IBM awarded $17.9M for accounting services by HHS CMS, contract duration over 3 years

Contract Overview

Contract Amount: $17,925,207 ($17.9M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2006-10-16

End Date: 2009-09-25

Contract Duration: 1,075 days

Daily Burn Rate: $16.7K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Other

Official Description: ACCOUNTING SERVICES

Place of Performance

Location: WINDSOR MILL, BALTIMORE County, MARYLAND, 21244

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $17.9 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: ACCOUNTING SERVICES Key points: 1. Value for money appears fair given the contract type and duration, though specific performance metrics are not detailed. 2. Competition dynamics indicate a sole-source award, potentially limiting price discovery and competitive pressure. 3. Risk indicators are moderate, with a Cost Plus Award Fee structure that incentivizes performance but requires careful oversight. 4. Performance context is limited due to the lack of publicly available details on specific deliverables and outcomes. 5. Sector positioning places this contract within the broader IT and financial services sector supporting government operations.

Value Assessment

Rating: fair

The contract was awarded as a sole-source delivery order under a larger indefinite-delivery/indefinite-quantity (IDIQ) contract, making direct price comparisons difficult. The Cost Plus Award Fee (CPAF) structure suggests that IBM's compensation is tied to performance, which can be a reasonable approach for complex services. However, without insight into the award fee criteria and achieved performance levels, a definitive value-for-money assessment is challenging. The total award value of $17.9 million over approximately three years suggests a moderate annual spend.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not openly competed. This approach is typically used when a specific contractor possesses unique capabilities or when circumstances necessitate a rapid award. The lack of competition means that potential savings from a competitive bidding process were not realized, and it limits the government's ability to explore alternative solutions or pricing structures.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as they bypass the price discovery mechanisms inherent in competitive procurements.

Public Impact

The Centers for Medicare and Medicaid Services (CMS) benefits from accounting services to support its vast financial operations. Services delivered likely include financial management, accounting, auditing support, and potentially financial system maintenance. The geographic impact is primarily national, given CMS's role in administering federal healthcare programs. Workforce implications are internal to CMS and IBM, involving specialized accounting and financial professionals.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential innovation.
Cost Plus Award Fee structure requires robust government oversight to ensure fair pricing and prevent cost overruns.
Lack of detailed performance metrics in public data makes assessing contractor effectiveness difficult.

Positive Signals

Contract awarded to a large, established firm (IBM) with significant experience in government contracting.
Cost Plus Award Fee structure incentivizes contractor performance if managed effectively.
Delivery order mechanism allows for task-specific awards under a broader contract vehicle.

Sector Analysis

This contract falls within the professional services sector, specifically accounting and financial services, which are critical for government operations. The IT services component is also relevant, as financial management often relies on sophisticated IT systems. The market for these services is large, with numerous large and small businesses capable of providing them. However, the sole-source nature of this award bypasses typical market dynamics for this type of service.

Small Business Impact

There is no indication that this contract involved small business set-asides or subcontracting opportunities. As a sole-source award to a large corporation, it is unlikely to have directly benefited the small business ecosystem. Future procurements could explore opportunities for small business participation.

Oversight & Accountability

Oversight for this contract would primarily reside with the contracting officers and program managers at CMS. The Cost Plus Award Fee structure necessitates diligent monitoring of performance against established criteria to ensure fair compensation. Transparency is limited by the sole-source nature and the proprietary details of the award fee determination. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Federal Accounting Standards Advisory Board (FASAB) guidance
Office of Management and Budget (OMB) Circulars on Financial Management
Healthcare Financial Management Association (HFMA) resources

Risk Flags

Sole-source award may limit cost savings.
Cost Plus Award Fee requires diligent oversight.
Limited public data on performance outcomes.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $17.9 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 $17.9 million.

What is the period of performance?

Start: 2006-10-16. End: 2009-09-25.

What specific accounting functions did IBM perform under this contract?

While the specific details of the services rendered are not publicly available, the contract's description as 'ACCOUNTING SERVICES' and its award to CMS suggests IBM provided support for financial management, transaction processing, financial reporting, and potentially auditing or compliance-related accounting functions. Given CMS's scale, these services likely involved complex financial systems and large volumes of data, ensuring adherence to federal accounting standards and regulations.

How does the Cost Plus Award Fee (CPAF) structure compare to other contract types for similar services?

The CPAF structure is often used for complex services where performance outcomes are difficult to define precisely upfront or where innovation is encouraged. It allows for a base fee plus an award fee determined by the government based on performance. This contrasts with Fixed-Price contracts, which offer more cost certainty but less flexibility, or Cost-Plus-Fixed-Fee (CPFF), where the fee is fixed regardless of performance. CPAF can incentivize high performance but requires robust government oversight to prevent cost escalation and ensure the award fee is justified.

What are the potential risks associated with a sole-source award for accounting services?

The primary risk of a sole-source award is the lack of competitive pressure, which can lead to higher prices than might be achieved through open competition. It also limits the government's ability to explore a wider range of solutions or innovative approaches offered by other potential contractors. Furthermore, reliance on a single source can create vendor lock-in and reduce flexibility if the contractor's performance or capabilities change over time. Effective contract management and oversight are crucial to mitigate these risks.

What is the historical spending trend for accounting services at CMS?

Analyzing historical spending trends for accounting services at CMS requires access to detailed procurement data beyond this single contract. However, given the continuous need for financial management and oversight of massive healthcare programs like Medicare and Medicaid, it is reasonable to assume that CMS consistently requires significant investment in accounting and financial services. Spending levels can fluctuate based on program changes, regulatory updates, and specific project needs. This $17.9M contract represents a portion of that ongoing requirement over its three-year period.

How does IBM's track record with government contracts influence the assessment of this award?

IBM is a major federal contractor with extensive experience across various agencies and service types, including IT and professional services. Their established presence suggests a familiarity with government procurement processes and compliance requirements. While this specific award was sole-source, IBM's broader track record indicates a capacity to handle large, complex contracts. However, the assessment of this particular award should focus on the specific performance and value delivered under this contract, rather than solely relying on the company's general reputation.

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: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DR, BETHESDA, MD, 20817

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $17,925,207

Exercised Options: $17,925,207

Current Obligation: $17,925,207

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: 500030014

IDV Type: IDC

Timeline