DHS awards $23.7M sole-source contract to IBM for critical customs system support

Contract Overview

Contract Amount: $23,754,052 ($23.8M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Homeland Security

Start Date: 2012-10-30

End Date: 2013-09-29

Contract Duration: 334 days

Daily Burn Rate: $71.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: TIME AND MATERIALS

Sector: IT

Official Description: SOLE SOURCED TO IBM FOR CONTINUATION OF SUPPORT FOR ACE AND ACS SERVICES UNTIL RECOMPETE BE AWARDED IN FY 13

Place of Performance

Location: GAITHERSBURG, MONTGOMERY County, MARYLAND, 20879

State: Maryland Government Spending

Plain-Language Summary

Department of Homeland Security obligated $23.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: SOLE SOURCED TO IBM FOR CONTINUATION OF SUPPORT FOR ACE AND ACS SERVICES UNTIL RECOMPETE BE AWARDED IN FY 13 Key points: 1. Contract awarded via sole-source justification, raising questions about competition and potential cost savings. 2. Significant portion of contract value allocated to continuation of existing services, suggesting limited scope for new innovation. 3. Performance period is relatively short, indicating an interim solution pending a future recompete. 4. The contract's reliance on Time and Materials pricing may lead to cost overruns if not closely managed. 5. Awarded by U.S. Customs and Border Protection, highlighting its importance to border security operations. 6. The contractor, IBM, has a substantial track record with government contracts.

Value Assessment

Rating: questionable

The $23.7 million award for a one-year period represents a significant investment for continued support. Without a competitive bidding process, it is difficult to benchmark the value for money. The Time and Materials pricing structure introduces inherent risk for cost escalation, as actual hours and material costs are billed. This contrasts with fixed-price contracts which offer greater cost certainty for the government. Given the sole-source nature, a thorough justification of the pricing and labor rates is crucial to ensure fair market value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, IBM, was solicited. This approach is typically justified when only one responsible source is available or when urgent and compelling circumstances exist. The lack of competition means that the government did not benefit from the price discovery and innovation that typically arises from multiple bidders vying for a contract. This can potentially lead to higher prices than might be achieved through a competitive process.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competition. The sole-source award limits the government's ability to negotiate the best possible price and terms, potentially resulting in less efficient use of public funds.

Public Impact

The primary beneficiaries are U.S. Customs and Border Protection (CBP) and its operational needs. Services delivered include the continuation of support for the Automated Commercial Environment (ACE) and Automated Commercial System (ACS). The geographic impact is national, supporting border operations across the United States. Workforce implications include the continued employment of personnel by IBM to maintain these critical systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs.
Time and Materials pricing structure carries risk of cost overruns.
Lack of recompete suggests potential for vendor lock-in if not managed proactively.
Contract duration is short, indicating a stop-gap measure rather than a long-term strategic solution.

Positive Signals

Contract ensures continuity of essential services for critical national security systems.
Awardee (IBM) is a known entity with established expertise in supporting government IT systems.
The contract is tied to a future recompete, which should eventually introduce competition.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically focusing on software and system support for government operations. The market for large-scale government IT support services is substantial, with numerous large system integrators and specialized software providers competing for such contracts. However, for specialized legacy systems like ACE and ACS, the pool of qualified vendors capable of providing immediate, continuity support can be limited, sometimes leading to sole-source awards as a pragmatic approach pending a broader market solicitation.

Small Business Impact

This contract does not appear to have a specific small business set-aside component. Given the sole-source nature and the large incumbent contractor, it is unlikely that significant subcontracting opportunities for small businesses will be mandated or readily available through this specific award. The focus is on continuity of service from a prime contractor, rather than fostering small business participation.

Oversight & Accountability

Oversight for this contract would primarily reside with the U.S. Customs and Border Protection contracting officers and program managers. The Department of Homeland Security's Office of Inspector General (OIG) may also conduct audits or investigations into the contract's performance and financial management, particularly given the sole-source nature and the significant dollar value. Transparency is enhanced through contract databases, but detailed operational oversight rests within the agency.

Related Government Programs

Automated Commercial Environment (ACE)
Automated Commercial System (ACS)
Department of Homeland Security IT Modernization Efforts
Customs and Border Protection Trade Facilitation Programs

Risk Flags

Sole-source justification requires careful review.
Time and Materials pricing increases cost uncertainty.
Potential for vendor lock-in.
Short contract duration indicates interim solution.

Frequently Asked Questions

What is this federal contract paying for?

Department of Homeland Security awarded $23.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. SOLE SOURCED TO IBM FOR CONTINUATION OF SUPPORT FOR ACE AND ACS SERVICES UNTIL RECOMPETE BE AWARDED IN FY 13

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 $23.8 million.

What is the period of performance?

Start: 2012-10-30. End: 2013-09-29.

What is the historical spending pattern for IBM's support of ACE and ACS systems?

Historical spending data for IBM's support of the Automated Commercial Environment (ACE) and Automated Commercial System (ACS) prior to this $23.7 million award would provide crucial context. Analyzing previous contract values, durations, and the nature of services rendered would help determine if this award represents a typical expenditure or an anomaly. For instance, if previous support contracts were significantly smaller or competitively bid, this sole-source award might warrant closer scrutiny regarding its necessity and pricing. Understanding the trend of spending on these critical systems is vital for long-term budget planning and identifying potential cost efficiencies over time. Without specific historical data points, it's challenging to assess if this $23.7 million is consistent with past investments or if it indicates a shift in cost or scope.

How does the pricing structure (Time and Materials) compare to industry benchmarks for similar IT support contracts?

The Time and Materials (T&M) pricing structure for this $23.7 million contract with IBM for ACE/ACS support presents a potential risk for cost escalation. Industry benchmarks for IT support contracts often favor fixed-price or cost-plus-fixed-fee arrangements when the scope of work is well-defined, as these provide greater cost certainty for the government. T&M contracts are typically used when the scope is uncertain or when the work is primarily labor-hour driven. To assess value for money, a detailed analysis of IBM's proposed labor rates (by skill level and role) and historical material costs against market data for comparable government and commercial IT support services is necessary. Benchmarking these rates against industry standards, considering factors like geographic location and required security clearances, would reveal if the government is paying a fair market price. Without this granular data, the $23.7 million award's cost-effectiveness remains difficult to ascertain.

What are the specific risks associated with relying on a sole-source award for critical infrastructure support?

Relying on a sole-source award for critical infrastructure support, such as the ACE/ACS systems managed by IBM, carries several significant risks. Firstly, the absence of competition can lead to inflated prices, as the contractor faces less pressure to offer competitive rates. Secondly, it can stifle innovation, as there is less incentive for the incumbent to proactively improve services or introduce efficiencies when their position is guaranteed. Thirdly, it creates a potential for vendor lock-in, making it difficult and costly to transition to a different provider in the future. Lastly, sole-source awards can raise concerns about transparency and accountability, as the justification process may not always be as rigorous as a competitive procurement. For critical systems like those managed by CBP, these risks could translate into higher operational costs, reduced system performance, and potential vulnerabilities if the incumbent's performance falters without readily available alternatives.

What is IBM's track record with Department of Homeland Security (DHS) contracts, particularly in IT support?

IBM has a substantial and long-standing track record of providing IT services and support to various government agencies, including the Department of Homeland Security (DHS). Analyzing their performance on previous DHS contracts, especially those related to customs, border protection, or similar large-scale IT systems, is crucial. Key performance indicators to examine would include on-time delivery, adherence to budget, quality of service, and responsiveness to issues. Past performance evaluations, contract award histories, and any documented disputes or corrective actions associated with IBM's DHS engagements would provide valuable insights. A positive history of successful contract execution suggests a lower risk profile for this current award, while any significant past issues might indicate a need for heightened oversight and risk mitigation strategies.

How does this contract align with the broader goals of the Automated Commercial Environment (ACE) modernization program?

This $23.7 million sole-source contract is described as providing continuation of support for ACE and ACS until a recompete is awarded. This suggests it is an interim measure rather than a direct contribution to the core modernization efforts of ACE. The ACE program has been undergoing significant transformation to modernize trade processing and enhance border security. This contract's primary function appears to be maintaining the operational status of existing systems (ACS) and ensuring continuity for ACE components while the government prepares for a future, likely competitive, procurement. Therefore, its alignment is more about ensuring stability and preventing disruption during the transition period, rather than driving new modernization features or capabilities. The success of this contract will be measured by its ability to keep these critical systems running smoothly until a more strategic, potentially modernized, solution can be competitively acquired.

Industry Classification

NAICS: Retail Trade › Electronics and Appliance Stores › Computer and Software Stores

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 1

Pricing Type: TIME AND MATERIALS (Y)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DRIVE, BETHESDA, MD, 20817

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

Financial Breakdown

Contract Ceiling: $26,127,929

Exercised Options: $23,754,052

Current Obligation: $23,754,052

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS35F4984H

IDV Type: FSS

Timeline