Treasury's $237M IPAA Software Contract Awarded to FOUR LLC Shows Strong Competition

Contract Overview

Contract Amount: $237,448,053 ($237.4M)

Contractor: Four LLC

Awarding Agency: Department of the Treasury

Start Date: 2018-06-30

End Date: 2023-06-29

Contract Duration: 1,825 days

Daily Burn Rate: $130.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: NEW IPAA SOFTWARE SUBSTITUTION FIXED Q NEW IPAA SOFTWARE SUBSTITUTION FIXED QUANTITY JUNE 30, 2018 THRU JUNE 29, 2019.

Place of Performance

Location: HERNDON, FAIRFAX County, VIRGINIA, 20170

State: Virginia Government Spending

Plain-Language Summary

Department of the Treasury obligated $237.4 million to FOUR LLC for work described as: NEW IPAA SOFTWARE SUBSTITUTION FIXED Q NEW IPAA SOFTWARE SUBSTITUTION FIXED QUANTITY JUNE 30, 2018 THRU JUNE 29, 2019. Key points: 1. Value for money appears reasonable given the firm-fixed-price structure and competitive award. 2. Full and open competition suggests a healthy market for this type of software. 3. The contract duration of five years presents potential long-term dependency risks. 4. Performance context is limited without specific delivery order details. 5. Positioned within the Software Publishers sector, serving the IRS's internal needs. 6. The award amount is substantial, indicating a significant software investment by the Treasury.

Value Assessment

Rating: good

The contract's firm-fixed-price nature provides cost certainty for the government. Benchmarking against similar software procurement for tax administration is challenging without more granular data on specific functionalities and service levels. However, the competitive award process suggests that the pricing achieved is likely within a reasonable market range. The total value of over $237 million over five years indicates a significant investment, and ongoing performance monitoring will be crucial to ensure continued value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. The presence of three bidders (no) suggests a competitive environment for this software solution. This level of competition is generally favorable for price discovery and can lead to better terms for the government.

Taxpayer Impact: The full and open competition ensures that taxpayer dollars are being used efficiently by fostering a market where multiple vendors can vie for the contract, driving down costs and improving service quality.

Public Impact

The Internal Revenue Service (IRS) is the primary beneficiary, receiving essential software for its operations. The software likely supports critical tax administration functions, impacting taxpayers indirectly through improved government efficiency. The geographic impact is national, as the IRS operates nationwide. Workforce implications are primarily internal to the IRS, potentially involving training and integration of the new software.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in due to the five-year duration.
Reliance on a single vendor for critical software could pose continuity risks.
The substantial contract value may indicate a complex system with integration challenges.

Positive Signals

Firm-fixed-price contract provides cost predictability.
Awarded through full and open competition, suggesting market viability and competitive pricing.
The vendor, FOUR LLC, is a recognized entity in the software space.

Sector Analysis

This contract falls within the Software Publishers industry (NAICS 511210), a sector characterized by the development, distribution, and licensing of software. The market for enterprise software solutions, particularly for government agencies, is substantial and competitive. This contract represents a significant procurement within this sector, likely for a mission-critical application supporting tax processing or taxpayer services. Comparable spending benchmarks would depend on the specific software's functionality, but large-scale government IT procurements often run into hundreds of millions of dollars.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a result, small businesses were likely not the primary focus of this procurement. However, the prime contractor, FOUR LLC, may engage small businesses for subcontracting opportunities to fulfill specific aspects of the contract, though this is not explicitly detailed in the provided data. The impact on the broader small business ecosystem would depend on the extent of any subcontracting.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Treasury's Inspector General, with specific program management and oversight conducted by the Internal Revenue Service. Accountability measures are inherent in the firm-fixed-price contract structure, requiring delivery of specified software and services. Transparency is facilitated by the contract award being made under full and open competition, with details likely available through federal procurement databases.

Related Government Programs

IRS Taxpayer Services Modernization Programs
Federal Government Software Licensing Agreements
Department of the Treasury IT Modernization Initiatives
Procurement of Enterprise Resource Planning (ERP) Systems

Risk Flags

Long contract duration may lead to technology obsolescence.
Potential for vendor lock-in over the five-year term.
Lack of specific performance metrics in the provided data.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $237.4 million to FOUR LLC. NEW IPAA SOFTWARE SUBSTITUTION FIXED Q NEW IPAA SOFTWARE SUBSTITUTION FIXED QUANTITY JUNE 30, 2018 THRU JUNE 29, 2019.

Who is the contractor on this award?

The obligated recipient is FOUR LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $237.4 million.

What is the period of performance?

Start: 2018-06-30. End: 2023-06-29.

What specific functionalities does the 'NEW IPAA SOFTWARE SUBSTITUTION' provide for the IRS?

The provided data does not specify the exact functionalities of the 'NEW IPAA SOFTWARE SUBSTITUTION'. However, given its award to the Internal Revenue Service (IRS) and the NAICS code for Software Publishers, it is highly probable that this software supports critical tax administration processes. This could include functions related to taxpayer account management, tax form processing, data analysis for compliance, or internal operational support systems. The term 'SUBSTITUTION' suggests it may be replacing an older system, implying a need for updated capabilities, improved efficiency, or enhanced security features. Further details would be found in the contract's statement of work.

How does the $237 million contract value compare to historical IRS software spending?

Comparing the $237 million contract value to historical IRS software spending requires access to detailed historical budget and procurement data for the IRS. However, as a single contract award for a five-year period, this amount represents a significant investment in software capabilities. The IRS, being a large federal agency responsible for tax collection and enforcement, consistently invests heavily in IT infrastructure and software solutions. This particular contract's value suggests a substantial undertaking, potentially a core system replacement or a major upgrade. Without specific historical data points for comparable IRS software procurements, it's difficult to definitively state if this is higher or lower than average, but it is indicative of a major IT initiative.

What are the potential risks associated with a five-year contract for software?

A five-year contract for software, like this one awarded to FOUR LLC, carries several potential risks. Firstly, there's the risk of vendor lock-in, where the government becomes heavily reliant on a single provider, making it difficult and costly to switch vendors in the future, even if better alternatives emerge. Secondly, technology evolves rapidly; a five-year-old software solution might become outdated or less efficient compared to newer market offerings by the end of the contract term. Thirdly, there's the risk of cost escalation if the contract includes options for extensions or if unforeseen needs arise that require additional funding. Finally, performance risk exists if the vendor fails to deliver the expected quality or support throughout the contract period.

What does the 'FULL AND OPEN COMPETITION' designation imply for the IRS and taxpayers?

The 'FULL AND OPEN COMPETITION' designation is a positive indicator for both the IRS and taxpayers. It signifies that the contract was awarded after a process where all responsible sources were allowed to submit bids, preventing favoritism and promoting a competitive marketplace. For the IRS, this typically leads to better pricing, higher quality solutions, and a wider range of innovative options from which to choose. For taxpayers, it means their money is being spent more efficiently, as competition generally drives down costs and ensures the government obtains the best value for its investments. This process enhances transparency and accountability in government spending.

What is the significance of the NAICS code 511210 (Software Publishers) for this contract?

The NAICS code 511210, 'Software Publishers,' indicates that the primary business activity of the contractor, FOUR LLC, is the publishing of software. This typically involves designing, developing, and marketing software products. For this contract with the IRS, it suggests that the procured item is likely a software product or a suite of software, rather than just IT services like consulting or hardware maintenance. This classification helps in understanding the nature of the acquisition and allows for comparison with other procurements within the software publishing industry, providing context for market size and competitive dynamics.

Industry Classification

NAICS: Information › Software Publishers › Software Publishers

Product/Service Code: INFORMATION TECHNOLOGY EQUIPMENT (INCLD FIRMWARE) SOFTWARE,SUPPLIES& SUPPORT EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 2303 DULLES STATION BLVD, HERNDON, VA, 20171

Business Categories: Category Business, Limited Liability Corporation, Partnership or Limited Liability Partnership, Small Business, Special Designations, U.S.-Owned Business, Woman Owned Business

Financial Breakdown

Contract Ceiling: $403,182,307

Exercised Options: $307,259,909

Current Obligation: $237,448,053

Actual Outlays: $138,461,678

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS35F0312U

IDV Type: FSS

Timeline