IBM awarded $40.7M contract for IRS authentication and access systems, with a 3-year performance period

Contract Overview

Contract Amount: $40,724,794 ($40.7M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of the Treasury

Start Date: 2023-09-10

End Date: 2027-10-09

Contract Duration: 1,490 days

Daily Burn Rate: $27.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: E-A3 (AUTHENTICATION, AUTHORIZATION, ACCESS) ARCHITECT AND DEVELOPMENT SUPPORT

Place of Performance

Location: BETHESDA, MONTGOMERY County, MARYLAND, 20817

State: Maryland Government Spending

Plain-Language Summary

Department of the Treasury obligated $40.7 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: E-A3 (AUTHENTICATION, AUTHORIZATION, ACCESS) ARCHITECT AND DEVELOPMENT SUPPORT Key points: 1. Contract value appears reasonable given the scope of critical IT infrastructure support. 2. Full and open competition suggests a healthy market for these specialized services. 3. Potential risks include vendor lock-in and the need for continuous security vigilance. 4. Performance context is crucial for ensuring the IRS's authentication systems remain robust. 5. This contract positions IBM as a key provider for essential government IT functions.

Value Assessment

Rating: good

The contract value of approximately $40.7 million over three years for authentication, authorization, and access (AAA) architecture and development support seems aligned with the complexity of supporting critical IRS IT infrastructure. Benchmarking against similar large-scale IT services contracts for federal agencies, this award falls within a typical range for specialized development and architectural support. The firm-fixed-price structure provides cost certainty for the government, although it places the risk of cost overruns on the contractor. Without specific details on the scope of work and deliverables, a precise value-for-money assessment is challenging, but the competitive nature of the award suggests a reasonable price was achieved.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple vendors were eligible to bid. The fact that it was competed suggests a robust market for these specialized IT services. The number of bidders is not specified, but the open competition process generally leads to better price discovery and a wider selection of qualified contractors. This approach is designed to ensure the government receives the best value by leveraging market forces to drive competitive pricing and innovation.

Taxpayer Impact: Taxpayers benefit from full and open competition as it typically leads to more competitive pricing, potentially saving government funds. It also ensures that the contract is awarded to the most capable and cost-effective provider, maximizing the return on taxpayer investment.

Public Impact

Taxpayers benefit from enhanced security and efficiency in IRS online services. IRS operations are supported through robust and reliable authentication and access systems. Federal employees and contractors will experience improved access controls and security protocols. The contract supports the modernization of critical government IT infrastructure. This ensures the integrity and confidentiality of sensitive taxpayer data.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in with IBM for critical authentication systems.
Ensuring continuous security updates and patches for evolving cyber threats.
Managing the complexity of integrating new authentication protocols with legacy systems.

Positive Signals

IBM's established track record in large-scale IT projects.
Firm-fixed-price contract provides cost predictability.
Full and open competition likely secured competitive pricing.
Contract duration allows for sustained development and support.

Sector Analysis

This contract falls within the Computer Systems Design Services sector, a significant segment of the federal IT market. This sector encompasses a wide range of services, including IT consulting, systems integration, and custom software development. The IRS's need for authentication, authorization, and access (AAA) architecture and development support is a critical component of its IT infrastructure, essential for securing taxpayer data and enabling digital services. Comparable spending in this sector often involves substantial investments in modernizing legacy systems and implementing advanced cybersecurity measures to meet evolving threats and regulatory requirements.

Small Business Impact

The data indicates this contract was not specifically set aside for small businesses (ss: false, sb: false). IBM, the prime contractor, is a large corporation. While there is no explicit mention of small business subcontracting requirements in the provided data, large federal IT contracts often include provisions for small business participation. The IRS, as a large agency, may have goals for small business utilization, which would necessitate IBM subcontracting a portion of the work to qualified small businesses, thereby contributing to the small business ecosystem.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Treasury and the Internal Revenue Service contracting officers and program managers. The firm-fixed-price nature of the contract provides a degree of financial oversight. Transparency is generally maintained through contract award databases and reporting requirements. The Inspector General for Tax Administration (TIGTA) may conduct audits or investigations into the performance and financial aspects of this contract to ensure accountability and prevent fraud, waste, and abuse.

Related Government Programs

IRS IT Modernization Programs
Federal Identity, Credential, and Access Management (ICAM)
Cybersecurity Support Services
Custom Software Development Contracts
IT Architecture and Engineering Services

Risk Flags

Potential for vendor lock-in
Cybersecurity threat landscape evolution
Integration complexity with existing IRS systems
Ensuring consistent performance over contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $40.7 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. E-A3 (AUTHENTICATION, AUTHORIZATION, ACCESS) ARCHITECT AND DEVELOPMENT SUPPORT

Who is the contractor on this award?

The obligated recipient is INTERNATIONAL BUSINESS MACHINES CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $40.7 million.

What is the period of performance?

Start: 2023-09-10. End: 2027-10-09.

What is IBM's track record with the IRS or similar federal agencies on large IT development contracts?

IBM has a long history of contracting with the U.S. federal government, including the IRS, across various IT domains. They have been involved in numerous large-scale projects related to tax systems, data management, and IT infrastructure modernization. For instance, IBM has previously supported IRS initiatives in areas like taxpayer data processing and IT security. Their experience with complex government systems, including those requiring robust authentication and authorization, is extensive. However, like any large contractor, past performance reviews and specific project outcomes should be examined for relevance to this particular contract's scope, focusing on their ability to deliver on time, within budget, and to required specifications for critical systems.

How does the $40.7 million contract value compare to similar authentication and access system development contracts awarded by the federal government?

The $40.7 million contract value for authentication, authorization, and access (AAA) architecture and development support over approximately three years is within the expected range for specialized IT services supporting a large federal agency like the IRS. Similar contracts for developing or enhancing identity management, access control, and secure authentication systems for agencies such as the Department of Defense, Department of Homeland Security, or Social Security Administration can range from tens to hundreds of millions of dollars, depending on the scope, duration, and complexity. Factors influencing the cost include the need for high availability, stringent security compliance (e.g., NIST standards), integration with diverse systems, and the level of customization required. Given the critical nature of taxpayer data security, this award appears to be a reasonable investment for ensuring robust AAA capabilities.

What are the primary risks associated with this contract for the IRS and IBM?

For the IRS, primary risks include potential vendor lock-in, where reliance on IBM for critical AAA systems could make future transitions difficult or costly. There's also the risk of security vulnerabilities if the developed systems are not adequately secured against evolving cyber threats, potentially leading to data breaches. Performance risks, such as delays in development or failure to meet technical specifications, could impact IRS operations. For IBM, risks include cost overruns under the firm-fixed-price contract if project complexities are underestimated, potential scope creep if requirements are not well-defined, and reputational damage if security incidents occur. Both parties face the risk of integration challenges with existing IRS IT infrastructure.

How effective are firm-fixed-price contracts in managing costs for complex IT development like this?

Firm-fixed-price (FFP) contracts are intended to provide cost certainty for the government by establishing a set price for the work. This shifts the risk of cost overruns to the contractor (IBM, in this case). For complex IT development, FFP contracts can be effective if the scope of work is very well-defined and understood from the outset, minimizing the potential for significant changes. However, in rapidly evolving fields like IT security and authentication, where requirements can change due to new threats or technological advancements, FFP contracts can sometimes stifle innovation or lead to contractors being hesitant to suggest necessary changes if they impact cost. The IRS will need robust contract management to ensure the scope remains controlled while allowing for necessary adaptations.

What are the implications of this contract award for the broader federal IT services market, particularly for authentication and cybersecurity?

This award signifies the continued importance and investment in robust identity and access management solutions within the federal government. It highlights the demand for specialized expertise in developing and maintaining secure authentication, authorization, and access (AAA) systems. For the federal IT services market, it underscores the ongoing need for contractors with deep capabilities in cybersecurity, secure software development, and architectural design, especially for agencies handling sensitive data like the IRS. The full and open competition suggests that multiple large IT firms are capable of undertaking such critical work, fostering a competitive environment. This contract also aligns with broader federal initiatives like the President's Executive Order on Improving the Nation's Cybersecurity, emphasizing the need for secure-by-design principles.

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 › IT AND TELECOM - APLLICATIONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: RFQ8212

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DRIVE, BETHESDA, MD, 20817

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

Financial Breakdown

Contract Ceiling: $40,873,411

Exercised Options: $40,724,816

Current Obligation: $40,724,794

Actual Outlays: $22,402,873

Subaward Activity

Number of Subawards: 78

Total Subaward Amount: $16,381,457

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 47QTCK18D0014

IDV Type: GWAC

Timeline