HHS Awards $14.5M IBM Contract for Financial Transaction Processing, Lacking Competition

Contract Overview

Contract Amount: $14,572,040 ($14.6M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2008-06-21

End Date: 2012-09-30

Contract Duration: 1,562 days

Daily Burn Rate: $9.3K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS AWARD FEE

Sector: IT

Official Description: REPLACE T.O. 21-OPERATIONS-W/NEW TASK ORDER #31.

Place of Performance

Location: WINDSOR MILL, BALTIMORE County, MARYLAND, 21244

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $14.6 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: REPLACE T.O. 21-OPERATIONS-W/NEW TASK ORDER #31. Key points: 1. The contract awarded to IBM for financial transaction processing represents a significant expenditure. 2. Lack of competition raises concerns about potential overpricing and limited innovation. 3. The sector involves critical financial operations for Medicare and Medicaid Services. 4. Long contract duration (2008-2012) suggests a need for ongoing services.

Value Assessment

Rating: questionable

The contract type is Cost Plus Award Fee, which can incentivize performance but also lead to higher costs if not managed tightly. Without a competitive benchmark, assessing the value for money is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This limits price discovery and potentially leads to higher costs for taxpayers as there was no market pressure to offer the best price.

Taxpayer Impact: The lack of competition for a contract of this size means taxpayers may have paid more than necessary for the services rendered.

Public Impact

Impacts the efficiency of financial transactions for Medicare and Medicaid. Potential for higher healthcare costs due to non-competitive contract. Reliability of IBM's services is crucial for program integrity.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition
Cost Plus Award Fee contract type
Long contract duration

Positive Signals

Established vendor (IBM)
Critical function for CMS

Sector Analysis

This contract falls within the IT and financial services sector, specifically supporting the complex financial operations of healthcare programs. Benchmarks for similar financial transaction processing contracts are difficult to ascertain without competitive data.

Small Business Impact

The data indicates no specific set-aside for small businesses, and the awardee is a large corporation. This suggests limited opportunity for small businesses in this particular contract.

Oversight & Accountability

The 'not competed' status warrants further investigation into the justification for a sole-source award. Oversight would be needed to ensure the Cost Plus Award Fee structure was managed effectively to control costs.

Related Government Programs

Financial Transactions Processing, Reserve, and Clearinghouse Activities
Department of Health and Human Services Contracting
Centers for Medicare and Medicaid Services Programs

Risk Flags

Sole-source award lacks transparency and competitive pricing.
Cost Plus Award Fee can lead to higher costs without strict oversight.
Long contract duration may indicate a lack of market alternatives or vendor lock-in.
No small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $14.6 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. REPLACE T.O. 21-OPERATIONS-W/NEW TASK ORDER #31.

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 $14.6 million.

What is the period of performance?

Start: 2008-06-21. End: 2012-09-30.

What was the justification for not competing this contract, and were alternative solutions explored?

The justification for not competing this contract is not provided in the data. Typically, sole-source awards require a strong rationale, such as a unique capability or urgent need. Without this information, it's impossible to assess if alternative solutions were considered or if this was the most cost-effective approach for the government.

How did the Cost Plus Award Fee structure impact the final cost and performance outcomes?

The Cost Plus Award Fee (CPAF) structure allows for reimbursement of costs plus an award fee based on performance. While it can incentivize good performance, it also carries a risk of cost overruns if performance metrics are not strictly defined or if the award fee criteria are too lenient. Without detailed performance reports and fee allocations, it's hard to determine the precise impact on the final cost.

What was the actual performance of IBM under this contract, and did it justify the costs incurred?

The provided data does not include specific performance metrics or outcomes for IBM's services under this contract. To assess if the costs were justified, a review of performance evaluations, service level agreements, and any documented issues or successes would be necessary. This information is crucial for determining the true value delivered.

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 AWARD FEE (R)

Contractor Details

Address: 6710 ROCKLEDGE DR, BETHESDA, MD, 20817

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $14,572,040

Exercised Options: $14,572,040

Current Obligation: $14,572,040

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: 500030014

IDV Type: IDC

Timeline