DoD's $29.2M VMware software contract with Carahsoft Technology Corp. shows fair value despite limited competition

Contract Overview

Contract Amount: $29,221,491 ($29.2M)

Contractor: Carahsoft Technology Corp

Awarding Agency: Department of Defense

Start Date: 2016-12-30

End Date: 2019-12-31

Contract Duration: 1,096 days

Daily Burn Rate: $26.7K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: VMWARE SOFTWARE AND SUPPORT

Place of Performance

Location: RESTON, FAIRFAX County, VIRGINIA, 20190

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $29.2 million to CARAHSOFT TECHNOLOGY CORP for work described as: VMWARE SOFTWARE AND SUPPORT Key points: 1. The contract's value appears reasonable when benchmarked against similar software procurements. 2. Competition was limited, raising questions about optimal price discovery for taxpayers. 3. The firm-fixed-price structure mitigates some cost overrun risks. 4. This procurement supports essential IT infrastructure for the Department of the Army. 5. VMware software is a critical component in many government IT environments. 6. The contract duration of nearly three years suggests a stable, ongoing need.

Value Assessment

Rating: fair

The $29.2 million contract for VMware software and support appears to be within a reasonable range for enterprise software licenses and maintenance. While direct public benchmarks for this specific configuration are scarce, the price per year ($9.7M) is comparable to other large federal IT software agreements. The firm-fixed-price nature of the contract helps control costs, but the lack of robust competition could have led to a higher price than might have been achieved in a more open bidding process. Without more granular data on the specific software modules and support levels, a definitive value assessment is challenging, but it doesn't appear to be an outlier.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

This contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES,' indicating that while competition was sought, it was not entirely open. The specific reasons for excluding other sources are not detailed in the provided data. With four bidders, the competition level was moderate, but the exclusion of certain potential sources limits the extent to which market forces could drive down prices. This type of competition can sometimes be justified for specialized software or when specific vendor lock-in or integration requirements exist.

Taxpayer Impact: The limited competition means taxpayers may not have benefited from the lowest possible price. While four bidders participated, the exclusion of other potential vendors could have suppressed competitive pressure, potentially leading to a higher overall cost for the government.

Public Impact

The Department of the Army benefits from access to critical VMware virtualization software and support. This contract ensures the continued operation and maintenance of essential IT infrastructure. The software likely supports a wide range of military and administrative functions across various Army installations. Workforce productivity is supported through reliable and updated IT systems. The geographic impact is nationwide, supporting Army operations wherever VMware is deployed.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition may have resulted in a higher price than a fully open process.
Lack of transparency regarding the exclusion of sources hinders a full assessment of competition.
Reliance on a single software vendor (VMware) can create long-term dependency and potential future cost increases.

Positive Signals

Firm-fixed-price contract type helps control budget certainty.
The contract duration suggests a stable and predictable IT environment for the Army.
The award to Carahsoft Technology Corp. indicates a known entity within the federal IT procurement landscape.

Sector Analysis

This contract falls within the broader Information Technology sector, specifically focusing on software and support services. The market for enterprise virtualization software, dominated by companies like VMware, is substantial within the federal government. Agencies increasingly rely on virtualization to optimize server utilization, enhance flexibility, and reduce data center costs. Comparable spending benchmarks for enterprise software licenses and support often run into millions of dollars annually for large agencies like the Department of the Army, making this contract size typical for such needs.

Small Business Impact

The contract data indicates that small business participation (sb) was false, and it was not a small business set-aside (ss). This suggests that the primary award was not specifically targeted towards small businesses. However, Carahsoft Technology Corp. often acts as a reseller and may have subcontracting arrangements with small businesses for implementation or support services, though this is not explicitly stated in the provided data. The absence of a small business set-aside means the primary focus was on obtaining the best value from the available bidders, regardless of their size.

Oversight & Accountability

The contract is a definitive contract awarded by the Department of the Army, a component of the Department of Defense. Oversight would typically be managed by contracting officers and program managers within the Army. The firm-fixed-price nature provides a degree of cost control. Transparency is moderate, as the contract details are publicly available through federal procurement databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected during the contract's performance or award.

Related Government Programs

Department of Defense IT Modernization Programs
Army Enterprise Software Licenses
Virtualization Technology Procurement
Cloud Computing Infrastructure Support
IT Services for Military Operations

Risk Flags

Limited Competition
Potential for Vendor Lock-in
Lack of Specific Product Detail

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $29.2 million to CARAHSOFT TECHNOLOGY CORP. VMWARE SOFTWARE AND SUPPORT

Who is the contractor on this award?

The obligated recipient is CARAHSOFT TECHNOLOGY CORP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $29.2 million.

What is the period of performance?

Start: 2016-12-30. End: 2019-12-31.

What specific VMware products and support levels were included in this $29.2 million contract?

The provided data identifies the contract as being for 'VMWARE SOFTWARE AND SUPPORT' but does not specify the exact products (e.g., vSphere, Horizon, NSX) or the level of support (e.g., standard, premier, 24/7). This level of detail is crucial for a precise value assessment. Without it, comparisons are generalized. For instance, if the contract included advanced security modules or premium support, the price would be expected to be higher than for basic virtualization licenses. Understanding the specific components allows for benchmarking against similar, detailed procurements and assessing if the quantity and features align with the total cost.

How did Carahsoft Technology Corp. win this contract, and what was the bidding process?

This contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' with four bidders. This designation implies that the government initially intended to compete the requirement broadly but later excluded certain sources before awarding the contract. The exact justification for excluding sources is not provided. Carahsoft Technology Corp. was the winning bidder. The process suggests that while multiple vendors were considered, the final pool was narrowed, potentially based on specific technical requirements, existing relationships, or other pre-defined criteria. The limited number of bidders, even with an initial open competition phase, raises questions about the extent of market engagement.

What is the typical cost range for similar VMware software and support contracts within the federal government?

Federal contracts for enterprise VMware software and support can vary significantly based on the scope, duration, and specific products. However, for large agencies like the Department of the Army, multi-million dollar contracts are common. Annual spending can range from hundreds of thousands to several million dollars. For example, contracts covering comprehensive virtualization suites with premium support for thousands of users or servers often fall in the $1 million to $5 million per year range. The $29.2 million over three years ($9.7 million annually) for this contract appears consistent with large-scale enterprise deployments, though specific comparisons require matching product suites and support tiers.

What are the potential risks associated with relying on a single vendor like VMware for critical IT infrastructure?

Relying heavily on a single vendor like VMware presents several risks. Firstly, it can lead to vendor lock-in, making it difficult and costly to switch to alternative solutions in the future. This can reduce negotiating leverage during subsequent contract renewals, potentially leading to price increases. Secondly, dependence on one vendor's technology stack can create vulnerabilities if that vendor experiences security breaches or product EOL (End-of-Life) issues. Thirdly, it may stifle innovation by limiting the adoption of potentially superior or more cost-effective solutions from competing vendors. Agencies must actively manage these risks through strategic planning, exploring multi-cloud or hybrid strategies, and maintaining awareness of market alternatives.

How does the firm-fixed-price contract type impact the government's financial risk compared to other contract types?

A firm-fixed-price (FFP) contract type is generally favorable for the government in terms of financial risk, especially for procurements where the scope of work is well-defined, such as software licenses and standard support. Under an FFP contract, the contractor assumes most of the risk for cost overruns. The government pays a set price, regardless of the contractor's actual costs. This provides budget certainty and predictability. In contrast, cost-reimbursement contracts shift more risk to the government, as the contractor is reimbursed for actual costs incurred, plus a fee. For IT software and support, where requirements are less likely to fluctuate dramatically, FFP is often preferred to control spending.

What is the track record of Carahsoft Technology Corp. as a federal contractor, particularly for VMware products?

Carahsoft Technology Corp. is a well-established and prominent government IT solutions provider and reseller. They have a long history of contracting with various federal agencies, including the Department of Defense. Carahsoft is known for its extensive portfolio of IT products, including a strong partnership with VMware. They frequently win contracts for VMware software and services through various contract vehicles, often leveraging their ability to aggregate demand and provide competitive pricing through established government-wide acquisition contracts (GWACs) or other contract types. Their track record indicates a high level of experience navigating federal procurement processes for IT solutions.

Industry Classification

NAICS: Manufacturing › Computer and Peripheral Equipment Manufacturing › Electronic Computer Manufacturing

Product/Service Code: INFORMATION TECHNOLOGY EQUIPMENT (INCLD FIRMWARE) SOFTWARE,SUPPLIES& SUPPORT EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 4

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1860 MICHAEL FARADAY DR, SUITE 100, RESTON, VA, 20190

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

Financial Breakdown

Contract Ceiling: $29,221,491

Exercised Options: $29,221,491

Current Obligation: $29,221,491

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Timeline