IBM's $47M Treasury contract for computer systems design services spanned a decade

Contract Overview

Contract Amount: $46,984,794 ($47.0M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of the Treasury

Start Date: 2006-05-25

End Date: 2016-03-16

Contract Duration: 3,583 days

Daily Burn Rate: $13.1K/day

Competition Type: COMPETITIVE DELIVERY ORDER

Number of Offers Received: 22

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: IBM, TIPPS-3

Place of Performance

Location: LANHAM, PRINCE GEORGES County, MARYLAND, 20706

State: Maryland Government Spending

Plain-Language Summary

Department of the Treasury obligated $47.0 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: IBM, TIPPS-3 Key points: 1. Contract awarded through a competitive delivery order, suggesting a degree of market vetting. 2. The contract's duration of nearly 10 years indicates a long-term need for these services. 3. Services provided fall under Computer Systems Design, a broad category with diverse applications. 4. The contract was not set aside for small businesses, potentially limiting direct opportunities for smaller firms. 5. The Cost Plus Fixed Fee pricing structure can incentivize cost control while ensuring contractor profit. 6. Awarded to a large, established contractor (IBM), implying a focus on capability and past performance.

Value Assessment

Rating: fair

Benchmarking the value of this specific $46.98 million contract is challenging without detailed service descriptions and performance metrics. However, the decade-long duration suggests a sustained need and potentially a reasonable cost over time for the services rendered. Comparing it to similar large-scale IT service contracts awarded by the Treasury or IRS would provide better context on pricing and value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: unknown

This contract was awarded as a competitive delivery order under a larger indefinite-delivery/indefinite-quantity (IDIQ) contract, likely TIPPS-3. The presence of 22 bids indicates a robust competitive environment at the IDIQ level, which should have driven favorable pricing for this delivery order. The competitive nature suggests that multiple vendors were vying for this work, allowing the government to select the best value.

Taxpayer Impact: A competitive award process generally benefits taxpayers by fostering price discovery and encouraging contractors to offer competitive rates, potentially leading to cost savings compared to sole-source awards.

Public Impact

The primary beneficiary is the Department of the Treasury, specifically the Internal Revenue Service (IRS), which received computer systems design services. These services likely supported critical IRS operations, potentially including tax processing, data management, or IT infrastructure. The geographic impact is centered in Maryland, where the contract was managed. The contract supported a large, established technology provider, indirectly impacting the workforce within that company.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration could lead to vendor lock-in if not managed carefully.
Cost Plus Fixed Fee contracts can sometimes lead to scope creep if not tightly controlled.
Lack of small business set-aside may limit broader economic participation.

Positive Signals

Competitive award process suggests potential for good value.
Award to a major contractor like IBM implies access to significant technical expertise.
The contract's long lifespan indicates a stable and reliable service delivery.

Sector Analysis

Computer Systems Design Services (NAICS 541512) is a significant sector within the federal IT landscape. This contract represents a portion of the government's substantial investment in maintaining and modernizing its IT infrastructure. The market for these services is large and competitive, with major players like IBM often securing large-scale contracts due to their established capabilities and past performance.

Small Business Impact

This contract was not specifically set aside for small businesses, nor does it appear to have a subcontracting plan indicated in the provided data. The award to a large prime contractor like IBM suggests that opportunities for small businesses would likely be through subcontracting, if IBM chose to engage them. The absence of a set-aside means direct prime contracting opportunities for small businesses were not prioritized for this specific award.

Oversight & Accountability

Oversight for this contract would have been managed by the Department of the Treasury's contracting officers and program managers. The Inspector General for the Treasury would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract. Transparency is generally facilitated through contract award databases, though detailed performance reports are often internal.

Related Government Programs

TIPPS-3 IDIQ Contract
IRS IT Modernization Programs
Treasury Department IT Services
Computer Systems Design Services Contracts

Risk Flags

Long contract duration
Cost Plus Fixed Fee pricing structure
Potential for technological obsolescence
Lack of explicit small business set-aside

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $47.0 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. IBM, TIPPS-3

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 $47.0 million.

What is the period of performance?

Start: 2006-05-25. End: 2016-03-16.

What was the specific nature of the computer systems design services provided under this contract?

The provided data identifies the contract under NAICS code 541512, 'Computer Systems Design Services.' This broad category typically encompasses services such as designing and developing computer systems integration, providing IT consulting, and offering IT support. For this specific contract with the IRS, the services likely involved the design, development, implementation, or maintenance of complex IT systems supporting tax administration, data processing, or internal operations. Without more granular information on the task orders issued under this delivery order, the precise nature of the services remains general.

How does the $46.98 million total value compare to other similar IT service contracts awarded by the Treasury or IRS during that period?

The total value of $46.98 million over approximately 10 years (from May 2006 to March 2016) averages around $4.7 million per year. This is a substantial but not extraordinary amount for a large federal agency like the IRS requiring complex IT services. Many large IT modernization or sustainment contracts can range from tens to hundreds of millions of dollars. To provide a precise comparison, one would need to analyze IT service contracts of similar scope (e.g., systems design, integration, support) awarded by the Treasury or IRS to large system integrators during the 2006-2016 timeframe. This contract appears to be within the typical range for significant IT support for a major federal agency.

What were the key performance indicators (KPIs) or metrics used to assess IBM's performance under this contract?

The provided data does not include specific Key Performance Indicators (KPIs) or performance metrics for this contract. Typically, for IT service contracts, KPIs might include system uptime, response times for support, successful project completion rates, adherence to security protocols, and user satisfaction. Performance assessments are usually documented in contract performance reports, which are not publicly available in this dataset. The Cost Plus Fixed Fee (CPFF) structure implies that performance would be monitored to ensure the fixed fee was earned and that costs remained within reasonable bounds for the scope of work.

What is the significance of the contract type being 'Cost Plus Fixed Fee' (CPFF)?

The Cost Plus Fixed Fee (CPFF) contract type means that IBM was reimbursed for all allowable costs incurred during the performance of the contract, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is well-defined but there's some uncertainty in the exact costs. For the government, it aims to provide a degree of cost control by fixing the profit margin. For the contractor, it offers a guaranteed profit. However, CPFF contracts require careful oversight to ensure costs are reasonable and allocable, and to prevent scope creep that could inflate costs without a corresponding increase in the fixed fee.

How did the competitive landscape for computer systems design services evolve during the contract's lifespan (2006-2016)?

The period from 2006 to 2016 saw significant evolution in the IT services market. Cloud computing began to emerge and gain traction, shifting demand towards cloud-based solutions and services. Agile development methodologies became more prevalent, impacting how software and systems were designed and delivered. Cybersecurity also grew in importance, requiring more sophisticated design considerations. While this contract was awarded competitively, the broader market likely saw increased competition from specialized cloud providers and firms adept at modern development practices, potentially influencing future contract vehicles and strategies for the IRS and Treasury.

Were there any notable risks or challenges associated with this contract, given its long duration and the nature of IT services?

Yes, several risks are inherent in long-duration IT service contracts. Technological obsolescence is a major concern; systems designed early in the contract could become outdated by its end. Scope creep, where the project's requirements expand beyond the original agreement, is another risk, particularly with CPFF contracts, potentially increasing costs. Vendor lock-in could occur if the government becomes overly reliant on IBM's specific solutions or expertise, making future transitions difficult. Furthermore, maintaining consistent performance and adapting to evolving cybersecurity threats over a decade requires diligent contract management and proactive engagement from both the government and the contractor.

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: 22

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: $56,518,551

Exercised Options: $56,517,112

Current Obligation: $46,984,794

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: TIRNO06D00019

IDV Type: IDC

Timeline