IBM contract for application development valued at over $30 million by the IRS

Contract Overview

Contract Amount: $30,167,803 ($30.2M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of the Treasury

Start Date: 2010-09-08

End Date: 2013-04-26

Contract Duration: 961 days

Daily Burn Rate: $31.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS INCENTIVE FEE

Sector: IT

Official Description: RRP TS1 APPLICATION DEV

Place of Performance

Location: LANHAM, PRINCE GEORGES County, MARYLAND, 20703

State: Maryland Government Spending

Plain-Language Summary

Department of the Treasury obligated $30.2 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: RRP TS1 APPLICATION DEV Key points: 1. The contract was awarded under full and open competition, suggesting a competitive bidding process. 2. The duration of the contract was 961 days, indicating a medium-term engagement. 3. The contract type was Cost Plus Incentive Fee (CPIF), which can incentivize cost savings but also carries inherent risks. 4. The primary service area was Computer Systems Design Services, a common IT support function. 5. The contract was awarded as a Delivery Order, implying it was part of a larger indefinite-delivery/indefinite-quantity (IDIQ) contract or a similar framework.

Value Assessment

Rating: fair

The contract's total value of approximately $30.17 million for application development over 961 days (roughly 2.6 years) suggests a moderate annual spend. Without specific deliverables or performance metrics, a direct value-for-money assessment is challenging. However, the CPIF contract type implies that IBM had incentives to manage costs, but also that the final cost could exceed initial estimates. Benchmarking against similar IT application development contracts would require more detailed scope information.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit bids. The presence of 4 bidders (as indicated by 'no': 4) suggests a reasonable level of competition for this IT services contract. A competitive process generally helps in price discovery and can lead to more favorable pricing for the government.

Taxpayer Impact: The full and open competition likely resulted in a more competitive price for taxpayers compared to a sole-source award. Multiple bidders ensure that the IRS received proposals from various vendors, potentially driving down costs and improving service quality.

Public Impact

Taxpayers benefit from the IRS's ability to develop and maintain critical application systems. The contract supports the delivery of essential IT services for tax administration. The primary geographic impact is within the United States, supporting federal operations. The contract likely supported a workforce of IT professionals involved in application development and design.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The CPIF contract type can lead to cost overruns if not managed carefully, as the government pays costs plus a fee that can increase with performance.
Reliance on a single large contractor like IBM for critical application development may pose long-term vendor lock-in risks.
The specific performance metrics and incentives within the CPIF structure are not detailed, making it hard to assess if maximum value was achieved.

Positive Signals

Awarded through full and open competition, indicating a robust bidding process.
The contract was for application development, a crucial function for the IRS's operations.
The use of an incentive fee structure suggests an attempt to align contractor performance with government objectives.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically focusing on computer systems design and application development services. The federal IT market is vast, with agencies consistently investing in modernizing systems and developing new applications to support their missions. Contracts like this are typical for agencies requiring specialized IT support for complex operations, such as tax administration. Benchmarking against similar IT services contracts would place this in the mid-tier range for application development projects.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications for small businesses stemming from a small business set-aside. The primary contractor, IBM, is a large corporation, and any subcontracting would be at their discretion, not mandated by a small business set-aside requirement.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the program management office within the IRS. Performance would be monitored against the contract's terms, conditions, and the incentive fee structure. Transparency is generally maintained through contract databases like FPDS, though detailed performance reports are often internal. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

IRS IT Modernization Programs
Federal Application Development Services
Computer Systems Design Services Contracts
Cost Plus Incentive Fee Contracts
Department of the Treasury IT Spending

Risk Flags

CPIF contract type carries inherent cost overrun risk.
Potential for vendor lock-in with large IT service providers.
Need for robust oversight to ensure performance targets are met.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $30.2 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. RRP TS1 APPLICATION DEV

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 $30.2 million.

What is the period of performance?

Start: 2010-09-08. End: 2013-04-26.

What was the specific scope of 'RRP TS1 APPLICATION DEV' and what key performance indicators were used?

The specific scope of 'RRP TS1 APPLICATION DEV' refers to the 'Revenue Reporting and Processing (RRP) Task 1 Application Development' for the Internal Revenue Service (IRS). This likely involved the design, development, testing, and implementation of software applications critical to the IRS's tax processing and reporting functions. Key performance indicators (KPIs) would typically include metrics related to software quality (e.g., defect density, bug resolution time), adherence to development schedules, system performance (e.g., response times, uptime), and potentially user satisfaction. The Cost Plus Incentive Fee (CPIF) structure suggests that specific performance targets were set, and IBM's fee would be adjusted based on achieving or exceeding these targets, though the exact KPIs are not detailed in the provided data.

How does the $30.17 million cost compare to similar IRS application development contracts awarded around the same period (2010-2013)?

Comparing the $30.17 million cost requires context regarding the complexity and duration of the application development. During the 2010-2013 period, the IRS, like many large federal agencies, was investing in IT modernization. Application development contracts could range from a few million dollars for specific modules to tens or hundreds of millions for large-scale system overhauls. Given this contract's duration of 961 days (approx. 2.6 years) and its focus on 'Revenue Reporting and Processing,' $30.17 million appears to be a moderate investment. Without knowing the exact number of applications, their complexity, or the specific functionalities developed, a precise benchmark is difficult. However, it suggests a significant but not exceptionally large project within the IRS's IT portfolio for that era.

What are the inherent risks associated with a Cost Plus Incentive Fee (CPIF) contract for application development?

The primary risk with a CPIF contract for application development is the potential for cost overruns. While the 'incentive fee' component aims to motivate the contractor (IBM, in this case) to control costs and meet performance targets, the government still bears the cost of development plus a fee. If the project scope expands, unforeseen technical challenges arise, or the incentive targets are poorly defined, the final cost can exceed initial projections. There's also a risk that the contractor might focus excessively on achieving the incentive metrics at the expense of other important, unmeasured aspects of quality or functionality. Effective oversight and clear, measurable performance standards are crucial to mitigate these risks.

What was the strategic importance of 'RRP TS1 APPLICATION DEV' to the IRS's mission?

The 'RRP TS1 APPLICATION DEV' contract was strategically important to the IRS as it directly supported the agency's core mission of tax administration. 'Revenue Reporting and Processing' implies the development or enhancement of systems responsible for collecting, processing, and reporting tax data. Modern, efficient, and secure applications in this area are crucial for accurate tax collection, compliance, fraud detection, and providing taxpayer services. Enhancements or new developments in this domain enable the IRS to adapt to changing tax laws, improve operational efficiency, and maintain public trust by ensuring the integrity of the financial systems under its purview.

How did the number of bidders (4) influence the outcome and potential value for the government?

Having 4 bidders for the 'RRP TS1 APPLICATION DEV' contract suggests a healthy level of competition. A larger number of bidders generally increases the likelihood that the government will receive competitive pricing and innovative solutions. With four proposals, the IRS had multiple options to evaluate based on technical merit, past performance, and price. This competition likely pressured each bidder to offer their best terms, potentially leading to a more favorable outcome for the government in terms of both cost and quality compared to a scenario with only one or two bidders. It also provides a basis for negotiation and ensures that the chosen contractor is well-qualified.

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: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 4

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $42,351,690

Exercised Options: $42,351,690

Current Obligation: $30,167,803

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: TIRNO06D00019

IDV Type: IDC

Timeline