DOJ's $57.8M IBM contract for claims system enhancements shows fair value but limited competition

Contract Overview

Contract Amount: $57,784,023 ($57.8M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Justice

Start Date: 2018-01-01

End Date: 2023-06-30

Contract Duration: 2,006 days

Daily Burn Rate: $28.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: LABOR HOURS

Sector: IT

Official Description: THE CONTRACTOR SHALL DESIGN, DEVELOP, AND IMPLEMENT ENHANCEMENTS AND NEW FUNCTIONALITY TO THE EXISTING CLAIMS MANAGEMENT SYSTEM IN ACCORDANCE WITH THE STATEMENT OF WORK AND CONTRACTOR'S PROPOSAL DATED DECEMBER 15, 2017.

Place of Performance

Location: BETHESDA, MONTGOMERY County, MARYLAND, 20817

State: Maryland Government Spending

Plain-Language Summary

Department of Justice obligated $57.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: THE CONTRACTOR SHALL DESIGN, DEVELOP, AND IMPLEMENT ENHANCEMENTS AND NEW FUNCTIONALITY TO THE EXISTING CLAIMS MANAGEMENT SYSTEM IN ACCORDANCE WITH THE STATEMENT OF WORK AND CONTRACTOR'S PROPOSAL DATED DECEMBER 15, 2017. Key points: 1. The contract's value appears reasonable given the scope of system development and modernization. 2. IBM's extensive experience in large-scale IT projects likely contributed to the contract's successful execution. 3. The contract's duration and phased delivery suggest a well-managed, long-term IT modernization effort. 4. Performance metrics, though not detailed here, are crucial for assessing the true value of system enhancements. 5. The 'Administrative Management and General Management Consulting Services' NAICS code indicates a broad scope beyond pure software development.

Value Assessment

Rating: good

The contract's total value of approximately $57.8 million over five years for designing, developing, and implementing enhancements to a claims management system appears to be within a reasonable range for a project of this scale and complexity. Benchmarking against similar large-scale government IT modernization projects suggests that the pricing, while substantial, is not outliers. The use of labor hours (pt: LABOR HOURS) allows for flexibility but requires diligent oversight to ensure efficiency and prevent cost overruns. Without specific performance data or detailed cost breakdowns, a definitive value-for-money assessment is challenging, but the overall investment aligns with typical expenditures for such critical system upgrades.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. This approach generally fosters a competitive environment, encouraging bidders to offer their best pricing and technical solutions. The fact that it was competed broadly suggests that the Department of Justice sought a wide range of capabilities. The number of bidders and the specific evaluation criteria would provide further insight into the intensity of the competition and its impact on the final price and solution.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically drives down costs and encourages innovation, leading to better value for public funds. It ensures that the government is not locked into a single provider without exploring all market options.

Public Impact

The primary beneficiaries are the Department of Justice personnel who will utilize the enhanced claims management system, leading to improved efficiency and accuracy in processing claims. The services delivered include the design, development, and implementation of new functionalities and improvements to an existing system. The geographic impact is primarily within the Department of Justice's operational centers, likely concentrated in Maryland where the contract is managed. Workforce implications include the potential need for training DOJ staff on the new system features and the utilization of IBM's technical workforce for development and implementation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for scope creep given the long duration and iterative development nature of system enhancements.
Reliance on a single large contractor (IBM) for critical system modernization could pose risks if performance falters.
Ensuring adequate government oversight to manage labor hours effectively and control costs throughout the project lifecycle.

Positive Signals

IBM's established track record in large-scale government IT projects suggests a high likelihood of successful delivery.
The contract's phased approach allows for iterative feedback and adjustments, mitigating risks associated with big-bang implementations.
Full and open competition at the outset indicates a robust market exploration process.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically focusing on software development and system integration for administrative functions. The market for government IT services is vast and highly competitive, with numerous large and small businesses offering specialized solutions. Comparable spending benchmarks for large-scale government IT modernization projects often run into tens or hundreds of millions of dollars, depending on the complexity and scope. This contract's value is significant but not unusual for a multi-year, comprehensive system overhaul within a major federal agency.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications or benefits specifically for small businesses mandated by this contract's award. The primary contractor, IBM, is a large corporation, and while they may engage small businesses as subcontractors in their broader operations, this specific contract does not appear to have a small business set-aside component. This means the direct impact on the small business ecosystem from this particular award is likely minimal.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Justice's contracting officers and program managers. They are responsible for monitoring performance, ensuring adherence to the statement of work, and managing payments. Given the nature of IT development, regular progress reviews, milestone tracking, and quality assurance checks are essential oversight mechanisms. Transparency is typically maintained through contract reporting requirements and public contract databases. Inspector General jurisdiction would apply if any allegations of fraud, waste, or abuse arise during the contract's performance.

Related Government Programs

Justice Department Case Management Systems
Federal IT Modernization Initiatives
Administrative Systems Development Contracts
Large-Scale Software Implementation Projects

Risk Flags

Potential for cost overruns due to Labor Hours contract type.
Risk of technological obsolescence over the contract's long duration.
Need for robust government oversight to manage contractor performance and efficiency.

Frequently Asked Questions

What is this federal contract paying for?

Department of Justice awarded $57.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. THE CONTRACTOR SHALL DESIGN, DEVELOP, AND IMPLEMENT ENHANCEMENTS AND NEW FUNCTIONALITY TO THE EXISTING CLAIMS MANAGEMENT SYSTEM IN ACCORDANCE WITH THE STATEMENT OF WORK AND CONTRACTOR'S PROPOSAL DATED DECEMBER 15, 2017.

Who is the contractor on this award?

The obligated recipient is INTERNATIONAL BUSINESS MACHINES CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Justice (Offices, Boards and Divisions).

What is the total obligated amount?

The obligated amount is $57.8 million.

What is the period of performance?

Start: 2018-01-01. End: 2023-06-30.

What is IBM's track record with the Department of Justice on similar IT contracts?

IBM has a long history of working with various government agencies, including the Department of Justice, on complex IT projects. While specific details on past DOJ contracts are not provided in this data snippet, IBM's general profile includes extensive experience in enterprise resource planning (ERP), case management systems, and IT infrastructure modernization for federal clients. Their ability to secure a contract of this magnitude suggests a positive past performance record or a strong competitive offering. A deeper dive into DOJ's contract databases and performance evaluations would reveal specific successes and challenges IBM may have encountered on prior engagements with the agency.

How does the $57.8 million cost compare to similar claims management system modernization projects in the federal government?

The $57.8 million cost for a five-year claims management system enhancement project is substantial but falls within the expected range for large-scale federal IT modernization efforts. Projects of this nature often involve significant customization, integration with legacy systems, and extensive testing. For comparison, other federal agencies have undertaken similar system overhauls costing tens to hundreds of millions of dollars over several years. Factors influencing cost include the complexity of the existing system, the number of users, the scope of new functionalities, and the level of security required. Without specific details on the DOJ's system complexity, a precise benchmark is difficult, but the figure is consistent with the high cost of major government IT undertakings.

What are the primary risks associated with a long-term (2006 months duration) IT development contract like this?

A long-term IT development contract, such as this one with a duration of 2006 months (approximately 167 years, likely a typo and intended to be 5 years based on start/end dates), carries several risks. Key risks include technological obsolescence, where the technology developed becomes outdated before the system's lifecycle ends. Scope creep is another major risk, where requirements expand beyond the original agreement, leading to cost overruns and delays. Contractor performance issues, such as delays, quality problems, or failure to meet milestones, can significantly impact project success. Furthermore, changes in agency priorities or leadership can lead to project redirection or cancellation. Effective risk management, including clear scope definition, change control processes, and robust oversight, is crucial.

How effective is 'full and open competition' in ensuring value for money for taxpayers on large IT contracts?

Full and open competition is generally considered the most effective method for ensuring value for money for taxpayers on large IT contracts. By soliciting bids from all responsible sources, the government maximizes the potential for receiving competitive pricing and innovative solutions. This broad competition drives down costs as contractors vie for the contract. It also allows the government to select the best technical approach and the most capable vendor. While it requires more upfront effort in solicitation and evaluation, the long-term benefits of cost savings and superior performance typically outweigh these initial costs, leading to better utilization of taxpayer funds.

What are the implications of using 'Labor Hours' (pt: LABOR HOURS) as the contract type for this project?

Using 'Labor Hours' as the contract type means the contractor is reimbursed based on the actual hours worked by their personnel at pre-negotiated hourly rates. This provides flexibility, especially for projects where the exact scope or effort is not fully defined at the outset, such as system enhancements. However, it shifts the risk of cost overruns to the government if the contractor is inefficient or if the project takes longer than anticipated. Effective oversight is critical to ensure that labor hours are reasonable, necessary, and accurately reported. It requires diligent monitoring of progress and productivity to prevent inflated billing and ensure the project stays within budget.

What is the significance of the NAICS code 541611 (Administrative Management and General Management Consulting Services)?

The NAICS code 541611 indicates that the primary purpose of this contract is related to administrative and management consulting services, which often includes IT strategy, system analysis, process improvement, and organizational development, alongside the actual design and development of systems. This suggests the contract may encompass more than just pure software coding; it likely involves advising the Department of Justice on how to best manage and improve its claims processes through technology. This broader scope can justify the significant investment, as it aims to optimize administrative functions and potentially yield greater efficiency gains beyond just the technical implementation.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Management, Scientific, and Technical Consulting Services › Administrative Management and General Management Consulting 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: 1

Pricing Type: LABOR HOURS (Z)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DRIVE, BETHESDA, MD, 20817

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

Financial Breakdown

Contract Ceiling: $63,164,536

Exercised Options: $63,164,536

Current Obligation: $57,784,023

Actual Outlays: $53,727,564

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $918,502

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Parent Contract

Parent Award PIID: GS00F005DA

IDV Type: FSS

Timeline