DoD Awards IBM $22.7M for Microelectronics Services Amidst Sole-Source Contract

Contract Overview

Contract Amount: $22,707,211 ($22.7M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Defense

Start Date: 2024-03-20

End Date: 2026-02-28

Contract Duration: 710 days

Daily Burn Rate: $32.0K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: SERVICES TO DESIGN, FABRICATE, ASSEMBLE, BUILD, TEST, EVALUATE, VERIFY, VALIDATE, AND/OR PROCURE MICROELECTRONICS AND OPERATE SUCH A FACILITY.

Place of Performance

Location: BALLSTON SPA, SARATOGA County, NEW YORK, 12020

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $22.7 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: SERVICES TO DESIGN, FABRICATE, ASSEMBLE, BUILD, TEST, EVALUATE, VERIFY, VALIDATE, AND/OR PROCURE MICROELECTRONICS AND OPERATE SUCH A FACILITY. Key points: 1. Significant award for critical microelectronics design and fabrication services. 2. IBM secures a sole-source contract, raising questions about competition. 3. Potential risks include limited vendor options and price discovery challenges. 4. The IT and Defense sectors are heavily reliant on advanced microelectronics.

Value Assessment

Rating: fair

The contract type is Cost Plus Fixed Fee, which can lead to cost overruns if not managed carefully. Benchmarking against similar microelectronics services contracts is difficult due to the specialized nature and sole-source award.

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 may not yield the best value for taxpayers.

Taxpayer Impact: The lack of competition for this critical technology could result in higher costs for taxpayers than if multiple vendors had competed.

Public Impact

Ensures access to specialized microelectronics capabilities for national security. Potential for innovation within the defense supply chain. Raises concerns about reliance on a single provider for critical components.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of small business participation

Positive Signals

Critical technology development
Experienced contractor (IBM)

Sector Analysis

This award falls within the Engineering Services sector, specifically for advanced microelectronics. Spending in this area is crucial for national defense and technological advancement, with benchmarks often driven by R&D intensity and specialized facilities.

Small Business Impact

The data indicates no small business participation in this contract. Given the specialized nature of microelectronics, opportunities for small businesses may be limited, but further analysis is needed to confirm.

Oversight & Accountability

The sole-source nature of this award warrants close oversight to ensure fair pricing and effective execution. The Defense Microelectronics Activity should provide detailed justifications for the lack of competition.

Related Government Programs

Engineering Services
Department of Defense Contracting
Defense Microelectronics Activity Programs

Risk Flags

Sole-source award limits competition and potentially increases cost.
Cost Plus Fixed Fee contract type can lead to cost overruns.
No small business participation noted.
Potential for vendor lock-in for critical technology.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $22.7 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. SERVICES TO DESIGN, FABRICATE, ASSEMBLE, BUILD, TEST, EVALUATE, VERIFY, VALIDATE, AND/OR PROCURE MICROELECTRONICS AND OPERATE SUCH A FACILITY.

Who is the contractor on this award?

The obligated recipient is INTERNATIONAL BUSINESS MACHINES CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Microelectronics Activity).

What is the total obligated amount?

The obligated amount is $22.7 million.

What is the period of performance?

Start: 2024-03-20. End: 2026-02-28.

What is the justification for awarding this contract on a sole-source basis, and what steps are being taken to ensure fair pricing?

The justification for a sole-source award typically involves unique capabilities, urgent needs, or lack of adequate competition. For this contract, the specific reasons need to be documented by the agency. To ensure fair pricing, the agency should conduct thorough cost analyses, benchmark against similar (if available) sole-source procurements, and negotiate the fixed fee diligently.

What are the risks associated with relying on a single vendor for critical microelectronics design and fabrication services?

The primary risks include supply chain vulnerability, potential for price escalation due to lack of competition, and limited access to alternative technological advancements. If IBM faces production issues or strategic shifts, the DoD's microelectronics capabilities could be significantly impacted, potentially delaying critical defense programs.

How does this contract contribute to the overall effectiveness of the Department of Defense's microelectronics strategy?

This contract is likely intended to secure essential microelectronics capabilities for defense applications, ensuring access to advanced components and potentially fostering domestic production. Its effectiveness hinges on IBM's ability to deliver high-quality, reliable microelectronics that meet stringent defense requirements and timelines.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HQ072724R4000

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 1 NEW ORCHARD RD, ARMONK, NY, 10504

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $137,041,925

Exercised Options: $49,732,377

Current Obligation: $22,707,211

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ072724D0002

IDV Type: IDC

Timeline