Treasury's IRS Awards $3.1M Contract for Expert Witness Services on Intercompany Loan Interest Rates

Contract Overview

Contract Amount: $3,095,985 ($3.1M)

Contractor: Lustig Credit Rating Advisory LLC

Awarding Agency: Department of the Treasury

Start Date: 2024-09-19

End Date: 2029-09-18

Contract Duration: 1,825 days

Daily Burn Rate: $1.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: LABOR HOURS

Sector: Other

Official Description: EXPERT WITNESS SERVICES TO OPINE ON THE ARMS-LENGTH INTEREST RATE FOR L EACH INTERCOMPANY LOANS THAT THAT OPERATES IN THE HEALTHCARE, LIFE SCIENCES AND ELECTRONICS INDUSTRY.

Place of Performance

Location: WOODMERE, NASSAU County, NEW YORK, 11598

State: New York Government Spending

Plain-Language Summary

Department of the Treasury obligated $3.1 million to LUSTIG CREDIT RATING ADVISORY LLC for work described as: EXPERT WITNESS SERVICES TO OPINE ON THE ARMS-LENGTH INTEREST RATE FOR L EACH INTERCOMPANY LOANS THAT THAT OPERATES IN THE HEALTHCARE, LIFE SCIENCES AND ELECTRONICS INDUSTRY. Key points: 1. Contract focuses on complex financial valuation for healthcare, life sciences, and electronics industries. 2. Sole-source award raises questions about price discovery and potential for overpayment. 3. Long contract duration (5 years) could lead to escalating costs without competitive re-evaluation. 4. Services are highly specialized, requiring specific expertise in transfer pricing and financial forensics.

Value Assessment

Rating: questionable

The contract value of $3.1M over five years for expert witness services appears high, especially given it's a sole-source award. Benchmarking is difficult without more detail on the scope and specific expertise required, but the lack of competition suggests potential for inflated pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded sole-source, meaning there was no competition. This limits the government's ability to ensure the best possible price and value, as potential providers were not given an opportunity to bid.

Taxpayer Impact: The lack of competition for this significant contract value may result in taxpayers paying more than necessary for these specialized expert witness services.

Public Impact

Taxpayers may bear the cost of potentially inflated expert witness fees due to the sole-source nature of the contract. The IRS's reliance on a single provider for critical financial analysis could impact the accuracy and fairness of tax assessments. Companies in the healthcare, life sciences, and electronics sectors may face increased scrutiny and costs related to intercompany loan interest rate disputes.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Long contract duration
Lack of clear performance metrics
Potential for cost overruns

Positive Signals

Highly specialized expertise
Addresses a critical IRS need
Potential for improved tax compliance

Sector Analysis

The professional, scientific, and technical services sector, particularly within financial consulting and expert witness services, is vast. This contract falls under 'All Other Professional, Scientific, and Technical Services' (NAICS 541990). Benchmarks for such specialized sole-source contracts are difficult to establish, but the value suggests a significant undertaking.

Small Business Impact

This contract was not awarded to a small business. The sole-source nature of the award further limits opportunities for small businesses to participate in providing these specialized services.

Oversight & Accountability

The IRS, as part of the Department of the Treasury, is subject to various oversight mechanisms. However, the sole-source nature of this contract warrants close scrutiny to ensure the necessity and reasonableness of the cost and scope of work.

Related Government Programs

All Other Professional, Scientific, and Technical Services
Department of the Treasury Contracting
Internal Revenue Service Programs

Risk Flags

Lack of competition may lead to higher costs.
Long contract duration increases risk of price escalation.
Potential for vendor lock-in.
Dependence on a single provider for critical expertise.
Limited transparency in pricing and selection.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $3.1 million to LUSTIG CREDIT RATING ADVISORY LLC. EXPERT WITNESS SERVICES TO OPINE ON THE ARMS-LENGTH INTEREST RATE FOR L EACH INTERCOMPANY LOANS THAT THAT OPERATES IN THE HEALTHCARE, LIFE SCIENCES AND ELECTRONICS INDUSTRY.

Who is the contractor on this award?

The obligated recipient is LUSTIG CREDIT RATING ADVISORY 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 $3.1 million.

What is the period of performance?

Start: 2024-09-19. End: 2029-09-18.

What specific criteria justified the sole-source award, and were alternatives thoroughly explored?

The justification for a sole-source award typically involves demonstrating that only one responsible source can provide the required services. For this contract, the IRS likely cited the unique expertise required to opine on intercompany loan interest rates across specific, complex industries (healthcare, life sciences, electronics). A thorough review would examine if other firms possess comparable specialized knowledge and if a competitive process was indeed infeasible or would significantly delay critical IRS functions.

How will the IRS ensure the cost-effectiveness and value of these expert services over the five-year contract period?

Ensuring cost-effectiveness in a sole-source contract is challenging. The IRS should implement rigorous performance monitoring, regular reviews of billing rates against industry standards, and potentially establish clear milestones or deliverables tied to payment. Periodic re-evaluations of the necessity of the services and the provider's performance should be conducted to mitigate risks of cost escalation and ensure continued value.

What is the potential impact on tax revenue and fairness if the expert witness's opinion is flawed or biased?

A flawed or biased expert opinion could have significant negative impacts. It could lead to incorrect tax assessments, resulting in either lost revenue for the government or unfair burdens on taxpayers. This underscores the importance of selecting highly credible, objective experts and having robust internal review processes within the IRS to validate the opinions provided under this contract.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Other Professional, Scientific, and Technical Services › All Other Professional, Scientific, and Technical Services

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: LABOR HOURS (Z)

Evaluated Preference: NONE

Contractor Details

Address: 653 ARBUCKLE AVE, WOODMERE, NY, 11598

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

Financial Breakdown

Contract Ceiling: $3,095,985

Exercised Options: $3,095,985

Current Obligation: $3,095,985

Actual Outlays: $1,026,184

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline