DoD awards IBM $52.6M for custom computer programming, raising value-for-money questions

Contract Overview

Contract Amount: $52,616,438 ($52.6M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Defense

Start Date: 2016-09-19

End Date: 2021-09-30

Contract Duration: 1,837 days

Daily Burn Rate: $28.6K/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: MECHANICSBURG, CUMBERLAND County, PENNSYLVANIA, 17055

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $52.6 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: IBM SOFTWARE SOLUTION Key points: 1. Contract value of $52.6M for custom programming services suggests a significant investment. 2. Full and open competition was utilized, indicating a potentially broad market engagement. 3. The contract duration of 1837 days (over 5 years) implies a long-term need for these services. 4. Fixed-price contract type may offer cost certainty but could limit flexibility for evolving requirements. 5. The specific nature of 'custom computer programming' warrants scrutiny regarding scope and necessity. 6. Lack of small business set-aside suggests larger prime contractors are the primary focus. 7. The award was a single delivery order, indicating a specific, defined task within a larger framework.

Value Assessment

Rating: fair

The contract value of $52.6 million for custom computer programming services over approximately five years requires careful benchmarking. Without specific details on the services rendered, it's challenging to compare directly to similar contracts. However, for custom software development, this amount could represent a fair price for complex, long-term projects, or it could be on the higher end if the scope was less extensive than anticipated. The firm fixed-price nature provides cost predictability but might not reflect the best value if requirements changed significantly.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple vendors had the opportunity to bid. The fact that it resulted in a single delivery order implies that while the initial solicitation was broad, the final award was made to one specific entity, IBM. The level of competition at the bid stage is not detailed, but full and open competition generally promotes price discovery and can lead to more competitive pricing.

Taxpayer Impact: Taxpayers benefit from the potential for competitive pricing inherent in full and open competition, which aims to ensure the government receives services at a reasonable cost.

Public Impact

The Department of Defense benefits from specialized custom computer programming services to meet its unique technological needs. This contract likely supports critical defense information systems, enhancing operational capabilities. The geographic impact is primarily within the operational sphere of the Defense Information Systems Agency, potentially nationwide or global. Workforce implications could include the employment of skilled software developers, programmers, and IT specialists by IBM and its potential subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for scope creep in custom programming projects can lead to cost overruns if not managed tightly.
Long contract durations increase the risk of technology obsolescence or changing requirements.
Reliance on a single large contractor like IBM may limit future flexibility or innovation from smaller firms.

Positive Signals

Full and open competition suggests a robust bidding process that could yield competitive pricing.
Firm fixed-price contract type provides budget certainty for the government.
The award to a well-established contractor like IBM may indicate a level of confidence in their ability to deliver complex solutions.

Sector Analysis

This contract falls within the IT services sector, specifically custom computer programming. The market for such services is vast and highly competitive, encompassing both large system integrators and specialized software development firms. The Department of Defense is a major consumer of IT services, with significant spending allocated to software development, maintenance, and integration to support its complex operational requirements. Benchmarking this contract's value against other large-scale custom software development efforts within the federal government or the broader IT industry would provide further context on its relative cost-effectiveness.

Small Business Impact

The data indicates this contract was not set aside for small businesses, and the prime contractor is IBM, a large corporation. This suggests that small businesses were likely not the primary target for this specific award, either as prime contractors or through mandatory subcontracting requirements. While large contracts can sometimes include subcontracting opportunities for small businesses, the absence of a specific set-aside or explicit mention of small business participation implies that the focus was on securing a comprehensive solution from a major provider.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the contracting officer's representative (COR) within the Defense Information Systems Agency (DISA). Accountability measures are embedded in the firm fixed-price contract terms, requiring IBM to deliver specified services within the agreed budget. Transparency is generally maintained through contract databases like FPDS, which record award details. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Information Technology Contracting Office
Information Technology Professional Services and Labor Hour
Software and Systems Development Services

Risk Flags

Long contract duration increases risk of obsolescence
Potential for scope creep in custom development
Lack of specific performance metrics makes value assessment difficult

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $52.6 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 $52.6 million.

What is the period of performance?

Start: 2016-09-19. End: 2021-09-30.

What specific custom computer programming services were delivered under this contract?

The provided data identifies the contract as being for 'Custom Computer Programming Services' (NAICS code 541511) awarded to IBM. However, it does not detail the specific nature of these services. Typically, custom computer programming involves designing, developing, and implementing software solutions tailored to unique client requirements. For the Department of Defense, this could range from developing new command and control systems, enhancing existing logistics software, creating cybersecurity tools, or building specialized data analytics platforms. Without further documentation, such as the Statement of Work (SOW) or contract modifications, the precise deliverables remain unspecified.

How does the $52.6 million contract value compare to similar custom programming contracts awarded by the DoD?

Comparing the $52.6 million value requires context on the duration and scope of services. For a contract spanning over five years (1837 days), this annual average is approximately $10.5 million. The DoD frequently awards large IT contracts, and custom software development can be a significant component. While $10.5 million annually for specialized programming might be within the expected range for complex, mission-critical systems, it's crucial to benchmark against contracts with similar technical requirements, complexity, and duration. Without access to detailed SOWs and performance metrics for comparable contracts, a precise value-for-money assessment is difficult. However, given the scale, it suggests a substantial and potentially critical IT undertaking.

What are the primary risks associated with a five-year firm fixed-price contract for custom software development?

A significant risk with a five-year firm fixed-price contract for custom software development is the potential for requirements to change or technology to become obsolete before the contract term ends. If the DoD's needs evolve, adapting the software under a fixed-price agreement can be challenging and may lead to costly change orders or the need for a new contract. Conversely, if IBM underpriced the initial bid due to unforeseen complexities, they might face financial losses or reduce the quality of deliverables. Furthermore, the long duration increases the risk of vendor lock-in and may not capture the most current technological advancements available in the market towards the end of the contract period.

What was the competitive landscape for this contract, and what does it imply for price discovery?

The contract was awarded under 'Full and Open Competition,' indicating that the solicitation was broadly advertised, allowing any interested and qualified vendor to submit a proposal. While this process is designed to maximize competition and facilitate price discovery, the fact that it resulted in a single delivery order awarded to IBM suggests that, ultimately, IBM's proposal was deemed the most advantageous. The number of bids received is not specified, but a robust competitive process, even if resulting in one award, generally leads to better price discovery than a sole-source procurement. It implies that the government received proposals that allowed for a reasoned comparison of technical merit and price.

What is IBM's track record with the Department of Defense for similar IT services?

IBM has a long-standing and extensive track record of providing a wide array of IT services and solutions to the Department of Defense and other federal agencies. Their experience spans decades and covers complex systems integration, software development, cloud services, cybersecurity, and data analytics. For custom computer programming, IBM has historically been involved in developing and maintaining large-scale, mission-critical systems for defense clients. While specific performance details for this particular $52.6 million contract are not provided, IBM's general reputation and established presence within the defense sector suggest a capacity to handle such requirements, though performance can vary across individual contracts.

Industry Classification

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

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: HC102816R0013

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, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $52,616,438

Exercised Options: $52,616,438

Current Obligation: $52,616,438

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS35F110DA

IDV Type: FSS

Timeline