HHS awards IBM $119M for accounting services, raising concerns over sole-source procurement

Contract Overview

Contract Amount: $119,119,077 ($119.1M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2008-06-21

End Date: 2013-02-28

Contract Duration: 1,713 days

Daily Burn Rate: $69.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Other

Official Description: TAS::75 0511::TAS ACCOUNTING SERVICES

Place of Performance

Location: WINDSOR MILL, BALTIMORE County, MARYLAND, 21244

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $119.1 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: TAS::75 0511::TAS ACCOUNTING SERVICES Key points: 1. Significant contract value of $119M for financial transaction processing. 2. Sole-source award to IBM suggests limited competition. 3. Long contract duration of over 1700 days warrants scrutiny. 4. Potential for higher costs due to lack of competitive bidding.

Value Assessment

Rating: questionable

The contract type is Cost Plus Award Fee, which can incentivize contractors to exceed cost targets. Without competitive benchmarks, assessing the value for money is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award to IBM. This limits price discovery and potentially leads to higher costs for taxpayers.

Taxpayer Impact: The lack of competition for a large contract may result in the government paying more than necessary, impacting taxpayer funds.

Public Impact

Taxpayers may be overpaying for essential accounting services due to the absence of competitive bidding. The long-term nature of the contract could lock the government into a potentially suboptimal pricing arrangement. Reliance on a single vendor for critical financial functions raises concerns about vendor lock-in and future flexibility.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source procurement
Cost-plus contract type
Long contract duration
Lack of transparency in pricing

Positive Signals

Established vendor relationship
Potential for specialized expertise

Sector Analysis

This contract falls under financial transactions processing, reserve, and clearinghouse activities. The value is substantial, and the lack of competition for such a critical function is notable within this sector.

Small Business Impact

The data does not indicate any specific provisions or considerations for small businesses in this sole-source award to a large corporation like IBM.

Oversight & Accountability

The sole-source nature of this award suggests a potential gap in competitive sourcing strategies. Further oversight is needed to ensure fair pricing and explore future competitive opportunities.

Related Government Programs

Financial Transactions Processing, Reserve, and Clearinghouse Activities
Department of Health and Human Services Contracting
Centers for Medicare and Medicaid Services Programs

Risk Flags

Lack of competition
Potential for cost overruns
Limited transparency
Long contract duration
Sole-source justification unclear

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $119.1 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. TAS::75 0511::TAS ACCOUNTING SERVICES

Who is the contractor on this award?

The obligated recipient is INTERNATIONAL BUSINESS MACHINES CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Centers for Medicare and Medicaid Services).

What is the total obligated amount?

The obligated amount is $119.1 million.

What is the period of performance?

Start: 2008-06-21. End: 2013-02-28.

What was the justification for awarding this contract on a sole-source basis, and were alternative solutions considered?

The justification for a sole-source award is crucial for understanding why competition was bypassed. Agencies typically require detailed documentation outlining the necessity of a single source, such as unique capabilities or urgent needs. Without this information, it's difficult to assess if taxpayer funds were used efficiently or if a more competitive approach could have yielded better value.

How does the cost-plus award fee structure impact IBM's incentive to control costs compared to a fixed-price contract?

A Cost Plus Award Fee (CPAF) contract allows the contractor to recover allowable costs plus a fee that is adjusted based on performance. While it can incentivize meeting performance goals, it may reduce the contractor's inherent motivation to minimize costs compared to a fixed-price contract, where the contractor bears more risk for cost overruns. This structure necessitates robust government oversight to manage costs effectively.

What mechanisms are in place to ensure the quality and effectiveness of the financial transaction processing services provided by IBM under this contract?

Given the critical nature of financial transaction processing, robust quality assurance and performance monitoring are essential. The 'Award Fee' component of the contract suggests that IBM's performance is evaluated against specific metrics. However, the details of these metrics and the government's oversight processes are not provided, making it difficult to independently assess the effectiveness and ensure the services meet the required standards.

Industry Classification

NAICS: Finance and Insurance › Activities Related to Credit Intermediation › Financial Transactions Processing, Reserve, and Clearinghouse Activities

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DR, BETHESDA, MD, 08

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $119,423,293

Exercised Options: $119,119,077

Current Obligation: $119,119,077

Parent Contract

Parent Award PIID: 500030014

IDV Type: IDC

Timeline