DoD's $93.8M IBM Software Contract: A Deep Dive into Value, Competition, and Sector Impact

Contract Overview

Contract Amount: $93,820,896 ($93.8M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Defense

Start Date: 2006-11-05

End Date: 2012-01-31

Contract Duration: 1,913 days

Daily Burn Rate: $49.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: IBM SOFTWARE

Place of Performance

Location: MECHANICSBURG, CUMBERLAND County, PENNSYLVANIA, 17055

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $93.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: IBM SOFTWARE Key points: 1. Analysis reveals a significant investment in IBM software, raising questions about long-term value and potential for cost optimization. 2. The contract was awarded under full and open competition, suggesting a robust market for these software solutions. 3. While specific risk indicators are not detailed, the duration and value warrant scrutiny of performance and vendor lock-in. 4. This spending aligns with broader government IT modernization efforts, but its specific contribution to agency goals needs further context. 5. The contract falls within the IT sector, specifically software procurement, a critical area for defense operations. 6. Benchmarking against similar software procurements is essential to determine if the pricing reflects fair market value.

Value Assessment

Rating: fair

The total contract value of $93.8 million over approximately six years suggests a substantial but not extraordinary investment for enterprise software. Without detailed breakdowns of software modules, licensing terms, and support services, a precise value-for-money assessment is challenging. Comparing this to similar large-scale IBM software procurements by other federal agencies or large enterprises would be necessary to benchmark pricing and identify potential cost efficiencies or overspending. The firm-fixed-price structure provides cost certainty but may limit flexibility if needs evolve.

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 were eligible to bid. This process typically fosters competitive pricing and encourages vendors to offer their best terms. The fact that IBM was ultimately awarded the contract suggests they provided the most advantageous offer based on the evaluation criteria. The number of bidders is not specified, which would provide further insight into the intensity of the competition.

Taxpayer Impact: Full and open competition generally benefits taxpayers by driving down prices and ensuring the government receives competitive value for its spending. It reduces the risk of inflated costs associated with sole-source or limited competition awards.

Public Impact

The primary beneficiaries are the Department of Defense personnel who rely on the procured IBM software for their daily operations and mission execution. The contract delivers essential software licenses and potentially support services crucial for defense information systems. The geographic impact is national, supporting DoD operations across various locations, though specific deployment sites are not detailed. Workforce implications include the need for trained personnel to manage, operate, and maintain the IBM software within the DoD IT infrastructure.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in with a large enterprise software provider like IBM.
Risk of cost escalation if maintenance and support costs increase significantly over the contract duration.
Dependency on a single vendor for critical software can create vulnerabilities.
Ensuring adequate training and skill development for DoD personnel to effectively utilize the software.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing was sought.
Firm-fixed-price contract provides budget certainty for the government.
Long-term contract allows for stable access to necessary software capabilities.
IBM is a well-established software provider with a track record in enterprise solutions.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically focusing on software procurement. The market for enterprise software, particularly for large government agencies like the Department of Defense, is dominated by major players like IBM, Microsoft, and Oracle. Spending in this category is substantial across the federal government, driven by the need for robust operating systems, database management, productivity tools, and specialized applications. Comparable spending benchmarks would involve analyzing other large federal IT software contracts, particularly those for operating systems and core business applications, to assess unit costs and overall value.

Small Business Impact

The data indicates that this contract was not specifically set aside for small businesses (sb: false). There is no explicit information regarding subcontracting plans for small businesses within this award. Therefore, the direct impact on the small business ecosystem is likely minimal unless IBM actively engages small businesses for support or integration services related to this software. Further investigation into subcontracting reports would be needed to confirm any small business participation.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Information Systems Agency (DISA) and the Department of Defense's contracting and program management offices. Accountability measures are embedded in the contract terms, including performance standards and delivery schedules, with potential penalties for non-compliance. Transparency is facilitated through contract award databases like FPDS-NG, which provide basic details of the procurement. The Inspector General for the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

General Services Administration (GSA) IT Schedule Contracts
Department of Defense Enterprise Software Agreements (DESA)
NASA Solutions for Enterprise-Wide Procurement (SEWP)
Procurements for Operating Systems Software
Database Management Software Contracts

Risk Flags

Long contract duration may increase risk of obsolescence or changing needs.
Lack of detailed per-unit cost data hinders value assessment.
Potential for vendor lock-in with a single large software provider.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $93.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. IBM SOFTWARE

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 (Defense Information Systems Agency).

What is the total obligated amount?

The obligated amount is $93.8 million.

What is the period of performance?

Start: 2006-11-05. End: 2012-01-31.

What specific IBM software products and versions were procured under this contract, and what were the primary intended uses within the Department of Defense?

The provided data does not specify the exact IBM software products or versions acquired. However, given the 'Computer and Software Stores' (NAICS 443120) classification and the large contract value, it is highly probable that the procurement included enterprise-level software such as operating systems (e.g., AIX, Linux on IBM hardware), database software (e.g., Db2), middleware, or potentially software development tools and suites. These would likely be used to support critical defense information systems, data management, application hosting, and potentially research and development activities across various DoD components. Without more granular data, the precise applications remain speculative but would be essential for a comprehensive understanding of the contract's utility and value.

How does the per-unit cost of licenses or support for this IBM software compare to market rates or similar government procurements?

The provided data does not include per-unit cost information for licenses or support. The total award amount of $93.8 million is a consolidated figure. To assess per-unit costs, one would need a breakdown of the number of licenses, types of software, and the duration of support agreements. Benchmarking would involve comparing these unit costs against publicly available pricing from IBM's government price lists (if available), other federal agencies' recent procurements of the same or comparable IBM software, and potentially commercial price lists, adjusted for government discounts. Without this detailed breakdown, a per-unit cost comparison is not feasible based solely on the provided summary data.

What was the total spending on IBM software by the Department of Defense in the years leading up to and during this contract's performance period (2006-2012)?

The provided data pertains to a single contract award of $93.8 million for IBM software to the Department of Defense, awarded on November 5, 2006, and expiring on January 31, 2012. This single contract represents a significant portion of spending on IBM software during that period. However, it does not encompass all DoD spending on IBM software. The DoD likely had other contracts for IBM software, including different products, support services, or procurements through other vehicles like GSA schedules or enterprise agreements. To determine total spending, a comprehensive search across federal procurement databases (like FPDS-NG) for all contracts awarded to IBM (or its subsidiaries) by the DoD for software during the specified timeframe would be necessary. This would provide a more complete picture of the DoD's investment in IBM's software portfolio.

What performance metrics or service level agreements (SLAs) were included in this contract, and how was IBM's performance measured?

The provided summary data does not detail the specific performance metrics or Service Level Agreements (SLAs) associated with this contract. Typically, large software procurement contracts, especially those with a firm-fixed-price structure and a multi-year duration, would include clauses related to software delivery timelines, uptime guarantees (for hosted solutions or support), response times for technical support, and potentially software update/patch delivery schedules. Performance would likely be monitored by contracting officers and technical points of contact within DISA, through regular reporting from IBM, and potentially through user feedback. Failure to meet agreed-upon metrics could result in contractual remedies, though the specifics would be outlined in the full contract documentation.

Were there any identified risks or challenges associated with this contract, such as vendor lock-in, cost overruns, or technical obsolescence, and how were they mitigated?

While the summary data doesn't explicitly list risks, common challenges with large enterprise software contracts include vendor lock-in, potential for cost increases in maintenance and support, and the risk of technical obsolescence as technology evolves. Given the firm-fixed-price nature, direct cost overruns on the initial award amount are less likely unless modifications or change orders occur. Mitigation strategies could have included negotiating favorable long-term pricing, clearly defining software scope and upgrade paths, establishing clear exit strategies or data portability clauses, and ensuring robust technical support. The multi-year duration (1913 days) suggests a strategic decision to invest in these capabilities, implying that the perceived benefits outweighed the inherent risks at the time of award.

Industry Classification

NAICS: Retail Trade › Electronics and Appliance Stores › Computer and Software Stores

Product/Service Code: INFORMATION TECHNOLOGY EQUIPMENT (INCLD FIRMWARE) SOFTWARE,SUPPLIES& SUPPORT EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

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, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $93,820,896

Exercised Options: $93,820,896

Current Obligation: $93,820,896

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS35F4984H

IDV Type: FSS

Timeline