IBM contract for MEF Release R9 application support awarded $25.6M by Treasury's IRS

Contract Overview

Contract Amount: $25,593,592 ($25.6M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of the Treasury

Start Date: 2012-09-14

End Date: 2014-11-30

Contract Duration: 807 days

Daily Burn Rate: $31.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: IGF::CT::IGF CRITICAL FUNCTIONS - PROVIDE APPLICATION SUPPORT FOR MEF RELEASE R9 MS 2 A9CU2

Place of Performance

Location: FAIRFAX, FAIRFAX County, VIRGINIA, 22033

State: Virginia Government Spending

Plain-Language Summary

Department of the Treasury obligated $25.6 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: IGF::CT::IGF CRITICAL FUNCTIONS - PROVIDE APPLICATION SUPPORT FOR MEF RELEASE R9 MS 2 A9CU2 Key points: 1. Contract awarded to a single, large incumbent vendor, raising questions about competitive pricing. 2. The contract's duration of 807 days suggests a need for sustained support services. 3. Awarded under a Cost Plus Fixed Fee (CPFF) structure, which can incentivize cost overruns. 4. The North American Industry Classification System (NAICS) code 541519 indicates a broad range of IT services. 5. The contract was awarded in 2012, with performance ending in 2014, indicating historical data. 6. The contract value of $25.6M falls within a moderate spending range for IT support services.

Value Assessment

Rating: fair

The contract value of $25.6 million for application support over approximately two years appears moderate for a large federal IT contract. However, without specific benchmarks for MEF Release R9 support or comparable IBM contracts for similar services, a precise value-for-money assessment is challenging. The CPFF pricing structure warrants scrutiny, as it may not always yield the most cost-effective outcome compared to fixed-price or other incentive-based contracts, especially if not tightly managed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. However, the award went to a single contractor, International Business Machines Corporation (IBM). The number of bids received is not specified, which limits the ability to fully assess the level of competition and its impact on price discovery. A single award from a full and open competition could suggest that only one vendor met the stringent requirements or that the incumbent had a significant advantage.

Taxpayer Impact: While full and open competition is generally beneficial for taxpayers by encouraging a wider range of offers, the ultimate benefit depends on the number of actual bids and the resulting pricing. If competition was robust, taxpayers likely benefited from competitive pricing. If competition was limited in practice, the taxpayer benefit may be less pronounced.

Public Impact

The Internal Revenue Service (IRS) benefits from continued application support for its MEF Release R9 system, ensuring operational continuity. Federal employees and contractors involved in tax administration are supported by the reliable functioning of this critical system. Taxpayers indirectly benefit from the efficient processing and management of tax-related data facilitated by this application. The contract supports IT professionals employed by IBM, contributing to the federal IT workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee (CPFF) contract type can lead to higher costs if not managed diligently.
Award to a single large incumbent may indicate limited effective competition despite 'full and open' designation.
Lack of specific performance metrics or outcomes makes it difficult to assess the true value delivered.

Positive Signals

Awarded under 'full and open competition', suggesting an initial intent to maximize market participation.
Contract duration of over two years indicates a recognized need for sustained, critical IT support.
The contractor, IBM, is a well-established entity with significant experience in large-scale IT services.

Sector Analysis

This contract falls within the broader IT services sector, specifically focusing on application support and maintenance for government systems. The market for federal IT services is substantial, with agencies consistently outsourcing complex IT functions. Comparable spending benchmarks for similar application support contracts can vary widely based on system complexity, criticality, and vendor rates. IBM's position as a major federal IT contractor places it within a competitive landscape alongside other large system integrators.

Small Business Impact

The contract details do not indicate any specific small business set-aside provisions or subcontracting goals. Given the award to a large incumbent like IBM, it is less likely that small businesses were primary awardees. However, IBM may have utilized small business subcontractors, though this information is not provided. The absence of explicit small business considerations suggests a limited direct impact on the small business IT ecosystem through this specific contract.

Oversight & Accountability

Oversight for this contract would have been managed by the Department of the Treasury's Internal Revenue Service. As a CPFF contract, rigorous oversight of costs and performance would be expected to ensure adherence to the fixed fee and prevent unnecessary expenditures. Transparency is typically facilitated through contract reporting mechanisms and potentially through the IRS's internal audit functions. The Inspector General for the Treasury Department would likely have jurisdiction for audits and investigations related to potential fraud, waste, or abuse.

Related Government Programs

IRS Application Modernization Programs
Federal Civilian IT Modernization
Department of the Treasury IT Services
Large-Scale IT Support Contracts

Risk Flags

Cost Plus Fixed Fee (CPFF) pricing structure
Potential for limited effective competition despite 'full and open' designation
Lack of detailed performance metrics for value assessment

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $25.6 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. IGF::CT::IGF CRITICAL FUNCTIONS - PROVIDE APPLICATION SUPPORT FOR MEF RELEASE R9 MS 2 A9CU2

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 $25.6 million.

What is the period of performance?

Start: 2012-09-14. End: 2014-11-30.

What was the specific nature of the 'MEF Release R9' system supported by this contract, and what was its criticality to IRS operations?

The 'MEF Release R9' likely refers to a specific release or version of the Modernized e-File (MeF) system used by the IRS. The MeF system is critical for processing tax returns filed electronically by individuals and businesses. It facilitates the transmission, validation, and processing of tax data, playing a vital role in the IRS's tax administration functions. Ensuring the continuous availability and performance of such systems is paramount for timely tax processing and revenue collection. The criticality is underscored by the substantial contract value and duration awarded for its support.

How did the 'full and open competition' process for this contract translate into actual market participation and pricing?

While the contract was advertised as 'full and open competition,' the available data does not specify the number of bids received. This lack of detail makes it difficult to ascertain the extent of actual market participation. If only a few bids were submitted, or if IBM's bid was significantly advantageous due to incumbency or unique qualifications, the competitive pressure on pricing might have been limited. Taxpayers benefit most from full and open competition when it results in multiple strong bids, driving down costs and improving service offerings. Without knowing the bid count, the precise taxpayer benefit from this specific competition remains unclear.

What are the typical risks associated with Cost Plus Fixed Fee (CPFF) contracts in the federal IT sector, and how might they apply here?

Cost Plus Fixed Fee (CPFF) contracts carry inherent risks, primarily related to cost control. The government agrees to pay the contractor's allowable costs plus a fixed fee, which represents the contractor's profit. A key risk is that the contractor may have less incentive to control costs compared to fixed-price contracts, as cost overruns are generally reimbursed. This can lead to the government paying more than initially anticipated. For this contract, effective oversight by the IRS would have been crucial to scrutinize allowable costs, ensure efficiency, and prevent scope creep that could inflate the total cost while the fixed fee remains constant. The risk is that the 'cost' portion could escalate significantly.

Can the $25.6 million contract value be benchmarked against similar IT application support contracts awarded by the federal government during that period?

Benchmarking this $25.6 million contract requires comparing it to similar IT application support contracts for systems of comparable complexity and criticality, awarded around the 2012-2014 timeframe. Federal IT support contracts can range widely; however, for a system supporting a core function like tax return processing for a major agency like the IRS, this value appears moderate. Larger, more complex enterprise-wide systems or those involving significant development might command higher values. Without specific details on the scope of 'application support' for MEF Release R9, direct comparisons are difficult. However, the value suggests a substantial, ongoing need for specialized technical expertise.

What was IBM's track record with the IRS or similar agencies prior to or during the performance of this contract?

International Business Machines Corporation (IBM) has a long-standing and extensive history of contracting with U.S. federal agencies, including the IRS, across a wide array of IT services. Prior to and during the 2012-2014 performance period of this contract, IBM was a major player in the federal IT landscape, known for its capabilities in systems integration, software development, and infrastructure management. While specific performance details for this particular contract are not detailed here, IBM's general track record suggests a capacity to handle large, complex government IT projects. However, like any large contractor, its performance history across numerous contracts would likely show a range of outcomes, necessitating specific contract-level oversight.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Other Computer Related 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

Solicitation ID: RTCP# 4110

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DR, BETHESDA, MD, 08

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $25,872,295

Exercised Options: $25,806,399

Current Obligation: $25,593,592

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: TIRNO11D00022

IDV Type: IDC

Timeline