Navy ERP Implementation Contract Awarded to IBM for $49M, Lacking Competition

Contract Overview

Contract Amount: $49,085,322 ($49.1M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Defense

Start Date: 2009-06-20

End Date: 2010-10-02

Contract Duration: 469 days

Daily Burn Rate: $104.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: NAVY ERP IMPLEMENTATION AND SUSTAINMENT

Place of Performance

Location: BETHESDA, MONTGOMERY County, MARYLAND, 20817

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $49.1 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: NAVY ERP IMPLEMENTATION AND SUSTAINMENT Key points: 1. Significant contract value of $49M for a critical IT system. 2. Sole provider IBM dominates the market for this specific ERP solution. 3. Risk of cost overruns due to Cost Plus Fixed Fee structure. 4. IT sector spending is substantial, but this contract's lack of competition is notable.

Value Assessment

Rating: questionable

The $49M contract value for ERP implementation and sustainment is substantial. Without comparable contract data or a competitive bidding process, assessing its value relative to similar projects is difficult. The Cost Plus Fixed Fee structure introduces potential for cost escalation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This significantly limits price discovery and potentially leads to higher costs for taxpayers as there was no market pressure to offer the best price.

Taxpayer Impact: The lack of competition likely resulted in a higher price than a competed contract would have achieved, impacting taxpayer funds.

Public Impact

Taxpayers may have overpaid due to the absence of competitive bidding. Reliance on a single vendor for a critical system poses a long-term risk. The Navy's ability to adapt or upgrade its ERP system could be constrained by the vendor relationship.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competition
Potential for cost overruns

Positive Signals

Awarded to a major IT vendor
Addresses critical Navy ERP needs

Sector Analysis

This contract falls within the IT services sector, specifically computer systems design. Government spending in this area is extensive, but the lack of competition for this significant ERP implementation is a concern for efficient resource allocation.

Small Business Impact

The contract was awarded to International Business Machines Corporation, a large business. There is no indication that small businesses were involved in this specific contract, missing an opportunity for their participation.

Oversight & Accountability

The sole-source nature of this award warrants close oversight to ensure the Navy receives fair value and that costs are managed effectively. Accountability for performance and budget adherence is crucial.

Related Government Programs

Computer Systems Design Services
Department of Defense Contracting
Defense Contract Management Agency Programs

Risk Flags

Sole-source award limits competition and price discovery.
Cost Plus Fixed Fee contract type may lead to cost overruns.
Lack of small business participation.
Potential for vendor lock-in.
Significant taxpayer investment without competitive vetting.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $49.1 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. NAVY ERP IMPLEMENTATION AND SUSTAINMENT

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 Contract Management Agency).

What is the total obligated amount?

The obligated amount is $49.1 million.

What is the period of performance?

Start: 2009-06-20. End: 2010-10-02.

What was the justification for awarding this significant ERP contract on a sole-source basis?

The justification for a sole-source award typically involves unique capabilities, proprietary technology, or urgent needs that cannot be met by other vendors. Without specific documentation, it's difficult to ascertain the precise rationale. However, sole-source awards often raise concerns about whether a competitive process was truly impossible or if it was simply deemed less efficient by the procuring agency.

What are the potential risks associated with a sole-source ERP implementation contract?

Sole-source contracts for complex systems like ERPs carry risks of vendor lock-in, inflated costs due to lack of competition, and potential for scope creep. The government may have less leverage in negotiations for changes or upgrades. Furthermore, if the vendor faces financial difficulties or strategic shifts, the project's continuity could be jeopardized.

How does the Cost Plus Fixed Fee contract type impact the effectiveness of this ERP implementation?

The Cost Plus Fixed Fee (CPFF) structure aims to provide the contractor with cost reimbursement plus a fixed fee, incentivizing cost control. However, it can still lead to cost overruns if the initial cost estimates are inaccurate or if the scope changes significantly. The effectiveness relies heavily on robust government oversight to manage the 'cost' portion and ensure the 'fixed fee' remains appropriate.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0003909R0059

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DR, BETHESDA, MD, 20817

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

Financial Breakdown

Contract Ceiling: $55,425,200

Exercised Options: $55,425,200

Current Obligation: $49,085,322

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline