DoD Awards $9.6M Microelectronics Facility Contract to IBM, Raising Competition Concerns

Contract Overview

Contract Amount: $9,635,000 ($9.6M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Defense

Start Date: 2023-10-01

End Date: 2026-09-30

Contract Duration: 1,095 days

Daily Burn Rate: $8.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: MARQUESAS RELOCATION DESIGN & INSTALLATION SERVICES TO DESIGN, FABRICATE, ASSEMBLE, BUILD, TEST, EVALUATE, VERIFY, VALIDATE MICROELECTRONICS AND OPERATE SUCH A FACILITY.

Place of Performance

Location: ESSEX JUNCTION, CHITTENDEN County, VERMONT, 05452

State: Vermont Government Spending

Plain-Language Summary

Department of Defense obligated $9.6 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: MARQUESAS RELOCATION DESIGN & INSTALLATION SERVICES TO DESIGN, FABRICATE, ASSEMBLE, BUILD, TEST, EVALUATE, VERIFY, VALIDATE MICROELECTRONICS AND OPERATE SUCH A FACILITY. Key points: 1. Significant investment in critical microelectronics infrastructure. 2. Sole-source award to IBM limits competitive pricing and innovation. 3. Potential for higher costs due to lack of competition. 4. Defense sector reliance on advanced microelectronics is a key risk.

Value Assessment

Rating: questionable

The $9.6 million contract value for microelectronics design and installation services appears high, especially given the sole-source nature. Benchmarking against similar, competitively awarded contracts for facility development and specialized engineering services would be necessary to determine true value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award to IBM. This lack of competition significantly hinders price discovery and may lead to inflated costs for the government.

Taxpayer Impact: Taxpayers may bear higher costs due to the absence of competitive bidding, potentially diverting funds from other critical defense needs.

Public Impact

Ensures access to advanced microelectronics, crucial for national security. Potential for cost overruns impacts overall defense budget allocation. IBM's role could consolidate market power in a sensitive sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Lack of competition
Potential for cost overruns
Critical technology dependence

Positive Signals

Addresses critical need for microelectronics infrastructure
Long-term contract duration ensures stability

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting advanced microelectronics for the Department of Defense. Spending in this area is critical for maintaining technological superiority but is often characterized by high R&D costs and specialized expertise.

Small Business Impact

The contract does not indicate any specific provisions or set-asides for small businesses. The sole-source nature of the award to a large corporation like IBM further suggests limited opportunities for small business participation.

Oversight & Accountability

The sole-source nature of this award warrants close oversight to ensure fair pricing and prevent potential waste, fraud, and abuse. The Defense Microelectronics Activity should provide detailed justifications for the lack of competition.

Related Government Programs

Engineering Services
Department of Defense Contracting
Defense Microelectronics Activity Programs

Risk Flags

Sole-source award limits competition.
Potential for inflated pricing.
Lack of small business participation.
High dependence on a single contractor.
National security implications of microelectronics supply chain.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $9.6 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. MARQUESAS RELOCATION DESIGN & INSTALLATION SERVICES TO DESIGN, FABRICATE, ASSEMBLE, BUILD, TEST, EVALUATE, VERIFY, VALIDATE MICROELECTRONICS AND OPERATE SUCH A FACILITY.

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 $9.6 million.

What is the period of performance?

Start: 2023-10-01. End: 2026-09-30.

What is the justification for awarding this critical microelectronics facility contract on a sole-source basis to IBM, and what steps were taken to ensure fair and reasonable pricing?

The justification for a sole-source award typically involves unique capabilities, urgent needs, or lack of viable alternatives. The Defense Microelectronics Activity must provide detailed documentation supporting these claims. To ensure fair pricing, they should have conducted thorough market research, benchmarked against similar services, and negotiated aggressively with IBM, potentially seeking cost breakdowns and justifications for their proposed price.

What are the long-term risks associated with relying on a single, large corporation like IBM for the design and operation of a critical microelectronics facility?

Long-term risks include potential vendor lock-in, reduced bargaining power for future contracts, and stifled innovation if IBM's solutions become proprietary or difficult to integrate with other systems. Dependence on one entity can also create vulnerabilities in supply chain security and resilience, especially in a sector as strategically important as microelectronics.

How will the effectiveness of this microelectronics facility be measured, and what metrics will be used to assess the value delivered to the Department of Defense?

Effectiveness will likely be measured by the facility's ability to meet performance specifications, deliver microelectronic components on time and within budget, and support the DoD's strategic objectives. Key metrics could include yield rates, defect rates, production capacity, turnaround times for new designs, and overall cost-effectiveness compared to alternative solutions or previous capabilities.

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

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: $19,270,000

Exercised Options: $19,270,000

Current Obligation: $9,635,000

Subaward Activity

Number of Subawards: 2

Total Subaward Amount: $1,732,985

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ072719D4000

IDV Type: IDC

Timeline