IBM contract for IT services awarded by DHS exceeds $37.5M, with a high per-unit cost

Contract Overview

Contract Amount: $37,535,658 ($37.5M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Homeland Security

Start Date: 2013-09-30

End Date: 2015-03-29

Contract Duration: 545 days

Daily Burn Rate: $68.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: TIME AND MATERIALS

Sector: IT

Official Description: IGF::CL::IGF, T&M TO FOR ACE/ACS BRIDGE NEEDED

Place of Performance

Location: GAITHERSBURG, MONTGOMERY County, MARYLAND, 20879

State: Maryland Government Spending

Plain-Language Summary

Department of Homeland Security obligated $37.5 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: IGF::CL::IGF, T&M TO FOR ACE/ACS BRIDGE NEEDED Key points: 1. The contract value of over $37.5 million indicates a significant investment in IT services. 2. IBM, a large established contractor, holds this award, suggesting a focus on experienced providers. 3. The Time and Materials (T&M) contract type can present cost control challenges if not closely managed. 4. The contract duration of 545 days (approx. 1.5 years) suggests a medium-term need for these services. 5. The award was made under full and open competition, implying a broad search for qualified vendors. 6. The specific nature of the services (Computer and Software Stores) points to IT infrastructure or support needs.

Value Assessment

Rating: questionable

The per-unit cost benchmark of $68,873 is exceptionally high when compared to typical IT service contracts, even for complex projects. While the specific services are not detailed, this figure raises concerns about potential overspending or inefficient resource allocation. Further analysis of the labor categories and hours billed would be necessary to fully assess value for money. The Time and Materials pricing structure, without clear caps or fixed deliverables, exacerbates this concern.

Cost Per Unit: $68,873

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. However, the fact that only one award was made (no. 1) suggests that either the competition was not as robust as the 'full and open' designation implies, or IBM was uniquely qualified. The limited number of awards could potentially reduce price discovery and negotiation leverage for the government.

Taxpayer Impact: While competition was broad, the single award may have limited the government's ability to secure the most cost-effective solution, potentially leading to higher costs for taxpayers.

Public Impact

This contract primarily benefits the U.S. Customs and Border Protection (CBP) within the Department of Homeland Security by providing necessary computer and software resources. The services delivered are crucial for maintaining and potentially upgrading IT infrastructure supporting border security operations. The geographic impact is likely concentrated around CBP facilities and operational centers, primarily in Maryland where the contract is registered. The workforce implications involve IT professionals, potentially including software developers, system administrators, and support staff, both within IBM and potentially supporting CBP's internal IT teams.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

High per-unit cost raises concerns about value for money and potential for overruns.
Time and Materials contract type can lead to cost escalation if not managed rigorously.
Single award under full and open competition might indicate limited market interest or contractor specialization, potentially impacting future competition.
Lack of detailed service description makes it difficult to benchmark performance and cost-effectiveness.

Positive Signals

Awarded through full and open competition, suggesting an attempt to leverage market capabilities.
Contractor (IBM) is a large, established entity with significant experience in government IT services.
Contract supports a critical agency (DHS/CBP) with essential IT functions.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically related to computer hardware, software, and associated services. The IT services market for government agencies is substantial, with significant spending allocated to maintaining and modernizing critical infrastructure. Comparable spending benchmarks for IT support and software solutions vary widely based on scope, but a per-unit cost of nearly $70,000 is notably high, suggesting a specialized or high-level service component.

Small Business Impact

There is no indication that this contract involved small business set-asides, as the prime contractor is IBM, a large corporation. The contract does not specify subcontracting goals for small businesses. This suggests that the primary focus was on securing the capabilities of a large, established IT provider, potentially limiting opportunities for small businesses to participate directly in this specific award.

Oversight & Accountability

Oversight for this contract would typically fall under the U.S. Customs and Border Protection's contracting officers and program managers. The Department of Homeland Security's Office of Inspector General (OIG) would have jurisdiction for audits and investigations into potential fraud, waste, or abuse. Transparency is facilitated through contract databases like FPDS, but detailed performance metrics and spending breakdowns are often not publicly available.

Related Government Programs

DHS IT Modernization Programs
CBP Information Technology Support Services
Federal Civilian IT Procurement
Large-Scale Software and Hardware Procurement

Risk Flags

High Per-Unit Cost
Time and Materials Contract Type
Limited Number of Awards Under Full Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Homeland Security awarded $37.5 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. IGF::CL::IGF, T&M TO FOR ACE/ACS BRIDGE NEEDED

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 $37.5 million.

What is the period of performance?

Start: 2013-09-30. End: 2015-03-29.

What specific IT services were provided under this contract, and how do they align with CBP's mission needs?

The contract is categorized under 'Computer and Software Stores' (NAICS 443120), suggesting procurement of hardware, software licenses, and potentially related installation or configuration services. For CBP, these services are critical for maintaining the operational IT infrastructure that supports border security, customs processing, data management, and law enforcement activities. Without more granular data on the specific line items and deliverables, it's difficult to precisely map the services to mission needs, but they are fundamental to enabling CBP's day-to-day operations and technological advancements.

How does the per-unit cost of $68,873 compare to industry benchmarks for similar IT services?

The per-unit cost of $68,873 is exceptionally high and warrants scrutiny. Standard IT support services, even for complex enterprise environments, typically have much lower per-unit costs when calculated based on typical contract structures (e.g., per user, per server, or hourly rates for specialized labor). This high figure might represent the cost of a specific, high-value asset (like a complex software license or specialized hardware) or a very intensive, short-term service engagement. However, without knowing the unit of measure (e.g., is it per system, per hour of a highly specialized consultant, or a bundle of goods/services?), a direct comparison is challenging. It strongly suggests a need for detailed justification from the contracting agency regarding the value received for this expenditure.

What are the potential risks associated with a Time and Materials (T&M) contract of this magnitude?

Time and Materials contracts, while offering flexibility, carry inherent risks, especially for large-value awards like this one ($37.5M). The primary risk is cost escalation, as the government pays for the time and materials consumed without a fixed ceiling on the total cost, unless specific limitations are imposed. This can lead to budget overruns if the contractor's efficiency is low or if the scope of work expands unexpectedly. For taxpayers, this means a potential for paying more than anticipated. Effective oversight, detailed tracking of labor hours and material costs, and strong program management are crucial to mitigate these risks and ensure fair pricing.

Given the full and open competition, why was only one award made?

The award of only one contract under 'full and open competition' can occur for several reasons. It might indicate that while many vendors were eligible to bid, only one (IBM, in this case) submitted a proposal that met all the technical requirements and evaluation criteria. Alternatively, it could suggest that IBM possessed unique qualifications, proprietary technology, or a significant existing relationship that made its offer superior or the only viable option. In some cases, it may also reflect a lack of robust competition within the specific niche addressed by the requirement, despite the broad solicitation.

What is IBM's track record with similar large-scale IT contracts within the federal government?

IBM has a long and extensive history of securing and performing large-scale IT contracts across numerous federal agencies, including the Department of Homeland Security. They are a major provider of cloud services, software solutions, hardware, and IT consulting. While their track record is generally extensive, like any large contractor, specific contract performance can vary. Analysis of past performance ratings, any significant contract disputes, or audit findings related to IBM's federal contracts would provide a more nuanced view of their reliability and value delivery in similar engagements.

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: $39,895,423

Exercised Options: $37,535,658

Current Obligation: $37,535,658

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS35F4984H

IDV Type: FSS

Timeline