DoD's $39.7M OCMO Services Reform Support contract awarded to McKinsey & Company without competition

Contract Overview

Contract Amount: $39,708,646 ($39.7M)

Contractor: Mckinsey & Company, Inc. Washington D.C.

Awarding Agency: Department of Defense

Start Date: 2020-04-14

End Date: 2021-10-13

Contract Duration: 547 days

Daily Burn Rate: $72.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: OCMO SERVICES REFORM SUPPORT

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20036

State: District of Columbia Government Spending

Plain-Language Summary

Department of Defense obligated $39.7 million to MCKINSEY & COMPANY, INC. WASHINGTON D.C. for work described as: OCMO SERVICES REFORM SUPPORT Key points: 1. Contract awarded on a sole-source basis, raising questions about potential cost savings from competition. 2. The contract duration of 547 days suggests a significant, ongoing need for reform support. 3. Awarded to a single, well-known consulting firm, indicating a potential lack of broad market engagement. 4. The fixed-price contract type aims to control costs, but the absence of competition limits price benchmarking. 5. Performance is concentrated in Washington D.C., suggesting a focus on headquarters-level reform initiatives. 6. The 'All Other Professional, Scientific, and Technical Services' NAICS code is broad, making direct comparisons difficult.

Value Assessment

Rating: questionable

The contract's value of $39.7 million for 547 days of service, awarded to McKinsey & Company, warrants scrutiny due to the lack of competitive bidding. Without a competitive process, it is difficult to benchmark the pricing against market rates or assess if the government received the best possible value. While McKinsey is a reputable firm, the absence of competition prevents a definitive value-for-money assessment. The fixed-price nature of the contract provides some cost certainty, but the overall fairness of the price cannot be independently verified.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of Defense did not solicit bids from multiple potential contractors. This approach bypasses the standard competitive procurement process, which typically involves advertising the requirement and evaluating offers from various companies. The decision to award solely to McKinsey & Company, Inc. suggests that the agency may have justified this approach under specific exceptions to full and open competition, such as the availability of unique capabilities or urgent needs. However, the lack of competition limits the government's ability to explore a wider range of solutions and potentially secure more favorable pricing.

Taxpayer Impact: Sole-source awards can potentially lead to higher costs for taxpayers as the absence of competition reduces the incentive for contractors to offer their lowest possible prices. It also limits opportunities for other qualified firms to secure government contracts.

Public Impact

The primary beneficiary is the Department of Defense's Office of the Chief Management Officer (OCMO), which receives support for its reform initiatives. The services delivered are professional, scientific, and technical in nature, aimed at improving organizational efficiency and effectiveness. The geographic impact is concentrated in Washington D.C., where the headquarters services are located. The contract supports a specific reform agenda, potentially impacting defense management practices and workforce strategies.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits transparency and potential cost savings.
Broad NAICS code makes it difficult to assess the specificity and necessity of services.
High dollar value for a single contractor without competition raises value-for-money concerns.

Positive Signals

Awarded to a well-established firm with a known track record in consulting.
Fixed-price contract type provides cost predictability.
Contract duration suggests a sustained effort towards achieving reform objectives.

Sector Analysis

This contract falls within the professional, scientific, and technical services sector, a significant area of federal spending. The market for management and consulting services is highly competitive, with numerous firms offering expertise in organizational reform and strategic planning. Federal agencies frequently engage consulting firms to address complex challenges, implement new policies, and improve operational efficiency. Benchmarking this contract's value is challenging without competitive data, but similar large-scale reform support contracts can range from tens to hundreds of millions of dollars, depending on scope and duration.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the contractor, McKinsey & Company, Inc., is a large, established firm, making it unlikely to be a small business. There is no explicit information provided regarding subcontracting plans for small businesses. Therefore, this award does not directly benefit the small business ecosystem through set-asides or prime contracting opportunities.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's internal procurement and program management offices, specifically within the Washington Headquarters Services and the OCMO. As a sole-source award, it may have undergone specific justification and approval processes. Transparency is limited due to the lack of a competitive bidding process. Inspector General jurisdiction would apply if any allegations of fraud, waste, or abuse arise during the contract's performance.

Related Government Programs

Management and Consulting Services
Defense Management Reform Initiatives
Professional and Technical Services
Headquarters Operations Support

Risk Flags

Sole-source award
Lack of competition
High contract value without competitive benchmark

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $39.7 million to MCKINSEY & COMPANY, INC. WASHINGTON D.C.. OCMO SERVICES REFORM SUPPORT

Who is the contractor on this award?

The obligated recipient is MCKINSEY & COMPANY, INC. WASHINGTON D.C..

Which agency awarded this contract?

Awarding agency: Department of Defense (Washington Headquarters Services).

What is the total obligated amount?

The obligated amount is $39.7 million.

What is the period of performance?

Start: 2020-04-14. End: 2021-10-13.

What specific reform initiatives is McKinsey & Company supporting under this contract?

The contract, titled 'OCMO SERVICES REFORM SUPPORT,' indicates that McKinsey & Company is providing professional, scientific, and technical services to support reform efforts within the Department of Defense's Chief Management Officer (OCMO) organization. While the specific details of these reform initiatives are not publicly elaborated in the provided data, such contracts typically involve areas like improving financial management, streamlining processes, enhancing organizational structure, implementing new technologies, or driving strategic change. The OCMO's mandate is to improve the efficiency and effectiveness of DoD business operations, so McKinsey's support likely focuses on achieving these high-level objectives through analysis, strategy development, and implementation guidance.

How does the $39.7 million contract value compare to similar reform support contracts within the DoD?

Directly comparing the $39.7 million value of this sole-source contract to similar reform support contracts within the DoD is challenging without access to a broader dataset of competitive bids and awarded contracts for comparable services. However, large consulting engagements for major federal agencies, particularly those involving significant organizational reform or strategic overhauls, can often reach tens of millions of dollars. The duration of 547 days (approximately 1.5 years) suggests a substantial and ongoing effort. While the price itself isn't inherently unreasonable for such a scope, the lack of competition prevents a definitive assessment of whether this represents optimal value compared to what could have been achieved through a competitive process.

What are the primary risks associated with awarding a contract of this magnitude on a sole-source basis?

The primary risks associated with awarding a contract of this magnitude ($39.7 million) on a sole-source basis are: 1. **Lack of Best Value:** Without competition, the government may not achieve the best possible price or the most innovative solution available in the market. 2. **Potential for Overpricing:** The absence of competitive pressure can lead to higher costs than might be incurred in a competitive environment. 3. **Limited Transparency:** Sole-source awards can reduce transparency in the procurement process, making it harder for the public and oversight bodies to verify fairness and efficiency. 4. **Contractor Lock-in:** The agency may become overly reliant on a single contractor, potentially limiting future flexibility. 5. **Missed Opportunities:** Other qualified firms are denied the opportunity to compete and demonstrate their capabilities.

What is the track record of McKinsey & Company with the Department of Defense?

McKinsey & Company, Inc. has a significant and long-standing track record of contracting with the Department of Defense and other federal agencies. They are a globally recognized management consulting firm known for advising on strategy, operations, and organizational transformation. Their work with the DoD often involves complex challenges related to defense modernization, efficiency improvements, and policy implementation. While specific contract details vary, McKinsey has frequently been awarded large-value contracts across various defense components for high-level advisory and support services. Their extensive experience suggests a deep understanding of the defense environment, though the sole-source nature of this particular award warrants scrutiny regarding competition.

How does the fixed-price contract type influence the risk and value proposition for this DoD contract?

A Firm Fixed Price (FFP) contract type, as used here, shifts most of the risk from the government to the contractor (McKinsey & Company). The contractor is obligated to complete the work for the agreed-upon price, regardless of their actual costs. This provides the government with cost certainty, as the total expenditure is known upfront. For the value proposition, FFP is generally preferred when the scope of work is well-defined and the risks are manageable. In this case, it aims to ensure that the $39.7 million budget is adhered to. However, the effectiveness of the FFP in ensuring 'value' is diminished by the sole-source nature of the award; while the price is fixed, there's no assurance it's the *best* fixed price achievable through competition.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Other Professional, Scientific, and Technical Services › All Other Professional, Scientific, and Technical Services

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Mckinsey & Company, Inc.

Address: 1200 19TH ST NW STE 1000, WASHINGTON, DC, 20036

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

Financial Breakdown

Contract Ceiling: $39,708,646

Exercised Options: $39,708,646

Current Obligation: $39,708,646

Actual Outlays: $1,836,557

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline