Virginia Government Spending
Plain-Language Summary
Department of Defense obligated $33.8 million to VERIZON BUSINESS NETWORK SERVICES LLC for work described as: USARC MANAGED NETWORK SERVICES Key points: 1. Contract awarded through full and open competition, indicating a broad search for qualified vendors. 2. The contract's duration of 1871 days suggests a long-term need for these services. 3. Fixed-price contract type helps mitigate cost overrun risks for the government. 4. The number of bids received (2) suggests moderate competition, potentially impacting price optimization. 5. Services provided fall under computing infrastructure and data processing, a critical area for military operations. 6. The contract was awarded by the Department of the Army, a major component of the DoD. 7. The contract's value is relatively modest within the broader IT services landscape for the DoD.
Value Assessment
Rating: fair
The contract's total value of approximately $33.8 million over its term suggests a moderate annual spend. Benchmarking against similar managed network services contracts within the Department of Defense is challenging without more granular data on service levels and scope. However, the firm fixed-price structure generally provides predictable costs. The limited number of bidders (2) might indicate that the pricing, while fixed, may not have been driven down by extensive competition.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit bids. Despite this broad solicitation, only two bids were received. This level of competition, while meeting the 'full and open' criteria, is on the lower end and could suggest barriers to entry for other potential providers or a concentrated market for these specific services.
Taxpayer Impact: With only two bidders, taxpayers may not have benefited from the most competitive pricing achievable through a wider range of offers. The government secured a provider, but the potential for cost savings through robust competition was likely constrained.
Public Impact
The Department of the Army benefits from reliable managed network services essential for its operations. Military personnel and civilian staff gain access to robust computing infrastructure and data processing capabilities. The services support the operational readiness and communication needs of the Army, primarily within Virginia. The contract likely supports IT professionals and technicians involved in network management and support.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Limited competition (2 bidders) may have resulted in less favorable pricing for taxpayers.
- The long contract duration could lead to vendor lock-in if not managed carefully.
- Reliance on a single vendor for critical network services presents a potential single point of failure risk.
- The specific scope of 'managed network services' can be broad; ensuring all requirements are met is crucial.
Positive Signals
- Awarded under full and open competition, ensuring a fair process.
- Firm fixed-price contract type provides cost certainty.
- The contract supports essential IT infrastructure for a major military branch.
- The vendor, Verizon Business Network Services LLC, is a recognized provider in the telecommunications and network services industry.
Sector Analysis
This contract falls within the broader Information Technology (IT) sector, specifically focusing on computing infrastructure and data processing. The market for managed network services is substantial, with government agencies being significant consumers due to the complexity and scale of their IT needs. This contract represents a portion of the Department of Defense's overall spending on IT services, which is critical for maintaining operational capabilities and cybersecurity. Comparable spending benchmarks would typically involve analyzing other large-scale network service contracts awarded by federal agencies.
Small Business Impact
The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications or specific benefits for the small business ecosystem stemming from this particular award. The focus was on securing services from capable large-scale providers.
Oversight & Accountability
Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. As a firm fixed-price contract, the primary oversight would focus on ensuring service delivery meets the defined requirements and performance standards. Transparency is generally maintained through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.
Related Government Programs
- Department of Defense IT Services
- Army Network Modernization Programs
- Managed Telecommunications Services
- Data Center and Hosting Services
- Federal IT Infrastructure Contracts
Risk Flags
- Limited competition may lead to suboptimal pricing.
- Contract duration could pose long-term dependency risks.
- Scope definition for 'managed network services' needs careful monitoring.
Tags
it-services, managed-network-services, department-of-defense, department-of-the-army, firm-fixed-price, full-and-open-competition, computing-infrastructure, data-processing, virginia, large-contract
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $33.8 million to VERIZON BUSINESS NETWORK SERVICES LLC. USARC MANAGED NETWORK SERVICES
Who is the contractor on this award?
The obligated recipient is VERIZON BUSINESS NETWORK SERVICES 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 $33.8 million.
What is the period of performance?
Start: 2009-07-17. End: 2014-08-31.
What was the specific performance period and total value of this contract?
The contract had a duration of 1871 days, which is approximately 5.1 years. It was awarded on July 17, 2009, and expired on August 31, 2014. The total value of the contract was $33,814,348.49. This indicates a significant investment by the Department of the Army in managed network services over a multi-year period, supporting critical IT infrastructure.
How does the number of bidders (2) compare to typical competition levels for similar IT services contracts within the DoD?
For large-scale IT services contracts, especially those requiring specialized expertise like managed network services, receiving only two bids under a full and open competition can be considered moderate to low. While some highly specialized or niche procurements might naturally attract fewer bidders, a more robust competition typically involves four or more offers. This limited number suggests potential market concentration or high barriers to entry, which could impact the government's ability to secure the most competitive pricing.
What are the potential risks associated with a firm fixed-price contract for managed network services?
Firm fixed-price (FFP) contracts are generally favored for their cost certainty. However, for complex managed network services, the primary risk lies in the potential for the contractor to cut corners on service quality or scope to maintain profitability if the initial price was set too low or if unforeseen technical challenges arise. Conversely, if the price was set too high due to limited competition, the government might overpay. Effective performance monitoring and clear service level agreements (SLAs) are crucial to mitigate these risks and ensure value delivery.
What does the NAICS code 518210 signify in the context of this contract?
The North American Industry Classification System (NAICS) code 518210 represents 'Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services.' This code accurately categorizes the core services provided under this contract, which involve managing and maintaining the network infrastructure essential for data processing, communication, and potentially hosting services. It confirms the contract's focus on foundational IT support critical for military operations.
What is the significance of the contract being awarded by the Department of the Army (SA) versus the Department of Defense (AG)?
The 'AG' field indicates the overarching agency (Department of Defense), while 'SA' specifies the specific service or subordinate agency awarding the contract (Department of the Army). This distinction is important because it shows that the funding and requirement originated directly from the Army, one of the largest branches within the DoD. While the DoD sets broad strategic IT goals, individual service branches like the Army manage their specific procurements to meet their unique operational needs.
How does the contract's geographic location (ST: VA) potentially influence its scope and cost?
The contract's primary location is Virginia (VA). This is significant as Virginia is a major hub for federal government agencies and defense contractors, including significant military installations and IT infrastructure. Proximity to these entities can influence logistics, support response times, and potentially the cost of labor and services. However, for managed network services, the physical location might be less critical than the network's reach and the provider's ability to manage infrastructure remotely or across distributed sites.
Industry Classification
NAICS: Information › Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services › Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services
Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Solicitation ID: W91LV208R0007
Offers Received: 2
Pricing Type: FIRM FIXED PRICE (J)
Evaluated Preference: NONE
Contractor Details
Parent Company: Verizon Communications Inc (UEI: 107212169)
Address: 22001 LOUDOUN COUNTY PKWY, ASHBURN, VA, 10
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $48,041,123
Exercised Options: $48,041,123
Current Obligation: $33,814,348
Contract Characteristics
Cost or Pricing Data: NO
Timeline
Start Date: 2009-07-17
Current End Date: 2014-08-31
Potential End Date: 2014-08-31 00:00:00
Last Modified: 2014-08-15
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