DoD's $26M Engineering Services Contract Awarded to IBM Raises Value and Competition Questions

Contract Overview

Contract Amount: $25,989,975 ($26.0M)

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: $23.1K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: BURLINGTON VT OPEARATIONS

Place of Performance

Location: SOUTH BURLINGTON, CHITTENDEN County, VERMONT, 05403

State: Vermont Government Spending

Plain-Language Summary

Department of Defense obligated $26.0 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: BURLINGTON VT OPEARATIONS Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The firm-fixed-price contract type suggests cost certainty for the government, but the lack of competition is a concern. 3. Performance is spread over three years, indicating a need for sustained engineering support. 4. The contract falls within the Engineering Services sector, a critical area for defense modernization. 5. IBM's extensive experience in technology and defense contracting suggests a capable provider, but benchmarks are needed. 6. The absence of small business set-asides or subcontracting requirements warrants further investigation into broader economic impact.

Value Assessment

Rating: questionable

Benchmarking the value of this $26 million contract for engineering services is challenging without more detailed scope information. However, the sole-source award to IBM, a large and established contractor, suggests a premium may have been paid compared to a competitively bid scenario. While IBM is a capable provider, the lack of competitive pressure means the government may not have achieved the best possible pricing. Further analysis would require comparing the specific deliverables and labor rates to similar sole-source engineering contracts within the Department of Defense.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. The Department of Defense likely justified this approach due to specific circumstances, such as the unique capabilities of IBM or the urgency of the requirement. However, the lack of competition limits the government's ability to solicit and evaluate multiple proposals, potentially leading to higher prices and reduced innovation. The absence of a competitive process means that price discovery through market forces was not utilized.

Taxpayer Impact: Taxpayers may have paid a higher price for these engineering services due to the lack of competition. Without a bidding process, there is less incentive for the contractor to offer the most competitive rates, and the government has fewer options to ensure it is receiving the best value for its investment.

Public Impact

The Department of Defense benefits from specialized engineering services crucial for its operations. This contract supports the Defense Microelectronics Activity, indicating a focus on advanced technological capabilities. The services are delivered in Burlington, Vermont, providing localized economic impact. The contract duration of over three years suggests a sustained need for these engineering functions within the DoD.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value for taxpayers.
Lack of transparency in the justification for sole-source award.
Potential for higher costs due to absence of market-driven price discovery.
No indication of small business participation or subcontracting opportunities.

Positive Signals

Award to a large, established contractor (IBM) suggests technical capability.
Firm-fixed-price contract provides cost certainty for the government.
Long-term duration indicates a sustained and important need for the services.

Sector Analysis

This contract falls within the Engineering Services sector, which is vital for government agencies, particularly in defense, requiring specialized technical expertise. The market for engineering services is broad, encompassing design, development, testing, and consulting. The Department of Defense is a significant consumer of these services, often seeking highly specialized skills for complex projects. Benchmarking this contract's value is difficult without specific scope, but large sole-source awards to major technology firms like IBM are not uncommon in specialized defense technology areas, though they often attract scrutiny regarding value for money.

Small Business Impact

This contract does not appear to include any specific small business set-aside provisions, nor is there information indicating subcontracting requirements for small businesses. The award to a large prime contractor like IBM suggests that the primary focus was on securing the required engineering expertise directly. This could mean missed opportunities for small businesses to participate in defense contracting and contribute to this specific project, potentially limiting the broader economic impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The Defense Microelectronics Activity would be responsible for monitoring performance and ensuring deliverables meet requirements. As a sole-source award, the justification and procurement process would be subject to internal DoD review and potentially oversight from bodies like the Government Accountability Office (GAO) if protests were filed. Transparency is limited by the sole-source nature, but contract modifications and performance reports would be key areas for accountability.

Related Government Programs

Defense Engineering Services
Microelectronics Research and Development
Information Technology Services
Federal IT Procurement
Sole-Source Contract Awards

Risk Flags

Sole-source award
Lack of competition
Potential for non-competitive pricing
Limited transparency on justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $26.0 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. BURLINGTON VT OPEARATIONS

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 $26.0 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 contract, awarded to IBM, is for 'Engineering Services' under NAICS code 541330. While the specific details of the services are not fully elaborated in the provided data, the awarding activity, Defense Microelectronics Activity (DMEA), focuses on ensuring the U.S. defense industrial base has access to microelectronics technologies and manufacturing capabilities. Therefore, it is highly probable that IBM's services are related to the design, development, testing, or integration of microelectronic components, systems, or related manufacturing processes critical for defense applications. This could include areas like semiconductor design, advanced packaging, supply chain security for microelectronics, or research into next-generation microelectronic technologies essential for maintaining a technological edge in defense.

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

The provided data indicates this contract was awarded as 'NOT COMPETED,' signifying a sole-source procurement. Government agencies typically sole-source contracts when only one responsible source can provide the required supplies or services. For a large technology firm like IBM, this justification might stem from unique intellectual property, specialized expertise, existing infrastructure integration, or a critical need for continuity with prior work. Without the full contract file, the specific justification remains unknown. However, standard procurement regulations require agencies to conduct market research to determine if other sources exist and to document why a sole-source award is necessary and in the government's best interest. The lack of competition here means taxpayers did not benefit from a potentially lower price that could have resulted from a competitive bidding process.

How does the $26 million contract value compare to similar engineering services contracts awarded by the Department of Defense or other federal agencies?

Comparing the $26 million value of this IBM contract requires context regarding the scope and duration of services. Engineering services contracts within the DoD can range from a few million to hundreds of millions of dollars, depending on complexity and duration. For a three-year firm-fixed-price contract awarded sole-source to a major technology provider like IBM, $26 million might be considered moderate. However, without knowing the specific deliverables, labor categories, and rates, a direct value-for-money assessment is difficult. Generally, sole-source awards tend to be higher than competitively procured contracts. Benchmarking against similar sole-source awards for specialized engineering support to entities like DMEA would provide a more relevant comparison, but such data is not readily available in this summary.

What are the potential risks associated with a sole-source award of this magnitude, particularly concerning cost overruns and performance quality?

The primary risk with a sole-source award of this magnitude is the potential for inflated costs due to the absence of competitive pressure. IBM, as the sole provider, may not have the same incentive to offer the most cost-effective solution as it would in a competitive environment. While the firm-fixed-price (FFP) contract type offers cost certainty to the government regarding the total price, it does not guarantee value for money. Performance quality risks are mitigated by IBM's established reputation, but oversight is still crucial. Without competition, the government has fewer options to benchmark performance or switch providers if issues arise. Robust contract management and performance monitoring by the Defense Microelectronics Activity are essential to mitigate these risks and ensure the services meet the required standards.

What is IBM's track record with the Department of Defense, and have they previously received significant sole-source contracts for similar services?

International Business Machines Corporation (IBM) has a long and extensive history of contracting with the Department of Defense and other federal agencies, providing a wide array of IT, technology, and professional services. Their track record generally indicates a capacity to handle large, complex projects. Regarding sole-source contracts, large technology providers like IBM are sometimes awarded such contracts when their specific expertise, proprietary technology, or existing system integration is deemed essential and unique. While specific details on IBM's past sole-source awards for microelectronics engineering services are not provided here, it is plausible that they have received similar awards given their market position. A deeper dive into historical contract data would be needed to confirm the frequency and nature of such awards.

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: $25,989,975

Exercised Options: $25,989,975

Current Obligation: $25,989,975

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ072719D4000

IDV Type: IDC

Timeline