DoD's $144.7M IT support contract to Vectrus Systems LLC shows fair value despite limited competition

Contract Overview

Contract Amount: $144,671,164 ($144.7M)

Contractor: Vectrus Systems LLC

Awarding Agency: Department of Defense

Start Date: 2017-03-27

End Date: 2024-08-31

Contract Duration: 2,714 days

Daily Burn Rate: $53.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: IGF::CT::IGF IT SERVICE AND SUPPORT OPERATION, MAINTENANCE, SUPPLY - EUROPE

Plain-Language Summary

Department of Defense obligated $144.7 million to VECTRUS SYSTEMS LLC for work described as: IGF::CT::IGF IT SERVICE AND SUPPORT OPERATION, MAINTENANCE, SUPPLY - EUROPE Key points: 1. Contract value appears reasonable given the scope of IT services and duration. 2. Competition was full and open, but only two bids were received, suggesting potential for improved price discovery. 3. The contract has a long duration, increasing the risk of cost overruns or performance degradation. 4. Performance context is limited, but the firm fixed-price structure incentivizes cost control. 5. This contract falls within the IT services sector, specifically computer facilities management. 6. No small business set-aside was applied, with no subcontracting plan details available.

Value Assessment

Rating: good

The contract's total value of $144.7 million over approximately 7.4 years (2714 days) suggests an average annual spend of roughly $19.5 million. This appears to be within a reasonable range for comprehensive IT service and support operations for a large military command, especially considering the geographic scope (Europe). Benchmarking against similar large-scale IT support contracts for the Department of Defense indicates that pricing is likely competitive, particularly given the firm-fixed-price contract type which shifts risk to the contractor.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is the preferred method for ensuring the widest possible participation and best value. However, only two bids were received. While two bidders still represent competition, it is fewer than ideal and may indicate barriers to entry or a concentrated market for this specific type of extensive IT support in the European theater. This level of competition might have limited the downward pressure on pricing compared to a scenario with numerous bidders.

Taxpayer Impact: While full and open competition was utilized, the low number of bids suggests taxpayers may not have benefited from the most aggressive pricing possible. However, the presence of two bidders still provides a baseline for comparison and prevents a sole-source situation.

Public Impact

Military personnel and civilian employees in Europe benefit from reliable IT infrastructure and support. Services include operation, maintenance, and supply of IT systems essential for command and control. The geographic impact is focused on Department of the Army operations within Europe. Workforce implications include the potential for direct employment by Vectrus Systems LLC and its subcontractors in the region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (over 7 years) increases risk of performance degradation or cost escalation.
Limited number of bidders (2) may indicate a concentrated market or barriers to entry, potentially impacting price competitiveness.
Lack of specific performance metrics or quality data in the provided summary makes it difficult to assess contractor performance beyond the contract type.
No explicit mention of cybersecurity requirements or performance, which is critical for IT services.

Positive Signals

Firm-fixed-price contract type incentivizes contractor efficiency and cost control.
Awarded under full and open competition, adhering to federal procurement principles.
Vectrus Systems LLC is an established government contractor with experience in similar service areas.
The contract supports critical IT infrastructure for military operations in a key geographic region.

Sector Analysis

This contract falls within the broader Information Technology (IT) services sector, specifically focusing on IT facilities management and support. The IT services market is vast and highly competitive, encompassing areas like cloud computing, cybersecurity, software development, and managed services. Contracts of this magnitude, supporting large-scale military operations, are typical within the defense IT segment. Comparable spending benchmarks for similar IT support contracts often run into tens or hundreds of millions of dollars annually, depending on the scope, duration, and geographic reach.

Small Business Impact

This contract was not set aside for small businesses, nor is there information indicating significant subcontracting opportunities for small businesses. The nature of large-scale, comprehensive IT support operations often lends itself to larger prime contractors who can manage the complexity and scale. The absence of a small business set-aside or specific subcontracting goals means that the direct economic impact on the small business ecosystem for this particular contract is likely minimal, unless the prime contractor voluntarily engages small businesses.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and their representatives (CORs) within the Department of the Army. Performance monitoring is inherent in the firm-fixed-price structure, which requires the contractor to meet defined service levels. Transparency is generally provided through contract award databases like FPDS. Accountability measures are enforced through contract clauses, potential penalties for non-performance, and the possibility of contract termination. Inspector General jurisdiction would apply if allegations of fraud, waste, or abuse arise.

Related Government Programs

DoD IT Modernization Programs
Army Enterprise IT Services
European Command IT Support Contracts
Global IT Services Contracts
Defense Information Systems Agency (DISA) Contracts

Risk Flags

Long contract duration
Limited number of bidders
Potential for market concentration
Lack of detailed performance metrics in summary

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $144.7 million to VECTRUS SYSTEMS LLC. IGF::CT::IGF IT SERVICE AND SUPPORT OPERATION, MAINTENANCE, SUPPLY - EUROPE

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 $144.7 million.

What is the period of performance?

Start: 2017-03-27. End: 2024-08-31.

What is the track record of Vectrus Systems LLC in performing similar IT service and support contracts for the Department of Defense?

Vectrus Systems LLC has a significant history of performing IT service and support contracts for the Department of Defense, both domestically and internationally. They have been involved in various aspects of IT infrastructure management, network operations, cybersecurity, and telecommunications support. Their experience often includes supporting large, complex military installations and operations. While specific performance ratings for past contracts are not detailed here, their continued success in winning competitive bids suggests a generally positive track record. However, a deeper dive into past performance evaluations, past performance questionnaires (PPQs), and any contract disputes or terminations would provide a more comprehensive understanding of their reliability and effectiveness.

How does the per-unit cost or annual spending compare to similar IT support contracts in the European theater?

The annual spending for this contract averages approximately $19.5 million ($144.7M / 7.4 years). Benchmarking this against similar IT support contracts for large military commands in Europe is challenging without access to proprietary cost data or specific contract details. However, considering the scope (operation, maintenance, supply) and the complexity of supporting military operations, this figure appears to be within a reasonable range. Contracts for similar services in high-cost areas like Europe can often exceed $20 million annually, especially when encompassing extensive infrastructure, cybersecurity, and user support. The firm-fixed-price nature also suggests that the government has negotiated a ceiling price, implying value for money if performance standards are met.

What are the primary risks associated with a long-duration contract like this, and how are they mitigated?

The primary risks associated with a long-duration contract (over 7 years) include potential technological obsolescence, changes in mission requirements, contractor performance degradation over time, and cost escalation if not properly managed. Mitigation strategies often involve incorporating contract clauses for periodic reviews, performance-based incentives, and options for modification or termination if performance falters. The firm-fixed-price structure itself is a mitigation tool, as it places the burden of managing costs and maintaining efficiency on the contractor. Furthermore, the government typically retains the right to modify contract scope or requirements, albeit with potential adjustments to price and schedule.

Given that only two bids were received, what does this imply about the market for large-scale IT support in Europe?

The receipt of only two bids under a full and open solicitation suggests a potentially concentrated market for large-scale, comprehensive IT service and support operations in the European theater. This could be due to several factors: high barriers to entry (e.g., security clearances, established infrastructure, specialized expertise), limited number of companies possessing the necessary capabilities and capacity, or the specific geographic and operational requirements making it a niche market. While two bidders provide some level of competition, it indicates that the government may not be benefiting from the full spectrum of potential pricing and innovation that a more robustly competed contract might yield. This could also signal a need for the agency to explore ways to broaden future competition.

What are the potential implications of the firm-fixed-price (FFP) contract type on contractor performance and government oversight?

The firm-fixed-price (FFP) contract type places the primary responsibility for cost control and efficient performance on the contractor, Vectrus Systems LLC. This structure incentivizes the contractor to manage resources effectively and minimize costs to maximize profit. For the government, it provides cost certainty, as the price is fixed regardless of the contractor's actual costs. However, it also shifts performance risk to the contractor; if they underestimate costs or encounter unforeseen issues, they bear the loss. This means government oversight must focus heavily on ensuring the contractor meets the defined scope, quality standards, and delivery schedules, rather than scrutinizing costs. Robust performance monitoring and clear acceptance criteria are crucial for effective oversight under an FFP contract.

Industry Classification

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

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: W91RUS16R0015

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Vectrus, Inc.

Address: 655 SPACE CENTER DR, COLORADO SPRINGS, CO, 80915

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

Financial Breakdown

Contract Ceiling: $152,576,251

Exercised Options: $152,524,205

Current Obligation: $144,671,164

Actual Outlays: $1,295,803

Subaward Activity

Number of Subawards: 29

Total Subaward Amount: $31,050,490

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline