DoD's $1.3B Army Communications Contract to Vectrus Systems LLC Shows Fair Value Amidst Limited Competition

Contract Overview

Contract Amount: $1,300,868,235 ($1.3B)

Contractor: Vectrus Systems LLC

Awarding Agency: Department of Defense

Start Date: 2013-06-01

End Date: 2021-02-28

Contract Duration: 2,829 days

Daily Burn Rate: $459.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: OPERATIONS, MAINTENANCE, AND DEFENSE OF ARMY COMMUNICATIONS IN SOUTHWEST ASIA AND CENTRAL ASIA (OMDAC-SWACA).

Place of Performance

Location: COLORADO SPRINGS, EL PASO County, COLORADO, 80919

State: Colorado Government Spending

Plain-Language Summary

Department of Defense obligated $1.30 billion to VECTRUS SYSTEMS LLC for work described as: OPERATIONS, MAINTENANCE, AND DEFENSE OF ARMY COMMUNICATIONS IN SOUTHWEST ASIA AND CENTRAL ASIA (OMDAC-SWACA). Key points: 1. The contract's value appears reasonable when benchmarked against similar IT support services. 2. Competition was limited, raising questions about potential price overruns and optimal value. 3. The contractor, Vectrus Systems LLC, has a substantial history with the DoD. 4. Performance context is crucial, as the contract spans extensive geographic regions and a long duration. 5. This contract falls within the broader IT and Defense support services sector. 6. The absence of small business set-asides suggests limited direct impact on smaller enterprises. 7. Oversight mechanisms are critical given the contract's scale and operational complexity.

Value Assessment

Rating: good

The total obligated amount of approximately $1.3 billion over its period of performance suggests a significant investment. Benchmarking against similar large-scale IT and communications support contracts for defense operations indicates that the pricing structure, while not explicitly detailed here, is likely within a competitive range for the services rendered. The cost-plus-fixed-fee (CPFF) award type suggests that while costs are reimbursed, a fixed fee provides some incentive for contractor efficiency. However, without granular data on specific service components and their associated costs, a definitive value-for-money assessment is challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, with five bidders participating. This level of competition is generally positive for price discovery and ensuring a range of qualified vendors are considered. However, the fact that only five bids were received for such a large and complex contract might indicate a specialized market or high barriers to entry, potentially limiting the full benefit of competition.

Taxpayer Impact: A full and open competition with multiple bidders is beneficial for taxpayers as it drives down prices through competitive pressure and encourages innovation among contractors.

Public Impact

The primary beneficiaries are the U.S. Army units operating in Southwest Asia and Central Asia, receiving essential communication services. Services delivered include operations, maintenance, and defense of critical communication infrastructure. The geographic impact is extensive, covering multiple regions critical for military operations. Workforce implications include employment for personnel involved in maintaining and operating complex communication systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in Cost Plus Fixed Fee contracts.
Complexity of managing communications infrastructure across vast and potentially challenging geographic areas.
Dependence on a single contractor for critical operational support.
Ensuring consistent service quality and security across all operational theaters.

Positive Signals

Awarded through full and open competition, indicating a broad initial search for qualified vendors.
Contractor has a long-standing relationship with the Department of Defense, suggesting familiarity with requirements.
The contract duration and scale indicate a significant commitment to supporting essential military functions.
The fixed fee component of the contract provides some cost control for the government.

Sector Analysis

This contract falls within the broader Information Technology (IT) and Defense sector, specifically focusing on the maintenance and operation of communication equipment. The market for such services is characterized by high technical expertise, stringent security requirements, and significant government spending. Comparable spending benchmarks in this area often involve multi-billion dollar contracts for global IT support and network infrastructure management for defense and intelligence agencies.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, and there is no explicit mention of subcontracting goals for small businesses. This suggests that the primary award went to a large business, and the direct impact on the small business ecosystem may be limited unless significant subcontracting opportunities arise. Further analysis would be needed to determine if small businesses are involved as subcontractors.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting oversight mechanisms, potentially involving the Defense Contract Management Agency (DCMA) and the Army's program executive offices. Accountability measures are usually embedded within the contract terms, including performance metrics, reporting requirements, and penalties for non-compliance. Transparency is often managed through contract databases and reporting, though specific operational details may be classified.

Related Government Programs

Global Base Support Services
Defense Communications Network Operations
IT Infrastructure Maintenance Contracts
Contingency Communications Support
Theater-Specific IT Services

Risk Flags

Long contract duration increases risk of technological obsolescence.
Geographic complexity may lead to higher operational costs and logistical challenges.
Cost-plus-fixed-fee structure requires diligent oversight to control expenses.
Limited competition, despite being full and open, warrants scrutiny for optimal pricing.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.30 billion to VECTRUS SYSTEMS LLC. OPERATIONS, MAINTENANCE, AND DEFENSE OF ARMY COMMUNICATIONS IN SOUTHWEST ASIA AND CENTRAL ASIA (OMDAC-SWACA).

Who is the contractor on this award?

The obligated recipient is VECTRUS SYSTEMS LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $1.30 billion.

What is the period of performance?

Start: 2013-06-01. End: 2021-02-28.

What is Vectrus Systems LLC's track record with the Department of Defense, particularly on similar large-scale communication contracts?

Vectrus Systems LLC has a significant and long-standing track record with the Department of Defense, having been awarded numerous contracts over the years. Their experience often includes providing a wide range of services such as base operations, logistics, IT support, and communications infrastructure management, particularly in overseas contingency environments. For instance, they have held substantial contracts in regions like Afghanistan and the Middle East, similar to the OMDAC-SWACA contract. This extensive history suggests a deep understanding of military requirements, operational challenges, and compliance standards. However, like any large contractor, their performance history would need to be reviewed for specific instances of success, challenges, and any past performance issues or disputes on comparable contracts to fully assess their capability for this specific requirement.

How does the cost-plus-fixed-fee (CPFF) structure impact the overall value and risk for taxpayers on this contract?

The Cost-Plus-Fixed-Fee (CPFF) contract structure means that the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. For taxpayers, this structure presents a mixed bag of value and risk. On the positive side, the fixed fee provides a predictable profit margin, which can simplify negotiations and budgeting. It also incentivizes the contractor to control costs, as any savings below the estimated cost do not reduce their fee. However, the risk lies in the reimbursement of all costs. If costs escalate due to unforeseen circumstances, inefficiencies, or scope creep, taxpayers bear the burden of these increased expenses. Robust government oversight and stringent cost accounting standards are therefore critical to ensure that only reasonable and necessary costs are reimbursed, thereby mitigating potential value erosion for the government and taxpayers.

What are the key performance indicators (KPIs) typically used to measure the success of a contract like OMDAC-SWACA, and how are they monitored?

For a contract like OMDAC-SWACA, which focuses on operations, maintenance, and defense of communications, Key Performance Indicators (KPIs) would likely revolve around network availability, uptime, latency, data transfer rates, response times for maintenance requests, and security compliance. For instance, maintaining a 99.9% network uptime in critical operational areas would be a crucial KPI. Monitoring these KPIs typically involves a combination of automated network performance monitoring tools, regular reporting from the contractor, site inspections, and user feedback from military personnel. The Defense Contract Management Agency (DCMA) or the Army Contracting Command would be responsible for overseeing the contractor's adherence to these KPIs, often through dedicated contract officers and technical representatives who review performance data and conduct audits to ensure the services meet the required standards and objectives.

Given the duration of the contract (2013-2021), what are the potential risks associated with technological obsolescence in communication equipment?

A contract spanning nearly eight years (2013-2021) for communication equipment operations and maintenance inherently carries a significant risk of technological obsolescence. Communication technology evolves rapidly, and equipment that is state-of-the-art at the beginning of the contract period may become outdated or unsupported by the end. This can lead to several issues: increased maintenance costs for aging equipment, difficulty in sourcing spare parts, reduced performance capabilities compared to newer systems, and potential security vulnerabilities in older hardware or software. To mitigate this, contracts often include clauses for technology refresh, upgrade paths, or require the contractor to propose solutions for incorporating newer, more efficient technologies. Effective contract management would involve proactive planning and assessment of technological trends to ensure the deployed systems remain relevant and effective throughout the contract's life.

How does the geographic scope (Southwest Asia and Central Asia) influence the operational complexity and cost of this contract?

The vast and often challenging geographic scope of Southwest Asia and Central Asia significantly influences the operational complexity and cost of this contract. Operating and maintaining communication systems across multiple countries, potentially remote or austere locations, requires robust logistical support, secure transportation of personnel and equipment, and adherence to diverse local regulations and security protocols. Costs are inflated by factors such as hazardous duty pay for personnel, increased travel expenses, higher insurance premiums, the need for hardened infrastructure, and the potential for disruptions due to political instability or environmental conditions. Furthermore, ensuring consistent network performance and security across such a wide area necessitates sophisticated network management and redundancy planning, adding to both complexity and expense.

Industry Classification

NAICS: Other Services (except Public Administration) › Electronic and Precision Equipment Repair and Maintenance › Communication Equipment Repair and Maintenance

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W91RUS09R0030

Offers Received: 5

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Vectrus, Inc.

Address: 2424 GARDEN OF THE GODS RD STE 300, COLORADO SPRINGS, CO, 80919

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

Financial Breakdown

Contract Ceiling: $1,356,223,604

Exercised Options: $1,356,223,604

Current Obligation: $1,300,868,235

Actual Outlays: $25,259,492

Subaward Activity

Number of Subawards: 410

Total Subaward Amount: $1,061,388,427

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline