IRS Spends $62.8M on IBM's EA3 Support, Raising Questions on Value and Competition

Contract Overview

Contract Amount: $62,769,739 ($62.8M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of the Treasury

Start Date: 2018-11-07

End Date: 2023-03-06

Contract Duration: 1,580 days

Daily Burn Rate: $39.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: LABOR HOURS

Sector: IT

Official Description: EA3 (AUTHENTICATION, AUTHORIZATION, ACCESS) ARCHITECT AND DEVELOPMENT SUPPORT

Place of Performance

Location: BETHESDA, MONTGOMERY County, MARYLAND, 20817

State: Maryland Government Spending

Plain-Language Summary

Department of the Treasury obligated $62.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: EA3 (AUTHENTICATION, AUTHORIZATION, ACCESS) ARCHITECT AND DEVELOPMENT SUPPORT Key points: 1. Significant contract value of $62.8 million awarded to IBM for critical authentication services. 2. Competition method is 'Full and Open', but specific pricing and cost-effectiveness require deeper analysis. 3. Potential risk associated with a single large award for essential IT infrastructure. 4. Spending falls within the Computer Systems Design Services sector, a common area for federal IT contracts.

Value Assessment

Rating: fair

The contract value of $62.8 million for EA3 support appears substantial. Without detailed breakdowns of labor hours and rates, it's difficult to benchmark against similar contracts for authentication, authorization, and access services. Further analysis is needed to determine if the pricing reflects fair market value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'Full and Open Competition'. However, the data does not specify the number of bids received or the evaluation criteria. This method is generally preferred for ensuring competitive pricing, but the impact on price discovery for this specific contract needs further investigation.

Taxpayer Impact: The substantial spending on this contract represents a significant allocation of taxpayer funds. Ensuring competitive pricing and efficient service delivery is crucial to maximize the value for taxpayers.

Public Impact

Taxpayers fund critical IT infrastructure for the IRS, impacting tax processing and citizen services. The reliance on a single vendor for such a core function raises concerns about long-term cost and flexibility. Transparency in contract performance and cost management is essential for public trust.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of detailed cost breakdown
Potential vendor lock-in
Limited insight into competitive landscape

Positive Signals

Awarded under full and open competition
Supports essential IRS functions

Sector Analysis

This contract falls under Computer Systems Design Services, a broad category encompassing IT support and development. Federal spending in this sector is consistently high, driven by the need for modernizing and maintaining complex IT systems across agencies. Benchmarking against similar contracts for authentication and authorization services is key.

Small Business Impact

The data indicates that this contract was not awarded to small businesses (sb: false). While large contracts often go to prime contractors like IBM, it's important to understand if subcontracting opportunities were provided to small businesses to ensure broader economic participation.

Oversight & Accountability

Oversight of this contract by the Department of the Treasury and the IRS is critical. Regular performance reviews, cost audits, and adherence to contract terms are necessary to ensure accountability and prevent cost overruns or service degradation.

Related Government Programs

Computer Systems Design Services
Department of the Treasury Contracting
Internal Revenue Service Programs

Risk Flags

High contract value warrants detailed cost-benefit analysis.
Potential for vendor lock-in on critical IT infrastructure.
Need for clarity on specific performance metrics and ROI.
Limited visibility into the competitive bidding process beyond 'full and open'.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $62.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. EA3 (AUTHENTICATION, AUTHORIZATION, ACCESS) ARCHITECT AND DEVELOPMENT SUPPORT

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 $62.8 million.

What is the period of performance?

Start: 2018-11-07. End: 2023-03-06.

What specific services are included under EA3 (Authentication, Authorization, Access) Architect and Development Support, and how do these align with the IRS's core mission needs?

EA3 support likely encompasses the design, development, implementation, and maintenance of systems that verify user identities (authentication), determine user permissions (authorization), and manage access to sensitive IRS data and systems. This is fundamental to cybersecurity and operational integrity, ensuring only authorized personnel can access necessary information for tax administration and taxpayer services.

Given the $62.8 million value, what metrics are used to assess the cost-effectiveness and return on investment for IBM's services over the contract's duration?

Assessing cost-effectiveness requires detailed performance metrics and cost-benefit analyses. Key metrics could include system uptime, reduction in security incidents related to access control, processing speed improvements, and the cost per transaction or user managed. Without these specific metrics, it's challenging to definitively state the ROI, though the criticality of the function suggests high strategic value.

How does the IRS ensure ongoing competition and prevent vendor lock-in for critical IT infrastructure services like EA3, especially after a significant award to a single vendor?

The IRS can mitigate vendor lock-in by structuring contracts with clear exit strategies, requiring knowledge transfer, and ensuring documentation is comprehensive. Planning for future procurements with defined performance periods and potentially breaking down services into smaller, more competitive lots can foster ongoing competition. Regular market research and engagement with alternative vendors are also crucial.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Computer Systems Design 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: 2

Pricing Type: LABOR HOURS (Z)

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: $68,341,328

Exercised Options: $67,125,572

Current Obligation: $62,769,739

Actual Outlays: $54,809,361

Subaward Activity

Number of Subawards: 229

Total Subaward Amount: $29,361,444

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS00Q09BGD0034

IDV Type: GWAC

Timeline