DoD's $28.4M Microsoft consulting contract awarded without competition, raising value-for-money questions

Contract Overview

Contract Amount: $28,411,361 ($28.4M)

Contractor: Microsoft Corporation

Awarding Agency: Department of Defense

Start Date: 2019-06-06

End Date: 2022-06-08

Contract Duration: 1,098 days

Daily Burn Rate: $25.9K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: MICROSOFT CONSULTING SERVICE LABOR

Place of Performance

Location: SCOTT AFB, SAINT CLAIR County, ILLINOIS, 62225

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $28.4 million to MICROSOFT CORPORATION for work described as: MICROSOFT CONSULTING SERVICE LABOR Key points: 1. Contract awarded on a firm-fixed-price basis, limiting flexibility but providing cost certainty. 2. Significant duration of 1098 days suggests a long-term need for services. 3. Awarded to a single vendor, Microsoft Corporation, indicating potential lack of market competition. 4. The contract falls under Computer Systems Design Services, a common area for IT support. 5. No small business set-aside was utilized, potentially limiting opportunities for smaller firms. 6. The contract was an "award" under a larger agreement, not a standalone new procurement.

Value Assessment

Rating: questionable

Benchmarking the value of this $28.4 million Microsoft consulting contract is challenging without detailed service descriptions and performance metrics. However, the lack of competition for a significant sum raises concerns about whether the government secured the best possible price. Comparing this to similar IT consulting contracts, especially those that undergo competitive bidding, would be necessary to assess if the pricing is aligned with market rates for comparable services. The firm-fixed-price structure offers predictability but could lead to overpayment if the scope of work is less demanding than anticipated.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor can provide the required goods or services, or in specific circumstances like urgent needs or follow-on work to an existing contract. The absence of a competitive bidding process means that the government did not benefit from the price discovery and innovation that typically arises from multiple companies vying for the contract.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to drive down prices. This limits the government's ability to ensure it is receiving the most cost-effective solution available in the market.

Public Impact

The primary beneficiaries are likely Department of Defense personnel and systems relying on Microsoft technologies. Services delivered likely include IT support, system integration, and consulting related to Microsoft software and platforms. The geographic impact is centered around the Defense Information Systems Agency (DISA) operations, primarily in Illinois. Workforce implications may involve reliance on Microsoft's specialized expertise, potentially reducing the need for in-house specialized skills.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices compared to a competed contract.
Sole-source award limits opportunities for other IT service providers, including small businesses.
Long contract duration without clear performance benchmarks could mask inefficiencies.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Award to Microsoft Corporation ensures access to specialized expertise for their own products.
Contract is an award under a larger agreement, suggesting a pre-existing relationship and potentially streamlined process.

Sector Analysis

This contract falls within the broader IT services sector, specifically focusing on computer systems design and related consulting. The market for IT consulting services is vast and highly competitive, with numerous firms offering specialized expertise. However, contracts involving proprietary software platforms, like Microsoft's, often lean towards sole-source or limited competition awards to the software vendor or their authorized partners. Comparable spending benchmarks would typically involve analyzing other large IT support contracts awarded by federal agencies, particularly those for enterprise-level software solutions.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. The award to a large corporation like Microsoft Corporation suggests that the primary focus was on obtaining specialized services directly from the vendor. This lack of small business inclusion means that opportunities for smaller IT firms to participate in this specific contract are non-existent, potentially impacting the broader small business IT ecosystem that relies on government contracting.

Oversight & Accountability

Oversight for this contract would typically fall under the contracting officer and program managers within the Defense Information Systems Agency (DISA). Accountability measures would be defined by the contract's terms and conditions, including performance standards and reporting requirements. Transparency is limited due to the sole-source nature of the award, making it difficult for the public to scrutinize the value proposition. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

General Services Administration (GSA) IT Schedule contracts
Department of Defense Enterprise IT Services
Computer Systems Design Services
Microsoft Software Licensing and Support Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for overpricing
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.4 million to MICROSOFT CORPORATION. MICROSOFT CONSULTING SERVICE LABOR

Who is the contractor on this award?

The obligated recipient is MICROSOFT CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $28.4 million.

What is the period of performance?

Start: 2019-06-06. End: 2022-06-08.

What specific services were provided under this $28.4 million Microsoft consulting contract?

The provided data indicates the contract falls under NAICS code 541512 (Computer Systems Design Services) and was awarded to Microsoft Corporation. While the exact services are not detailed, typical engagements for such contracts include IT strategy consulting, system implementation and integration, software customization, technical support, and training related to Microsoft's product suite (e.g., Windows, Office 365, Azure, Dynamics). Given the duration and value, it likely encompassed a broad range of support to maintain and enhance the Department of Defense's IT infrastructure leveraging Microsoft technologies.

How does the $28.4 million cost compare to similar IT consulting contracts awarded by the DoD?

Direct comparison is difficult without knowing the specific services rendered and the contract's performance period. However, $28.4 million over approximately three years (1098 days) for specialized IT consulting from a major vendor like Microsoft is within the range of large federal IT contracts. Contracts for enterprise-wide software support and implementation often reach these figures. The key concern here is the lack of competition; a competitively bid contract for similar services might have yielded a lower price, making a direct cost comparison less meaningful than an assessment of value achieved relative to the price paid.

What are the primary risks associated with a sole-source award of this magnitude?

The primary risks associated with a sole-source award of this magnitude include potential overpayment due to the absence of competitive pricing pressure, reduced incentive for the contractor to innovate or provide exceptional value beyond the contract's minimum requirements, and a lack of transparency into the procurement process. There's also a risk of vendor lock-in, where the agency becomes heavily reliant on a single provider, making future transitions difficult and potentially more expensive. Furthermore, without competition, the government may not be aware of or able to access potentially better or more cost-effective solutions available in the market.

What is the track record of Microsoft Corporation in fulfilling large federal IT consulting contracts?

Microsoft Corporation has a long and extensive track record of fulfilling large federal IT consulting contracts across various agencies, including the Department of Defense. They are a primary vendor for many government IT systems due to their ubiquitous software products. Historically, Microsoft has been awarded numerous contracts for software licensing, cloud services (Azure), implementation, and support. While generally considered a reliable large vendor, the nature of sole-source awards, like this one, often draws scrutiny regarding pricing and competition, regardless of the contractor's overall reputation.

How does this contract fit into the broader spending patterns for IT services within the Department of Defense?

This contract represents a component of the Department of Defense's substantial and ongoing investment in Information Technology. The DoD is one of the largest federal IT spenders, allocating billions annually to maintain and modernize its complex systems. Contracts for software, hardware, and related services, especially from major vendors like Microsoft, are a significant part of this spending. This specific award, focused on consulting services for Microsoft technologies, aligns with the DoD's strategy to leverage commercial off-the-shelf (COTS) software and cloud solutions to enhance operational capabilities and efficiency.

Were there any specific justifications provided for awarding this contract on a sole-source basis?

The provided data indicates the contract type was 'NOT COMPETED' and the award was an 'AWARD' (Delivery Order), suggesting it was likely issued under an existing indefinite-delivery/indefinite-quantity (IDIQ) contract or a pre-existing agreement where competition may have already occurred or was deemed unnecessary for subsequent orders. Federal regulations (like the FAR) require specific justifications for sole-source awards, often citing reasons such as only one responsible source being available, urgent and compelling needs, or specific follow-on requirements. Without access to the contract file or justification documentation, the precise reason remains unknown, but it implies a rationale existed within the DoD's procurement framework.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HC102816R0024

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: ONE MICROSOFT WAY, REDMOND, WA, 98052

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $28,411,361

Exercised Options: $28,411,361

Current Obligation: $28,411,361

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HC102817D0001

IDV Type: IDC

Timeline