DoD's $68M IBM Software Deal: A Deep Dive into Value, Competition, and Risk

Contract Overview

Contract Amount: $68,095,862 ($68.1M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Defense

Start Date: 2011-09-30

End Date: 2016-09-30

Contract Duration: 1,827 days

Daily Burn Rate: $37.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: IBM SOFTWARE SOLUTION

Place of Performance

Location: CHAMBERSBURG, FRANKLIN County, PENNSYLVANIA, 17201

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $68.1 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: IBM SOFTWARE SOLUTION Key points: 1. Analysis reveals potential for significant cost savings through competitive bidding. 2. Contracting approach suggests a focus on established vendors, potentially limiting innovation. 3. Performance period and delivery order structure present moderate execution risks. 4. Spending aligns with broader IT modernization trends within the Defense sector. 5. This contract represents a substantial investment in software solutions for defense operations. 6. The fixed-price nature of the contract shifts some financial risk to the contractor.

Value Assessment

Rating: good

The contract's value of approximately $68 million over five years warrants careful scrutiny. While specific benchmarks are unavailable without more granular data on the software and services provided, the fixed-price structure is generally favorable for the government in controlling costs. Comparing this to similar large-scale software procurements for defense agencies would be necessary for a definitive value assessment. The benchmark of $37,272 for the base contract value suggests a significant investment per delivery order, but the overall value proposition depends heavily on the utility and lifecycle of the IBM software solution.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely considered. This approach is generally preferred as it fosters a competitive environment, driving down prices and encouraging innovation. The presence of multiple bidders suggests that the government had a range of options to choose from, potentially leading to a more favorable outcome in terms of cost and quality. The specific number of bidders is not provided, which would offer further insight into the intensity of the competition.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically results in better pricing and a wider selection of qualified vendors, maximizing the value of government spending.

Public Impact

Defense agencies benefit from access to IBM software solutions, enhancing operational capabilities. The contract supports critical IT infrastructure for national security missions. Geographic impact is likely nationwide, supporting distributed defense operations. Workforce implications include the need for personnel trained in managing and utilizing IBM software.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in with a single software provider.
Risk of cost overruns if scope creep occurs despite fixed-price structure.
Dependence on IBM for updates and support could create long-term liabilities.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Fixed-price contract structure helps control overall expenditure.
Long-term contract duration allows for sustained support and integration.

Sector Analysis

This contract falls within the Information Technology sector, specifically software procurement for government use. The market for enterprise software solutions, particularly for large organizations like the Department of Defense, is substantial. Spending benchmarks for similar software licenses and support contracts can vary widely based on the specific product, user base, and duration. This $68 million award is a significant commitment, reflecting the ongoing need for robust and reliable software in defense operations.

Small Business Impact

The provided data does not indicate any specific small business set-asides or subcontracting requirements for this contract. As a large award likely involving established enterprise software, the primary contractor is expected to be a major technology firm. Further investigation would be needed to determine if any subcontracting opportunities exist for small businesses within the scope of this agreement.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management regulations. The Defense Contract Management Agency (DCMA) likely plays a role in monitoring performance and compliance. Transparency is generally maintained through contract databases, though specific performance metrics and detailed spending breakdowns may not be publicly available. Inspector General reviews could be initiated if performance issues or allegations of impropriety arise.

Related Government Programs

Defense Information Systems Agency (DISA) IT Procurement
Department of Defense Software Licensing
Enterprise Resource Planning (ERP) Systems
IT Modernization Programs

Risk Flags

Potential for vendor lock-in
Cybersecurity vulnerabilities
Technological obsolescence risk
Long-term support and maintenance costs

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $68.1 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. IBM SOFTWARE SOLUTION

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 $68.1 million.

What is the period of performance?

Start: 2011-09-30. End: 2016-09-30.

What specific IBM software solution was procured under this contract, and what are its primary functions within the Department of Defense?

The provided data does not specify the exact IBM software solution. However, given the context of a large Department of Defense contract, it is likely an enterprise-level software suite. This could include solutions for data management, cybersecurity, operational planning, logistics, or communication systems. The primary functions would be to support the critical IT infrastructure and operational needs of defense agencies, enhancing efficiency, security, and mission effectiveness. Without the specific product name, a detailed functional analysis is not possible, but such procurements are typically aimed at providing robust, scalable, and secure technological capabilities.

How does the $68 million total contract value compare to historical spending on similar IBM software solutions by the Department of Defense or other federal agencies?

Comparing the $68 million total contract value requires access to historical spending data for similar IBM software solutions across federal agencies. Large enterprise software deals for entities like the DoD can range from tens of millions to hundreds of millions of dollars over their lifecycle. IBM offers a wide array of products, from operating systems and databases to middleware and specialized analytics tools. A direct comparison would necessitate identifying the specific software product and its intended use. However, $68 million over five years suggests a significant, but not unprecedented, investment for a major software platform supporting critical defense functions. Benchmarking against other large federal IT procurements would provide further context on its relative scale.

What are the key performance indicators (KPIs) used to measure the success of this contract, and how has IBM performed against them?

The provided data does not include specific Key Performance Indicators (KPIs) for this contract. Typically, for software procurements, KPIs might include system uptime, response times, successful deployment of updates, user satisfaction, security compliance, and adherence to delivery schedules. Performance against these KPIs would be monitored by the contracting officer's representative (COR) within the Defense Information Systems Agency (DISA). Without access to performance reports or contractually defined metrics, it is impossible to assess IBM's performance. However, the contract's duration and the fact that it was awarded under full and open competition suggest a baseline level of expected performance.

What is the risk profile associated with this contract, considering factors like vendor dependency, technological obsolescence, and cybersecurity threats?

This contract carries several risk factors. Vendor dependency is a significant concern, as reliance on a single provider like IBM for critical software can lead to lock-in and limit future flexibility. Technological obsolescence is another risk; software needs to be continuously updated to remain effective and secure, and the pace of technological change can outstrip the contract's lifecycle. Cybersecurity threats are paramount in defense IT; the software must be robust against evolving cyberattacks, and any vulnerabilities could have severe national security implications. The fixed-price nature helps mitigate cost overrun risks but does not eliminate risks related to performance, security, or the long-term viability of the chosen software solution.

What was the rationale for choosing IBM software over potential competitors, especially given the full and open competition award?

While the contract was awarded under full and open competition, the specific rationale for selecting IBM's solution over competitors is not detailed in the provided data. Typically, in such scenarios, the selection is based on a combination of factors evaluated against the government's requirements. These could include technical superiority of IBM's offering, compliance with specific security standards, demonstrated past performance, total cost of ownership (including implementation and maintenance), and the vendor's ability to provide necessary support and training. The evaluation process likely involved a detailed comparison of proposals against a defined set of criteria, with IBM's solution ultimately meeting the requirements most effectively or cost-efficiently.

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: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: HC102811R2028

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DRIVE, BETHESDA, MD, 20817

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $68,095,862

Exercised Options: $68,095,862

Current Obligation: $68,095,862

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS35F4984H

IDV Type: FSS

Timeline