DoD's $37.3M Cisco maintenance renewal with Paragon Micro Inc. shows limited competition and potential value concerns

Contract Overview

Contract Amount: $37,287,992 ($37.3M)

Contractor: Paragon Micro Inc

Awarding Agency: Department of Defense

Start Date: 2020-03-26

End Date: 2023-03-25

Contract Duration: 1,094 days

Daily Burn Rate: $34.1K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 6

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: CISCO SMARTNET MAINTENANCE RENEWAL

Place of Performance

Location: TAMPA, HILLSBOROUGH County, FLORIDA, 33612

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $37.3 million to PARAGON MICRO INC for work described as: CISCO SMARTNET MAINTENANCE RENEWAL Key points: 1. The contract's value, while substantial, warrants scrutiny given the nature of maintenance renewals. 2. Competition was limited, raising questions about price discovery and potential overpayment. 3. The duration of the contract (nearly 3 years) suggests a long-term commitment that should be regularly reviewed. 4. Performance context is crucial to understand if the services provided justify the cost. 5. This contract falls within the IT services sector, specifically computer-related services. 6. The fixed-price nature of the contract shifts some risk to the contractor, but doesn't guarantee value.

Value Assessment

Rating: fair

Benchmarking Cisco maintenance renewals is challenging due to proprietary pricing and varying service levels. However, the $37.3 million expenditure over three years for IT maintenance services necessitates a close examination of the value delivered. Without specific performance metrics or comparisons to similar government or commercial contracts, it's difficult to definitively assess if this represents a good deal. The absence of a clear per-unit cost breakdown makes direct price comparison problematic.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'Full and Open Competition After Exclusion of Sources,' which implies that while competition was sought, certain sources were excluded, leading to a limited number of bidders. With only 6 bids received, the level of competition was moderate, potentially impacting the government's ability to secure the most competitive pricing. This suggests that the market for this specific type of Cisco maintenance renewal might be concentrated or that the solicitation terms may have inadvertently limited broader participation.

Taxpayer Impact: Limited competition can lead to higher prices for taxpayers as the government may not benefit from the full spectrum of market-driven cost reductions.

Public Impact

The U.S. Special Operations Command (SOCOM) is the primary beneficiary, receiving essential IT maintenance services. This contract ensures the continued operational readiness of critical Cisco network infrastructure supporting SOCOM's mission. The services delivered are vital for maintaining the functionality and security of IT systems. The geographic impact is primarily within Florida, where the contract is managed or services are rendered. Workforce implications include support for IT professionals managing and maintaining the Cisco equipment.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price creep on future renewals if competition remains limited.
Reliance on a single vendor for maintenance could create lock-in and limit flexibility.
Lack of detailed performance metrics makes it hard to quantify value for money.
The 'after exclusion of sources' clause warrants further investigation into why sources were excluded.

Positive Signals

The contract is firm-fixed-price, providing cost certainty for the government.
The renewal ensures continuity of essential IT support for a critical agency.
Multiple bids were received, indicating some level of market interest.
The contract duration is clearly defined, allowing for future planning.

Sector Analysis

This contract falls within the broader Information Technology (IT) services sector, specifically focusing on maintenance and support for network hardware. The market for IT maintenance, particularly for established vendors like Cisco, is significant, with government agencies being major consumers. Comparable spending benchmarks for similar maintenance contracts can vary widely based on the scope of services, equipment age, and vendor. However, the $37.3 million figure suggests a substantial investment in maintaining a critical IT infrastructure.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. There is no explicit mention of subcontracting goals for small businesses. Therefore, the direct impact on the small business ecosystem is likely minimal, and opportunities for small businesses to participate in this specific contract are limited unless they are part of a larger prime contractor's supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the U.S. Special Operations Command's contracting and program management offices. Accountability measures are inherent in the firm-fixed-price contract type, requiring the contractor to deliver specified services. Transparency is facilitated through contract databases like FPDS, which provide public access to contract details. The Inspector General's office for the Department of Defense may conduct audits or investigations if performance issues or potential fraud are identified.

Related Government Programs

IT Hardware Maintenance Services
Network Infrastructure Support
Cisco Systems Contracts
Department of Defense IT Spending
Special Operations Command Procurement

Risk Flags

Limited competition may lead to higher costs.
Potential for vendor lock-in.
Lack of detailed public performance data.
Complexity of IT maintenance contract benchmarking.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $37.3 million to PARAGON MICRO INC. CISCO SMARTNET MAINTENANCE RENEWAL

Who is the contractor on this award?

The obligated recipient is PARAGON MICRO INC.

Which agency awarded this contract?

Awarding agency: Department of Defense (U.S. Special Operations Command).

What is the total obligated amount?

The obligated amount is $37.3 million.

What is the period of performance?

Start: 2020-03-26. End: 2023-03-25.

What is the track record of Paragon Micro Inc. in fulfilling similar government contracts, particularly for IT maintenance?

Paragon Micro Inc. has a history of securing government contracts, including those related to IT hardware and services. Analyzing their past performance on similar contracts, especially those involving Cisco maintenance or renewals, would provide insight into their reliability and ability to deliver value. A review of past contract awards, performance evaluations (if publicly available), and any reported issues or disputes would be crucial. For instance, examining the number and value of previous contracts, the agencies they served, and the types of services rendered can help establish a baseline for assessing their capabilities and potential risks associated with this specific $37.3 million renewal.

How does the pricing of this Cisco maintenance renewal compare to other government or commercial contracts for similar services?

Directly comparing the pricing of this $37.3 million Cisco maintenance renewal is challenging without access to proprietary vendor pricing structures and detailed service level agreements (SLAs). However, a comparative analysis could involve benchmarking against other government contracts for similar Cisco maintenance, looking at per-device or per-service costs if available. Additionally, researching commercial market rates for comparable Cisco maintenance plans, considering factors like support tiers (e.g., NBD replacement, 24/7 support), and contract duration, can provide a reference point. The limited competition (6 bidders) suggests that the government may not have achieved the most aggressive pricing possible, warranting a deeper dive into the cost-effectiveness.

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

Key risks include potential overpayment due to limited competition, vendor lock-in with Cisco maintenance, and the possibility of service degradation over the contract's duration. Mitigation strategies could involve rigorous performance monitoring, seeking competitive bids from a wider range of authorized resellers or service providers in future procurements, and negotiating clear performance metrics and service level agreements (SLAs). The firm-fixed-price nature of the contract helps mitigate cost overrun risks for the government, but it does not guarantee optimal value. Proactive engagement with the vendor to address any emerging issues and regular reviews of the contract's necessity and scope are also critical.

What is the historical spending pattern for Cisco maintenance renewals by the Department of Defense or U.S. Special Operations Command?

Analyzing historical spending patterns for Cisco maintenance renewals by the DoD and SOCOM is essential for context. This involves examining past contract awards for similar services, noting the total amounts spent, contract durations, and the vendors involved. Understanding trends in spending—whether it's increasing, decreasing, or remaining stable—can highlight potential issues like escalating costs or effective cost management. For example, if spending on Cisco maintenance has consistently risen without a corresponding increase in service scope or performance, it could indicate a need for renegotiation or exploring alternative solutions. Conversely, stable or decreasing spending might suggest effective procurement strategies.

What are the performance metrics and service level agreements (SLAs) associated with this contract, and how is compliance being measured?

The specific performance metrics and SLAs for this $37.3 million Cisco maintenance renewal are critical for assessing value for money. These would typically include response times for technical support, hardware replacement turnaround times, availability of software updates, and potentially uptime guarantees for the maintained network infrastructure. Compliance measurement would involve regular reporting by the contractor, audits by the government's technical representatives, and potentially the use of monitoring tools. Without clear, measurable, and enforced SLAs, the government risks paying for services that do not meet its operational needs, making it difficult to hold the contractor accountable.

Industry Classification

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

Product/Service Code: INFORMATION TECHNOLOGY EQUIPMENT (INCLD FIRMWARE) SOFTWARE,SUPPLIES& SUPPORT EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 6

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 2 CORPORATE DR STE 105, LAKE ZURICH, IL, 60047

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $37,287,992

Exercised Options: $37,287,992

Current Obligation: $37,287,992

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Parent Contract

Parent Award PIID: NNG15SD91B

IDV Type: GWAC

Timeline