Booz Allen Hamilton awarded $39.75M for IRS legacy system modernization, facing scrutiny over value and competition

Contract Overview

Contract Amount: $39,752,202 ($39.8M)

Contractor: Booz Allen Hamilton Inc

Awarding Agency: Department of the Treasury

Start Date: 2019-04-15

End Date: 2023-09-29

Contract Duration: 1,628 days

Daily Burn Rate: $24.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: RFQ 8001 RRP LEGACY COMPONENTS

Place of Performance

Location: LANHAM, PRINCE GEORGES County, MARYLAND, 20706

State: Maryland Government Spending

Plain-Language Summary

Department of the Treasury obligated $39.8 million to BOOZ ALLEN HAMILTON INC for work described as: RFQ 8001 RRP LEGACY COMPONENTS Key points: 1. Contract value of $39.75M for IT systems design services. 2. Awarded under full and open competition, indicating broad market participation. 3. Long contract duration of 1628 days suggests a complex, multi-year project. 4. Firm Fixed Price contract type aims to control costs and manage risk. 5. Services focus on computer systems design, crucial for IRS operations. 6. Contractor Booz Allen Hamilton is a large, established player in federal IT. 7. Geographic location of performance in Maryland. 8. No small business set-aside was utilized for this contract.

Value Assessment

Rating: fair

The contract value of $39.75M for computer systems design services appears within a reasonable range for a multi-year, complex IT modernization effort. However, without specific benchmarks for similar IRS legacy system overhauls or detailed scope of work, a definitive value-for-money assessment is challenging. The firm-fixed-price structure provides cost certainty, but the total expenditure over nearly five years warrants close monitoring for efficiency and effectiveness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple vendors had the opportunity to bid. The presence of only one award (no=1) could indicate a highly competitive initial bidding process where one vendor was significantly stronger, or it might suggest that the solicitation was structured in a way that favored a specific type of bidder. Further analysis of the number of bids received would provide more insight into the actual level of competition.

Taxpayer Impact: Full and open competition is generally beneficial for taxpayers as it encourages a wider range of solutions and can drive down prices through market forces. However, the ultimate benefit depends on the effectiveness of the competition and the resulting price negotiated.

Public Impact

The Internal Revenue Service (IRS) benefits from modernized legacy IT components, potentially leading to improved operational efficiency and taxpayer services. Taxpayers may experience more reliable and secure interactions with the IRS due to updated systems. The contract supports IT professionals and potentially other roles within the contractor's organization. The primary geographic impact is in Maryland, where the contractor is based and likely where much of the work is performed.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration could lead to scope creep and cost overruns if not managed tightly.
Complexity of modernizing legacy systems carries inherent technical and integration risks.
Reliance on a single large contractor for a critical function may limit future flexibility.
Lack of specific performance metrics in the provided data makes it difficult to assess progress.
Potential for vendor lock-in if the system becomes highly proprietary.

Positive Signals

Firm Fixed Price contract type provides cost predictability for the government.
Full and open competition suggests a robust initial selection process.
Booz Allen Hamilton is a well-established contractor with significant experience in government IT.
The contract addresses a critical need for IRS IT infrastructure modernization.
Awarded to a reputable firm known for its technical capabilities.

Sector Analysis

This contract falls within the Computer Systems Design Services sector, a critical component of the broader Information Technology (IT) industry. The IT services market for the federal government is substantial, with significant spending allocated to software development, system integration, and IT modernization. Contracts like this, focused on updating or replacing legacy systems, are common as agencies strive to improve efficiency and security. Benchmarks for similar IT modernization projects within government agencies would provide a clearer picture of cost-effectiveness.

Small Business Impact

This contract was not awarded as a small business set-aside, and there is no indication of subcontracting requirements for small businesses in the provided data. This means that opportunities for small businesses to directly participate in this specific contract are limited. The focus on a large, established prime contractor like Booz Allen Hamilton suggests that the primary benefits will accrue to larger firms, with potential downstream impacts on the small business IT ecosystem depending on Booz Allen's subcontracting practices.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and program managers within the IRS, a bureau of the Department of the Treasury. The firm-fixed-price nature of the contract provides a degree of cost control. Transparency would be enhanced through regular reporting requirements and potentially through public contract databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

IRS IT Modernization Programs
Federal Civilian IT Services
Legacy System Modernization Contracts
Computer Systems Design Services
Department of the Treasury IT Spending

Risk Flags

Long contract duration may increase risk of cost overruns or scope creep.
Complexity of legacy system modernization presents technical challenges.
Potential for vendor lock-in due to specialized system development.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $39.8 million to BOOZ ALLEN HAMILTON INC. RFQ 8001 RRP LEGACY COMPONENTS

Who is the contractor on this award?

The obligated recipient is BOOZ ALLEN HAMILTON INC.

Which agency awarded this contract?

Awarding agency: Department of the Treasury (Internal Revenue Service).

What is the total obligated amount?

The obligated amount is $39.8 million.

What is the period of performance?

Start: 2019-04-15. End: 2023-09-29.

What is the track record of Booz Allen Hamilton with the IRS and similar legacy system modernization projects?

Booz Allen Hamilton is a large, well-established government contractor with extensive experience across various federal agencies, including the IRS. They have a significant portfolio in IT modernization, systems integration, and cybersecurity. For the IRS specifically, they have held numerous contracts over the years, often involving complex IT infrastructure and data management. Their track record with legacy system modernization is generally strong, characterized by their ability to handle large-scale, multi-year projects. However, like any large contractor, specific project outcomes can vary, and detailed performance reviews for individual IRS projects would be necessary for a comprehensive assessment. Their experience suggests they possess the technical expertise and project management capabilities required for such endeavors, but the success ultimately hinges on effective execution and government oversight.

How does the awarded amount of $39.75M compare to similar IRS legacy system modernization contracts?

Comparing the $39.75M award for this specific contract requires context regarding the scope, duration, and complexity of the modernization effort. The IRS, like many large federal agencies, undertakes numerous IT modernization initiatives, and costs can vary significantly. For instance, a contract focused solely on replacing a single legacy application might cost less than a comprehensive overhaul of core infrastructure. Given the 1628-day duration (over 4.5 years), this award suggests a substantial, multi-faceted project. Benchmarking against other IRS IT contracts, particularly those involving system design and integration for critical functions, would be necessary. Without access to detailed scope-of-work comparisons and specific performance metrics from similar contracts, it's difficult to definitively state whether $39.75M represents excellent, fair, or questionable value. However, for a multi-year, complex IT modernization, the figure is not inherently excessive but warrants scrutiny for efficiency.

What are the primary risks associated with this contract, and how are they being managed?

The primary risks associated with this contract include technical complexity in modernizing legacy systems, potential for scope creep over the long contract duration (1628 days), integration challenges with existing IRS infrastructure, and cybersecurity vulnerabilities during the transition. The firm-fixed-price (FFP) contract type helps manage cost risks by setting a ceiling on expenditures, shifting some financial risk to the contractor. However, FFP contracts can sometimes incentivize contractors to cut corners on quality if not properly overseen. Management of technical and integration risks relies heavily on Booz Allen Hamilton's expertise and the IRS's program management oversight. Cybersecurity risks are inherent in any IT project and would be managed through adherence to federal security standards (e.g., NIST), regular security audits, and robust incident response planning. The long duration also poses a risk of technological obsolescence if the project timeline slips significantly.

How effective is the 'full and open competition' strategy likely to be in ensuring the best value for taxpayers on this contract?

The 'full and open competition' strategy is designed to maximize opportunities for a wide range of vendors, theoretically leading to better pricing and innovative solutions for taxpayers. In this case, it suggests that the IRS sought bids from all responsible sources. The effectiveness hinges on the number of bids received and the quality of those bids. If multiple capable vendors submitted competitive proposals, it likely drove down the price and ensured the selection of a highly qualified contractor like Booz Allen Hamilton. However, if the competition was technically narrow or only a few bids were submitted, the 'full and open' label might be less indicative of true market pressure. The firm-fixed-price structure further aims to ensure value by capping costs. Ultimately, the long-term effectiveness will be judged by the successful modernization of the legacy systems within budget and schedule, and the resulting improvements in IRS operations.

What are the historical spending patterns for computer systems design services at the IRS and the Department of the Treasury?

Historical spending patterns for computer systems design services at the IRS and the broader Department of the Treasury are substantial, reflecting the critical role of IT in tax administration and financial management. Both entities rely heavily on complex, integrated systems to process information, manage taxpayer accounts, and ensure security. Spending in this category typically fluctuates based on major modernization initiatives, system upgrades, and evolving technological requirements. The IRS, in particular, has faced ongoing needs to update its aging IT infrastructure. Analyzing historical data would likely show significant investments in areas like data analytics, cloud migration, cybersecurity enhancements, and the modernization of core legacy systems. The $39.75M awarded to Booz Allen Hamilton for this specific contract should be viewed within the context of this broader historical spending trend, which generally indicates a consistent and significant demand for IT design and development services within these agencies.

Industry Classification

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

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Booz Allen Hamilton Holding Corporation

Address: 8283 GREENSBORO DR, MCLEAN, VA, 22102

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

Financial Breakdown

Contract Ceiling: $41,176,730

Exercised Options: $39,816,858

Current Obligation: $39,752,202

Actual Outlays: $36,366,045

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 47QTCK18D0004

IDV Type: GWAC

Timeline