IBM's $25.5M contract for computer systems design services awarded by Treasury's IRS

Contract Overview

Contract Amount: $25,506,319 ($25.5M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of the Treasury

Start Date: 2006-05-18

End Date: 2016-03-16

Contract Duration: 3,590 days

Daily Burn Rate: $7.1K/day

Competition Type: COMPETITIVE DELIVERY ORDER

Number of Offers Received: 21

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: TIPSS III

Place of Performance

Location: LANHAM, PRINCE GEORGES County, MARYLAND, 20706

State: Maryland Government Spending

Plain-Language Summary

Department of the Treasury obligated $25.5 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: TIPSS III Key points: 1. Contract awarded for computer systems design services, indicating a need for specialized IT support. 2. The contract duration of 3590 days (approx. 9.8 years) suggests a long-term strategic requirement. 3. Awarded as a competitive delivery order, implying multiple vendors were considered. 4. The contract type is Cost Plus Fixed Fee, which can incentivize cost control but requires careful oversight. 5. IBM is a major federal contractor, suggesting a track record with government agencies. 6. The services fall under NAICS code 541512, Computer Systems Design Services. 7. The contract was awarded in Maryland, a hub for federal contracting activity.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific deliverables and performance metrics. However, the duration and total value suggest a significant investment. The Cost Plus Fixed Fee structure requires diligent oversight to ensure costs remain reasonable and the fixed fee is justified by the scope of work. Comparing this to similar long-term IT support contracts would provide better context on its value proposition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded as a 'COMPETITIVE DELIVERY ORDER', indicating that it was competed under a broader contract vehicle. The presence of 21 delivery orders suggests a robust competition process for this specific task order. This level of competition is generally positive for price discovery and ensuring the government receives competitive pricing.

Taxpayer Impact: A competitive award process for this delivery order helps ensure taxpayer dollars are used efficiently by driving down costs through vendor rivalry.

Public Impact

The Internal Revenue Service (IRS) benefits from enhanced computer systems design capabilities. This contract supports the modernization and maintenance of critical IT infrastructure for tax administration. The services likely impact IRS operations nationwide, ensuring efficient tax processing and taxpayer services. Workforce implications may include the need for specialized IT personnel within the IRS or reliance on contractor expertise.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contracts can lead to cost overruns if not managed tightly.
Long contract durations increase the risk of scope creep and evolving technological needs.
Reliance on a single large contractor like IBM may limit flexibility and innovation over time.

Positive Signals

Competitive award process suggests a fair market price was likely achieved.
IBM's established presence in federal contracting indicates experience and capability.
The long duration allows for sustained support and development of specialized expertise.

Sector Analysis

This contract falls within the Information Technology sector, specifically Computer Systems Design Services. The federal IT market is vast, with agencies consistently investing in maintaining and upgrading complex systems. Comparable spending benchmarks for similar long-term IT support contracts can vary widely based on scope, but this contract represents a significant, multi-year commitment to a core IT service provider.

Small Business Impact

Information on small business set-asides or subcontracting is not directly available from the provided data. As this was a competitive delivery order, it's possible that opportunities for small businesses could have existed within the prime contractor's subcontracting plan, but this cannot be confirmed without further details.

Oversight & Accountability

The Cost Plus Fixed Fee contract type necessitates robust oversight to monitor costs and ensure the fixed fee aligns with the work performed. The duration of the contract suggests regular performance reviews and milestone tracking would be in place. Transparency would depend on the specific reporting requirements outlined in the contract and the agency's commitment to public disclosure of contract details.

Related Government Programs

IT Services
Computer Systems Design
Federal IT Modernization
IRS Technology Contracts

Risk Flags

Long contract duration may lead to technological obsolescence.
Cost Plus Fixed Fee requires diligent cost oversight.
Potential for scope creep over the contract's extended term.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $25.5 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. TIPSS III

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 $25.5 million.

What is the period of performance?

Start: 2006-05-18. End: 2016-03-16.

What is IBM's track record with the IRS and other federal agencies for similar IT services?

IBM is a long-standing and significant federal contractor, with extensive experience providing a wide range of IT services to numerous government agencies, including the IRS. Their track record typically involves large-scale system integration, software development, and IT infrastructure support. For the IRS specifically, IBM has historically been involved in various technology modernization efforts and ongoing support contracts. A detailed review of past performance evaluations and contract histories would be necessary to fully assess their specific performance on this TIPSS III delivery order and other similar engagements. However, their consistent presence suggests a capacity to meet federal requirements, though specific project successes and challenges would vary.

How does the Cost Plus Fixed Fee (CPFF) structure compare to other contract types for long-term IT services?

The Cost Plus Fixed Fee (CPFF) contract type is often used when the scope of work is not precisely defined at the outset, or when innovation and flexibility are paramount, as is common in IT services. It reimburses the contractor for allowable costs plus a predetermined fixed fee, which represents profit. This structure aims to incentivize the contractor to control costs, as the fee remains constant regardless of the final cost. However, it requires stringent oversight to ensure costs are reasonable and allocable. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers more flexibility but less cost certainty for the government. Compared to Cost Plus Incentive Fee (CPIF), the fee is not adjusted based on performance targets, making it simpler but potentially less motivating for exceeding expectations.

What are the potential risks associated with a nearly 10-year contract duration for IT services?

A contract duration of approximately 10 years for IT services presents several significant risks. Technology evolves rapidly, and a decade-long commitment could lock the government into outdated systems or solutions, requiring costly modifications or early termination. Scope creep is another major concern; as requirements change over such a long period, the initial scope may become irrelevant, leading to disputes and increased costs. Furthermore, long-term reliance on a single contractor can stifle competition and innovation, potentially leading to complacency and reduced service quality. Maintaining contractor performance and motivation over an extended period also requires continuous and effective oversight. Finally, the government's needs may shift significantly over a decade, making the original contract objectives misaligned with current strategic priorities.

How can the IRS ensure effective oversight and accountability for this long-term IT contract?

Effective oversight and accountability for this long-term IT contract can be achieved through several mechanisms. The IRS should establish clear performance metrics and Key Performance Indicators (KPIs) that are regularly monitored and reported on. A dedicated contract management team with technical expertise should be assigned to oversee the contractor's performance, costs, and adherence to the contract terms. Regular progress reviews, audits, and site visits are crucial. The Cost Plus Fixed Fee structure necessitates rigorous auditing of incurred costs to ensure they are allowable, allocable, and reasonable. Implementing phased reviews and potential re-competition or renegotiation points throughout the contract's life can also ensure continued value and alignment with evolving needs. Transparency in reporting and clear communication channels with the contractor are also vital.

What is the typical market rate or benchmark for Computer Systems Design Services like those provided under this contract?

Determining a precise market rate for Computer Systems Design Services is complex due to the wide variation in service scope, complexity, and required expertise. However, for services falling under NAICS code 541512, hourly rates for skilled professionals can range significantly, often from $100 to $300+ per hour, depending on the specific skill set (e.g., cybersecurity analysts, cloud architects, software engineers) and geographic location. For large, long-term contracts like this one, agencies often negotiate blended hourly rates or task-order specific pricing that reflects economies of scale. Benchmarking would require comparing the specific tasks, deliverables, and labor categories outlined in the delivery orders against similar government or commercial contracts, considering factors like security clearances, specialized certifications, and the level of support required.

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: COMPETITIVE DELIVERY ORDER

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 21

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DR, BETHESDA, MD, 20817

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $30,801,143

Exercised Options: $27,079,401

Current Obligation: $25,506,319

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: TIRNO06D00019

IDV Type: IDC

Timeline