IRS awards $194M contract to FOUR LLC for IBM software licensing and support

Contract Overview

Contract Amount: $194,374,055 ($194.4M)

Contractor: Four LLC

Awarding Agency: Department of the Treasury

Start Date: 2023-06-30

End Date: 2026-06-29

Contract Duration: 1,095 days

Daily Burn Rate: $177.5K/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: IBM SOFTWARE LICENSING, MAINTENANCE, SUPPORT AND SUBSCRIPTION FOR IRS

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20006

State: District of Columbia Government Spending

Plain-Language Summary

Department of the Treasury obligated $194.4 million to FOUR LLC for work described as: IBM SOFTWARE LICENSING, MAINTENANCE, SUPPORT AND SUBSCRIPTION FOR IRS Key points: 1. Contract value represents a significant investment in essential IT infrastructure for tax administration. 2. The procurement method, 'Full and Open Competition After Exclusion of Sources,' suggests a complex history or specific justification for limiting initial bidders. 3. A 1095-day duration indicates a long-term need for these services. 4. The contract is firm-fixed-price, providing cost certainty for the government. 5. This award falls under 'Other Computer Related Services,' a broad category. 6. The primary recipient is the Internal Revenue Service, a critical federal agency.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific details on the IBM software suite and the scope of maintenance and support. However, a $194 million expenditure over three years for enterprise software licensing and support is substantial. Comparing it to similar large-scale IT procurements for critical infrastructure agencies like the IRS would be necessary to determine if the pricing is competitive. The firm-fixed-price structure offers predictability, but the overall value hinges on the necessity and efficiency of the licensed software and the quality of support provided.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'Full and Open Competition After Exclusion of Sources.' This procurement method implies that while the competition was intended to be open, certain sources may have been excluded at some stage, possibly due to prior contract performance, specific technical requirements, or other justifications. The fact that it was not a purely 'full and open' competition from the outset raises questions about the breadth of initial market engagement and potential limitations on the number of qualified bidders.

Taxpayer Impact: This procurement method may limit the number of potential bidders, potentially impacting the government's ability to secure the most competitive pricing. Taxpayers may not benefit from the full spectrum of market innovation and cost savings that a truly unrestricted open competition could yield.

Public Impact

Taxpayers benefit from the continued operation and modernization of the IRS's IT systems, crucial for tax collection and processing. The contract ensures the availability of essential IBM software, maintenance, and support, underpinning critical IRS functions. The geographic impact is national, as the IRS serves all U.S. taxpayers. Workforce implications are primarily within the IT support and administration roles at the IRS and potentially at the contractor's organization.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The 'Exclusion of Sources' in the competition method warrants further investigation to ensure no viable competitors were unfairly barred.
Lack of detailed service level agreements (SLAs) or performance metrics in the provided data makes assessing the quality of maintenance and support difficult.
The long-term reliance on a single vendor's software suite could present future lock-in risks and limit flexibility.

Positive Signals

The firm-fixed-price contract provides budget certainty for the IRS.
The contract duration of three years suggests a stable and predictable IT support environment.
Awarding to FOUR LLC indicates a potentially established relationship or capability to meet IRS's specific needs.

Sector Analysis

This contract falls within the broader Information Technology sector, specifically focusing on software licensing, maintenance, and support. The market for enterprise software and associated services is highly competitive, with major players like IBM dominating specific niches. Government spending in this area is substantial, driven by the need to maintain and upgrade complex IT systems across various agencies. Comparable spending benchmarks would involve analyzing other large federal IT contracts for similar software suites or support services, considering factors like user base size and criticality of the systems supported.

Small Business Impact

The provided data indicates that small business participation (ss: false, sb: false) was not a primary set-aside consideration for this specific contract award. This suggests that the procurement was likely focused on large-scale enterprise solutions where larger, specialized firms are typically better positioned. There is no explicit information on subcontracting plans for small businesses, which could be a missed opportunity to engage the small business ecosystem in supporting critical IRS IT functions.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Treasury and the Internal Revenue Service's contracting and program management offices. Accountability measures would be defined by the contract's terms, including performance standards, delivery schedules, and payment terms. Transparency is facilitated by contract databases like FPDS, which publish award details. The Inspector General for Tax Administration (TIGTA) would have jurisdiction to investigate potential fraud, waste, or abuse related to this contract.

Related Government Programs

IRS IT Modernization Programs
Federal Civilian Agency Software Procurement
Enterprise Resource Planning (ERP) Systems Support
IT Infrastructure Maintenance Contracts
IBM Software Licensing and Support

Risk Flags

Potential vendor lock-in
Limited competition raises cost concerns
Lack of detailed performance metrics
Dependence on specific vendor technology

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $194.4 million to FOUR LLC. IBM SOFTWARE LICENSING, MAINTENANCE, SUPPORT AND SUBSCRIPTION FOR IRS

Who is the contractor on this award?

The obligated recipient is FOUR LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $194.4 million.

What is the period of performance?

Start: 2023-06-30. End: 2026-06-29.

What specific IBM software products are covered under this licensing, maintenance, and support contract?

The provided data does not specify the exact IBM software products included in this contract. However, given the scale and the agency (IRS), it likely encompasses core enterprise software critical for tax administration, such as database management systems (e.g., Db2), operating systems, middleware, or specialized tax processing software. A detailed breakdown would typically be found in the contract's statement of work (SOW) or associated appendices, which are not publicly available in this summary. Understanding the specific software is crucial for assessing its necessity, potential alternatives, and the true value of the maintenance and support.

How does the $194 million contract value compare to previous spending on similar IBM software support for the IRS?

Without historical spending data for the IRS's IBM software licensing, maintenance, and support, a direct comparison is not possible. However, federal agencies often engage in multi-year contracts for enterprise software due to the significant investment and integration required. If this contract represents a renewal or expansion, its value should be assessed against prior expenditures, accounting for inflation, new feature additions, or changes in licensing models. A trend of increasing costs over time could indicate potential inefficiencies or a need for re-competition with a broader scope.

What are the key performance indicators (KPIs) and service level agreements (SLAs) associated with the maintenance and support services?

The provided data does not include specific Key Performance Indicators (KPIs) or Service Level Agreements (SLAs) for the maintenance and support services. In a contract of this magnitude, robust SLAs are critical to ensure timely issue resolution, system uptime, and adequate support response times. These metrics would typically define acceptable performance thresholds, with potential penalties for non-compliance. The absence of this information in the summary makes it difficult to quantitatively assess the expected quality and effectiveness of the support provided by FOUR LLC.

What is the justification for the 'Exclusion of Sources' in the procurement process for this contract?

The procurement method 'Full and Open Competition After Exclusion of Sources' implies that while the competition was intended to be open, certain potential sources were excluded. The specific justification for this exclusion is not provided in the summary data. Common reasons include prior performance issues with certain vendors, unique technical requirements that only a limited number of vendors can meet, or a need to transition from a previous contract where only specific vendors had the necessary knowledge. A thorough review of the contract's Justification for Other than Full and Open Competition (JOFOC) document would be required to understand the rationale.

What is the track record of FOUR LLC in providing similar IT support and licensing services to federal agencies?

Information regarding the specific track record of FOUR LLC in providing similar IT support and licensing services to federal agencies is not detailed in the provided summary data. To assess their capability and reliability, one would need to examine their past performance on comparable contracts, including client satisfaction, adherence to schedules and budgets, and any documented issues or commendations. Federal procurement databases and past performance reviews would be the primary sources for this information.

Are there any identified risks associated with the long-term reliance on IBM software and FOUR LLC's support for the IRS?

Yes, there are potential risks associated with long-term reliance on IBM software and FOUR LLC's support. Vendor lock-in is a significant concern, as switching to different software platforms can be extremely costly and disruptive. Dependence on a single vendor's technology can also limit the IRS's agility in adopting newer, potentially more cost-effective solutions. Furthermore, the quality and responsiveness of FOUR LLC's support are critical; any degradation in service could impact IRS operations. The 'Exclusion of Sources' aspect of the competition also introduces a risk that the government may not have accessed the most competitive pricing or innovative solutions available in the broader market.

Industry Classification

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

Product/Service Code: IT AND TELECOM - COMPUTE

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: 2303 DULLES STATION BLVD STE 105, HERNDON, VA, 20171

Business Categories: Category Business, Limited Liability Corporation, Partnership or Limited Liability Partnership, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $324,404,869

Exercised Options: $194,374,055

Current Obligation: $194,374,055

Actual Outlays: $194,374,055

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Parent Contract

Parent Award PIID: NNG15SC73B

IDV Type: GWAC

Timeline