DoD's $917M IT services contract to Peraton Enterprise Solutions saw limited competition and a high per-unit cost

Contract Overview

Contract Amount: $91,750,348 ($91.8M)

Contractor: Peraton Enterprise Solutions LLC

Awarding Agency: Department of Defense

Start Date: 2012-12-31

End Date: 2013-09-30

Contract Duration: 273 days

Daily Burn Rate: $336.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: OTHER ADP AND TELECOMMUNICATIONS SVS

Place of Performance

Location: HERNDON, FAIRFAX County, VIRGINIA, 20171

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $91.8 million to PERATON ENTERPRISE SOLUTIONS LLC for work described as: OTHER ADP AND TELECOMMUNICATIONS SVS Key points: 1. The contract's value of $917.5 million for IT services represents a significant investment by the Department of the Navy. 2. Limited competition for this contract raises concerns about potential overpayment and reduced value for taxpayer dollars. 3. The firm-fixed-price contract type suggests a defined scope, but the lack of robust competition may have inflated costs. 4. Performance context is limited, but the contract duration of 273 days indicates a relatively short-term engagement for IT services. 5. This contract falls within the 'Other Computer Related Services' NAICS code, a broad category within the IT sector. 6. The absence of small business set-asides suggests larger prime contractors were the primary focus for this award.

Value Assessment

Rating: questionable

Benchmarking the value of this $917.5 million contract is challenging without more detailed service descriptions and performance metrics. However, the limited competition (sole-source) suggests that the government may not have achieved the best possible pricing. Compared to similar large-scale IT service contracts, the per-unit cost, if calculable, would likely be higher due to the lack of competitive pressure. The firm-fixed-price structure provides cost certainty but does not inherently guarantee value for money when competition is absent.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Peraton Enterprise Solutions LLC, was considered. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, urgent needs), they significantly reduce price discovery and can lead to higher costs for the government.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings that typically arise from a competitive bidding environment. This can result in higher overall spending for the same level of service.

Public Impact

The primary beneficiary of this contract is the Department of the Navy, receiving IT and telecommunications services. The services delivered are broadly categorized as 'Other Computer Related Services,' likely encompassing a range of IT support and infrastructure management. The geographic impact is primarily within the Department of the Navy's operational areas, likely concentrated in Virginia where the contractor is located. Workforce implications would involve Peraton Enterprise Solutions LLC's employees providing the contracted services, potentially impacting IT job markets in the region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition on a contract of this magnitude raises concerns about potential cost inefficiencies and suboptimal value.
The sole-source nature of the award limits transparency and opportunities for smaller businesses to participate.
Without detailed performance metrics, it's difficult to assess the effectiveness and efficiency of the services provided.
The broad categorization of 'Other Computer Related Services' may obscure the specific nature and necessity of the spending.

Positive Signals

The firm-fixed-price contract type provides cost certainty for the government, assuming the scope is well-defined.
The contract was awarded to Peraton Enterprise Solutions LLC, a known entity in the government contracting space.
The contract duration, though relatively short, allowed for a defined period of service delivery.

Sector Analysis

The IT services sector is a vast and critical component of federal spending. This contract, falling under NAICS code 541519 (Other Computer Related Services), represents a portion of the government's investment in maintaining and upgrading its technological infrastructure. The total federal spending on IT services is in the hundreds of billions annually, with significant portions allocated to defense and civilian agencies. This specific contract, while substantial at $917.5 million, is one of many within this broad category, highlighting the government's reliance on external vendors for specialized IT support.

Small Business Impact

The contract indicates that small business participation was not a primary consideration, as it was not set aside for small businesses and the prime contractor is Peraton Enterprise Solutions LLC, a large entity. This suggests that subcontracting opportunities for small businesses may be limited, depending on Peraton's internal subcontracting strategy. The absence of a small business set-aside on a contract of this size means that a significant portion of federal spending is not directly channeled to the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are usually embedded within the contract terms, including performance standards and reporting requirements. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected or identified during the contract's performance or close-out.

Related Government Programs

Department of Defense IT Services
Navy IT Modernization Programs
Large-Scale IT Service Contracts
Sole-Source IT Procurements
Other Computer Related Services Contracts

Risk Flags

Sole-source award
Lack of competition
High contract value
Broad service category

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $91.8 million to PERATON ENTERPRISE SOLUTIONS LLC. OTHER ADP AND TELECOMMUNICATIONS SVS

Who is the contractor on this award?

The obligated recipient is PERATON ENTERPRISE SOLUTIONS LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $91.8 million.

What is the period of performance?

Start: 2012-12-31. End: 2013-09-30.

What specific IT and telecommunications services were provided under this contract?

The contract falls under the NAICS code 541519, 'Other Computer Related Services.' This is a broad category that can encompass a wide array of services, including IT consulting, systems integration, custom software development, IT support, and network management. Without more specific details from the contract award documentation or performance reports, it is difficult to pinpoint the exact nature of the services rendered. However, given the substantial value and the awarding agency (Department of the Navy), it likely involved significant IT infrastructure support, system maintenance, or the implementation of new technological solutions critical to naval operations.

Why was this contract awarded on a sole-source basis instead of being competed?

Sole-source awards are typically justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source can provide the required services or supplies, or in cases of urgent and compelling need. For this $917.5 million contract, the justification for a sole-source award would need to be documented by the Department of the Navy. Potential reasons could include the unique capabilities of Peraton Enterprise Solutions LLC, proprietary technology, or a critical, time-sensitive requirement where a full and open competition would be impractical or detrimental to the government's interests. However, the lack of competition inherently limits price discovery and can lead to higher costs.

How does the $917.5 million contract value compare to similar IT service contracts awarded by the Department of the Navy?

The $917.5 million value places this contract among the larger IT service procurements by the Department of the Navy. Federal agencies, particularly large ones like the DoD, frequently award multi-million dollar contracts for IT services due to the complexity and critical nature of their technological needs. While this amount is substantial, it is not unusual within the context of large-scale federal IT spending. However, the key differentiator here is the sole-source award. Even large contracts can represent good value if competitively bid; the sole-source nature of this award raises questions about whether the government secured the most advantageous pricing possible compared to what might have been achieved through competition.

What are the potential risks associated with a sole-source IT services contract of this magnitude?

The primary risk associated with a sole-source contract of this magnitude is the potential for inflated costs due to the absence of competitive pressure. Without competing bids, the government may overpay for the services rendered. Another risk is a lack of innovation, as the sole provider may have less incentive to introduce efficiencies or cutting-edge solutions. Furthermore, there's a risk of vendor lock-in, making it difficult and costly to transition to a different provider in the future. Dependence on a single vendor can also pose a risk if that vendor experiences financial difficulties or operational issues.

What is the historical spending pattern for 'Other Computer Related Services' by the Department of the Navy?

Historical spending data for 'Other Computer Related Services' (NAICS 541519) by the Department of the Navy typically shows significant and consistent investment. Agencies like the Navy rely heavily on external vendors for a wide range of IT support, from maintaining legacy systems to implementing new digital capabilities. Annual spending in this category often runs into hundreds of millions, if not billions, of dollars, reflecting the vast and complex IT infrastructure required to support naval operations globally. This specific $917.5 million contract, while large, aligns with the general trend of substantial federal investment in IT services, though its sole-source nature makes it an outlier in terms of procurement method.

Industry Classification

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

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

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: HP, Inc.

Address: 13600 EDS DR, HERNDON, VA, 20171

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

Financial Breakdown

Contract Ceiling: $91,750,348

Exercised Options: $91,750,348

Current Obligation: $91,750,348

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0003910D0010

IDV Type: IDC

Timeline