IBM awarded $12.18M HIGLAS maintenance task order by HHS CMS, a sole-source contract

Contract Overview

Contract Amount: $12,175,977 ($12.2M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2008-06-21

End Date: 2013-02-28

Contract Duration: 1,713 days

Daily Burn Rate: $7.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: AWARD OF A NEW TASK ORDER 0030 FOR HIGLAS MAINTENANCE

Place of Performance

Location: BETHESDA, MONTGOMERY County, MARYLAND, 20817

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $12.2 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: AWARD OF A NEW TASK ORDER 0030 FOR HIGLAS MAINTENANCE Key points: 1. This contract represents a significant investment in maintaining critical financial transaction processing systems. 2. The sole-source nature of this award warrants scrutiny regarding potential cost efficiencies and market alternatives. 3. Performance risk is moderate, given the established nature of the HIGLAS system and IBM's role. 4. The contract duration of over 4 years suggests a long-term reliance on this specific solution. 5. This spending falls within the broader category of financial transaction processing and IT maintenance for federal health agencies.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging without competitive bids. The Cost Plus Fixed Fee (CPFF) structure means costs could fluctuate, but the fixed fee provides some predictability. Comparing it to similar maintenance contracts for large-scale financial systems across government would be necessary to assess if the overall cost aligns with industry standards for such specialized services. Given the lack of competition, there's a risk that the price may not reflect the most economical option available.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This typically occurs when a specific contractor possesses unique capabilities or when urgency dictates a direct award. The lack of competition limits the government's ability to leverage market forces to drive down prices and ensure the best possible value. It also raises questions about whether alternative solutions or providers were adequately considered.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without a competitive process, there is less pressure on the contractor to offer the lowest possible price for the services rendered.

Public Impact

The Centers for Medicare and Medicaid Services (CMS) benefits directly through the continued operation of the HIGLAS system. This contract ensures the ongoing maintenance and functionality of a critical financial transaction processing system. The geographic impact is primarily within the operational centers of CMS, likely in Maryland where the contractor is based. Workforce implications include the continued employment of IT professionals by IBM to support this system.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings.
CPFF contract type can lead to cost overruns if not closely managed.
Lack of competition may reduce incentives for innovation or efficiency improvements.

Positive Signals

IBM is a well-established contractor with extensive experience in government IT services.
The HIGLAS system is critical for CMS operations, implying a need for reliable maintenance.
The fixed fee component of the CPFF contract provides some cost certainty.

Sector Analysis

This contract falls within the IT services sector, specifically focusing on maintenance and support for financial transaction processing systems. The market for such specialized government IT maintenance is often dominated by a few large, experienced contractors. Benchmarking would involve comparing this contract's value and terms to other large-scale IT maintenance contracts awarded by federal agencies, particularly those managing sensitive financial data.

Small Business Impact

This contract was not competed and there is no indication of small business set-asides or subcontracting requirements. Therefore, it is unlikely to have a direct positive impact on the small business ecosystem. The focus is on a large incumbent contractor for a critical system.

Oversight & Accountability

Oversight for this contract would primarily fall under the Centers for Medicare and Medicaid Services (CMS) contracting officers and program managers. The Cost Plus Fixed Fee structure necessitates diligent monitoring of costs and performance to ensure value. Transparency is limited by the sole-source nature, but contract performance reports and financial audits would be key accountability measures. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

CMS Financial Management Systems
Federal Health IT Infrastructure
Government Financial Transaction Processing
IT Maintenance and Support Services

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competition may impact price discovery

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $12.2 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. AWARD OF A NEW TASK ORDER 0030 FOR HIGLAS MAINTENANCE

Who is the contractor on this award?

The obligated recipient is INTERNATIONAL BUSINESS MACHINES CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Centers for Medicare and Medicaid Services).

What is the total obligated amount?

The obligated amount is $12.2 million.

What is the period of performance?

Start: 2008-06-21. End: 2013-02-28.

What is the historical spending trend for HIGLAS maintenance prior to this award?

Detailed historical spending data for the HIGLAS maintenance prior to this specific $12.18 million award is not provided in the given data. However, the contract duration of 1713 days (approximately 4.7 years) and the award amount suggest a consistent annual expenditure. To understand the trend, one would need to examine prior task orders or contracts for HIGLAS maintenance, looking at the total amount spent annually and whether the costs have been increasing, decreasing, or remaining stable. This would help contextualize whether the current award represents a significant shift in spending or a continuation of established patterns for maintaining this critical system.

How does the Cost Plus Fixed Fee (CPFF) structure compare to other contract types for IT maintenance?

The Cost Plus Fixed Fee (CPFF) contract type is often used for complex projects where the scope is not fully defined or is expected to evolve, such as system maintenance and upgrades. It reimburses the contractor for allowable costs plus a fixed fee representing profit. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers more flexibility but less cost certainty for the government. FFP contracts provide greater cost predictability but can be risky if the scope is underestimated. For IT maintenance, CPFF can be advantageous if unforeseen technical issues arise, allowing the contractor to address them without extensive re-negotiation. However, it requires robust government oversight to manage costs effectively and prevent scope creep, which is a key consideration for this sole-source award.

What are the specific risks associated with a sole-source award for critical IT systems like HIGLAS?

Sole-source awards for critical IT systems like HIGLAS carry several risks. Primarily, the absence of competition can lead to higher prices than might be achieved through a competitive bidding process, potentially resulting in less value for taxpayer money. There's also a reduced incentive for the contractor to innovate or improve efficiency, as they face no direct market pressure. Furthermore, reliance on a single vendor can create vendor lock-in, making it difficult and costly to switch providers in the future. This can also pose a risk if the sole-source contractor experiences financial instability or decides to exit the market. Robust contract management and performance monitoring are crucial to mitigate these risks.

What is the typical performance benchmark for IT maintenance contracts of this scale in the federal government?

Performance benchmarks for IT maintenance contracts of this scale ($12.18 million over ~4.7 years) in the federal government typically focus on system uptime, response times to issues, resolution times for defects, and adherence to security protocols. For critical financial systems like HIGLAS, maintaining near-perfect uptime (e.g., 99.9% or higher) is paramount. Response times for critical issues should be measured in minutes or hours, with resolution targets also being very aggressive. Adherence to security standards and successful completion of audits are also key performance indicators. Without specific performance metrics from this contract, comparisons would involve reviewing similar contracts for financial systems at agencies like Treasury or IRS, assessing their Service Level Agreements (SLAs) and reported performance outcomes.

What is IBM's track record with large federal IT maintenance contracts, particularly for financial systems?

IBM has a long and extensive track record as a major contractor for the federal government, including numerous large-scale IT maintenance and support contracts across various agencies. They are known for their capabilities in managing complex enterprise systems, including financial and health-related IT infrastructure. For instance, IBM has historically held significant contracts with agencies like the Social Security Administration, the Department of Defense, and various components of the Department of Health and Human Services. Their experience often includes maintaining mission-critical systems that require high availability and robust security. However, like any large contractor, specific contract performance can vary, and a detailed review of their past performance on similar financial system maintenance contracts would be necessary to fully assess their suitability and reliability for the HIGLAS system.

Industry Classification

NAICS: Finance and Insurance › Activities Related to Credit Intermediation › Financial Transactions Processing, Reserve, and Clearinghouse Activities

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE (U)

Contractor Details

Address: 6710 ROCKLEDGE DR, BETHESDA, MD, 20817

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $12,175,977

Exercised Options: $12,175,977

Current Obligation: $12,175,977

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: 500030014

IDV Type: IDC

Timeline