Treasury's IRS awards $42.7M for WebMethods software, raising questions on value and competition

Contract Overview

Contract Amount: $42,739,471 ($42.7M)

Contractor: Countertrade Products, Inc.

Awarding Agency: Department of the Treasury

Start Date: 2022-12-13

End Date: 2027-12-12

Contract Duration: 1,825 days

Daily Burn Rate: $23.4K/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: SOFTWARE AG (SOFTWARE AKTIENGESELLSCHAFT) WEBMETHODS ENTERPRISE SOFTWARE LICENSE AND MAINTENANCE

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20004

State: District of Columbia Government Spending

Plain-Language Summary

Department of the Treasury obligated $42.7 million to COUNTERTRADE PRODUCTS, INC. for work described as: SOFTWARE AG (SOFTWARE AKTIENGESELLSCHAFT) WEBMETHODS ENTERPRISE SOFTWARE LICENSE AND MAINTENANCE Key points: 1. The contract for enterprise software licenses and maintenance represents a significant investment in critical IT infrastructure. 2. Competition was limited after exclusion of sources, potentially impacting price discovery and overall value. 3. The risk of vendor lock-in and the need for ongoing maintenance suggest potential long-term cost implications. 4. Spending in the IT services sector, particularly for specialized software, is substantial and growing.

Value Assessment

Rating: questionable

The $42.7 million award for WebMethods software and maintenance requires further scrutiny. Benchmarking against similar enterprise software contracts is difficult without detailed scope and feature comparisons, but the price appears substantial for a 5-year term.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'Full and Open Competition After Exclusion of Sources,' indicating that while competition was sought, specific circumstances led to limiting the pool of eligible bidders. This method can sometimes lead to higher prices than unrestricted full and open competition.

Taxpayer Impact: Taxpayer funds are being used for this significant software acquisition. The limited competition raises concerns about whether the best possible price was achieved, potentially impacting the efficient use of taxpayer dollars.

Public Impact

IRS operations rely on software like WebMethods for critical functions, impacting tax processing and taxpayer services. The significant contract value highlights the government's reliance on commercial software vendors for essential services. Limited competition could mean taxpayers are not getting the most cost-effective solution available. The long contract duration (5 years) suggests a need for stable, long-term software solutions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition raises price concerns.
Potential for vendor lock-in.
High contract value requires justification.
Lack of small business participation noted.

Positive Signals

Awarded for critical IRS functions.
Long-term contract provides stability.
Firm fixed price contract limits cost overrun risk.

Sector Analysis

The IT services sector, particularly software licensing and maintenance, is a major area of government spending. Agencies often rely on specialized commercial software to meet complex operational needs, with costs varying widely based on vendor, features, and contract terms.

Small Business Impact

The data indicates that neither small businesses nor small disadvantaged businesses were involved in this specific contract award. This suggests a focus on large, established vendors for this particular software requirement.

Oversight & Accountability

The contract was awarded by the Department of the Treasury's Internal Revenue Service. Oversight would typically involve contract management officials ensuring performance and adherence to terms, with potential for audits by the Treasury OIG.

Related Government Programs

Other Computer Related Services
Department of the Treasury Contracting
Internal Revenue Service Programs

Risk Flags

Limited competition may have inflated costs.
Potential for vendor lock-in with specialized software.
Lack of transparency in source exclusion.
High dollar value requires strong justification.
No small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $42.7 million to COUNTERTRADE PRODUCTS, INC.. SOFTWARE AG (SOFTWARE AKTIENGESELLSCHAFT) WEBMETHODS ENTERPRISE SOFTWARE LICENSE AND MAINTENANCE

Who is the contractor on this award?

The obligated recipient is COUNTERTRADE PRODUCTS, 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 $42.7 million.

What is the period of performance?

Start: 2022-12-13. End: 2027-12-12.

What specific functionalities does WebMethods provide for the IRS, and how critical are they to tax administration?

WebMethods is an integration platform that likely facilitates data exchange and workflow automation between various IRS systems. Its criticality stems from enabling seamless processing of tax filings, managing taxpayer data securely, and supporting internal operational efficiency. Without it, key tax administration processes could face significant delays or disruptions.

What were the specific reasons for excluding other sources, and did this exclusion significantly impact the final price?

The exclusion of sources typically occurs when only one or a limited number of vendors can meet highly specialized technical requirements, or due to urgent needs. The specific justification for excluding other sources here is not provided. However, limiting competition generally reduces price pressure, potentially leading to a higher final price than if a broader range of vendors had competed.

How does the $42.7 million cost over five years compare to industry benchmarks for similar enterprise integration software, considering the IRS's scale?

Benchmarking this cost requires detailed comparison of features, user counts, and support levels against similar enterprise integration platforms. Given the IRS's scale and the critical nature of its operations, the price might be justifiable if it reflects comprehensive functionality and robust support. However, without specific benchmarks, it's difficult to definitively assess value for money.

Industry Classification

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

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 4

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 7585 W 66TH AVE, ARVADA, CO, 80003

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

Financial Breakdown

Contract Ceiling: $42,739,471

Exercised Options: $42,739,471

Current Obligation: $42,739,471

Actual Outlays: $42,739,471

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Parent Contract

Parent Award PIID: NNG15SC65B

IDV Type: GWAC

Timeline