IBM contract for IT services awarded by Treasury's IRS, valued at $28.8M, spanning over 10 years

Contract Overview

Contract Amount: $28,803,926 ($28.8M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of the Treasury

Start Date: 2001-06-26

End Date: 2011-08-10

Contract Duration: 3,697 days

Daily Burn Rate: $7.8K/day

Competition Type: NON-COMPETITIVE DELIVERY ORDER

Number of Offers Received: 18

Pricing Type: COST PLUS AWARD FEE

Sector: IT

Official Description: MOD TO CHANGE DUNS # & CAGE CODE

Place of Performance

Location: NEW CARROLLTON, PRINCE GEORGE'S County, MARYLAND, 20784

State: Maryland Government Spending

Plain-Language Summary

Department of the Treasury obligated $28.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: MOD TO CHANGE DUNS # & CAGE CODE Key points: 1. Contract awarded to a single, large incumbent vendor, raising questions about potential lack of competitive pressure. 2. Long contract duration suggests a need for ongoing, complex IT support, but also potential for price creep. 3. The 'Cost Plus Award Fee' structure incentivizes performance but requires careful monitoring to ensure cost control. 4. Awarded as a non-competitive delivery order, indicating a specific, pre-existing need or limited vendor options. 5. The contract's value, while significant, needs to be benchmarked against similar IT service contracts for a full value assessment.

Value Assessment

Rating: fair

The total award value of $28.8 million over approximately 10 years averages to about $2.88 million per year. This figure needs to be benchmarked against comparable IT services contracts for agencies of similar size and complexity. The 'Cost Plus Award Fee' (CPAF) pricing structure can lead to costs exceeding initial estimates if not managed rigorously, but it also allows for flexibility and incentivizes contractor performance. Without detailed breakdowns of labor categories, hours, and specific award fee criteria, a precise value-for-money assessment is challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as a non-competitive delivery order, indicating that it was not competed broadly. Such awards typically occur when a specific need arises that can only be met by a particular vendor, often due to proprietary technology, existing infrastructure integration, or urgent requirements. The lack of open competition means that the government did not benefit from a range of proposals and potentially lower prices that could have resulted from a competitive bidding process.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. The government missed an opportunity to leverage market competition to drive down costs and ensure the best possible value for services rendered.

Public Impact

Internal Revenue Service (IRS) employees and operations benefit from the IT services provided, ensuring the continuity of tax administration. The contract supports critical IT infrastructure necessary for processing tax returns and managing taxpayer data. Geographic impact is likely nationwide, as the IRS operates across the United States. Workforce implications include the potential reliance on IBM's personnel for specialized IT support, complementing the IRS's internal IT staff.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Non-competitive award limits opportunities for other vendors and potentially higher prices.
Long contract duration could lead to cost overruns if not managed effectively.
CPAF structure requires robust oversight to ensure cost-effectiveness and prevent unnecessary expenses.

Positive Signals

Award fee structure incentivizes contractor performance and meeting specific objectives.
Long-term engagement suggests a stable and reliable IT support provider for critical IRS functions.
IBM's established presence and experience may ensure continuity and minimize disruption to IRS operations.

Sector Analysis

This contract falls within the Information Technology (IT) services sector, specifically focusing on support for government agencies. The IT services market for the federal government is substantial, with agencies consistently outsourcing various functions from infrastructure management to software development. Contracts like this, especially those with long durations and significant values, are common for large federal departments like the Treasury, which rely heavily on robust IT systems for their operations. Benchmarking would involve comparing this contract's value and scope to other large-scale IT support contracts awarded to major IT vendors by similar federal entities.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a large contract awarded to a major corporation like IBM, it is unlikely to have significant direct subcontracting opportunities for small businesses unless specifically mandated or if IBM chooses to engage them. The absence of small business participation in this specific award means it does not directly contribute to the federal small business contracting goals through this vehicle.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Treasury and the Internal Revenue Service contracting officers and program managers. The 'Cost Plus Award Fee' structure necessitates diligent monitoring of performance metrics and cost expenditures to ensure the award fee is justified and that costs remain reasonable. Transparency is dependent on the agency's reporting practices and public availability of contract performance data. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

IRS IT Modernization Programs
Federal Civilian Agency IT Services Contracts
Department of the Treasury IT Support
Large-Scale IT Service Delivery Contracts

Risk Flags

Non-competitive award
Long contract duration
Cost-plus pricing structure

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $28.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. MOD TO CHANGE DUNS # & CAGE CODE

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 Treasury (Internal Revenue Service).

What is the total obligated amount?

The obligated amount is $28.8 million.

What is the period of performance?

Start: 2001-06-26. End: 2011-08-10.

What specific IT services were provided under this contract?

While the provided data does not detail the specific IT services, contracts of this nature with IBM for the IRS typically encompass a broad range of support. This could include maintaining and upgrading existing mainframe systems, managing data centers, providing network infrastructure support, developing and maintaining custom software applications critical for tax processing, cybersecurity services, and potentially help desk support for IRS personnel. The 'Cost Plus Award Fee' structure suggests that performance against defined objectives in these service areas was a key component of the contract.

How does the $28.8 million value compare to similar IT contracts for federal agencies?

The $28.8 million value over approximately 10 years, averaging around $2.88 million annually, is a moderate figure for large-scale IT support contracts within the federal government. However, its significance is relative to the scope and complexity of services. For instance, major IT modernization efforts or enterprise-wide system overhauls can run into hundreds of millions or even billions of dollars. This contract appears to be for ongoing operational support and maintenance rather than a large-scale transformation project. Benchmarking against contracts for similar IT services (e.g., infrastructure management, application support) awarded to large IT vendors by agencies of comparable size like the IRS would provide a more precise comparison.

What are the primary risks associated with a 'Cost Plus Award Fee' contract of this duration?

The primary risks with a 'Cost Plus Award Fee' (CPAF) contract, especially one spanning over a decade, include potential cost overruns and a lack of aggressive cost control by the contractor if oversight is insufficient. While the award fee incentivizes performance, the 'cost plus' component means the government pays the allowable costs incurred by the contractor, plus a fee that is adjusted based on performance. If the baseline costs are high or if the performance metrics are not tightly defined and monitored, the total expenditure could exceed expectations. Additionally, the long duration increases the risk of technological obsolescence or changing agency needs that may not be fully accommodated by the original contract terms without costly modifications.

What is the historical spending pattern with IBM by the Department of the Treasury or IRS?

Without access to historical spending databases beyond this single contract, it's difficult to establish a definitive pattern. However, IBM is a major federal contractor with a long history of providing IT services across numerous government agencies, including the Department of the Treasury and its bureaus like the IRS. Agencies often engage large IT vendors like IBM for extended periods due to the complexity of their systems and the need for specialized expertise. A comprehensive analysis would require examining all contracts awarded to IBM by the Treasury and IRS over several fiscal years to identify trends in spending, contract types, and service areas.

What does the 'non-competitive delivery order' status imply about the procurement process?

The 'non-competitive delivery order' status signifies that this specific order was placed directly with IBM without a full and open competition. This typically occurs under a pre-existing contract vehicle (like a GSA Schedule or an Indefinite Delivery/Indefinite Quantity contract) where the agency has the authority to issue orders non-competitively, often due to specific justifications such as urgency, compatibility with existing systems, or when only one source can fulfill the requirement. For taxpayers, this implies that the government did not actively seek the lowest price through market competition for this particular delivery order, potentially leading to a higher cost than if it had been competed.

Competition & Pricing

Extent Competed: NON-COMPETITIVE DELIVERY ORDER

Offers Received: 18

Pricing Type: COST PLUS AWARD FEE (R)

Contractor Details

Address: 6710 ROCKLEDGE DR, BETHESDA, MD, 08

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $277,684,903

Exercised Options: $237,513,355

Current Obligation: $28,803,926

Parent Contract

Parent Award PIID: TIRNO00D00018

IDV Type: IDC

Timeline