IBM's $10.4M IRS Task Order for Computer Systems Design Services Awarded in 2006

Contract Overview

Contract Amount: $10,439,818 ($10.4M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of the Treasury

Start Date: 2006-05-30

End Date: 2013-04-26

Contract Duration: 2,523 days

Daily Burn Rate: $4.1K/day

Competition Type: COMPETITIVE DELIVERY ORDER

Number of Offers Received: 20

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: TASK ORDER 2070 FOR COMPETITION, RICS

Place of Performance

Location: LANHAM, PRINCE GEORGES County, MARYLAND, 20706

State: Maryland Government Spending

Plain-Language Summary

Department of the Treasury obligated $10.4 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: TASK ORDER 2070 FOR COMPETITION, RICS Key points: 1. Value-for-money assessment indicates fair pricing given the contract duration and services. 2. Competition dynamics show a competitive delivery order, suggesting potential for price discovery. 3. Risk indicators are moderate, with a Cost Plus Fixed Fee structure requiring careful oversight. 4. Performance context is within computer systems design, a critical area for the IRS. 5. Sector positioning is within IT services for a major federal agency.

Value Assessment

Rating: fair

This $10.4 million task order for computer systems design services awarded to IBM represents a significant investment over its 7-year period. While specific cost breakdowns are not provided, the Cost Plus Fixed Fee (CPFF) structure suggests that IBM's costs were reimbursed along with a predetermined profit. Benchmarking against similar IT services contracts of this duration and scope for federal agencies indicates that the overall value is within a reasonable range, though detailed cost efficiency cannot be fully assessed without more granular data on labor rates and overhead.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded as a competitive delivery order, indicating that it was competed among multiple vendors. The presence of 20 bids suggests a robust level of competition for this task order. A higher number of bidders generally leads to better price discovery and potentially lower costs for the government, as contractors are incentivized to offer competitive pricing to win the award.

Taxpayer Impact: The full and open competition for this task order likely resulted in a more favorable price for taxpayers compared to a sole-source or limited competition award.

Public Impact

Benefits the Internal Revenue Service by providing essential computer systems design services. Services delivered likely supported the modernization and maintenance of IRS IT infrastructure. Geographic impact is primarily within Maryland, where the contract was administered. Workforce implications include employment for IT professionals and support staff at IBM and potentially subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

CPFF contracts can incentivize cost overruns if not closely monitored.
Long contract duration (7 years) requires sustained performance management.
Reliance on a single large contractor (IBM) for critical IT services can pose risks.

Positive Signals

Awarded through full and open competition, indicating a competitive bidding process.
The task order was for computer systems design, a core IT competency.
The contract was managed by the Department of the Treasury, a major federal agency.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically focusing on computer systems design services. The federal IT services market is substantial, with agencies consistently investing in maintaining and upgrading their technological infrastructure. This contract with the IRS represents a typical engagement for large IT service providers like IBM, aiming to support complex government operations through specialized technical expertise. Comparable spending benchmarks for similar IT design and integration services within federal agencies often range in the millions to tens of millions of dollars annually, depending on scope and duration.

Small Business Impact

There is no indication that this contract was specifically set aside for small businesses. As a large contract awarded to a major corporation like IBM, it is unlikely to have direct subcontracting requirements aimed at small businesses unless specified within the task order's scope. The primary impact on the small business ecosystem would be indirect, through potential competition or opportunities if IBM chose to engage small business partners.

Oversight & Accountability

Oversight for this contract would have been managed by the contracting officers and program managers within the Department of the Treasury and the Internal Revenue Service. The Cost Plus Fixed Fee structure necessitates rigorous financial oversight to ensure that costs are reasonable and allocable to the contract. Transparency is typically managed through contract reporting requirements and performance reviews. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

IRS IT Modernization Programs
Treasury Department IT Services
Federal Computer Systems Design Contracts
Large-Scale IT Service Delivery

Risk Flags

Potential for cost overruns due to CPFF structure.
Need for sustained oversight over a long contract duration.
Reliance on a single large contractor for critical IT functions.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $10.4 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. TASK ORDER 2070 FOR COMPETITION, RICS

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 $10.4 million.

What is the period of performance?

Start: 2006-05-30. End: 2013-04-26.

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

The task order, valued at approximately $10.4 million, was for computer systems design services (NAICS code 541512) awarded to IBM by the IRS. While the specific details of the 'design' are not elaborated in the provided data, such services typically encompass the planning, analysis, design, development, and integration of computer systems. This could include architectural design, software design, network design, database design, and the creation of system specifications. Given the IRS's complex operational needs, these services likely supported the enhancement, maintenance, or development of critical tax processing, data management, or taxpayer service systems.

How does the $10.4 million value compare to other IRS IT contracts of similar duration?

The $10.4 million value for a 7-year contract (May 2006 - April 2013) averages to roughly $1.49 million per year. This figure is moderate when compared to the vast IT spending of the IRS, which often involves multi-year, multi-million dollar contracts for system modernization, cybersecurity, and data analytics. For instance, larger IRS IT modernization efforts can easily run into hundreds of millions or even billions of dollars over their lifecycles. Therefore, this specific task order, while substantial, appears to be a focused engagement within the broader IRS IT landscape, likely addressing a specific system design need rather than a comprehensive overhaul.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract structure for IT services?

The primary risk with a Cost Plus Fixed Fee (CPFF) contract is the potential for cost overruns. In a CPFF arrangement, the contractor is reimbursed for all allowable costs incurred, plus a fixed fee representing profit. While the fee is fixed, the total cost to the government can escalate if the contractor's costs are higher than anticipated. This structure can reduce the contractor's incentive to control costs rigorously, as their profit margin is guaranteed. Effective oversight, detailed cost accounting, and clear definition of allowable costs are crucial to mitigate these risks and ensure value for the government.

What does the number of bids (20) suggest about the competition for this specific task order?

Receiving 20 bids for this task order indicates a high level of competition. A larger number of bidders generally suggests that the contract opportunity was attractive and that multiple firms possessed the capabilities to perform the required computer systems design services. This robust competition is beneficial for the government as it typically drives down prices, encourages innovation, and allows the agency to select the offer that provides the best overall value, considering both technical approach and cost. It also signifies that the market for such services is healthy and accessible to a range of providers.

How has IBM's track record with the IRS influenced its ability to secure contracts like this one?

IBM, as a major federal IT contractor, has a long history of working with various government agencies, including the IRS. Securing contracts like this task order is often influenced by a contractor's established performance history, technical expertise, and existing relationships with the agency. Agencies often prefer to award contracts to vendors with a proven track record of successful delivery, especially for critical IT systems. While this specific task order was competitively awarded, IBM's prior experience and demonstrated capabilities within the federal space, and potentially with the IRS itself, would have been significant factors in its ability to bid effectively and be considered a viable candidate.

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: 20

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: $30,412,056

Exercised Options: $24,496,590

Current Obligation: $10,439,818

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: TIRNO06D00019

IDV Type: IDC

Timeline