Navy & Marine Corps Financial Audits: $338.6M Contract Awarded to Ernst & Young LLP

Contract Overview

Contract Amount: $338,646,280 ($338.6M)

Contractor: Ernst & Young LLP

Awarding Agency: Department of Defense

Start Date: 2021-01-01

End Date: 2026-12-31

Contract Duration: 2,190 days

Daily Burn Rate: $154.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: LABOR HOURS

Sector: Other

Official Description: THE DEPARTMENT OF THE NAVY AND THE UNITED STATES MARINE CORPS FINANCIAL STATEMENT AUDITS FOR FISCAL YEARS 2021-2025

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20005

State: District of Columbia Government Spending

Plain-Language Summary

Department of Defense obligated $338.6 million to ERNST & YOUNG LLP for work described as: THE DEPARTMENT OF THE NAVY AND THE UNITED STATES MARINE CORPS FINANCIAL STATEMENT AUDITS FOR FISCAL YEARS 2021-2025 Key points: 1. The contract covers financial statement audits for FY21-FY25, a critical period for financial accountability. 2. Ernst & Young LLP, a major accounting firm, is the awardee. 3. The contract was awarded under full and open competition, suggesting a competitive pricing process. 4. The sector is professional services, specifically accounting and auditing, within the defense domain.

Value Assessment

Rating: good

The contract value of $338.6M over six years appears reasonable for comprehensive financial statement audits of two major military branches. Benchmarking against similar large-scale government audit contracts would provide further context.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

Awarded under full and open competition, this method likely fostered competitive bidding among qualified firms, potentially leading to a more favorable price for the government. The use of delivery orders allows for flexibility in tasking and payment.

Taxpayer Impact: The competitive award process is expected to ensure taxpayer funds are used efficiently for essential audit services.

Public Impact

Ensures financial transparency and accountability for the Department of the Navy and Marine Corps. Supports the integrity of military financial reporting and compliance with federal regulations. Provides independent assurance to Congress and the public on the stewardship of defense funds. Facilitates identification of financial risks and control weaknesses within the audited entities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for scope creep in audit requirements over the five-year period.
Reliance on a single contractor for critical audit functions.
Ensuring consistent audit quality across all delivery orders.

Positive Signals

Awarded through full and open competition.
Experienced and reputable contractor selected.
Long-term contract provides stability for audit continuity.

Sector Analysis

This contract falls within the professional services sector, specifically accounting and auditing, for the Department of Defense. Spending in this area is crucial for maintaining financial integrity and compliance within large government agencies.

Small Business Impact

The contract was awarded under full and open competition, and there is no indication of specific set-asides for small businesses. Large accounting firms typically dominate these types of large-scale government audit contracts.

Oversight & Accountability

The Department of Defense's Defense Finance and Accounting Service (DFAS) is the primary oversight agency. Regular reporting and performance reviews will be critical to ensure the contractor meets audit objectives and maintains quality standards.

Related Government Programs

Offices of Certified Public Accountants
Department of Defense Contracting
Defense Finance and Accounting Service Programs

Risk Flags

Potential for audit scope expansion beyond initial estimates.
Ensuring consistent quality and objectivity from a single large firm.
Contractor performance risk over a multi-year engagement.
Dependency on key personnel within the audit team.
Effectiveness of government oversight in managing complex audits.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $338.6 million to ERNST & YOUNG LLP. THE DEPARTMENT OF THE NAVY AND THE UNITED STATES MARINE CORPS FINANCIAL STATEMENT AUDITS FOR FISCAL YEARS 2021-2025

Who is the contractor on this award?

The obligated recipient is ERNST & YOUNG LLP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Finance and Accounting Service).

What is the total obligated amount?

The obligated amount is $338.6 million.

What is the period of performance?

Start: 2021-01-01. End: 2026-12-31.

What specific audit standards and methodologies will be employed by Ernst & Young LLP to ensure comprehensive coverage of the Navy and Marine Corps' financial statements?

The contract likely specifies adherence to Generally Accepted Auditing Standards (GAAS) and Government Auditing Standards (GAS). Ernst & Young will employ risk-based audit approaches, including testing internal controls, substantive testing of account balances, and analytical procedures. The specific methodologies will be detailed in the audit plan for each fiscal year, subject to review and approval by the Department of Defense.

How will the government ensure that the labor hours charged under this contract are reasonable and reflect efficient audit work, given the potential for cost overruns?

Oversight by the Defense Contract Audit Agency (DCAA) and the contracting officer's representatives (CORs) is crucial. The government will monitor labor hour utilization against planned budgets and task requirements. Regular progress reports, invoice reviews, and potential audits of contractor costs will help ensure reasonableness and efficiency. Performance metrics and penalties for inefficiency could also be incorporated.

What mechanisms are in place to address potential conflicts of interest or maintain auditor independence throughout the six-year contract period?

Government contracts typically include clauses requiring auditor independence and prohibiting certain non-audit services that could impair independence. Ernst & Young must adhere to professional ethical standards and government regulations regarding independence. The contracting officer will monitor for any potential conflicts and require the contractor to address them promptly, potentially including replacement of personnel if necessary.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Accounting, Tax Preparation, Bookkeeping, and Payroll Services › Offices of Certified Public Accountants

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: HQ042320Q0009

Offers Received: 1

Pricing Type: LABOR HOURS (Z)

Evaluated Preference: NONE

Contractor Details

Address: 1 MANHATTAN WEST, NEW YORK, NY, 10001

Business Categories: Category Business, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $349,076,400

Exercised Options: $338,978,268

Current Obligation: $338,646,280

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Parent Contract

Parent Award PIID: GS00F290CA

IDV Type: FSS

Timeline