IBM mainframe hardware capacity purchase for SSA valued at $34.9M, awarded via sole-source delivery order

Contract Overview

Contract Amount: $34,940,646 ($34.9M)

Contractor: International Business Machines Corporation

Awarding Agency: Social Security Administration

Start Date: 2017-06-14

End Date: 2018-03-31

Contract Duration: 290 days

Daily Burn Rate: $120.5K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: PURCHASE MAINFRAME HARDWARE CAPACITY

Place of Performance

Location: BETHESDA, MONTGOMERY County, MARYLAND, 20817

State: Maryland Government Spending

Plain-Language Summary

Social Security Administration obligated $34.9 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: PURCHASE MAINFRAME HARDWARE CAPACITY Key points: 1. The contract awarded to IBM for mainframe hardware capacity represents a significant investment in essential IT infrastructure. 2. Sole-source procurement raises questions about potential price inflation and lack of competitive pressure. 3. The short duration of the delivery order (less than a year) suggests a potential need for ongoing or future capacity. 4. The fixed-price contract type offers some cost certainty for the government, but the absence of competition limits benchmarking. 5. The specific NAICS code (334111) indicates a focus on electronic computer manufacturing, aligning with the hardware purchase. 6. The contract's value, while substantial, needs to be assessed against market rates for similar hardware capacity.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific nature of mainframe hardware capacity. Without competitive bids, it's difficult to definitively assess if the $34.9 million price represents optimal value for money. However, mainframe hardware is a critical and often specialized component, and IBM is a dominant player in this market. The price should be compared to historical IBM mainframe capacity procurements or industry benchmarks for similar configurations and service levels, if available.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, IBM, was solicited. This approach is typically used when a unique product or service is required, or in cases of urgent need where competition is not feasible. The lack of competition means there was no opportunity for other vendors to bid, potentially leading to higher prices than if the contract had been competed. Price discovery is limited in such scenarios.

Taxpayer Impact: Taxpayers may have paid a premium for this hardware capacity due to the absence of competitive bidding. The government did not benefit from the price reductions and innovations that typically arise from a competitive procurement process.

Public Impact

The Social Security Administration (SSA) benefits directly, ensuring continued operation of its critical IT systems. Beneficiaries of SSA services indirectly benefit from the reliable functioning of the agency's infrastructure. The contract supports the maintenance and operation of IT infrastructure primarily located in Maryland. The contract likely supports a workforce skilled in mainframe operations and maintenance within the SSA and potentially IBM.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and may result in higher costs for taxpayers.
Lack of transparency in the procurement process due to sole-source award.
Potential for vendor lock-in with IBM for critical mainframe infrastructure.
Short contract duration might indicate a need for ongoing, potentially escalating, future spending.

Positive Signals

Award to a known, established vendor (IBM) for critical IT infrastructure.
Fixed-price contract provides some cost predictability.
The contract addresses a clear operational need for hardware capacity.

Sector Analysis

This contract falls within the Electronic Computer Manufacturing sector, specifically related to mainframe hardware. The mainframe market is a specialized segment of the broader IT industry, dominated by a few key players like IBM. Spending in this area is often characterized by long-term investments in robust, high-availability systems essential for large-scale data processing. Comparable spending benchmarks would involve analyzing other government or large enterprise procurements of similar mainframe capacity and support services.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there information suggesting subcontracting opportunities for small businesses. The award to IBM, a large corporation, indicates a focus on direct procurement from established prime contractors for specialized hardware. This contract is unlikely to have a significant direct impact on the small business ecosystem, other than potentially through indirect supply chains.

Oversight & Accountability

Oversight for this contract would primarily fall under the Social Security Administration's internal procurement and financial management controls. As a sole-source award, the justification for this procurement method would be subject to review. Transparency is limited due to the non-competitive nature. The SSA's Office of the Inspector General would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Federal IT Infrastructure Procurement
Mainframe Modernization Programs
Social Security Administration IT Operations
Large-Scale Data Processing Contracts

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for overpricing
Vendor lock-in risk

Frequently Asked Questions

What is this federal contract paying for?

Social Security Administration awarded $34.9 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. PURCHASE MAINFRAME HARDWARE CAPACITY

Who is the contractor on this award?

The obligated recipient is INTERNATIONAL BUSINESS MACHINES CORPORATION.

Which agency awarded this contract?

Awarding agency: Social Security Administration (Social Security Administration).

What is the total obligated amount?

The obligated amount is $34.9 million.

What is the period of performance?

Start: 2017-06-14. End: 2018-03-31.

What is the justification for awarding this mainframe hardware capacity contract to IBM on a sole-source basis?

The provided data indicates the contract was awarded as 'NOT COMPETED' and is a 'SOLE SOURCE'. The specific justification for this sole-source award is not detailed in the provided data snippet. Typically, sole-source procurements are justified when only one responsible source can provide the required supplies or services, often due to unique capabilities, proprietary technology, or urgent and compelling circumstances. For mainframe hardware, this could be due to IBM's unique architecture, specific compatibility requirements with existing SSA systems, or a lack of viable alternatives in the market at the time of procurement. A full justification would typically be documented by the agency.

How does the $34.9 million contract value compare to typical spending on mainframe hardware capacity?

Comparing the $34.9 million value requires context regarding the specific type and capacity of mainframe hardware procured. Mainframe systems are high-end, mission-critical computing platforms, and their acquisition or capacity expansion can represent substantial investments. IBM's mainframe offerings, such as the zSystems, are known for their high performance and reliability, commanding significant price points. Without knowing the exact specifications (e.g., processor cores, memory, storage capacity, software licensing included), it's difficult to provide a precise benchmark. However, this figure is within the range of significant capital expenditures for enterprise-level IT infrastructure. Further analysis would involve comparing it to other SSA mainframe procurements or similar large federal agency mainframe acquisitions.

What are the potential risks associated with a sole-source procurement for critical IT infrastructure like mainframe hardware?

The primary risk of a sole-source procurement is the lack of competitive pressure, which can lead to inflated prices and reduced innovation. Taxpayers may end up paying more than necessary for the hardware capacity. Another significant risk is vendor lock-in; the agency becomes heavily reliant on a single vendor for critical components, making it difficult and costly to switch providers in the future. This can also limit the agency's flexibility in adopting new technologies or negotiating favorable terms. Furthermore, without competition, there's a reduced incentive for the vendor to provide exceptional service or proactively address potential issues, although contractual terms can mitigate this.

What is the expected performance or operational impact of this hardware capacity purchase for the Social Security Administration?

This contract is intended to ensure the Social Security Administration (SSA) has adequate mainframe hardware capacity to support its critical operations. Mainframes are the backbone for many large organizations' core business functions, handling massive transaction volumes and complex data processing. By purchasing this capacity, the SSA aims to maintain or improve the performance, reliability, and availability of its systems, which are essential for processing benefits, managing records, and serving the public. The purchase likely supports increased workloads, new applications, or the replacement of aging hardware, thereby preventing potential service disruptions and ensuring the continued delivery of vital government services.

What is IBM's track record with the Social Security Administration for similar mainframe hardware procurements?

IBM has a long-standing relationship with government agencies, including the Social Security Administration, for providing mainframe hardware and related services. Given IBM's dominant position in the mainframe market, it is highly probable that the SSA has procured mainframe capacity from IBM for many years. Historical data would likely show a pattern of IBM being the primary, if not sole, provider for such needs. Assessing IBM's track record would involve reviewing past contracts, performance evaluations, and any documented issues or successes related to their previous engagements with the SSA for similar hardware procurements. This specific contract is a delivery order against a larger contract vehicle, suggesting an ongoing relationship.

What does the contract's duration (290 days) imply about the SSA's long-term mainframe capacity strategy?

The contract duration of 290 days (approximately 9.5 months) for this delivery order suggests that it might be addressing an immediate or short-term need for mainframe hardware capacity, rather than a long-term strategic acquisition. This could indicate several possibilities: the SSA might be in the process of evaluating its long-term capacity requirements, awaiting budget approvals for a larger, multi-year investment, or facing an urgent need due to unexpected demand or hardware issues. It could also imply that the SSA prefers to procure capacity in smaller, more manageable increments, potentially to maintain flexibility or adapt to evolving technological landscapes. This short duration necessitates future procurements to sustain ongoing operations beyond this period.

Industry Classification

NAICS: Manufacturing › Computer and Peripheral Equipment Manufacturing › Electronic Computer Manufacturing

Product/Service Code: INFORMATION TECHNOLOGY EQUIPMENT (INCLD FIRMWARE) SOFTWARE,SUPPLIES& SUPPORT EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

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: $34,940,646

Exercised Options: $34,940,646

Current Obligation: $34,940,646

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SS001660010

IDV Type: IDC

Timeline