DoD's $10M Microsoft contract for computer systems design services awarded without competition

Contract Overview

Contract Amount: $10,092,368 ($10.1M)

Contractor: Microsoft Corporation

Awarding Agency: Department of Defense

Start Date: 2023-09-24

End Date: 2026-09-23

Contract Duration: 1,095 days

Daily Burn Rate: $9.2K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: CNATRA UNIFIED & MCS

Place of Performance

Location: CORPUS CHRISTI, NUECES County, TEXAS, 78419

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $10.1 million to MICROSOFT CORPORATION for work described as: CNATRA UNIFIED & MCS Key points: 1. Contract awarded to a single vendor, raising questions about competitive pricing. 2. The fixed-price contract structure aims to control costs but requires careful monitoring. 3. Lack of competition may limit opportunities for other vendors and innovation. 4. The contract duration of three years suggests a need for sustained IT support. 5. Awarded by the Defense Information Systems Agency, indicating critical IT infrastructure needs. 6. The vendor, Microsoft Corporation, is a major player in the IT sector.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of competitive bids. Without comparison to other offers, it's difficult to ascertain if the firm fixed price represents a fair market value. The absence of competition suggests potential overpayment or suboptimal resource allocation. Further analysis would require access to internal cost data or comparable sole-source procurements.

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, often due to proprietary technology or urgent needs. The lack of competition means taxpayers did not benefit from potential price reductions that could arise from a bidding process.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as there is no market pressure to drive down costs. This limits the government's ability to secure the best possible value.

Public Impact

The Department of Defense benefits from sustained computer systems design services. This contract supports critical IT infrastructure and operations within the agency. The services are delivered in Texas, impacting the local economy and workforce. The contract ensures the availability of essential technology solutions for military operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices.
Sole-source awards reduce transparency and accountability in spending.
Potential for vendor lock-in with proprietary solutions.

Positive Signals

Award to a reputable and established technology provider.
Firm fixed-price contract can help manage budget predictability.
Long-term contract duration suggests a strategic alignment with agency needs.

Sector Analysis

This contract falls within the Computer Systems Design Services sector, a critical component of the IT industry. This sector provides expertise in designing, developing, and implementing computer systems. The market is characterized by major players like Microsoft, offering a wide range of software and cloud solutions. Government spending in this area is substantial, supporting national security and operational efficiency.

Small Business Impact

This contract does not appear to have a small business set-aside. The award to Microsoft Corporation, a large enterprise, suggests that subcontracting opportunities for small businesses may be limited unless explicitly mandated. The absence of a set-aside means small businesses did not have a direct opportunity to compete for this specific award.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Information Systems Agency's contracting officers and program managers. Accountability measures are inherent in the firm fixed-price structure, which obligates the contractor to deliver services within the agreed-upon cost. Transparency could be enhanced through public reporting of contract performance metrics and justifications for the sole-source award.

Related Government Programs

Defense Information Systems Agency IT Services
Department of Defense Computer Systems Design
Microsoft Software and Services Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for price inflation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $10.1 million to MICROSOFT CORPORATION. CNATRA UNIFIED & MCS

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 $10.1 million.

What is the period of performance?

Start: 2023-09-24. End: 2026-09-23.

What is the track record of Microsoft Corporation in fulfilling sole-source IT contracts with the Department of Defense?

Microsoft Corporation has a long-standing relationship with the Department of Defense, providing a wide array of software, cloud, and IT services. While many of their contracts are competed, sole-source awards do occur, often related to enterprise-wide licensing agreements, critical software updates, or specialized support for their proprietary systems. Analyzing past sole-source awards to Microsoft within DoD would involve reviewing justifications for necessity, pricing structures, and performance outcomes. Generally, Microsoft's track record is strong due to its market dominance and established support infrastructure, but the absence of competition in sole-source awards necessitates rigorous internal review by the agency to ensure fair pricing and value.

How does the $10 million value of this contract compare to similar computer systems design services procured by the DoD?

Comparing the $10 million value of this contract requires context regarding the scope and duration of services. For computer systems design services, $10 million over three years (approximately $3.33 million annually) is a moderate-sized contract. The DoD procures a vast range of IT services, from small, specialized projects to massive enterprise-wide solutions. Without knowing the specific deliverables (e.g., system architecture, software development, integration, maintenance), a direct comparison is difficult. However, given the sole-source nature and the provider (Microsoft), this likely represents a significant investment in core IT infrastructure or specialized support for Microsoft-centric environments within DISA. Larger, competed contracts for similar services can range from tens to hundreds of millions of dollars.

What are the primary risks associated with awarding a $10 million IT contract on a sole-source basis?

The primary risks associated with awarding a $10 million IT contract on a sole-source basis include: 1. **Price Inflation:** Without competitive bidding, the government may pay a higher price than if multiple vendors had vied for the contract. 2. **Limited Innovation:** A sole-source award can stifle innovation by not exposing the agency to alternative solutions or approaches offered by other vendors. 3. **Vendor Lock-in:** The agency may become overly reliant on the sole provider, making future transitions to different systems or vendors more difficult and costly. 4. **Reduced Accountability:** While a fixed-price contract provides some cost certainty, the lack of competition can reduce the vendor's incentive to optimize performance or efficiency beyond the contract's minimum requirements. 5. **Missed Opportunities:** The government misses the opportunity to foster competition and potentially discover emerging technologies or more cost-effective solutions from a broader market.

What does the firm fixed-price (FFP) contract type imply for program effectiveness and cost control?

A Firm Fixed-Price (FFP) contract type implies that the contractor, Microsoft Corporation, bears the primary risk for cost overruns. This means the agreed-upon price is not subject to adjustment based on the contractor's actual costs incurred in performing the work. For program effectiveness, this structure incentivizes the contractor to manage resources efficiently to maximize profit. For cost control, it provides budget certainty for the government, as the total cost is known upfront. However, the effectiveness hinges on a well-defined scope of work; if the scope changes significantly, contract modifications may be necessary, potentially negating some of the FFP benefits. The government's role shifts to ensuring the contractor meets the defined performance standards within the fixed price.

How has federal spending on computer systems design services (NAICS 541512) evolved over the past five years, and where does this contract fit?

Federal spending on Computer Systems Design Services (NAICS 541512) has shown a consistent upward trend over the past five years, driven by the increasing digitization of government operations, modernization efforts, and cybersecurity needs across various agencies. This sector consistently ranks among the top IT service procurements. This specific $10 million contract, awarded by the Defense Information Systems Agency (DISA) within the Department of Defense, represents a single, albeit significant, component of this broader spending category. While the total federal outlay for NAICS 541512 can reach billions annually, this contract is a specific instance of a sole-source award for essential IT support, fitting into the larger narrative of agencies investing in maintaining and upgrading their complex technological infrastructures.

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: $13,920,254

Exercised Options: $13,920,254

Current Obligation: $10,092,368

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HC102817D0001

IDV Type: IDC

Timeline