Treasury's IRS awards $6.46M for software and hardware maintenance, with a high per-unit cost for a short duration

Contract Overview

Contract Amount: $6,458,562 ($6.5M)

Contractor: Alphasix, LLC.

Awarding Agency: Department of the Treasury

Start Date: 2024-09-28

End Date: 2025-05-08

Contract Duration: 222 days

Daily Burn Rate: $29.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: HPE EZMERAL, ELASTIC SEARCH, AND CIPHERTRUST SOFTWARE LICENSES AND ONE IDENTITY SAFEGUARD HARDWARE MAINTENANCE LICENSES

Place of Performance

Location: KEARNEYSVILLE, JEFFERSON County, WEST VIRGINIA, 25430

State: West Virginia Government Spending

Plain-Language Summary

Department of the Treasury obligated $6.5 million to ALPHASIX, LLC. for work described as: HPE EZMERAL, ELASTIC SEARCH, AND CIPHERTRUST SOFTWARE LICENSES AND ONE IDENTITY SAFEGUARD HARDWARE MAINTENANCE LICENSES Key points: 1. The contract focuses on essential software licenses and hardware maintenance, indicating a need for ongoing operational support. 2. Competition was full and open, suggesting a robust market for these specialized IT services. 3. The contract duration is relatively short (222 days), implying a potential for re-competition or a bridge to a larger effort. 4. The award value is moderate, but the per-unit cost warrants closer examination given the short term. 5. The primary vendor, ALPHASIX, LLC, is a key player in providing these types of IT solutions. 6. The use of a Purchase Order suggests a streamlined acquisition process for these specific needs.

Value Assessment

Rating: fair

The total award of $6.46M for a 222-day period results in a high effective monthly burn rate. Benchmarking against similar software license and hardware maintenance contracts is crucial. The per-unit cost, while not explicitly detailed in the provided data, appears elevated when considering the short contract duration and the nature of the services. Further analysis would require breaking down costs by specific software/hardware components and comparing them to market rates for similar terms.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. This suggests a healthy competitive environment for the software and hardware maintenance services required by the IRS. The number of bidders is not specified, but the open competition generally leads to better price discovery and potentially more favorable terms for the government.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically drives down prices through market forces, ensuring the government obtains services at a competitive rate.

Public Impact

The Internal Revenue Service (IRS) benefits directly through the acquisition of critical software licenses and hardware maintenance, ensuring the continuity of its IT operations. Services delivered include access to and support for essential software like HPE EZMERAL, ELASTIC SEARCH, CIPHERTRUST, and ONE IDENTITY SAFEGUARD hardware. The geographic impact is primarily within the IRS's operational centers, likely supporting tax administration functions nationwide. Workforce implications are minimal in terms of direct job creation from this contract, but it ensures the IT infrastructure supporting IRS employees remains functional.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

High per-unit cost relative to contract duration may indicate potential overpayment or inefficient resource allocation.
Short contract duration could signal a temporary solution rather than a long-term strategic investment, potentially leading to future transition costs.
Reliance on specific software and hardware maintenance could create vendor lock-in if not managed carefully.
The specific nature of the software (e.g., data analytics, security) suggests potential sensitivity of the data being processed or protected.

Positive Signals

Awarded under full and open competition, ensuring a competitive marketplace and potentially better value.
Procurement via Purchase Order suggests an efficient and potentially faster acquisition process for necessary IT components.
The contract addresses essential operational needs for software and hardware maintenance, crucial for IRS functions.
The vendor, ALPHASIX, LLC, is likely experienced in providing these specialized IT solutions.

Sector Analysis

This contract falls within the Software Publishers sector, specifically related to IT services and maintenance. The market for enterprise software licenses and hardware support is substantial, with agencies like the IRS being significant consumers. Comparable spending benchmarks would involve analyzing other federal IT maintenance contracts, particularly those for similar software suites and hardware. The size of this specific award is moderate within the broader federal IT landscape.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications or specific impacts on the small business ecosystem stemming from a set-aside provision. The prime contractor, ALPHASIX, LLC, is likely an established entity capable of fulfilling these requirements independently.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Treasury's Inspector General, with specific program management and accountability residing within the Internal Revenue Service. Transparency is facilitated through contract databases like FPDS. The Purchase Order mechanism, while streamlined, still requires adherence to federal procurement regulations and internal agency controls to ensure proper use of funds and performance.

Related Government Programs

IRS IT Modernization Programs
Federal Software Licensing Agreements
IT Hardware Maintenance Services
Cybersecurity Software Procurement
Data Analytics Software Contracts

Risk Flags

Short contract duration may lead to transition risks and potential cost increases.
High effective monthly cost warrants scrutiny for value for money.
Lack of detailed cost breakdown hinders granular value assessment.
Potential for vendor lock-in with specialized software and hardware.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $6.5 million to ALPHASIX, LLC.. HPE EZMERAL, ELASTIC SEARCH, AND CIPHERTRUST SOFTWARE LICENSES AND ONE IDENTITY SAFEGUARD HARDWARE MAINTENANCE LICENSES

Who is the contractor on this award?

The obligated recipient is ALPHASIX, 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 $6.5 million.

What is the period of performance?

Start: 2024-09-28. End: 2025-05-08.

What is the specific breakdown of costs for HPE EZMERAL, ELASTIC SEARCH, CIPHERTRUST, and ONE IDENTITY SAFEGUARD licenses and maintenance?

The provided data aggregates the total contract value to $6,458,561.90 without itemizing costs per software or hardware component. To understand the value proposition accurately, a detailed breakdown is necessary. This would involve identifying the cost of each software license (e.g., perpetual vs. subscription, number of users/cores) and the associated maintenance fees for each. Similarly, the hardware maintenance costs for ONE IDENTITY SAFEGUARD would need to be itemized. Without this granular data, it's challenging to benchmark specific components against market rates or identify potential areas of overspending. The IRS likely has this detailed breakdown internally for justification and oversight.

How does the per-unit cost of these licenses and maintenance compare to similar federal contracts awarded over the past two years?

Benchmarking the per-unit cost requires a detailed understanding of what constitutes a 'unit' for each component (e.g., per user, per server, per core, per support hour). Assuming comparable software suites and maintenance agreements, the $6.46M award over approximately 7.4 months suggests a significant monthly expenditure. If we consider the total value divided by the duration, it implies a high operational cost. A comparative analysis would involve searching federal procurement databases for contracts with similar software (e.g., Elastic Search, CipherTrust) and hardware maintenance (e.g., identity management appliances) from other agencies. Factors like volume discounts, contract length, and specific service level agreements (SLAs) would need to be accounted for to ensure a fair comparison. Given the short duration, the per-unit cost might appear higher if it includes setup or initial licensing fees not amortized over a longer period.

What is the track record of ALPHASIX, LLC in delivering similar IT software and hardware maintenance services to federal agencies?

ALPHASIX, LLC has a history of federal contracting, though the extent and nature of their experience with specific products like HPE EZMERAL, Elastic Search, CipherTrust, and One Identity Safeguard would require deeper investigation. Publicly available data may show past performance on similar IT service contracts, including software licensing and maintenance. Key indicators to assess their track record would include contract values, agencies served, contract types (e.g., firm-fixed-price, time-and-materials), and any reported performance issues or awards. A review of their past performance evaluations (if accessible) and their demonstrated capabilities in managing complex IT environments would provide insight into their reliability and expertise for this specific IRS requirement.

What are the specific risks associated with the short duration (222 days) of this contract for the IRS?

The primary risk of a short contract duration like 222 days is the potential for disruption and increased costs associated with transition. It may indicate a stop-gap measure, requiring the IRS to initiate a new, potentially lengthy, procurement process soon after this one begins. This could lead to a period where services are less stable or where the agency lacks long-term strategic alignment for its IT infrastructure. Furthermore, vendors may price short-term contracts higher to account for the administrative overhead and uncertainty. There's also a risk that critical knowledge transfer or system optimization might not be fully achieved within such a limited timeframe, impacting overall operational efficiency.

How does the $6.46M award compare to the IRS's historical spending on software licenses and IT hardware maintenance?

To assess this, one would need to analyze the IRS's historical spending patterns over several fiscal years, specifically looking at categories related to software publishers, IT services, and hardware maintenance. The $6.46M award represents a significant, albeit potentially short-term, investment. If the IRS typically spends tens or hundreds of millions annually on IT operations, this contract might be a component of a larger strategy. However, if this amount represents a substantial portion of their annual budget for these specific types of services, it could indicate a shift in spending priorities or a response to a new requirement. Comparing this award to previous individual contracts for similar software or maintenance would provide context on its relative scale.

What is the potential impact of this contract on the market for Elastic Search and CipherTrust software and related maintenance services?

This contract, by awarding licenses and maintenance for Elastic Search and CipherTrust, signals continued demand and government reliance on these platforms. For Elastic Search, it reinforces its position in the federal market for log analysis, search, and observability. Similarly, CipherTrust's inclusion highlights the ongoing need for data security and encryption solutions within sensitive government environments. The award to ALPHASIX, LLC, acting as a reseller or integrator, suggests a healthy ecosystem of partners supporting these technologies. This specific award, while moderate in size, contributes to the overall market presence and revenue stream for these software vendors and their authorized service providers.

Industry Classification

NAICS: Information › Software Publishers › Software Publishers

Product/Service Code: IT AND TELECOM - COMPUTE

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

Parent Company: Alphasix Corporation

Address: 21355 RIDGETOP CIR STE 330, STERLING, VA, 20166

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

Financial Breakdown

Contract Ceiling: $6,458,562

Exercised Options: $6,458,562

Current Obligation: $6,458,562

Actual Outlays: $6,458,562

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Timeline