DoD's $24.7M software purchase for transportation systems lacked competition, raising value concerns

Contract Overview

Contract Amount: $24,696,349 ($24.7M)

Contractor: Software AG Government Solutions, Inc.

Awarding Agency: Department of Defense

Start Date: 2013-07-15

End Date: 2018-09-30

Contract Duration: 1,903 days

Daily Burn Rate: $13.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: IGF::OT::IGF AGILE TRANSPORTATION FOR THE 21STY CENTURY (AT21)&DEFENSE PERSONAL PROPERTY SYSTEM (DPS) PERPETUAL FLEX LICENSE AND MAINTENANCE

Place of Performance

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

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $24.7 million to SOFTWARE AG GOVERNMENT SOLUTIONS, INC. for work described as: IGF::OT::IGF AGILE TRANSPORTATION FOR THE 21STY CENTURY (AT21)&DEFENSE PERSONAL PROPERTY SYSTEM (DPS) PERPETUAL FLEX LICENSE AND MAINTENANCE Key points: 1. The contract was awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. A significant portion of the contract value was for perpetual licenses, which may not align with evolving software needs. 3. The duration of the contract (over 5 years) could lead to vendor lock-in and reduced flexibility. 4. Performance was tied to a firm-fixed-price structure, shifting risk to the government for cost overruns. 5. The specific software's role in critical defense transportation systems warrants scrutiny of its long-term value and support. 6. Lack of competitive bidding suggests potential missed opportunities for cost savings through market-based pricing.

Value Assessment

Rating: questionable

The $24.7 million awarded for software licenses and maintenance represents a substantial investment. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar government contracts. The inclusion of perpetual licenses, rather than subscription-based models, may also represent a less flexible and potentially more expensive long-term approach, especially if the software's utility diminishes over time. The firm-fixed-price nature further complicates value assessment, as the government bears the risk of cost increases.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not competed. This approach is typically reserved for situations where only one vendor can provide the required goods or services, often due to proprietary technology or unique capabilities. The lack of competition means that the government did not benefit from the price reductions and innovation that typically arise from a competitive bidding process.

Taxpayer Impact: Taxpayers may have paid a premium for this software due to the absence of competitive pressure. The government missed an opportunity to leverage market forces to secure a more favorable price and potentially better terms.

Public Impact

Military personnel and their families benefit from the efficient movement of personal property and household goods. The software supports critical logistics and transportation operations within the Department of Defense. Geographic impact is global, as USTRANSCOM manages worldwide personnel and cargo movements. Workforce implications include reliance on this system for planning, execution, and tracking of defense transportation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and may lead to overpayment.
Perpetual license model might become outdated or less cost-effective over time.
Firm-fixed-price contract shifts cost overrun risk to the government.
Long contract duration (over 5 years) could result in vendor lock-in.
Lack of transparency in the procurement process due to sole-source award.

Positive Signals

Software supports critical defense transportation and logistics functions.
Contract addresses a specific need for the Defense Personal Property System.
The vendor is a known entity in government IT solutions.

Sector Analysis

This contract falls within the broader IT and software sector, specifically focusing on enterprise resource planning and logistics management solutions for government agencies. The market for defense logistics software is specialized, often dominated by a few key players due to security requirements and integration complexities. Comparable spending benchmarks are difficult to establish without competitive data, but significant investments in defense IT are common, with a trend towards cloud-based and subscription models for greater flexibility and cost control.

Small Business Impact

There is no indication that this contract involved small business set-asides or subcontracting opportunities. As a sole-source award to a large software vendor, it is unlikely to have directly benefited the small business ecosystem. Further investigation would be needed to determine if any small businesses were indirectly involved as subcontractors, though this is not explicitly stated.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management offices, as well as the relevant Inspector General. Transparency is limited due to the sole-source nature of the award. Accountability would be measured by the software's performance against its intended use in supporting defense transportation systems, though the lack of competition makes cost accountability more challenging to assess.

Related Government Programs

Defense Personal Property System (DPS)
USTRANSCOM Logistics IT Modernization
Defense Logistics Agency (DLA) Software Procurement
General Services Administration (GSA) IT Schedule Contracts

Risk Flags

Sole-source award lacks competition
Potential for overpayment due to non-competitive pricing
Risk of software obsolescence with perpetual licenses
Limited transparency in procurement process
Firm-fixed-price shifts cost risk to government

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $24.7 million to SOFTWARE AG GOVERNMENT SOLUTIONS, INC.. IGF::OT::IGF AGILE TRANSPORTATION FOR THE 21STY CENTURY (AT21)&DEFENSE PERSONAL PROPERTY SYSTEM (DPS) PERPETUAL FLEX LICENSE AND MAINTENANCE

Who is the contractor on this award?

The obligated recipient is SOFTWARE AG GOVERNMENT SOLUTIONS, INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (USTRANSCOM).

What is the total obligated amount?

The obligated amount is $24.7 million.

What is the period of performance?

Start: 2013-07-15. End: 2018-09-30.

What was the specific justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was 'NOT COMPETED'. Typically, sole-source awards are justified under specific circumstances outlined in federal acquisition regulations (FAR). For this contract, the justification likely stemmed from the proprietary nature of the software, the need for specialized expertise only available from Software AG Government Solutions, Inc., or a critical, time-sensitive requirement where competition was deemed impractical. Without the specific justification document, the precise reason remains speculative, but it generally implies a lack of viable alternatives or a unique capability held by the awarded contractor that met an essential government need.

How does the $24.7 million cost compare to similar software procurements for logistics and transportation within the DoD or other federal agencies?

Directly comparing the $24.7 million cost is challenging without knowing the specific functionalities and scope of the 'AGILE TRANSPORTATION FOR THE 21STY CENTURY (AT21)' and 'DEFENSE PERSONAL PROPERTY SYSTEM (DPS)' software. However, large-scale IT procurements for defense logistics can range from tens to hundreds of millions of dollars, depending on complexity, user base, and duration. Given this was a sole-source award for perpetual licenses and maintenance over approximately five years, the cost per year averages around $5 million. This figure is substantial but not necessarily out of line for specialized defense systems. A competitive procurement might have yielded a lower price, but the absence of competition makes a definitive value comparison impossible based solely on the provided data.

What are the potential risks associated with a firm-fixed-price contract for perpetual software licenses and maintenance?

A firm-fixed-price (FFP) contract, while aiming to provide cost certainty, can present risks for the government in a perpetual software license and maintenance scenario. The primary risk is that the government pays a fixed amount upfront for licenses that may become obsolete or less valuable over time, especially if the software's underlying technology or the agency's needs evolve rapidly. Maintenance costs are also fixed, meaning the government pays the same amount regardless of the actual support required. If the vendor's support costs are lower than anticipated, the vendor profits more, and conversely, if unforeseen issues arise, the vendor might be incentivized to provide minimal support to maintain profitability. This contrasts with cost-reimbursement contracts where the government pays actual costs incurred, allowing for closer scrutiny of vendor expenses.

What is the expected lifespan and upgrade path for the perpetual licenses purchased under this contract?

The provided data does not specify the expected lifespan or the upgrade path for the perpetual licenses. Perpetual licenses typically grant the right to use the software indefinitely, but they often come with separate annual maintenance and support agreements. These agreements usually cover bug fixes, security patches, and sometimes minor version updates. Major upgrades or new versions often require additional purchases or are included in higher tiers of maintenance. The 'AT21' and 'DPS' systems are critical for defense operations, suggesting a need for ongoing updates to maintain functionality and security. The lack of detail on upgrade policies is a gap in understanding the long-term value and adaptability of the purchased software.

How does this contract align with current trends in government IT procurement, such as cloud migration and subscription-based services?

This contract, awarded in 2013 with an end date in 2018, predates the significant government-wide push towards cloud computing and subscription-based Software-as-a-Service (SaaS) models that gained momentum in later years. The purchase of perpetual licenses suggests a traditional on-premises software acquisition approach. While perpetual licenses offer long-term ownership, they often lack the scalability, flexibility, and potentially lower upfront costs associated with cloud and subscription models. Modern IT procurement trends favor services that can be scaled up or down as needed, with continuous updates and predictable operational expenses, which are characteristic of SaaS and cloud-based solutions rather than large, upfront perpetual license purchases.

Industry Classification

NAICS: Wholesale Trade › Professional and Commercial Equipment and Supplies Merchant Wholesalers › Computer and Computer Peripheral Equipment and Software Merchant Wholesalers

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HTC71113RD019

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Software AG (UEI: 319321147)

Address: 11700 PLAZA AMERICA DR STE 230, RESTON, VA, 20190

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

Financial Breakdown

Contract Ceiling: $24,696,349

Exercised Options: $24,696,349

Current Obligation: $24,696,349

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Timeline