DHS awards $77M contract for ACE infrastructure support to IBM, raising value-for-money questions

Contract Overview

Contract Amount: $77,162,198 ($77.2M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Homeland Security

Start Date: 2012-11-08

End Date: 2013-09-30

Contract Duration: 326 days

Daily Burn Rate: $236.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: TIME AND MATERIALS

Sector: IT

Official Description: THIS REQUIREMENT IS FOR SERVICES IN SUPPORT OF ACE INFRASTRUCTURE AND EDME ENGINEERING AND OPERATIONS INFRASTRUCTURE SUPPORT.

Place of Performance

Location: PITTSBURGH, ALLEGHENY County, PENNSYLVANIA, 15264

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Homeland Security obligated $77.2 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: THIS REQUIREMENT IS FOR SERVICES IN SUPPORT OF ACE INFRASTRUCTURE AND EDME ENGINEERING AND OPERATIONS INFRASTRUCTURE SUPPORT. Key points: 1. Contract value of $77.2 million for less than a year of service suggests a high per-diem rate. 2. Sole bidder for a critical infrastructure support contract warrants scrutiny of the competition process. 3. IBM's extensive government contracting history provides a mixed bag of performance, requiring careful review. 4. The contract's focus on IT infrastructure and engineering operations is a common but complex area for federal spending. 5. Delivery order under a larger IDIQ contract indicates potential for follow-on work and evolving requirements. 6. The use of Time and Materials pricing can lead to cost overruns if not closely managed.

Value Assessment

Rating: questionable

The contract's total value of $77.2 million for a period of approximately 10 months (November 2012 to September 2013) indicates a significant daily expenditure. Without specific details on the services rendered and the number of personnel involved, it is difficult to benchmark the value effectively. However, given the duration and the nature of IT infrastructure support, the implied per-diem cost appears high. Further analysis would require comparing this to similar contracts for comparable services and personnel levels.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is generally positive for price discovery. However, the data indicates only one bid was received. This could suggest that the solicitation was not widely disseminated, the requirements were highly specialized, or potential competitors were deterred for other reasons. A single bid in a full and open competition raises concerns about the effectiveness of the competition and whether the government received the best possible pricing and technical solutions.

Taxpayer Impact: A single bid in a full and open competition limits the government's ability to negotiate favorable terms and potentially leads to higher costs for taxpayers than if multiple bids had been submitted.

Public Impact

The primary beneficiary is the U.S. Customs and Border Protection (CBP) within the Department of Homeland Security, receiving essential IT infrastructure and engineering support. Services delivered include the maintenance and operation of critical infrastructure supporting the Automated Commercial Environment (ACE), a vital system for trade processing. The geographic impact is primarily within the operational areas of CBP, likely concentrated in locations where ACE infrastructure is managed and maintained. Workforce implications include the direct employment of personnel by IBM to fulfill the contract requirements, potentially including IT specialists, engineers, and support staff.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition despite full and open solicitation raises concerns about the robustness of the bidding process.
Time and Materials contract type can lead to cost escalation if not rigorously monitored.
The high total award amount for a relatively short period suggests a potentially high unit cost.
Lack of detailed performance metrics in the provided data makes it difficult to assess service quality.
The contract is for infrastructure support, which can be prone to unforeseen technical challenges and cost overruns.

Positive Signals

Awarded under full and open competition, indicating an attempt to solicit broad market participation.
IBM is a large, established contractor with significant experience in government IT services.
The contract supports a critical government system (ACE), suggesting a high priority for the agency.
The delivery order mechanism allows for flexibility in addressing evolving infrastructure needs.

Sector Analysis

This contract falls within the Information Technology (IT) and professional services sector, specifically focusing on infrastructure support and engineering operations. The federal IT services market is vast and highly competitive, with significant spending allocated to maintaining and upgrading complex systems like the Automated Commercial Environment (ACE). Comparable spending benchmarks for similar IT infrastructure support contracts can vary widely based on scope, duration, and complexity, but a $77 million award for approximately 10 months of service suggests a substantial investment in this particular area.

Small Business Impact

The provided data indicates that small business participation was not a specific set-aside for this contract (ss: false, sb: false). As a large prime contract awarded to IBM, there is potential for subcontracting opportunities for small businesses. However, without specific subcontracting plans or goals outlined in the award details, the extent of small business involvement remains unclear. The impact on the small business ecosystem would depend on whether IBM actively seeks out and utilizes small business subcontractors for specialized services or support.

Oversight & Accountability

Oversight for this contract would typically be managed by the U.S. Customs and Border Protection (CBP) contracting officers and program managers. Accountability measures would be embedded in the contract's terms and conditions, including performance standards and reporting requirements. Transparency is generally facilitated through contract award databases like FPDS, where basic information is publicly available. Inspector General jurisdiction would apply if any issues of fraud, waste, or abuse arise during the contract's performance or close-out.

Related Government Programs

Automated Commercial Environment (ACE) Modernization
Department of Homeland Security IT Infrastructure Services
Federal Cloud Computing Strategy
IT Operations and Maintenance Contracts
Large-Scale IT Service Delivery Contracts

Risk Flags

Limited competition despite full and open solicitation
Time and Materials contract type
High total award value for short duration
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Homeland Security awarded $77.2 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. THIS REQUIREMENT IS FOR SERVICES IN SUPPORT OF ACE INFRASTRUCTURE AND EDME ENGINEERING AND OPERATIONS INFRASTRUCTURE SUPPORT.

Who is the contractor on this award?

The obligated recipient is INTERNATIONAL BUSINESS MACHINES CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Homeland Security (U.S. Customs and Border Protection).

What is the total obligated amount?

The obligated amount is $77.2 million.

What is the period of performance?

Start: 2012-11-08. End: 2013-09-30.

What was the specific nature of the 'ACE Infrastructure and EDME Engineering and Operations Infrastructure Support' provided by IBM?

The requirement was for services in support of the Automated Commercial Environment (ACE) infrastructure and related Engineering, Design, Manufacturing, and Evaluation (EDME) operations. This likely encompassed a broad range of IT support activities, including network management, server maintenance, database administration, system monitoring, cybersecurity measures, and potentially software development or integration related to the ACE system. The 'engineering and operations' aspect suggests a focus on the technical design, implementation, and ongoing management of the underlying infrastructure that powers ACE, a critical system for U.S. trade processing.

How does the $77.2 million award for approximately 10 months compare to industry benchmarks for similar IT infrastructure support contracts?

The total award of $77.2 million for a period of roughly 10 months (November 8, 2012, to September 30, 2013) translates to an average monthly expenditure of approximately $7.72 million. This suggests a very high daily or hourly rate, depending on the number of personnel and the specific services rendered. Benchmarking this requires detailed knowledge of the labor categories, skill levels, and specific services provided. However, in the federal IT services market, such a high monthly burn rate for infrastructure support, especially under a Time and Materials contract, warrants close scrutiny to ensure cost-effectiveness and prevent potential overruns compared to fixed-price or well-defined service level agreements.

What are the potential risks associated with a 'Time and Materials' contract for critical IT infrastructure support?

Time and Materials (T&M) contracts, like this one, carry inherent risks for the government, primarily related to cost control. Unlike fixed-price contracts, T&M agreements reimburse the contractor for direct labor hours at specified rates and for the actual cost of materials. This structure can incentivize longer task durations and potentially higher labor hours if not meticulously monitored. For critical IT infrastructure, unforeseen technical issues or scope creep can easily inflate costs. Effective oversight, including detailed tracking of labor hours, rigorous review of material costs, and clear definition of 'completion,' is crucial to mitigate the risk of cost overruns and ensure value for taxpayer money.

Given that only one bid was received under 'full and open competition,' what does this imply about the contractor's position and potential pricing power?

Receiving only one bid under a 'full and open competition' solicitation is a significant indicator of potential issues with the procurement process or the market's response. It could suggest that the requirements were highly specialized, making it difficult for multiple companies to qualify or be interested. Alternatively, it might indicate that the solicitation was not effectively advertised, or that potential competitors perceived the contract terms or risks as unfavorable. In such a scenario, the single bidder, IBM, potentially holds considerable pricing power, as the government has limited alternatives to negotiate with. This situation raises concerns about whether the government secured the most competitive price possible.

What is IBM's track record with similar large-scale IT infrastructure support contracts for federal agencies?

IBM has a long and extensive history of performing large-scale IT infrastructure support contracts for numerous federal agencies, including the Department of Homeland Security. Their track record is generally characterized by the ability to handle complex, mission-critical systems. However, like many large contractors, their performance history can be mixed, with instances of both highly successful project completions and challenges related to cost, schedule, or scope management. For this specific contract, the limited competition and T&M nature suggest a need for diligent oversight to ensure IBM's performance aligns with expectations and delivers value.

How has federal spending on IT infrastructure support evolved since this contract was awarded in 2012-2013?

Since the 2012-2013 period, federal spending on IT infrastructure support has continued to grow, driven by increasing digitalization, cybersecurity threats, and the push towards cloud computing. Agencies have shifted focus towards modernizing legacy systems, enhancing data security, and adopting agile methodologies. While the fundamental need for infrastructure support remains, the nature of the services has evolved, with greater emphasis on cloud services, managed services, and data analytics. The overall trend indicates a sustained, and likely increasing, investment in maintaining and upgrading the technological backbone of government operations, albeit with evolving technological approaches and procurement strategies.

Industry Classification

NAICS: Retail Trade › Electronics and Appliance Stores › Computer and Software Stores

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: TIME AND MATERIALS (Y)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DRIVE, BETHESDA, MD, 20817

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $81,981,273

Exercised Options: $77,162,198

Current Obligation: $77,162,198

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS35F4984H

IDV Type: FSS

Timeline