SEC's $11.3M contract for GAAP financial statement taxonomy development awarded without competition

Contract Overview

Contract Amount: $11,318,519 ($11.3M)

Contractor: Xbrl US

Awarding Agency: Securities and Exchange Commission

Start Date: 2006-09-23

End Date: 2010-12-03

Contract Duration: 1,532 days

Daily Burn Rate: $7.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: TIME AND MATERIALS

Sector: Other

Official Description: DEVELOPMENT OF U.S. GAAP FINANCIAL STATEMENT TAXONOMY

Place of Performance

Location: NEW YORK, NEW YORK County, NEW YORK, 10281

State: New York Government Spending

Plain-Language Summary

Securities and Exchange Commission obligated $11.3 million to XBRL US for work described as: DEVELOPMENT OF U.S. GAAP FINANCIAL STATEMENT TAXONOMY Key points: 1. Contract awarded on a sole-source basis, limiting potential cost savings from competition. 2. The contract duration of over 4 years suggests a significant, long-term need. 3. The 'All Other Professional, Scientific, and Technical Services' NAICS code indicates a broad scope of work. 4. Awarded to XBRL US, a key player in financial data standards. 5. The contract was a Time and Materials type, which can pose cost control challenges. 6. No small business set-aside was applied, potentially impacting small business participation.

Value Assessment

Rating: fair

Benchmarking the value of this specific contract is challenging due to its unique nature in developing a financial statement taxonomy. However, the $11.3 million expenditure over approximately four years for specialized technical services in financial reporting standards suggests a substantial investment. Without comparable sole-source contracts for similar taxonomy development, it's difficult to definitively assess if the pricing was optimal. The Time and Materials (T&M) contract type, while flexible, often carries higher risk for cost overruns compared to fixed-price contracts, warranting close monitoring of labor hours and rates.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Securities and Exchange Commission (SEC) did not conduct a competitive bidding process. This approach is typically justified when only one responsible source can provide the required services. In this case, XBRL US was likely identified as the sole entity with the necessary expertise and established role in developing U.S. GAAP financial statement taxonomies. The lack of competition means there was no opportunity for price discovery through multiple bids, potentially leading to a higher cost than if multiple vendors had competed.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure to drive down costs. The SEC did not leverage the potential for cost savings that typically arises from a competitive procurement process.

Public Impact

The primary beneficiaries are the SEC and the broader financial reporting ecosystem, which gains a standardized taxonomy for U.S. GAAP financial statements. The services delivered include the development and refinement of a crucial tool for financial data standardization. The geographic impact is national, affecting all entities required to file financial statements with the SEC. Workforce implications include the need for specialized expertise in accounting standards, taxonomy development, and XBRL technology.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Time and Materials contract type can lead to cost overruns if not closely managed.
Lack of small business participation due to sole-source nature.

Positive Signals

Awarded to an organization with established expertise in XBRL and financial taxonomies.
Addresses a critical need for standardized financial reporting.
Long-term duration suggests a commitment to developing a robust and lasting solution.

Sector Analysis

The contract falls within the professional, scientific, and technical services sector, specifically related to financial data standards and taxonomy development. This is a niche area crucial for regulatory compliance and data analysis in the financial markets. The market for such specialized services is relatively small, often dominated by organizations with deep expertise in accounting standards (like U.S. GAAP) and data tagging languages (like XBRL). Comparable spending benchmarks are difficult to establish given the unique nature of taxonomy development, but the investment reflects the importance of standardized financial information for market integrity and investor protection.

Small Business Impact

This contract was not set aside for small businesses, and the sole-source nature of the award further limited opportunities for small business participation. As XBRL US is a non-profit consortium, it's unlikely that significant subcontracting opportunities were mandated or realized by small businesses within this specific award. The focus was on leveraging the unique capabilities of the incumbent organization rather than fostering small business growth through this particular procurement.

Oversight & Accountability

Oversight for this contract would have been managed by the Securities and Exchange Commission's contracting officers and program managers. Accountability measures would typically involve performance reviews, milestone tracking, and adherence to the terms of the Time and Materials contract. Transparency is generally facilitated through public contract award databases, though the specifics of performance and cost management might be internal. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Financial Reporting Standards Development
XBRL Taxonomy Development
Securities Data Standardization
GAAP Compliance Tools

Risk Flags

Sole-source award
Time and Materials contract type
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Securities and Exchange Commission awarded $11.3 million to XBRL US. DEVELOPMENT OF U.S. GAAP FINANCIAL STATEMENT TAXONOMY

Who is the contractor on this award?

The obligated recipient is XBRL US.

Which agency awarded this contract?

Awarding agency: Securities and Exchange Commission (Securities and Exchange Commission).

What is the total obligated amount?

The obligated amount is $11.3 million.

What is the period of performance?

Start: 2006-09-23. End: 2010-12-03.

What is the track record of XBRL US in developing and maintaining financial statement taxonomies?

XBRL US has a significant track record in developing and maintaining taxonomies for U.S. financial reporting. As a standards organization, it plays a crucial role in defining and updating the XBRL (eXtensible Business Reporting Language) taxonomies used by companies to tag their financial data. This includes the U.S. GAAP Financial Statement Taxonomy, which is essential for consistent and machine-readable financial disclosures. Their work involves collaboration with stakeholders, including the SEC, accounting standard-setters, and industry participants, to ensure the taxonomies meet evolving reporting requirements and facilitate data comparability. The development of the U.S. GAAP Financial Statement Taxonomy under this contract represents a core part of their mission and expertise.

How does the $11.3 million cost compare to similar taxonomy development projects?

Direct comparisons for taxonomy development projects are challenging due to the specialized nature of the work and the varying scope of different taxonomies. However, the $11.3 million expenditure over approximately four years for the U.S. GAAP Financial Statement Taxonomy suggests a substantial investment. This figure encompasses the labor, research, development, testing, and maintenance required to create and refine a comprehensive set of tags for financial reporting. Given that this was a sole-source award to XBRL US, a key entity in this domain, the cost reflects their specialized expertise and the complexity of the task. Without competitive bids, it's difficult to ascertain if this represents a market-optimal price, but it indicates a significant commitment by the SEC to establishing robust financial data standards.

What are the primary risks associated with a sole-source Time and Materials contract for taxonomy development?

The primary risks associated with this sole-source Time and Materials (T&M) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher costs than if multiple vendors had bid. The SEC did not benefit from price discovery through competition. Secondly, the T&M contract type, while offering flexibility, carries inherent risks of cost overruns. Without fixed price points for deliverables, the total cost is directly tied to the hours worked and the rates charged. Effective oversight is crucial to manage these risks, ensuring that labor hours are reasonable, rates are fair, and the scope of work remains aligned with the project's objectives. Scope creep could exacerbate cost increases under a T&M arrangement.

How effective has the U.S. GAAP Financial Statement Taxonomy been in improving financial reporting?

The U.S. GAAP Financial Statement Taxonomy, developed and maintained with support from contracts like this one, has been instrumental in improving financial reporting by enabling machine-readable data. Its effectiveness lies in standardizing the way financial information is tagged, allowing for greater consistency, comparability, and analytical capability across different companies' filings. This facilitates more efficient data aggregation and analysis by regulators, investors, and researchers. While adoption and consistent application can present challenges, the taxonomy provides a foundational structure for structured financial data, enhancing transparency and reducing the burden of manual data extraction. Its ongoing development ensures it remains relevant to evolving accounting standards and reporting needs.

What is the historical spending pattern for taxonomy development at the SEC?

Historical spending patterns for taxonomy development at the SEC, particularly for the U.S. GAAP Financial Statement Taxonomy, are closely tied to the evolution of XBRL adoption and regulatory requirements. Prior to the widespread use of XBRL, spending on such specific taxonomy development would have been minimal or non-existent. As the SEC mandated XBRL filings, investments in developing and maintaining the necessary taxonomies became essential. This $11.3 million contract represents a significant, long-term investment in a critical piece of financial reporting infrastructure. Analyzing prior contracts for similar, large-scale taxonomy development efforts is difficult as this specific taxonomy's development is a foundational, ongoing effort rather than a series of discrete, comparable projects.

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: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 1

Pricing Type: TIME AND MATERIALS (Y)

Evaluated Preference: NONE

Contractor Details

Address: 1211 6TH AVE 19TH FL, NEW YORK, NY, 90

Business Categories: Category Business, Nonprofit Organization, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $11,318,519

Exercised Options: $11,318,519

Current Obligation: $11,318,519

Timeline