IBM contract for IT services awarded by IRS, totaling over $39.5M, with no competition

Contract Overview

Contract Amount: $39,593,858 ($39.6M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of the Treasury

Start Date: 2004-02-12

End Date: 2006-06-17

Contract Duration: 856 days

Daily Burn Rate: $46.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 18

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: TIRNO-00-D-00018 0004 MOD 0030

Place of Performance

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

State: Maryland Government Spending

Plain-Language Summary

Department of the Treasury obligated $39.6 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: TIRNO-00-D-00018 0004 MOD 0030 Key points: 1. The contract's value of $39.59 million over its period of performance suggests a significant investment in IT services. 2. The absence of competition raises concerns about potential overpricing and limited value for taxpayer money. 3. The contract's duration of 856 days (approximately 2.3 years) indicates a medium-term engagement for IT support. 4. Awarded as a 'NOT COMPETED' action, this contract bypasses standard procurement processes, potentially limiting market engagement. 5. The 'COST PLUS FIXED FEE' contract type can incentivize cost overruns if not closely monitored. 6. The contract's focus on IT services positions it within a critical but often high-spend sector for government agencies.

Value Assessment

Rating: questionable

Benchmarking the value of this $39.59 million contract is challenging without specific service details and comparable market rates. However, the 'NOT COMPETED' award type and 'COST PLUS FIXED FEE' structure inherently introduce risk. Without competitive pressure, the pricing may not reflect the best value achievable. The fixed fee component offers some cost control, but the cost-plus nature means the government bears the risk of increased costs, which could lead to a higher overall expenditure than a fixed-price contract awarded through competition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a 'NOT COMPETED' procurement method, indicating that a full and open competition was not conducted. This suggests that only one source, International Business Machines Corporation (IBM), was considered or solicited for this requirement. The lack of competition limits the government's ability to explore alternative solutions or leverage market dynamics to secure the most favorable pricing and terms.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions and innovation that typically arise from competitive bidding processes. This can lead to higher costs for the government and, consequently, for taxpayers.

Public Impact

The primary beneficiary is the Internal Revenue Service (IRS), which receives essential IT services to support its operations. The contract delivers critical IT support, likely encompassing infrastructure maintenance, software development, or system integration, enabling the IRS to fulfill its tax administration mission. The geographic impact is primarily within Maryland, where the contract was administered ('MD', 'MARYLAND'). The contract supports a workforce, likely including IT professionals employed by IBM and potentially subcontractors, contributing to the IT labor market.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to suboptimal pricing and reduced value for taxpayer funds.
Cost-plus contract type can incentivize higher spending if not rigorously managed.
Limited transparency due to sole-source award makes independent value assessment difficult.
Potential for vendor lock-in if services are highly specialized and integrated.
Absence of performance metrics or specific deliverables makes assessing effectiveness challenging without further data.

Positive Signals

IBM is a large, established technology provider with a long history of government contracting.
The contract is for essential IT services, indicating a recognized need within the IRS.
The fixed fee component provides some level of cost predictability for a portion of the contract value.
The contract duration suggests a stable, ongoing requirement for these IT services.

Sector Analysis

This contract falls within the Information Technology (IT) sector, a critical area for government operations. The IT services market is vast and highly competitive, with numerous vendors offering a wide range of solutions. Government IT spending is substantial, often driven by the need to modernize legacy systems, enhance cybersecurity, and improve service delivery. Comparable spending benchmarks for IT services can vary widely based on the specific services (e.g., cloud computing, software development, cybersecurity, infrastructure management) and the scale of the agency's needs. Without more detail on the specific services rendered, direct comparison is difficult, but the $39.59 million figure represents a significant investment.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the awardee is International Business Machines Corporation, a large business. There is no explicit information provided regarding subcontracting plans for small businesses. Therefore, the direct impact on the small business ecosystem from this specific award is likely minimal, and there is no indication of efforts to leverage small businesses for subcontracting opportunities.

Oversight & Accountability

Oversight mechanisms for this contract would typically be managed by the contracting officer and the IRS's program office responsible for IT services. The 'COST PLUS FIXED FEE' structure necessitates close monitoring of costs incurred by the contractor to ensure they align with the contract's objectives and the fixed fee. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected or identified during the contract's performance or audit.

Related Government Programs

IRS IT Modernization Programs
Federal Civilian IT Services Contracts
Department of the Treasury IT Procurement
Large Business IT Service Contracts
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Sole-source award bypasses competition
Cost-plus contract type carries inherent cost escalation risk
Lack of detailed service description hinders value assessment
Potential for reduced innovation due to limited market engagement

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $39.6 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. TIRNO-00-D-00018 0004 MOD 0030

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 $39.6 million.

What is the period of performance?

Start: 2004-02-12. End: 2006-06-17.

What specific IT services were provided under this contract?

The provided data does not specify the exact IT services rendered under contract TIRNO-00-D-00018 0004 MOD 0030. However, given the awardee (IBM) and the agency (IRS), typical services could include IT infrastructure management, network support, software development and maintenance, cybersecurity services, data center operations, or help desk support. The 'COST PLUS FIXED FEE' (CPFF) contract type suggests a scope that might involve evolving requirements or research and development aspects where precise costs are difficult to predict upfront, but a fixed fee is negotiated for the contractor's effort. Further details would be required from the contract's statement of work (SOW) to ascertain the precise nature of the IT services.

How does the total contract value of $39.59 million compare to similar IT contracts awarded by the IRS or other Treasury bureaus?

Comparing the $39.59 million total value requires context on the contract's duration and scope. This contract spanned approximately 856 days (about 2.3 years). For the IRS, IT contracts can range significantly. Large-scale system modernization or infrastructure projects can easily reach tens or hundreds of millions of dollars over several years. Smaller, more targeted support contracts might be in the low millions. Without knowing the specific services, it's hard to benchmark precisely. However, for a multi-year IT support or development contract awarded non-competitively, this value is substantial but not necessarily outside the realm of possibility for a large agency like the IRS, especially if it involves critical infrastructure or legacy system maintenance. The non-competitive nature, however, raises questions about whether this represents optimal value compared to what could have been achieved through competition.

What are the primary risks associated with a 'NOT COMPETED' and 'COST PLUS FIXED FEE' contract award?

The primary risks associated with a 'NOT COMPETED' award are the lack of price competition, potentially leading to higher costs for the government, and the missed opportunity to explore innovative solutions from a wider market. It can also signal potential organizational issues or a lack of strategic planning if requirements were not identified early enough for competitive procurement. For a 'COST PLUS FIXED FEE' (CPFF) contract, the main risks involve cost control. While the fixed fee provides the contractor with an incentive to perform efficiently to earn their fee, the government bears the risk of increased costs for labor, materials, and overhead. If the contractor's costs escalate significantly, the total contract value paid by the government will increase, potentially exceeding initial estimates. Robust oversight is crucial to manage these risks effectively.

What is the track record of International Business Machines Corporation (IBM) in performing similar IT contracts for the federal government?

International Business Machines Corporation (IBM) has an extensive and long-standing track record of performing IT contracts for the federal government across numerous agencies. As a major technology provider, IBM has historically secured significant contracts for a wide array of services, including cloud computing, cybersecurity, software development, IT infrastructure management, and large-scale system integration. Their experience spans decades, and they are a common awardee for complex IT requirements. While their overall track record is extensive, the performance on any specific contract can vary. Government contract databases often contain performance ratings and past performance reviews, which would provide a more granular assessment of IBM's success on similar engagements. However, generally, IBM is considered a capable large business vendor for federal IT needs.

How does the 'MD' (Maryland) designation impact the contract's administration and potential for local economic impact?

The 'MD' designation indicates that the contract's administrative location or the primary place of performance is Maryland. This typically means that the contracting officer, administrative personnel, and potentially the program management team overseeing the contract are based in Maryland. For the local economy, this implies that a portion of the contract spending, particularly related to IBM's personnel and potentially subcontractor activities within Maryland, will contribute to the state's economic activity. It may also suggest that the IRS facilities or operations being supported by these IT services are located within or managed from Maryland. This geographic focus can be relevant for tracking economic benefits and ensuring compliance with state-level regulations or initiatives.

What does the 'AW: DO' designation signify in the context of this contract award?

The 'AW: DO' designation likely refers to the 'Awarding Agency' or 'Awarding Office' and indicates the specific entity within the Department of the Treasury that officially awarded this contract. 'DO' could stand for 'Departmental Offices' or a specific office within the Treasury that has the authority to obligate funds and enter into contracts. In this case, it signifies that the Departmental Offices of the Treasury were the authority responsible for the procurement process and the final decision to award the contract to IBM. This designation helps in tracing the procurement authority and understanding the organizational structure responsible for managing this particular contract.

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 18

Pricing Type: COST PLUS FIXED FEE (U)

Contractor Details

Address: 6710 ROCKLEDGE DR, BETHESDA, MD, 08

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $40,108,684

Exercised Options: $40,108,684

Current Obligation: $39,593,858

Parent Contract

Parent Award PIID: TIRNO00D00018

IDV Type: IDC

Timeline