HHS awards $39M for Accounting Services to IBM, raising concerns about competition and value

Contract Overview

Contract Amount: $39,002,148 ($39.0M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2006-04-01

End Date: 2008-06-30

Contract Duration: 821 days

Daily Burn Rate: $47.5K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: ACCOUNTING SERVICES

Place of Performance

Location: BETHESDA, MONTGOMERY County, MARYLAND, 20817

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $39.0 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: ACCOUNTING SERVICES Key points: 1. Significant contract value of $39M for accounting services. 2. Sole-source award to IBM limits competitive pricing. 3. Potential risk of overpayment due to lack of competition. 4. IT and professional services sector with a focus on financial transactions.

Value Assessment

Rating: questionable

The contract value of $39M for accounting services is substantial. Without competitive bidding, it's difficult to assess if this price represents fair market value compared to similar services procured through competitive means.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning IBM was the only vendor considered. This significantly limits price discovery and potentially leads to higher costs for taxpayers.

Taxpayer Impact: The lack of competition in this sole-source award may result in taxpayers paying a premium for accounting services.

Public Impact

Taxpayers may be overpaying for essential accounting services due to the absence of competitive bidding. The reliance on a single vendor for critical financial functions could pose a risk if service quality declines or costs escalate. Lack of transparency in the procurement process hinders public trust and accountability.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Lack of competition
Potential for overpricing
No small business participation

Positive Signals

Established vendor (IBM)
Firm fixed price contract

Sector Analysis

This contract falls within the professional services sector, specifically accounting and financial transaction processing. Benchmarks for similar large-scale accounting service contracts are highly variable and depend on scope, but competitive awards typically yield better value.

Small Business Impact

The data indicates no small business participation in this contract, which is a missed opportunity to support small businesses and potentially introduce innovative solutions at competitive prices.

Oversight & Accountability

The sole-source nature of this award warrants closer oversight to ensure the government is receiving adequate value for the funds expended and that the justification for sole-sourcing is robust.

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 competition.
Potential for inflated pricing.
No small business participation.
Limited transparency in procurement.
Risk of vendor lock-in.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $39.0 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. ACCOUNTING SERVICES

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 $39.0 million.

What is the period of performance?

Start: 2006-04-01. End: 2008-06-30.

What was the specific justification for awarding this contract on a sole-source basis to IBM?

The justification for a sole-source award typically involves unique capabilities, urgent needs, or a lack of other qualified sources. Without further documentation, it's impossible to determine the validity of the sole-source justification for this $39M accounting services contract. A thorough review would be needed to confirm if competitive alternatives were genuinely unavailable or if the justification was insufficient.

How does the pricing of this contract compare to industry benchmarks for similar accounting services procured competitively?

Direct comparison is challenging without detailed scope of work and service level agreements. However, sole-source contracts are inherently at a disadvantage regarding price discovery. Industry best practices suggest competitive bidding typically yields savings of 10-30% compared to sole-source procurements, indicating a potential for overpayment in this $39M award.

What are the potential risks associated with a sole-source award for critical accounting services over an extended period?

Risks include vendor lock-in, reduced incentive for the vendor to innovate or control costs, and potential for service degradation if oversight is lax. If IBM's performance falters or their pricing increases significantly, the government has limited recourse due to the lack of competitive alternatives, potentially impacting financial operations.

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 AVAILABLE FOR COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DR, BETHESDA, MD, 08

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $39,002,148

Exercised Options: $39,002,148

Current Obligation: $39,002,148

Contract Characteristics

Multi-Year Contract: Yes

Parent Contract

Parent Award PIID: 500030014

IDV Type: IDC

Timeline