Treasury's IRS Leases IBM Mainframes for $24.2M, Facing Limited Competition from Unisys

Contract Overview

Contract Amount: $24,185,170 ($24.2M)

Contractor: Unisys Corporation

Awarding Agency: Department of the Treasury

Start Date: 2015-06-28

End Date: 2019-02-28

Contract Duration: 1,341 days

Daily Burn Rate: $18.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: IGF::CL::IGF LEASE OF MAINFRAME IBM ZSERIES COMPUTERS

Place of Performance

Location: RESTON, FAIRFAX County, VIRGINIA, 20190

State: Virginia Government Spending

Plain-Language Summary

Department of the Treasury obligated $24.2 million to UNISYS CORPORATION for work described as: IGF::CL::IGF LEASE OF MAINFRAME IBM ZSERIES COMPUTERS Key points: 1. Spending of $24.2M on mainframe computer services. 2. Unisys Corporation is the sole competitor identified. 3. Lease contract duration of 1341 days. 4. Services fall under 'Other Computer Related Services' NAICS code. 5. Contract type is Firm Fixed Price.

Value Assessment

Rating: fair

The $24.2 million cost for mainframe leasing over approximately 3.7 years appears high when considering the age of the technology and potential for cloud alternatives. Benchmarking against similar mainframe leases is difficult without more specific hardware and service level details.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is positive for price discovery. However, the specific mention of Unisys Corporation as a competitor suggests that the market for these specialized mainframe services may be limited, potentially impacting the final negotiated price.

Taxpayer Impact: Taxpayer funds are used for this lease. While competition was sought, the specialized nature of mainframe leasing could lead to costs that are not fully optimized, impacting overall value for money.

Public Impact

IRS operations rely on these mainframes for critical tax processing. The lease ensures continuity of essential government services. Potential for higher costs due to specialized hardware needs. Limited vendor pool could impact future contract negotiations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition in specialized mainframe market.
Aging technology may not be cost-effective.
Potential for vendor lock-in with specialized hardware.

Positive Signals

Awarded under full and open competition.
Firm Fixed Price contract provides cost certainty.
Ensures continuity of essential IRS functions.

Sector Analysis

The IT sector, particularly mainframe services, is a mature market. However, specialized leasing for high-performance mainframes like IBM ZSeries can command premium pricing due to the niche nature of the hardware and required support. Benchmarks are difficult without specific configurations.

Small Business Impact

The data does not indicate any specific participation or set-aside for small businesses in this contract. The nature of mainframe leasing typically involves large, established vendors, making it less accessible for small businesses.

Oversight & Accountability

The contract was awarded via a delivery order, implying a larger indefinite-delivery/indefinite-quantity (IDIQ) contract existed. Oversight would focus on ensuring the terms of the original IDIQ were met and that the delivery order represented fair value.

Related Government Programs

Other Computer Related Services
Department of the Treasury Contracting
Internal Revenue Service Programs

Risk Flags

Potential for overpayment due to limited competition.
Risk of technological obsolescence.
Dependency on a single vendor for critical infrastructure.
High cost associated with specialized hardware leasing.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $24.2 million to UNISYS CORPORATION. IGF::CL::IGF LEASE OF MAINFRAME IBM ZSERIES COMPUTERS

Who is the contractor on this award?

The obligated recipient is UNISYS 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 $24.2 million.

What is the period of performance?

Start: 2015-06-28. End: 2019-02-28.

What is the total cost of ownership comparison between leasing this IBM mainframe and migrating to a modern cloud-based solution for the IRS?

A comprehensive total cost of ownership (TCO) analysis would be required. This should include not only the lease cost but also power, cooling, maintenance, personnel, and software licensing for the mainframe. Cloud migration costs involve initial setup, data transfer, ongoing subscription fees, and potential retraining. Without detailed IRS workload data and specific cloud provider quotes, a definitive comparison is impossible, but cloud solutions often offer greater scalability and potentially lower long-term operational costs.

Given the limited competition, what strategies were employed to ensure the government received a fair price for the mainframe lease?

During the full and open competition phase, the government likely relied on market research to identify potential bidders and establish a price range. Negotiation strategies would involve comparing Unisys's offer against historical pricing, industry benchmarks (if available), and potentially requesting best and final offers. The firm-fixed-price structure provides some cost certainty, but the initial price discovery is crucial when the vendor pool is constrained.

How does the continued reliance on leased mainframe technology impact the IRS's long-term IT modernization goals and cybersecurity posture?

Continued reliance on leased mainframe technology, especially older systems, can hinder IT modernization efforts by creating technical debt and limiting agility. It may also present cybersecurity challenges if the hardware or associated software is not kept up-to-date with the latest security patches and protocols. While mainframes can be secure, integrating them into a modern, heterogeneous IT environment requires significant effort and specialized expertise, potentially increasing the attack surface.

Industry Classification

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

Product/Service Code: LEASE/RENT EQUIPMENT › LEASE OR RENTAL OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 11720 PLAZA AMERICA DR TOWER III, RESTON, VA, 20190

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

Financial Breakdown

Contract Ceiling: $24,185,171

Exercised Options: $24,185,171

Current Obligation: $24,185,170

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: TIRNO13D00001

IDV Type: IDC

Timeline