DHS Awards IBM $63.6M for Mainframe-as-a-Service, Raising Questions on Value and Competition

Contract Overview

Contract Amount: $63,558,589 ($63.6M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Homeland Security

Start Date: 2022-02-01

End Date: 2024-01-31

Contract Duration: 729 days

Daily Burn Rate: $87.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: MAINFRAME-AS-A-SERVICE (MFAAS) BASE PERIOD

Place of Performance

Location: DURHAM, DURHAM County, NORTH CAROLINA, 27703

State: North Carolina Government Spending

Plain-Language Summary

Department of Homeland Security obligated $63.6 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: MAINFRAME-AS-A-SERVICE (MFAAS) BASE PERIOD Key points: 1. Significant contract value for essential IT infrastructure. 2. IBM is a dominant player in mainframe services. 3. Potential risk of vendor lock-in and limited competition. 4. IT services sector sees ongoing mainframe modernization efforts.

Value Assessment

Rating: questionable

The award amount of $63.6M for a 2-year period seems substantial. Benchmarking against similar mainframe modernization or managed services contracts is difficult without more granular data on service scope and performance metrics. The fixed-price nature suggests an attempt at cost control, but the overall value proposition requires deeper scrutiny.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is positive. However, the specific nature of mainframe services often limits the number of capable bidders. The impact on price discovery is therefore potentially constrained, even with an open solicitation.

Taxpayer Impact: Taxpayers are funding a critical IT service for DHS. While competition was sought, the long-term cost-effectiveness and potential for price increases in future contract renewals warrant attention.

Public Impact

Ensures continuity of critical U.S. Customs and Border Protection operations. Supports national security and border management functions. Potential for cost savings through cloud-based mainframe solutions. IBM's role highlights the continued reliance on established vendors for legacy systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition despite full and open award
Potential for vendor lock-in with specialized mainframe services
Lack of detailed performance metrics for value assessment

Positive Signals

Awarded under full and open competition
Firm fixed-price contract aims for cost certainty
Supports critical national security functions

Sector Analysis

This contract falls within the IT services sector, specifically focusing on mainframe modernization and managed services. Spending benchmarks for mainframe-as-a-service are highly variable, depending on the scale and complexity of the infrastructure managed. Large government agencies often have significant investments in mainframe technology.

Small Business Impact

The contract was awarded to IBM, a large business. There is no indication that small businesses were involved as subcontractors or partners in this specific award. Opportunities for small businesses in this niche mainframe sector are typically limited.

Oversight & Accountability

Oversight will be crucial to ensure IBM meets performance requirements and that the pricing remains competitive in future solicitations. The Department of Homeland Security's internal procurement and contract management processes will be key to accountability.

Related Government Programs

Computer Systems Design Services
Department of Homeland Security Contracting
U.S. Customs and Border Protection Programs

Risk Flags

Potential for high costs associated with specialized mainframe expertise.
Risk of vendor lock-in due to the proprietary nature of mainframe systems.
Limited number of capable competitors in the mainframe-as-a-service market.
Lack of transparency on specific performance metrics and value realization.

Frequently Asked Questions

What is this federal contract paying for?

Department of Homeland Security awarded $63.6 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. MAINFRAME-AS-A-SERVICE (MFAAS) BASE PERIOD

Who is the contractor on this award?

The obligated recipient is INTERNATIONAL BUSINESS MACHINES CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Homeland Security (U.S. Customs and Border Protection).

What is the total obligated amount?

The obligated amount is $63.6 million.

What is the period of performance?

Start: 2022-02-01. End: 2024-01-31.

What is the specific breakdown of services included in the "Mainframe-as-a-Service" offering, and how does this compare to industry standards for similar government contracts?

The provided data lacks specifics on the service breakdown. A detailed analysis would require access to the contract's statement of work. Comparing it to industry standards necessitates understanding the exact compute, storage, network, and software components included, as well as the service level agreements. Without this, assessing value against benchmarks is speculative.

Given the specialized nature of mainframe services, what mechanisms are in place to ensure continued competitive pricing beyond this initial contract period?

While awarded under full and open competition, the inherent barriers to entry in mainframe services can limit future competition. Mechanisms like requiring vendor-neutral architectures, fostering internal expertise, or exploring alternative technologies could mitigate this. However, the government must actively plan for future competition to avoid vendor lock-in and ensure fair pricing.

How will the effectiveness of this "Mainframe-as-a-Service" contract be measured in terms of operational efficiency, cost savings, and modernization progress for U.S. Customs and Border Protection?

Effectiveness measurement should rely on clearly defined Key Performance Indicators (KPIs) within the contract. These could include system uptime, transaction processing speed, incident response times, and actual cost savings compared to previous on-premise operations. Regular performance reviews and independent audits would be essential to track progress and ensure the service meets its intended goals.

Industry Classification

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

Product/Service Code: IT AND TELECOM - PLATFORM

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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: $64,119,692

Exercised Options: $63,558,589

Current Obligation: $63,558,589

Actual Outlays: $35,976,850

Subaward Activity

Number of Subawards: 3

Total Subaward Amount: $1,522,800

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Parent Contract

Parent Award PIID: HHSN316201200030W

IDV Type: GWAC

Timeline