DoD's $60M IBM contract for telecom services shows fair value, but limited competition raises concerns

Contract Overview

Contract Amount: $60,205,865 ($60.2M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Defense

Start Date: 2010-09-30

End Date: 2017-01-13

Contract Duration: 2,297 days

Daily Burn Rate: $26.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: SUBTASK 1

Place of Performance

Location: FAIRFAX, FAIRFAX County, VIRGINIA, 22033

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $60.2 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: SUBTASK 1 Key points: 1. Value for money appears reasonable given the contract duration and scope. 2. Competition was limited, potentially impacting price discovery and overall value. 3. Risk indicators are moderate, with a long performance period and fixed-price structure. 4. Performance context suggests a need for ongoing telecommunications support within the Army. 5. Sector positioning is within the IT and telecommunications services for government agencies.

Value Assessment

Rating: good

The contract's total value of approximately $60.2 million over nearly 7 years suggests a significant investment in telecommunications infrastructure. Benchmarking against similar large-scale IT service contracts for the Department of Defense indicates that the per-year cost is within a reasonable range, especially considering the specialized nature of wired telecommunications. The firm-fixed-price structure provides cost certainty, though it may limit flexibility if requirements change significantly.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. The presence of 5 bidders suggests a degree of competition, which is generally positive for price discovery. However, the specific details of the bidding process and the number of proposals received would provide a clearer picture of the actual competitive intensity.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a competitive environment that can drive down prices and encourage innovation.

Public Impact

The Department of the Army benefits from reliable wired telecommunications services essential for its operations. Services delivered include the maintenance and support of critical communication networks. The geographic impact is likely concentrated within the Virginia region where the contract was performed. Workforce implications include support for IT and telecommunications professionals employed by IBM and potentially subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (2297 days) increases the risk of scope creep or evolving technological needs not being fully met.
Reliance on a single large contractor for critical infrastructure can create vendor lock-in.
The fixed-price nature might disincentivize proactive cost-saving measures by the contractor if not carefully managed.

Positive Signals

Firm-fixed-price contract provides budget certainty for the government.
Awarded under full and open competition, suggesting a competitive bidding process.
The contract duration indicates a long-term need for these services, suggesting strategic planning.

Sector Analysis

The contract falls within the Information Technology and Telecommunications sector, specifically focusing on wired telecommunications carriers. This sector is crucial for government operations, providing the backbone for communication and data transfer. Spending in this area is substantial across federal agencies, with significant investments in network infrastructure, maintenance, and upgrades. Comparable spending benchmarks would involve analyzing other large-scale telecommunications service contracts awarded by DoD and other federal entities.

Small Business Impact

The data indicates this contract was not specifically set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications for small businesses arising from a set-aside provision. However, the prime contractor, IBM, may engage small businesses as subcontractors, depending on their internal policies and the specific needs of the contract, which is not detailed here.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the relevant program management office within the Department of the Army. Accountability measures are embedded in the contract terms, including performance standards and delivery schedules. Transparency is generally facilitated through contract award databases, though detailed performance metrics and oversight reports may not always be publicly accessible. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Department of Defense IT Services
Army Communications Infrastructure
Wired Telecommunications Contracts
Federal IT Procurement
Large-Scale IT Service Contracts

Risk Flags

Long contract duration may lead to technology obsolescence.
Fixed-price contract might limit contractor's incentive for innovation/cost reduction.
Potential for vendor lock-in with a single large provider for critical infrastructure.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $60.2 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. SUBTASK 1

Who is the contractor on this award?

The obligated recipient is INTERNATIONAL BUSINESS MACHINES CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $60.2 million.

What is the period of performance?

Start: 2010-09-30. End: 2017-01-13.

What was the specific nature of the wired telecommunications services provided under this contract?

The contract, awarded to IBM, falls under the NAICS code 517110 for Wired Telecommunications Carriers. This typically encompasses services such as the provision and maintenance of local and long-distance telephone services, internet access, and other data transmission services delivered over wired networks. For the Department of the Army, these services are critical for maintaining command and control, operational communications, and administrative functions across various installations and facilities, particularly within the Virginia region where this delivery order was placed.

How does the total contract value of $60.2 million compare to similar telecommunications contracts awarded by the DoD?

The total contract value of approximately $60.2 million over a period of nearly 7 years (2297 days) translates to an average annual expenditure of roughly $8.6 million. This figure appears moderate when compared to the vast IT and telecommunications spending within the Department of Defense, which often involves multi-billion dollar enterprise-wide contracts. However, for a specific regional or sub-component requirement like this delivery order, it represents a substantial investment. Benchmarking requires comparing it to contracts of similar scope, duration, and service type within DoD or other federal agencies.

What are the potential risks associated with a long-term (nearly 7 years) fixed-price contract for telecommunications services?

A long-term fixed-price contract for telecommunications services carries several potential risks. Firstly, technological obsolescence is a significant concern; telecommunications technology evolves rapidly, and a 7-year contract might lock the government into outdated systems or services. Secondly, the fixed-price nature, while offering budget certainty, can disincentivize the contractor from proactively seeking cost efficiencies or adopting newer, more cost-effective technologies unless explicitly incentivized. Lastly, if the government's requirements change substantially over the contract period, modifications can be complex and costly, potentially negating the initial benefits of the fixed price.

Given the 'full and open competition' award, what does the number of bidders (5) suggest about the market for these services?

The fact that this contract was awarded under 'full and open competition' with 5 bidders suggests a reasonably competitive market for the specific wired telecommunications services required by the Department of the Army. Having five distinct bidders indicates that multiple companies were capable of and interested in fulfilling the contract requirements. While not an exceptionally large number of bidders, it is sufficient to suggest that the government likely received competitive proposals and avoided a situation with very limited or no viable alternatives, which is generally positive for price and service quality.

What is the significance of the 'Wired Telecommunications Carriers' NAICS code (517110) in the context of this contract?

The North American Industry Classification System (NAICS) code 517110, 'Wired Telecommunications Carriers,' signifies that the core services procured under this contract relate to the infrastructure and services provided by companies that operate and maintain wired networks. This includes traditional telephone services, broadband internet access, and other data transmission services delivered via physical lines (e.g., fiber optic, copper). For the Department of the Army, this implies a need for robust and reliable fixed-line communication capabilities, essential for base operations, data centers, and secure communication channels.

Industry Classification

NAICS: Information › Wired and Wireless Telecommunications (except Satellite) › Wired Telecommunications Carriers

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: 5

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: $65,848,217

Exercised Options: $65,848,217

Current Obligation: $60,205,865

Subaward Activity

Number of Subawards: 7

Total Subaward Amount: $364,888

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W91QUZ06D0010

IDV Type: IDC

Timeline