IBM contract for critical IT functions exceeds $27M, awarded via full and open competition

Contract Overview

Contract Amount: $27,030,489 ($27.0M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of the Treasury

Start Date: 2015-09-08

End Date: 2017-08-28

Contract Duration: 720 days

Daily Burn Rate: $37.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: IGF::CT::IGF FOR CRITICAL FUNCTIONS - PROVIDE APPLICATION SUPPORT FOR MEF RELEASE 10

Place of Performance

Location: FAIRFAX, FAIRFAX County, VIRGINIA, 22033

State: Virginia Government Spending

Plain-Language Summary

Department of the Treasury obligated $27.0 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: IGF::CT::IGF FOR CRITICAL FUNCTIONS - PROVIDE APPLICATION SUPPORT FOR MEF RELEASE 10 Key points: 1. Contract awarded to a large, established technology provider. 2. Pricing appears competitive given the scope of IT application support. 3. Risk indicators are moderate, with performance dependent on contractor execution. 4. Contract duration of two years provides a defined performance window. 5. This contract falls within the IT services sector, a significant area of federal spending. 6. The fixed-price nature of the contract shifts performance risk to the contractor.

Value Assessment

Rating: good

The contract value of approximately $27 million over two years for critical IT application support appears reasonable when benchmarked against similar large-scale IT service contracts. IBM is a major player in this space, and their pricing is generally in line with industry standards for complex support services. The fixed-price structure suggests a defined scope, which aids in cost control. However, a detailed cost breakdown would be needed for a more precise value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. This process is designed to foster price discovery and ensure the government receives the best value. The fact that it was competed openly suggests a healthy market for these types of IT support services.

Taxpayer Impact: Full and open competition generally leads to more favorable pricing for taxpayers by encouraging a wider range of bids and driving down costs through market forces.

Public Impact

The Internal Revenue Service (IRS) benefits from continued support for critical IT functions, ensuring operational continuity. Essential application support services are delivered, maintaining the functionality of key IRS systems. The primary geographic impact is within the IRS's operational centers, likely concentrated in Virginia. The contract supports a workforce of IT professionals employed by IBM, contributing to the tech sector employment.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in if follow-on work is required and not re-competed.
Dependence on a single contractor for critical functions could pose a risk if performance degrades.

Positive Signals

Awarded through full and open competition, suggesting a competitive bidding process.
Fixed-price contract structure aligns incentives and limits cost overruns.
Contractor is a well-established entity with significant experience in IT services.

Sector Analysis

This contract falls within the broader IT services sector, which is a substantial component of federal procurement. The market for IT application support is large and competitive, with numerous large and small businesses offering specialized services. This specific contract addresses a niche within IT services focused on critical application maintenance and support for a major government agency.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded to a large corporation. There is no explicit information regarding subcontracting plans for small businesses within the provided data. The focus is on a large prime contractor, and the impact on the small business ecosystem would depend on whether IBM utilizes small business subcontractors, which is not detailed here.

Oversight & Accountability

Oversight for this contract would typically reside with the contracting officer and program managers within the IRS. Performance reviews, regular reporting, and adherence to the contract's terms and conditions would be key accountability measures. Transparency is facilitated by the contract being publicly awarded, though detailed performance metrics are usually internal.

Related Government Programs

IRS IT Modernization Efforts
Federal Civilian IT Services Procurement
Application Maintenance and Support Contracts

Risk Flags

Potential for performance issues impacting critical IRS functions.
Dependency on a single vendor for essential IT services.
Risk of cost overruns if scope is not clearly defined or unforeseen issues arise.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $27.0 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. IGF::CT::IGF FOR CRITICAL FUNCTIONS - PROVIDE APPLICATION SUPPORT FOR MEF RELEASE 10

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 $27.0 million.

What is the period of performance?

Start: 2015-09-08. End: 2017-08-28.

What is the track record of International Business Machines Corporation (IBM) in performing similar federal IT support contracts?

IBM has a long and extensive history of performing IT support and services for various U.S. federal agencies. They are a major government contractor with a broad portfolio encompassing infrastructure management, application development and maintenance, cloud services, and cybersecurity. Their track record includes numerous large-scale contracts with agencies like the Department of Defense, NASA, and the Department of Homeland Security. While specific performance details for individual contracts are often proprietary or found in agency performance reports, IBM's general reputation is that of a capable, albeit sometimes costly, provider of complex IT solutions. Their ability to secure and execute large federal contracts indicates a demonstrated capacity to meet government requirements, though specific contract performance can vary.

How does the awarded price compare to similar IT application support contracts for federal agencies?

Benchmarking this $27 million contract against similar federal IT application support contracts requires careful consideration of scope, duration, and complexity. Contracts for application support can vary widely. For a two-year duration, $27 million suggests a significant level of support, potentially covering multiple critical applications with high availability requirements. Large-scale IT support contracts for agencies like the IRS, Department of Defense, or Health and Human Services often run into tens or hundreds of millions of dollars over several years. Given IBM's status as a major IT service provider and the critical nature of IRS functions, the price appears to be within the expected range for such a service. However, without specific details on the number of applications supported, service level agreements (SLAs), and the specific technologies involved, a precise comparison is challenging.

What are the primary risks associated with this contract for the IRS?

The primary risks associated with this contract for the IRS revolve around performance and dependency. A key risk is contractor performance; if IBM fails to deliver the agreed-upon application support services effectively, it could lead to disruptions in critical IRS operations, impacting tax processing, taxpayer services, and internal functions. Another risk is vendor lock-in, where the IRS becomes heavily reliant on IBM's specific systems and expertise, making it difficult and costly to switch providers in the future. Technical risks, such as the contractor's ability to support legacy systems or integrate new technologies, also exist. Finally, cost escalation, although mitigated by the fixed-price structure, could still occur if unforeseen issues require significant additional effort not fully captured in the initial scope.

What is the historical spending pattern for IT application support services by the IRS?

Historical spending patterns for IT application support services by the IRS are generally substantial, reflecting the agency's reliance on complex and extensive IT systems to manage the nation's tax code. The IRS consistently invests significant portions of its budget into IT operations, maintenance, and modernization. Over the past decade, spending on IT services, including application support, has been in the billions of dollars annually. This specific contract for "IGF FOR CRITICAL FUNCTIONS" represents a portion of that broader IT expenditure. Trends often show a continued need for maintaining existing systems while also investing in upgrades and new technologies to improve efficiency and security. The IRS's IT budget is subject to congressional appropriations and agency priorities, which can influence year-over-year spending.

How does the 'Other Computer Related Services' NAICS code (541519) typically encompass IT application support?

The North American Industry Classification System (NAICS) code 541519, 'Other Computer Related Services,' is a broad category that encompasses a wide range of IT services not specifically classified under other codes like custom programming services (541511) or computer systems design services (541512). Application support, maintenance, and help desk services often fall under this code when they involve providing ongoing technical assistance, troubleshooting, and upkeep for existing software applications. This can include services like bug fixing, performance tuning, user support, and ensuring the continued functionality of software systems. Given that this contract is for 'application support for MEF release 10,' it aligns well with the descriptive scope of NAICS 541519, indicating specialized services related to maintaining and supporting computer applications.

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: TTN#4263

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DR, BETHESDA, MD, 20817

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

Financial Breakdown

Contract Ceiling: $54,180,057

Exercised Options: $29,052,234

Current Obligation: $27,030,489

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: TIRNO11D00022

IDV Type: IDC

Timeline