CBP Modernization ACE Project Awarded to IBM for $20.4M, Facing Potential Cost Overruns

Contract Overview

Contract Amount: $20,457,884 ($20.5M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Homeland Security

Start Date: 2004-03-27

End Date: 2006-12-31

Contract Duration: 1,009 days

Daily Burn Rate: $20.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: IT

Official Description: CBP MODERNIZATION ACE/INTERNATIONAL TRADE DATA SYSTEM

Place of Performance

Location: ALEXANDRIA, ALEXANDRIA CITY County, VIRGINIA, 22311

State: Virginia Government Spending

Plain-Language Summary

Department of Homeland Security obligated $20.5 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: CBP MODERNIZATION ACE/INTERNATIONAL TRADE DATA SYSTEM Key points: 1. The contract focuses on modernizing international trade data systems for U.S. Customs and Border Protection. 2. IBM is the sole contractor, raising questions about competitive pricing and innovation. 3. The project's Cost Plus Award Fee structure introduces risk of inflated costs if not managed tightly. 4. This IT modernization effort is critical for efficient trade processing and national security.

Value Assessment

Rating: questionable

The Cost Plus Award Fee (CPAF) contract type, with an initial award value of $20.4M, allows for costs plus a fee that is earned based on performance. This structure can incentivize contractors to incur costs to achieve higher fees, potentially leading to cost overruns if performance metrics are not rigorously defined and monitored.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting a competitive process initially. However, the specific award mechanism (Delivery Order) and the nature of the project may limit subsequent competition or lead to sole-source modifications over time. The pricing discovery relies on the initial competitive bid and the CPAF structure.

Taxpayer Impact: The success of this modernization is crucial for streamlining trade, potentially increasing revenue collection and reducing costs for businesses. However, cost overruns due to the CPAF structure could negatively impact taxpayer funds.

Public Impact

Enhances efficiency and security in international trade processing. Modernizes critical infrastructure for U.S. Customs and Border Protection. Potential for increased revenue collection through improved data accuracy and processing. Impacts businesses involved in international trade through streamlined customs procedures.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee structure can lead to cost overruns.
Sole contractor (IBM) may limit future competition and innovation.
Project duration and complexity increase risk of delays and scope creep.

Positive Signals

Awarded under full and open competition.
Modernization is critical for national security and trade facilitation.
Potential for significant improvements in operational efficiency.

Sector Analysis

This contract falls within the Information Technology sector, specifically focusing on large-scale system modernization for a federal agency. Benchmarks for similar IT modernization projects vary widely, but costs can escalate rapidly due to complexity, integration challenges, and evolving technological requirements.

Small Business Impact

The provided data does not indicate any specific set-asides for small businesses. Large IT contracts like this often involve significant subcontracting opportunities, but the prime contract is held by a large corporation (IBM), suggesting limited direct benefit to small businesses as prime contractors.

Oversight & Accountability

The Department of Homeland Security, through U.S. Customs and Border Protection, is responsible for oversight. The Cost Plus Award Fee structure necessitates robust oversight to ensure performance targets are met and costs are controlled. The number of delivery orders (2) suggests ongoing tasking within the contract.

Related Government Programs

Department of Homeland Security Contracting
U.S. Customs and Border Protection Programs

Risk Flags

Cost Overruns (CPAF structure)
Vendor Lock-in (Sole Awardee)
Scope Creep
Integration Complexity
Performance Measurement Challenges

Frequently Asked Questions

What is this federal contract paying for?

Department of Homeland Security awarded $20.5 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. CBP MODERNIZATION ACE/INTERNATIONAL TRADE DATA SYSTEM

Who is the contractor on this award?

The obligated recipient is INTERNATIONAL BUSINESS MACHINES CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Homeland Security (U.S. Customs and Border Protection).

What is the total obligated amount?

The obligated amount is $20.5 million.

What is the period of performance?

Start: 2004-03-27. End: 2006-12-31.

What specific performance metrics are in place to manage the 'Award Fee' component of the CPAF contract, and how are they audited?

The effectiveness of the CPAF structure hinges on clearly defined, measurable, and auditable performance metrics. These metrics should align directly with the modernization goals of the ACE system. Robust oversight by CBP is required to independently verify IBM's performance against these metrics to ensure the award fee is justified and taxpayer money is well-spent, preventing potential inflation of costs.

Given IBM is the sole awardee, what mechanisms are in place to ensure continued competitive pressure and prevent vendor lock-in for future phases or sustainment?

While the initial award was full and open, the long-term strategy needs to address potential vendor lock-in. CBP should explore options like breaking down future phases into smaller, independently competitive procurements, actively seeking alternative solutions, and ensuring clear contract exit strategies are defined. Regular market research is essential to identify emerging technologies and potential competitors.

How does the modernization of the ACE system directly contribute to improved national security and trade facilitation beyond basic processing?

The ACE system modernization aims to create a unified, modern platform for processing international trade data, enhancing risk assessment capabilities for security threats and improving the efficiency of legitimate trade. By integrating disparate systems and leveraging advanced analytics, it allows for better targeting of illicit goods, faster clearance of compliant cargo, and more accurate data for economic analysis, ultimately strengthening border security and economic competitiveness.

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

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: $20,457,884

Exercised Options: $20,457,884

Current Obligation: $20,457,884

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: TC2001025

IDV Type: IDC

Timeline