Navy ERP Technical Support Services Contract Exceeds $837M with IBM

Contract Overview

Contract Amount: $837,815,904 ($837.8M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Defense

Start Date: 2021-04-23

End Date: 2026-04-22

Contract Duration: 1,825 days

Daily Burn Rate: $459.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: NAVY ENTERPRISE RESOURCE PLANNING (ERP) TECHNICAL SUPPORT SERVICES (NETSS).

Place of Performance

Location: WASHINGTON NAVY YARD, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20374

State: District of Columbia Government Spending

Plain-Language Summary

Department of Defense obligated $837.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: NAVY ENTERPRISE RESOURCE PLANNING (ERP) TECHNICAL SUPPORT SERVICES (NETSS). Key points: 1. Significant contract value of over $837 million for critical ERP technical support. 2. IBM is the sole contractor, raising questions about competition and potential price escalation. 3. The contract's duration and cost-plus structure may present financial risks. 4. Engineering services sector sees substantial investment in enterprise systems.

Value Assessment

Rating: questionable

The contract's Cost Plus Fixed Fee (CPFF) structure, while common for complex IT services, can lead to higher costs if not managed tightly. Benchmarking against similar large-scale ERP support contracts is difficult without detailed cost breakdowns.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

Although awarded under full and open competition, the single award to IBM suggests limited bidding or a highly specialized requirement. This lack of ongoing competition could impact price discovery and potentially lead to less favorable terms over the contract's life.

Taxpayer Impact: Taxpayer funds are committed to a long-term, high-value contract. Without robust competition, there's a risk of overpayment compared to what could be achieved in a more competitive market.

Public Impact

Ensures continuity of critical Navy enterprise resource planning systems. Supports thousands of Navy personnel relying on ERP for daily operations. Potential for cost overruns impacts overall defense budget allocation. IBM's role highlights the reliance on large contractors for government IT infrastructure.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole awardee to IBM
Cost Plus Fixed Fee structure
Long contract duration (5 years)
Lack of small business participation noted

Positive Signals

Supports critical Navy IT infrastructure
Awarded under full and open competition initially

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting complex IT systems. Benchmarks for similar large-scale, multi-year ERP support contracts are typically in the hundreds of millions, aligning with this award's scale.

Small Business Impact

The data indicates no specific set-aside for small businesses. Large, complex IT contracts like this often present challenges for small business participation, potentially limiting opportunities for smaller, innovative firms.

Oversight & Accountability

The Department of Defense's oversight is crucial for managing the CPFF structure and ensuring IBM delivers on performance metrics. Regular audits and performance reviews are essential to control costs and mitigate risks.

Related Government Programs

Engineering Services
Department of Defense Contracting
Department of the Navy Programs

Risk Flags

High contract value
Sole awardee (IBM)
Cost Plus Fixed Fee structure
Long contract duration (5 years)
No explicit small business participation noted

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $837.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. NAVY ENTERPRISE RESOURCE PLANNING (ERP) TECHNICAL SUPPORT SERVICES (NETSS).

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 (Department of the Navy).

What is the total obligated amount?

The obligated amount is $837.8 million.

What is the period of performance?

Start: 2021-04-23. End: 2026-04-22.

What specific performance metrics are in place to ensure IBM delivers value for the $837M investment?

The contract likely includes performance work statements (PWS) with specific deliverables and service level agreements (SLAs). However, without access to the contract details, it's difficult to ascertain the rigor of these metrics. Effective oversight would involve regular reviews of IBM's performance against these agreed-upon standards to ensure value for money and identify any potential shortfalls or cost inefficiencies.

What are the primary risks associated with a sole-source award for such a critical IT system?

The primary risks include a lack of competitive pressure on pricing, potentially leading to higher costs for taxpayers. There's also a risk of vendor lock-in, making it difficult and expensive to switch providers if performance degrades or needs change. Furthermore, a sole provider might have less incentive to innovate or proactively address emerging technological challenges compared to a competitive environment.

How effectively does this contract ensure the long-term technological relevance and security of the Navy's ERP systems?

The effectiveness hinges on the contract's clauses regarding technology refresh, cybersecurity, and adaptability. A CPFF structure can support necessary upgrades, but proactive management and clear requirements are essential. The Navy must ensure IBM is incentivized and contractually obligated to maintain state-of-the-art security and incorporate future technological advancements, rather than just maintaining the status quo.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: N0003921R3006

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DRIVE, BETHESDA, MD, 20817

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

Financial Breakdown

Contract Ceiling: $1,015,875,180

Exercised Options: $956,790,019

Current Obligation: $837,815,904

Actual Outlays: $10,283,254

Subaward Activity

Number of Subawards: 2028

Total Subaward Amount: $601,897,550

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0017819D7876

IDV Type: IDC

Timeline