IBM awarded $57.7M for engineering services by Defense Microelectronics Activity, a sole-source contract

Contract Overview

Contract Amount: $57,722,861 ($57.7M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Defense

Start Date: 2021-03-01

End Date: 2024-03-31

Contract Duration: 1,126 days

Daily Burn Rate: $51.3K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: MARQUESASA PMO

Place of Performance

Location: RESTON, FAIRFAX County, VIRGINIA, 20190

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $57.7 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: MARQUESASA PMO Key points: 1. Contract awarded to a single vendor suggests potential lack of competitive pricing. 2. Long contract duration of over three years may indicate ongoing need for specialized services. 3. Firm Fixed Price contract type offers cost certainty but limits flexibility for scope changes. 4. The specific engineering services provided are not detailed, making direct performance assessment difficult. 5. Awarded by Defense Microelectronics Activity, indicating a focus on critical defense technology infrastructure. 6. No small business set-aside was utilized, potentially limiting opportunities for smaller firms in this sector.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without detailed service descriptions or comparable sole-source awards. The $57.7 million total award amount over three years, averaging approximately $19.2 million annually, appears substantial for engineering services. However, the lack of competition means there's no market-driven price discovery to assess if this represents a fair market value. Without data on the specific deliverables and their market rates, it's difficult to definitively state if the government is receiving excellent value for its investment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, International Business Machines Corporation (IBM), was solicited. The justification for a sole-source award typically involves unique capabilities, urgent needs, or a lack of other responsible sources. Without further details on the specific circumstances leading to this sole-source determination, it's difficult to assess the extent of competition. This approach bypasses the standard competitive bidding process, which could lead to higher costs for the government.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to drive down prices, potentially resulting in higher costs for taxpayers. It also reduces transparency in the procurement process.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Defense Microelectronics Activity, which receives specialized engineering support. The services delivered are engineering services, crucial for the development, maintenance, or enhancement of microelectronics within defense systems. The geographic impact is primarily within Virginia, where the contract is managed or performed, but the ultimate impact is on national defense capabilities. Workforce implications may include specialized engineering roles within IBM, contributing to the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced innovation.
Opaque sole-source justification makes it difficult to verify necessity and fairness.
Limited transparency on specific services provided hinders performance and value assessment.

Positive Signals

Award to a large, established contractor like IBM may indicate reliability and proven capability.
Firm Fixed Price contract provides budget certainty for the agency.
Long-term contract suggests a sustained need for critical engineering expertise.

Sector Analysis

This contract falls within the Engineering Services sector (NAICS 541330), a critical component of the broader professional, scientific, and technical services industry. The Defense Microelectronics Activity's focus suggests this contract supports the development and sustainment of advanced microelectronic components vital for national security. The market for specialized defense engineering services is often characterized by high barriers to entry, requiring significant technical expertise and security clearances, which can favor large, established contractors. Comparable spending benchmarks are difficult to establish due to the specialized nature and sole-source award.

Small Business Impact

This contract was not awarded as a small business set-aside, nor does it appear to have subcontracting requirements specified. The award to a large corporation like IBM means that opportunities for small businesses to participate in this specific contract are likely minimal, unless IBM voluntarily engages them for subcontracting. This approach does not actively contribute to the small business ecosystem for this particular procurement.

Oversight & Accountability

Oversight for this contract would primarily reside with the contracting officers and program managers within the Defense Microelectronics Activity and the Department of Defense. Accountability measures are typically embedded in the contract terms, including performance standards and payment schedules tied to deliverables. Transparency is limited due to the sole-source nature and the proprietary aspects of engineering services. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Research and Development Contracts
Defense Microelectronics Initiatives
Engineering and Technical Services Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award lacks competitive pricing validation.
Limited transparency on specific services and justification.
Potential for higher costs due to lack of competition.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $57.7 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. MARQUESASA PMO

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 Microelectronics Activity).

What is the total obligated amount?

The obligated amount is $57.7 million.

What is the period of performance?

Start: 2021-03-01. End: 2024-03-31.

What specific engineering services are being provided under this contract, and how do they align with the Defense Microelectronics Activity's mission?

The provided data indicates the contract is for 'Engineering Services' under NAICS code 541330. While the Defense Microelectronics Activity (DEMA) focuses on ensuring the U.S. defense industrial base has access to microelectronics, the specific services rendered under this $57.7 million IBM contract are not detailed. These services could range from design and development of new microelectronic components, testing and validation, system integration, to research into advanced materials or manufacturing processes relevant to defense applications. Understanding the precise nature of these services is crucial for assessing their alignment with DEMA's mission and for evaluating the overall value and necessity of the contract.

What was the justification for awarding this contract on a sole-source basis to IBM?

The data explicitly states the contract type as 'NOT COMPETED,' which typically signifies a sole-source or limited competition award. For a sole-source award, the government must justify why only one contractor can meet the requirement. Common justifications include unique capabilities, specialized knowledge, urgent and compelling needs where competition is impractical, or if only one responsible source exists. Without the specific justification document (e.g., a Justification and Approval or J&A), it's impossible to determine the precise reason DEMA selected IBM exclusively. This lack of transparency is a common concern with sole-source procurements, as it bypasses the standard process designed to ensure fair pricing and broad market access.

How does the $57.7 million contract value compare to similar engineering services contracts awarded by the Department of Defense?

Comparing this $57.7 million contract value requires context regarding the duration and scope of services. The contract spans over three years (March 2021 to March 2024), averaging approximately $19.2 million per year. While substantial, its 'fairness' as a benchmark is difficult to ascertain without knowing the specific engineering tasks, complexity, and deliverables. Large defense contracts for specialized engineering, particularly those involving advanced technologies like microelectronics, can range significantly. However, the sole-source nature means this figure wasn't validated through competitive bidding, making direct comparison to competitively awarded contracts potentially misleading regarding value for money.

What are the potential risks associated with a sole-source contract of this magnitude and duration?

Sole-source contracts, especially large and long-term ones like this $57.7 million award to IBM, carry several risks. Firstly, the lack of competition can lead to higher prices than might be achieved through a competitive process, as the contractor faces less pressure to offer the most cost-effective solution. Secondly, there's a risk of complacency; without the threat of losing future business to competitors, the contractor might be less incentivized to innovate or maintain the highest levels of service quality. Thirdly, the government may become overly reliant on a single provider, creating vendor lock-in and making it difficult or costly to switch providers if performance issues arise or needs change. Finally, the absence of a competitive bidding process reduces transparency and makes it harder for the public and oversight bodies to verify that the government is receiving optimal value.

What is IBM's track record with the Department of Defense, particularly in engineering and microelectronics-related contracts?

IBM is a long-standing and major technology contractor with the U.S. government, including the Department of Defense. They have a broad history of providing IT services, hardware, software, and complex engineering solutions across various defense agencies. While specific details on IBM's performance for this particular sole-source contract are not provided, their extensive experience suggests a significant capacity to handle large-scale defense projects. However, like any large contractor, IBM's performance can vary across different contracts and agencies. Assessing their track record would involve reviewing past performance evaluations, contract awards, and any documented issues or successes in similar defense-related engineering or microelectronics programs.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HQ072719R4000

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 11107 SUNSET HILLS RD STE 500, RESTON, VA, 20190

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: $104,136,287

Exercised Options: $57,722,861

Current Obligation: $57,722,861

Subaward Activity

Number of Subawards: 31

Total Subaward Amount: $48,441,047

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ072719D4000

IDV Type: IDC

Timeline