IBM's $37.7M contract for TAS Risk Adjustment Suite of Systems shows fair value with moderate competition

Contract Overview

Contract Amount: $37,766,419 ($37.8M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2010-11-01

End Date: 2015-10-31

Contract Duration: 1,825 days

Daily Burn Rate: $20.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: IT

Official Description: TAS::75 0511::TAS RISK ADJUSTMENT SUITE OF SYSTEMS

Place of Performance

Location: LINTHICUM HEIGHTS, ANNE ARUNDEL County, MARYLAND, 21090

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $37.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: TAS::75 0511::TAS RISK ADJUSTMENT SUITE OF SYSTEMS Key points: 1. Contract value appears reasonable given the duration and scope of IT systems development. 2. Competition was robust, suggesting potential for price discovery and value for taxpayers. 3. Performance risk indicators are not explicitly detailed but are inherent in large IT projects. 4. This contract falls within the broader IT services sector, specifically custom computer systems design. 5. The agency's use of a Cost Plus Award Fee structure suggests a focus on performance incentives.

Value Assessment

Rating: fair

The contract's total value of approximately $37.7 million over five years averages to about $7.5 million annually. This figure seems within a reasonable range for complex IT system development and maintenance for a federal agency of this size. Benchmarking against similar custom computer systems design contracts would provide a more precise value-for-money assessment, but initial indications suggest a fair price point for the services rendered.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. While the specific number of bidders is not provided, this procurement method generally fosters a competitive environment, which can lead to better pricing and service offerings for the government. The agency's choice of full and open competition suggests confidence in the market's ability to provide suitable solutions.

Taxpayer Impact: Full and open competition typically benefits taxpayers by driving down costs through market forces and encouraging a wider pool of innovative solutions, potentially leading to more efficient government operations.

Public Impact

The Centers for Medicare and Medicaid Services (CMS) benefits from improved IT systems for risk adjustment. Services delivered include the design and development of computer systems crucial for healthcare program administration. The geographic impact is primarily national, supporting federal healthcare initiatives. Workforce implications include IT professionals involved in system design, development, and maintenance.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of specific performance metrics makes it difficult to assess the true value delivered.
Cost Plus Award Fee contracts can sometimes lead to cost overruns if not managed tightly.
The duration of the contract (5 years) might not fully account for rapidly evolving IT needs.

Positive Signals

Awarded under full and open competition, suggesting a competitive bidding process.
The contract aims to enhance critical IT infrastructure for healthcare program administration.
IBM is a large, established contractor with significant experience in government IT projects.

Sector Analysis

This contract falls within the broader Information Technology (IT) sector, specifically focusing on custom computer systems design and integration services. The market for federal IT services is substantial, with agencies continually seeking to modernize legacy systems and implement new digital solutions. Comparable spending benchmarks for similar large-scale IT development projects within federal health agencies would place this contract within a significant investment category, reflecting the complexity and criticality of the systems involved.

Small Business Impact

The provided data does not indicate any specific small business set-asides or subcontracting requirements for this contract. As a large contract awarded to a major corporation, the primary focus is likely on the prime contractor's capabilities. Further analysis would be needed to determine if small businesses were involved as subcontractors or if there were opportunities missed for small business participation.

Oversight & Accountability

Oversight for this contract would typically reside with the Centers for Medicare and Medicaid Services (CMS) contracting officers and program managers. The Cost Plus Award Fee structure implies performance monitoring and evaluation to determine award fees. Transparency is generally facilitated through contract databases like FPDS, though detailed performance reports are often internal. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Healthcare IT Modernization Programs
Federal Health Data Management Systems
Centers for Medicare and Medicaid Services IT Infrastructure
Custom Software Development Contracts
Risk Adjustment and Financial Management Systems

Risk Flags

Cost Plus Award Fee structure requires careful oversight to manage costs.
Lack of specific performance metrics in summary data hinders detailed value assessment.
Potential for scope creep in long-term IT development projects.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $37.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. TAS::75 0511::TAS RISK ADJUSTMENT SUITE OF SYSTEMS

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 $37.8 million.

What is the period of performance?

Start: 2010-11-01. End: 2015-10-31.

What is the track record of International Business Machines Corporation (IBM) with federal IT contracts of similar scope and value?

IBM has a long and extensive history of contracting with the U.S. federal government, particularly in the IT sector. They have been awarded numerous large-scale contracts across various agencies, including Health and Human Services (HHS), for services ranging from cloud computing and cybersecurity to custom software development and systems integration. Their track record generally indicates a capacity to handle complex projects. However, like any large contractor, specific project performance can vary. For this particular contract, the award fee structure suggests performance was monitored, but detailed outcomes require access to internal agency performance reports. A review of past performance evaluations and any disputes or contract modifications would provide a more granular understanding of IBM's specific performance on this TAS Risk Adjustment Suite of Systems contract.

How does the average annual cost of this contract compare to similar federal IT system development projects?

This contract's average annual cost is approximately $7.5 million ($37.7 million over 5 years). Benchmarking this against similar federal IT system development projects requires access to a detailed database of comparable contracts, including factors like system complexity, user base, and specific functionalities. Generally, custom IT system development for large federal agencies can range significantly, from a few million to tens of millions annually, depending on the scope. Given that this contract involves a 'Risk Adjustment Suite of Systems' for CMS, a critical and complex agency, the $7.5 million annual average appears to be within a reasonable, albeit not necessarily low, range. Without specific comparable contract data, a definitive value-for-money assessment is challenging, but it doesn't immediately signal an outlier.

What are the primary risks associated with a Cost Plus Award Fee (CPAF) contract for IT system development?

Cost Plus Award Fee (CPAF) contracts present unique risks for the government. The primary risk is that the contractor may have less incentive to control costs compared to fixed-price contracts, as costs are reimbursed. The 'award fee' component is intended to mitigate this by incentivizing performance, but the criteria for earning the award fee must be clearly defined and measurable. If the criteria are too vague or subjective, it can lead to disputes or the government paying higher fees than warranted. For IT system development, risks include potential cost overruns if project scope expands or unforeseen technical challenges arise, and the possibility that the award fee structure might not adequately motivate the contractor to achieve the most cost-effective solution. Robust oversight and clear performance metrics are crucial to managing these risks.

What was the specific purpose and expected outcome of the TAS Risk Adjustment Suite of Systems?

The TAS Risk Adjustment Suite of Systems contract was established to support the Centers for Medicare and Medicaid Services (CMS) in its administration of healthcare programs, specifically related to risk adjustment. Risk adjustment is a methodology used in health insurance to account for the health status of individuals enrolled in health plans. The systems developed under this contract likely aimed to improve the accuracy, efficiency, and reliability of calculating risk scores for beneficiaries. Expected outcomes would include enhanced data processing capabilities, better fraud detection and prevention related to risk adjustment, improved financial solvency of health plans participating in government programs, and more accurate resource allocation based on beneficiary health needs. Ultimately, these systems are critical for the financial integrity and operational effectiveness of programs like Medicare Advantage and the Health Insurance Marketplace.

How has federal spending on IT services for healthcare administration evolved over the period of this contract (2010-2015)?

The period between 2010 and 2015 was a significant time for federal IT spending in healthcare administration, largely driven by the Affordable Care Act (ACA) enacted in 2010. This era saw increased investment in modernizing IT infrastructure to support new insurance marketplaces, expanded coverage, and complex data management requirements like risk adjustment. Agencies like CMS received substantial funding to upgrade systems, improve data analytics, and enhance cybersecurity. Spending on IT services, including custom system development, integration, and maintenance, saw a notable increase during these years as agencies worked to implement and manage the ACA's provisions. This contract aligns with that broader trend of increased federal IT investment in the healthcare sector during that timeframe.

Industry Classification

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

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: 1

Pricing Type: COST PLUS AWARD FEE (R)

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: $51,704,867

Exercised Options: $37,766,419

Current Obligation: $37,766,419

Subaward Activity

Number of Subawards: 19

Total Subaward Amount: $4,231,329

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Parent Contract

Parent Award PIID: HHSM500200700018I

IDV Type: IDC

Timeline