IBM's $31M contract for IT services saw a 47% increase in cost over its initial estimated value

Contract Overview

Contract Amount: $31,186,449 ($31.2M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of the Interior

Start Date: 2010-06-09

End Date: 2012-03-31

Contract Duration: 661 days

Daily Burn Rate: $47.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: FBMS TASK ORDER 6 (DEPLOYMENT 6)

Place of Performance

Location: HERNDON, FAIRFAX County, VIRGINIA, 20170

State: Virginia Government Spending

Plain-Language Summary

Department of the Interior obligated $31.2 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: FBMS TASK ORDER 6 (DEPLOYMENT 6) Key points: 1. The contract's final cost significantly exceeded initial estimates, suggesting potential underestimation of project scope or unforeseen challenges. 2. IBM, a large incumbent contractor, secured this task order under full and open competition. 3. The fixed-price contract type generally shifts risk to the contractor, but cost overruns may indicate pricing issues. 4. Performance duration was 661 days, with a final delivery order issued. 5. The contract falls under 'Other Computer Related Services', a broad category within the IT sector.

Value Assessment

Rating: fair

The final award amount of $31.19 million was substantially higher than the initial estimated value of $4.72 million, representing a nearly 470% increase. This significant deviation raises questions about the accuracy of the initial cost estimation or the presence of scope creep during the contract's lifecycle. Benchmarking against similar 'Other Computer Related Services' contracts is difficult without more specific service details, but such a large percentage increase warrants scrutiny.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. The presence of a single award suggests that IBM was selected as the most advantageous offer. While competition was present, the significant cost increase post-award could imply that the initial competitive pricing did not fully account for the eventual project requirements or that market conditions shifted.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it aims to secure the best value through market forces. However, the substantial cost growth in this instance suggests that either the initial competitive bids were not sufficiently detailed or that unforeseen factors drove up costs significantly after the award.

Public Impact

The Department of the Interior benefits from IT services aimed at supporting its operations. The contract likely supported various computer-related services, though specific deliverables are not detailed. Services were delivered within Virginia, the contractor's stated location. The contract supported IT infrastructure and services, potentially impacting the department's workforce efficiency.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost growth from initial estimate to final award value.
Lack of detailed service descriptions makes it hard to assess value for money.
The broad 'Other Computer Related Services' category could mask inefficiencies.

Positive Signals

Awarded under full and open competition, suggesting a competitive process.
Firm fixed-price contract type generally protects the government from cost overruns, though this was not the case here.
IBM is a large, established contractor with a significant presence in government IT.

Sector Analysis

This contract falls within the broader Information Technology sector, specifically under 'Other Computer Related Services'. This category often includes a wide range of IT support, consulting, and implementation services. The IT services market for the federal government is substantial, with significant spending allocated annually to maintain and upgrade its technological infrastructure. Comparable spending benchmarks would depend on the specific nature of the 'other computer related services' provided.

Small Business Impact

There is no indication that this contract included small business set-asides, nor is there information on subcontracting plans. Given the large contract value and the incumbent contractor (IBM), it is less likely that small businesses were primary awardees, though they may have participated as subcontractors.

Oversight & Accountability

As a task order under a larger contract vehicle, oversight would typically be managed by the contracting officer at the Department of the Interior. Transparency is limited by the public availability of detailed performance reports or justifications for cost increases. Inspector General jurisdiction would apply if fraud, waste, or abuse were suspected.

Related Government Programs

IT Professional Services
IT Services (8(a))
Cloud Computing Services
Cybersecurity Services
Software Development

Risk Flags

Significant cost growth post-award.
Broad service category lacks specificity.
Potential for inaccurate initial cost estimation.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Interior awarded $31.2 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. FBMS TASK ORDER 6 (DEPLOYMENT 6)

Who is the contractor on this award?

The obligated recipient is INTERNATIONAL BUSINESS MACHINES CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of the Interior (Departmental Offices).

What is the total obligated amount?

The obligated amount is $31.2 million.

What is the period of performance?

Start: 2010-06-09. End: 2012-03-31.

What specific services were included under 'Other Computer Related Services' for this task order?

The provided data does not specify the exact services rendered under the 'Other Computer Related Services' category (NAICS 541519). This broad classification can encompass a wide array of IT functions, including but not limited to IT consulting, systems integration, custom software development, IT support, and network management. Without a detailed statement of work or task description, it is impossible to ascertain the precise nature of the services IBM provided to the Department of the Interior under this specific task order. This lack of specificity hinders a thorough assessment of the value delivered and the reasons for the significant cost increase.

What factors contributed to the 470% cost increase from the initial estimate to the final award value?

The substantial 470% increase from the initial estimated value ($4.72 million) to the final award value ($31.19 million) suggests significant discrepancies in the initial planning or unforeseen developments during contract performance. Potential factors include underestimation of the project's scope, complexity, or required resources; changes in requirements or scope creep initiated by the government; unforeseen technical challenges; or market fluctuations affecting labor or material costs. The firm fixed-price nature of the contract typically places the risk of such cost increases on the contractor, implying that IBM either absorbed these additional costs or that the initial estimate was fundamentally flawed. Further investigation into the contract modifications and justifications would be necessary to pinpoint the exact causes.

How does IBM's performance on this contract compare to its general track record with the Department of the Interior?

Assessing IBM's performance on this specific task order against its broader track record with the Department of the Interior requires access to performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS) and historical contract data. The significant cost overrun on this $31.19 million task order could be viewed negatively if it indicates poor project management or inaccurate bidding. However, without comparative data on other IBM contracts with the DOI, it's difficult to determine if this was an anomaly or indicative of a pattern. A comprehensive review would involve analyzing past performance ratings, contract modifications, and any documented issues or successes on similar IT service contracts awarded to IBM by the DOI.

What is the typical market rate for 'Other Computer Related Services' of this scale and duration?

Determining a precise 'typical market rate' for 'Other Computer Related Services' (NAICS 541519) is challenging due to the broadness of the category and the variability in service specifics, required expertise, and geographic location. However, federal contracting data indicates that IT services contracts, especially those involving large incumbents like IBM, can range widely in price. The initial estimate of $4.72 million for a 661-day period might suggest a more modest scope, while the final $31.19 million award points to a substantial, complex engagement. Benchmarking would ideally involve comparing the specific deliverables and labor categories against similar contracts awarded to other large IT providers within the federal government, considering factors like security clearances, specialized skills, and project management overhead.

Were there any specific risk indicators or challenges identified during the bidding or performance of this contract?

The provided data does not explicitly detail risk indicators or challenges encountered during the bidding or performance phases of this contract. However, the significant cost increase from the initial estimate to the final award value ($4.72M to $31.19M) serves as a strong post-hoc indicator of potential risks that were either underestimated or materialized during execution. These could include technical complexity, integration issues, resource availability, or evolving government requirements. The firm fixed-price contract type suggests that the government aimed to mitigate financial risk, but the magnitude of the cost growth implies that the initial pricing may not have adequately accounted for the project's inherent risks or the contractor's execution capabilities.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Other Computer Related Services

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

Solicitation ID: 60485

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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: $31,212,449

Exercised Options: $31,186,449

Current Obligation: $31,186,449

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: INN06PC10435

IDV Type: IDC

Timeline