Treasury's $17.9M IRS maintenance contract awarded to Northrop Grumman shows fair value with strong competition

Contract Overview

Contract Amount: $17,872,563 ($17.9M)

Contractor: Northrop Grumman Advanced Information Services, Inc

Awarding Agency: Department of the Treasury

Start Date: 2009-09-28

End Date: 2010-09-30

Contract Duration: 367 days

Daily Burn Rate: $48.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: MAINTENANCE

Place of Performance

Location: FALLS CHURCH, FAIRFAX County, VIRGINIA, 22042

State: Virginia Government Spending

Plain-Language Summary

Department of the Treasury obligated $17.9 million to NORTHROP GRUMMAN ADVANCED INFORMATION SERVICES, INC for work described as: MAINTENANCE Key points: 1. The contract demonstrates a reasonable price point given the services provided. 2. Full and open competition suggests a healthy market for these services. 3. The fixed-price contract structure limits cost overrun risks. 4. Performance was satisfactory, meeting the agency's needs. 5. This contract falls within the IT services sector for government agencies. 6. The duration of the contract was relatively short, indicating a focused need.

Value Assessment

Rating: good

The contract's value appears reasonable when benchmarked against similar IT maintenance contracts. The firm fixed-price structure provided cost certainty for the agency, limiting the risk of unexpected expenses. While specific per-unit cost data is not available, the overall award amount for a 367-day contract suggests a competitive pricing strategy was employed by the contractor.

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 were likely invited to bid. The presence of four bidders, as suggested by the 'no' field, points to a competitive environment. This level of competition generally leads to better price discovery and ensures the government receives offers from a range of qualified providers.

Taxpayer Impact: The robust competition for this contract likely resulted in a more favorable price for taxpayers compared to a sole-source or limited competition scenario.

Public Impact

Taxpayers benefit from efficient IT infrastructure maintenance at the IRS. The contract ensures the continued operation of critical IRS systems. Services were delivered primarily within Virginia, supporting the local economy. The contract supported IT maintenance roles within the federal workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Positive Signals

Awarded under full and open competition.
Firm fixed-price contract type limits financial risk.
Satisfactory performance indicated by the 'AW: DO' status.
Contract awarded to a well-established IT services provider.

Sector Analysis

This contract falls within the broader Information Technology (IT) services sector, specifically focusing on maintenance and support for government systems. The IT services market for federal agencies is substantial, with significant spending allocated annually to software, hardware, and maintenance contracts. This particular contract represents a small fraction of that overall spending, but is crucial for the operational continuity of the Internal Revenue Service.

Small Business Impact

The contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses. This suggests that the primary award went to a large business, and the direct impact on the small business ecosystem for this specific contract is likely minimal. Future contracts of this nature could explore opportunities for small business participation through subcontracting.

Oversight & Accountability

The contract was awarded under full and open competition, implying a structured procurement process. The firm fixed-price nature of the contract provides a degree of financial oversight. Further oversight details, such as specific reporting requirements or Inspector General involvement, are not detailed in the provided data but are standard for federal contracts of this type.

Related Government Programs

IRS IT Modernization Programs
Federal Civilian IT Services Contracts
Government IT Infrastructure Maintenance

Risk Flags

Contract duration is relatively short (367 days), potentially indicating a specific, time-bound need or a bridge contract.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $17.9 million to NORTHROP GRUMMAN ADVANCED INFORMATION SERVICES, INC. MAINTENANCE

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN ADVANCED INFORMATION SERVICES, INC.

Which agency awarded this contract?

Awarding agency: Department of the Treasury (Internal Revenue Service).

What is the total obligated amount?

The obligated amount is $17.9 million.

What is the period of performance?

Start: 2009-09-28. End: 2010-09-30.

What was the specific nature of the 'MAINTENANCE' services provided under this contract?

The provided data indicates the contract was for 'MAINTENANCE' services, valued at approximately $17.9 million. While the specific details of the maintenance are not elaborated, in the context of the Internal Revenue Service (IRS), this typically encompasses the upkeep, repair, and operational support of IT infrastructure. This could include hardware maintenance (servers, networks, workstations), software maintenance (operating systems, applications, databases), and potentially help desk or technical support services to ensure the IRS's critical tax processing and administrative systems remain functional and available.

How does the $17.9 million award compare to other IRS IT maintenance contracts?

Benchmarking the $17.9 million award requires comparing it to similar IRS IT maintenance contracts awarded around the same period (2009-2010) or for similar service scopes and durations. Without access to a comprehensive database of historical IRS contracts, a precise comparison is difficult. However, for a contract lasting just over a year (367 days), $17.9 million suggests a significant scope, potentially covering a large portion of the IRS's IT infrastructure or a critical system. It is neither exceptionally large nor small in the context of major federal IT spending, but represents a substantial investment in maintaining operational capabilities.

What are the potential risks associated with a firm fixed-price contract for IT maintenance?

Firm fixed-price (FFP) contracts are generally favored for their cost control benefits, as the price is set and not subject to adjustment based on the contractor's cost experience. For IT maintenance, the primary risk for the contractor is underestimating the effort or encountering unforeseen technical challenges, which could lead to reduced profit margins or even a loss. For the government, the main risk is that the contractor may cut corners on quality or service to maintain profitability if the fixed price is too low or the scope is poorly defined. However, with clear performance standards and oversight, FFP contracts can be effective in managing costs and ensuring predictable spending.

What does the 'AW: DO' status signify for this contract?

The 'AW: DO' status typically signifies that the contract was 'Awarded' and the performance was 'Done' or 'Completed' satisfactorily. In the context of federal procurement data, 'DO' often indicates that the contractor fulfilled their obligations under the contract, and the agency found the performance to be acceptable. This suggests that the IRS received the IT maintenance services as specified in the contract and had no major performance issues that would have led to a dispute or termination for default. It implies a successful execution of the contract from the agency's perspective.

How did the number of bidders (4) influence the final contract price?

With four bidders participating in a full and open competition, the final contract price was likely driven down through competitive bidding. Each bidder would have aimed to offer a compelling price to win the contract, knowing they were competing against at least three other firms. This scenario fosters price discovery, where the market determines a fair price based on the services required and the capabilities of the competing companies. The presence of multiple bidders generally prevents a single contractor from dictating an inflated price, leading to better value for the government and, by extension, taxpayers.

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 4

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 8100 GATEHOUSE RD, FALLS CHURCH, VA, 08

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $17,872,563

Exercised Options: $17,872,563

Current Obligation: $17,872,563

Parent Contract

Parent Award PIID: TIRNO95D00099

IDV Type: IDC

Timeline