DHS Awards $145.5M to IBM for Financial Systems Modernization, Facing Potential Cost Overruns

Contract Overview

Contract Amount: $145,512,383 ($145.5M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Homeland Security

Start Date: 2017-12-26

End Date: 2021-09-26

Contract Duration: 1,370 days

Daily Burn Rate: $106.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: LABOR HOURS

Sector: IT

Official Description: IGF::CT::IGF FINANCIAL SYSTEMS MODERNIZATION

Place of Performance

Location: BETHESDA, MONTGOMERY County, MARYLAND, 20817

State: Maryland Government Spending

Plain-Language Summary

Department of Homeland Security obligated $145.5 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: IGF::CT::IGF FINANCIAL SYSTEMS MODERNIZATION Key points: 1. IBM secured a significant contract for financial systems modernization, highlighting the demand for IT infrastructure services. 2. The contract's value suggests a substantial investment in upgrading critical government financial operations. 3. Potential cost overruns and the lack of explicit small business participation are key risks. 4. The IT sector, particularly cloud and data processing, continues to be a major area of federal spending.

Value Assessment

Rating: questionable

The contract's total award value is $145.5 million. Without specific unit pricing or detailed cost breakdowns, it's difficult to benchmark against similar contracts. The 'labor hours' pricing structure can lead to cost variability.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting a robust price discovery process. However, the 'labor hours' pricing model may not always yield the most cost-effective outcome compared to fixed-price arrangements.

Taxpayer Impact: While competition was utilized, the potential for cost overruns and the lack of transparency in labor hour billing could lead to inefficient use of taxpayer funds.

Public Impact

Modernization of financial systems aims to improve efficiency and security of government financial data. IBM's role indicates a reliance on large technology providers for critical infrastructure. The duration of the contract (nearly 4 years) suggests a complex and long-term project.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to labor hour pricing.
Lack of explicit small business participation.
Contract duration and complexity.

Positive Signals

Awarded under full and open competition.
Addresses critical financial systems modernization.

Sector Analysis

This contract falls within the IT sector, specifically computing infrastructure and data processing services. Federal spending in this area is substantial, driven by the need to modernize legacy systems and enhance cybersecurity. Benchmarks for similar IT modernization contracts vary widely based on scope and technology.

Small Business Impact

The data indicates that small businesses were not explicitly involved in this contract award. This raises questions about opportunities for small business participation in large federal IT modernization projects.

Oversight & Accountability

The contract was awarded by the Department of Homeland Security's Office of Procurement Operations. Oversight would typically involve regular performance reviews and financial audits to ensure contract compliance and manage costs.

Related Government Programs

Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services
Department of Homeland Security Contracting
Office of Procurement Operations Programs

Risk Flags

Potential for cost overruns
Lack of explicit small business participation
Reliance on labor hours pricing model
Contract duration and complexity

Frequently Asked Questions

What is this federal contract paying for?

Department of Homeland Security awarded $145.5 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. IGF::CT::IGF FINANCIAL SYSTEMS MODERNIZATION

Who is the contractor on this award?

The obligated recipient is INTERNATIONAL BUSINESS MACHINES CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Homeland Security (Office of Procurement Operations).

What is the total obligated amount?

The obligated amount is $145.5 million.

What is the period of performance?

Start: 2017-12-26. End: 2021-09-26.

What specific financial modernization capabilities is IBM delivering under this contract, and how do they align with DHS's strategic goals?

The contract focuses on 'Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services' for financial systems modernization. This likely includes upgrading servers, databases, and potentially cloud migration to enhance the efficiency, security, and scalability of DHS's financial operations. The alignment with strategic goals would depend on DHS's specific modernization roadmap and objectives for financial management.

What mechanisms are in place to mitigate the risk of cost overruns given the 'labor hours' pricing structure?

Mitigation strategies typically involve establishing clear labor categories with pre-negotiated rates, setting spending ceilings, requiring detailed timesheets and progress reports, and conducting regular performance reviews. The contracting officer's vigilance in monitoring hours and deliverables against the base contract value and any modifications is crucial to controlling costs.

How will the success of this financial systems modernization be measured, and what are the key performance indicators (KPIs)?

Success metrics would likely include improvements in processing speed, reduction in system downtime, enhanced data security, successful integration with other DHS systems, and user satisfaction. Key Performance Indicators (KPIs) might track system uptime percentages, data breach incidents, transaction processing times, and the number of successful system updates or feature deployments.

Industry Classification

NAICS: Information › Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services › Computing Infrastructure Providers, Data Processing, Web Hosting, and Related 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: 3

Pricing Type: LABOR HOURS (Z)

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: $163,437,454

Exercised Options: $153,617,698

Current Obligation: $145,512,383

Subaward Activity

Number of Subawards: 72

Total Subaward Amount: $64,117,504

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: HSHQDC13DE2089

IDV Type: IDC

Timeline