DoD's $26.9M accounting services contract with KPMG LLP shows fair value, but limited competition raises concerns

Contract Overview

Contract Amount: $26,923,975 ($26.9M)

Contractor: Kpmg LLP

Awarding Agency: Department of Defense

Start Date: 2024-02-01

End Date: 2026-01-31

Contract Duration: 730 days

Daily Burn Rate: $36.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: LABOR BASE YEAR

Place of Performance

Location: MCLEAN, FAIRFAX County, VIRGINIA, 22102

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $26.9 million to KPMG LLP for work described as: LABOR BASE YEAR Key points: 1. The contract's value appears reasonable given the scope of accounting services required. 2. Competition was limited, potentially impacting price discovery and overall value for taxpayers. 3. The contractor, KPMG LLP, has a significant presence in federal contracting, suggesting experience. 4. Performance context is crucial; the effectiveness of these accounting services needs ongoing monitoring. 5. This contract falls within the professional services sector, specifically accounting and auditing. 6. The fixed-fee structure provides some cost certainty, but the 'cost plus' element warrants scrutiny.

Value Assessment

Rating: fair

The contract's base year value of approximately $26.9 million for accounting services appears within a reasonable range for a large federal agency like the Department of the Navy. Benchmarking against similar large-scale accounting support contracts awarded to major firms suggests this pricing is not excessively high. However, the 'cost plus fixed fee' structure means the final cost could exceed the base year amount, necessitating careful oversight to ensure costs remain controlled and justified. Without detailed task breakdowns and performance metrics, a definitive value assessment is challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. However, only three bids were received, which is a relatively low number for a contract of this magnitude and scope. This limited number of bidders may suggest a specialized service area or a high barrier to entry for potential competitors. While competition existed, the low bidder count could have implications for the government's ability to secure the most competitive pricing.

Taxpayer Impact: A low number of bidders, even under full and open competition, can limit the downward pressure on pricing, potentially resulting in higher costs for taxpayers than if more firms had competed.

Public Impact

The Department of the Navy benefits from essential accounting and financial management support, ensuring compliance and operational efficiency. Services delivered include a range of accounting functions critical for federal financial reporting and auditing. The geographic impact is primarily within the Department of Defense's operational areas, likely supporting various naval installations. Workforce implications include the direct employment of accounting professionals by KPMG LLP and potential indirect impacts on government financial management staff.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition (3 bidders) may have restricted price negotiation leverage.
The 'cost plus' component of the contract type introduces potential for cost overruns if not tightly managed.
Lack of specific performance metrics in the provided data makes it difficult to assess efficiency and effectiveness.
The contract's duration (730 days) means potential for sustained cost increases over its term.

Positive Signals

Awarded under full and open competition, allowing for broad market participation.
KPMG LLP is a well-established firm with extensive experience in federal contracting.
The fixed-fee element provides a degree of cost predictability for the base year.
The contract addresses a critical function (accounting services) for a major federal agency.

Sector Analysis

This contract falls within the professional, scientific, and technical services sector, specifically the accounting and auditing services sub-sector. This is a significant area of federal spending, with agencies relying heavily on external expertise for complex financial management, compliance, and auditing functions. The market is dominated by large, established firms like KPMG, Deloitte, EY, and PwC, alongside specialized government contractors. Federal spending in this area often benchmarks against private sector rates but is influenced by unique government regulations and oversight requirements. The total federal spending on accounting and auditing services is in the billions annually.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a large contract awarded to a major firm, it is unlikely to involve significant direct subcontracting opportunities for small businesses unless specifically mandated or if KPMG identifies specialized needs. The primary impact on the small business ecosystem would be indirect, through the overall health of the professional services market and potential competition for future, smaller-scale contracts.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy contracting officers and program managers. The 'cost plus fixed fee' structure necessitates rigorous financial oversight to validate incurred costs and ensure the fixed fee remains appropriate. Transparency is generally maintained through contract award databases and reporting requirements. The Inspector General for the Department of Defense may have jurisdiction for audits and investigations related to potential fraud, waste, or abuse.

Related Government Programs

Department of Defense Financial Management
Federal Accounting Standards Advisory Board (FASAB)
Government Accountability Office (GAO) Audits
Professional Services Schedule (PSS)
Other Accounting Services Contracts

Risk Flags

Limited competition
Cost Plus contract type risk
Potential for cost overruns
Need for robust oversight

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $26.9 million to KPMG LLP. LABOR BASE YEAR

Who is the contractor on this award?

The obligated recipient is KPMG LLP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $26.9 million.

What is the period of performance?

Start: 2024-02-01. End: 2026-01-31.

What is KPMG LLP's track record with federal contracts, particularly within the Department of Defense?

KPMG LLP is a major federal contractor with a substantial history of awards across various agencies, including the Department of Defense. They frequently secure contracts for financial management, auditing, consulting, and IT services. Their track record generally indicates significant experience and capacity to handle large, complex federal requirements. However, like any large contractor, they may have faced past performance reviews or disputes on specific contracts. A deeper dive into their contract history, including past performance evaluations and any significant issues, would provide a more comprehensive understanding of their reliability for this specific accounting services requirement.

How does the pricing of this contract compare to similar accounting services contracts awarded by the Department of the Navy or other federal agencies?

Benchmarking the pricing of this $26.9 million base year contract requires comparing it against similar 'cost plus fixed fee' contracts for accounting services awarded to large, established firms by agencies of comparable size and complexity. Without access to detailed task order breakdowns, labor categories, and specific deliverables, a precise comparison is difficult. However, given the scale and the contractor's profile, the price appears to be within a plausible range for comprehensive federal accounting support. The 'cost plus' element introduces variability, making direct year-over-year or contract-to-contract comparisons less straightforward than fixed-price contracts. Further analysis would involve examining the average labor rates, overhead application, and the fixed fee percentage relative to total costs on comparable awards.

What are the primary risks associated with a 'Cost Plus Fixed Fee' (CPFF) contract for accounting services?

The primary risk with a CPFF contract is that the government may end up paying more than anticipated if the contractor's costs exceed initial estimates, even though the contractor's profit (the fixed fee) remains constant. This necessitates robust government oversight to scrutinize all claimed costs, ensuring they are reasonable, allocable, and allowable under the contract terms. For accounting services, risks include potential inefficiencies leading to higher labor hours, unexpected complexities requiring additional resources, or scope creep if not managed carefully. The contractor is incentivized to control costs to maximize their fee relative to actual costs, but the government bears the ultimate cost risk.

How effective are the current oversight mechanisms in place for this contract to ensure value for money and prevent cost overruns?

The effectiveness of oversight mechanisms depends heavily on the diligence of the Department of the Navy's contracting officers, contract specialists, and technical monitors. Key oversight activities should include regular reviews of contractor invoices and cost submissions, validation of labor hours and rates, monitoring of progress against milestones (if applicable), and proactive management of any potential scope changes. The presence of an Inspector General's office within the DoD provides an additional layer of accountability for detecting fraud, waste, or abuse. However, the adequacy of these mechanisms is often qualitative and relies on the resources and expertise dedicated to contract administration.

What has been the historical spending trend for similar accounting services within the Department of the Navy over the past five years?

Analyzing historical spending trends for accounting services within the Department of the Navy requires accessing detailed federal procurement data. Generally, spending in this category tends to be relatively stable, driven by ongoing operational needs and regulatory compliance requirements. However, significant shifts could occur due to major system implementations, changes in auditing standards, or reorganizations within the Navy. Without specific data, it's reasonable to assume consistent, substantial investment in financial management and accounting support. Increases might correlate with budget expansions or new compliance mandates, while decreases could reflect efficiency gains or shifts to internal resources.

Given the limited number of bidders (3), what strategies could the Department of the Navy employ in the future to encourage broader competition for similar contracts?

To encourage broader competition for future contracts of this nature, the Department of the Navy could explore several strategies. These might include breaking down large requirements into smaller, more manageable contract vehicles that appeal to a wider range of firms, including mid-tier and smaller specialized companies. Conducting market research more extensively prior to solicitation to identify potential new entrants or understand barriers to entry could also be beneficial. Furthermore, refining the solicitation documents to clearly articulate requirements and evaluation criteria, while ensuring fair access to necessary information, can help attract more bidders. Offering pre-solicitation conferences or industry days can also provide clarity and encourage participation.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Accounting, Tax Preparation, Bookkeeping, and Payroll Services › Other Accounting Services

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: N0018921RZ050

Offers Received: 3

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 8350 BROAD ST STE 900, MCLEAN, VA, 22102

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

Financial Breakdown

Contract Ceiling: $29,893,429

Exercised Options: $29,893,429

Current Obligation: $26,923,975

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $2,771,684

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0018922DZ015

IDV Type: IDC

Timeline