DoD's $12.7M HP contract for capacity services saw strong competition but raises questions on value

Contract Overview

Contract Amount: $12,756,154 ($12.8M)

Contractor: HP, Inc.

Awarding Agency: Department of Defense

Start Date: 2007-10-01

End Date: 2009-09-30

Contract Duration: 730 days

Daily Burn Rate: $17.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COMBINATION (TWO OR MORE)

Sector: IT

Official Description: CAPACITY SERVICES CONTRACT FOR HP WLL

Place of Performance

Location: PALO ALTO, SANTA CLARA County, CALIFORNIA, 94304

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $12.8 million to HP, INC. for work described as: CAPACITY SERVICES CONTRACT FOR HP WLL Key points: 1. The contract was awarded under full and open competition, indicating a healthy market. 2. Four bidders participated, suggesting a competitive landscape for these services. 3. The contract duration of 730 days provided a stable period for service delivery. 4. The award was made to HP, Inc., a major player in the IT services sector. 5. The contract's value of $12.7 million falls within a moderate spending range for IT services. 6. The absence of small business set-aside raises questions about broader economic impact.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific performance metrics or detailed cost breakdowns. However, the per-unit cost, if calculable, would need to be compared against industry standards for similar IT capacity services. Given the $12.7 million award over two years, the annual cost is approximately $6.35 million. This figure should be assessed against the market rate for comparable services from other major IT providers to determine if it represents a competitive price point. Without more granular data, a definitive value assessment is difficult, but the competitive award suggests an attempt at fair pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded through full and open competition, meaning all responsible sources were permitted to submit offers. The participation of four bidders suggests a reasonably competitive environment for these IT capacity services. A higher number of bidders generally leads to better price discovery and potentially lower costs for the government. The fact that four firms engaged in the bidding process indicates that the market for these services is accessible and that the requirements were well-defined enough to attract multiple proposals.

Taxpayer Impact: The full and open competition and multiple bidders likely resulted in a more competitive price for taxpayers compared to a sole-source or limited competition award. This process helps ensure that the government is not overpaying for the services procured.

Public Impact

The Department of Defense benefits from the provision of essential IT capacity services. These services likely support critical defense information systems and operations. The contract's geographic impact is primarily within the Defense Information Systems Agency's operational areas. Workforce implications may include IT professionals employed by HP, Inc. and potentially subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of transparency on specific performance metrics makes value assessment difficult.
Potential for vendor lock-in if services are highly specialized.
Limited visibility into subcontracting arrangements, if any.

Positive Signals

Awarded through full and open competition, indicating market access.
Multiple bidders participated, suggesting a competitive process.
Contract duration provided stability for service provision.

Sector Analysis

This contract falls within the broader Information Technology (IT) services sector, specifically focusing on capacity services. The IT services market is vast and highly competitive, with numerous providers offering a range of solutions from hardware to cloud computing and managed services. Contracts for IT capacity, which can include computing power, storage, and network bandwidth, are crucial for government agencies to maintain and upgrade their technological infrastructure. Spending in this area is significant across all federal agencies, with benchmarks varying widely based on the specific services and scale required.

Small Business Impact

The contract was not set aside for small businesses, and there is no indication of specific subcontracting requirements for small businesses. This means that the primary award went to a large business, HP, Inc. While this ensures access to a major IT provider, it limits the direct opportunities for small businesses to participate in this specific contract. The impact on the small business ecosystem is neutral to negative in terms of direct contract awards, though HP, Inc. may engage small businesses as subcontractors, the extent of which is not detailed here.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Information Systems Agency (DISA) and the Department of Defense (DoD). Accountability measures would be embedded in the contract's performance work statement (PWS), with regular reviews and reporting requirements. Transparency is generally facilitated through contract award databases, though detailed performance data and cost breakdowns may not always be publicly available. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

IT Infrastructure Services
Cloud Computing Services
Managed IT Services
Defense Information Technology Services

Risk Flags

Potential for cost creep if usage is not managed.
Security risks inherent in IT infrastructure contracts.
Lack of detailed performance data hinders value assessment.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $12.8 million to HP, INC.. CAPACITY SERVICES CONTRACT FOR HP WLL

Who is the contractor on this award?

The obligated recipient is HP, INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Information Systems Agency).

What is the total obligated amount?

The obligated amount is $12.8 million.

What is the period of performance?

Start: 2007-10-01. End: 2009-09-30.

What specific IT capacity services were provided under this contract?

The contract, "CAPACITY SERVICES CONTRACT FOR HP WLL," awarded to HP, Inc. by the Defense Information Systems Agency (DISA) under the Department of Defense (DoD), likely encompassed a range of IT infrastructure resources. This could include computing power (e.g., server access, virtual machines), data storage solutions, and network bandwidth. The term 'capacity services' suggests a provision of scalable resources that the DoD could draw upon as needed, rather than a fixed set of equipment. Without the detailed Performance Work Statement (PWS), the exact nature of these services remains general, but they are fundamental to supporting the DoD's vast information technology requirements and ensuring operational continuity.

How does the $12.7 million award compare to similar IT capacity contracts within the DoD?

Comparing the $12.7 million award for this two-year contract requires context regarding the specific type and scale of IT capacity services. For instance, if this contract provided extensive cloud computing resources or dedicated high-performance computing capabilities, the cost might be considered reasonable or even low. Conversely, if it covered more basic IT infrastructure, it might be on the higher end. Benchmarking against other DISA or DoD contracts for similar services, such as managed hosting or data center capacity, would be necessary. Given the competitive nature of the award (4 bidders), it suggests the pricing was likely aligned with market expectations for the defined scope at the time of award. However, without specific performance metrics and detailed cost breakdowns, a precise value-for-money assessment relative to peers is difficult.

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

Primary risks associated with IT capacity services contracts often include performance failures, security vulnerabilities, cost overruns, and vendor lock-in. For this contract, potential performance risks might involve ensuring the availability and reliability of the IT capacity provided by HP, Inc. Security risks are paramount for the DoD, requiring robust measures to protect sensitive data and systems. Cost risks could arise if usage exceeds projections or if the pricing model is inefficient. Vendor lock-in is a concern if the services are highly proprietary or difficult to migrate away from. Mitigation strategies typically involve stringent Service Level Agreements (SLAs) in the contract, regular performance monitoring, security audits, clear invoicing and reporting mechanisms, and defined exit strategies. The competitive bidding process itself can mitigate some risks by selecting a vendor perceived to have the best capability and pricing.

What is HP, Inc.'s track record with federal IT capacity contracts?

HP, Inc. (and its predecessors/related entities like Hewlett Packard Enterprise) has a long-standing and extensive track record of providing IT hardware, software, and services to the federal government, including the Department of Defense. They are a major contractor for various IT solutions, including servers, storage, networking equipment, and related support and managed services. Their experience spans numerous large-scale federal contracts, often involving complex infrastructure and high-security requirements. While specific details on past performance for 'capacity services' contracts would require deeper analysis of contract databases, HP's general presence and history suggest a significant capability and familiarity with government procurement processes and performance expectations.

How has federal spending on IT capacity services evolved since this contract was awarded in 2007?

Federal spending on IT capacity services has seen significant evolution since 2007, largely driven by the rapid advancements in cloud computing, virtualization, and data analytics. In 2007, 'capacity services' might have primarily referred to on-premises hardware provisioning or dedicated data center space. Over the subsequent years, there has been a substantial shift towards cloud-based solutions (Infrastructure as a Service - IaaS, Platform as a Service - PaaS), offering greater scalability, flexibility, and often cost-efficiency. Agencies have increasingly adopted hybrid cloud models. This trend has likely influenced the nature of 'capacity services' contracts, moving from traditional hardware leases or dedicated infrastructure towards more dynamic, on-demand resource allocation managed by cloud providers, both public and private. Consequently, the market structure and pricing dynamics for IT capacity have transformed considerably.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Other Computer 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: HC101306R2000

Offers Received: 4

Pricing Type: COMBINATION (TWO OR MORE) (2)

Evaluated Preference: NONE

Contractor Details

Address: 3000 HANOVER ST, PALO ALTO, CA, 90

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $12,756,154

Exercised Options: $12,756,154

Current Obligation: $12,756,154

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HC101307D2004

IDV Type: IDC

Timeline