IBM's Navy ERP contract awarded $137.7M for deployment and sustainment services

Contract Overview

Contract Amount: $137,673,129 ($137.7M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Defense

Start Date: 2010-04-01

End Date: 2013-03-31

Contract Duration: 1,095 days

Daily Burn Rate: $125.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: DEPLOYMENT AND SUSTAINMENT OF NAVY ERP

Place of Performance

Location: BETHESDA, MONTGOMERY County, MARYLAND, 20817

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $137.7 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: DEPLOYMENT AND SUSTAINMENT OF NAVY ERP Key points: 1. Contract awarded for a significant sum, requiring careful monitoring of performance and cost efficiency. 2. The nature of the contract suggests a complex, long-term engagement for a critical system. 3. Limited information on specific performance metrics makes a comprehensive value assessment challenging. 4. The duration of the contract indicates a sustained need for these services within the Navy. 5. IBM's role as a major IT services provider positions them to handle such large-scale deployments. 6. The cost-plus fixed-fee structure necessitates robust oversight to manage potential cost overruns.

Value Assessment

Rating: fair

The contract's value of $137.7 million over three years for ERP deployment and sustainment is substantial. Benchmarking this against similar large-scale government ERP implementations is difficult without more granular data on the specific services provided and the complexity of the Navy's existing systems. The cost-plus fixed-fee (CPFF) pricing structure, while common for complex projects, carries inherent risks of cost escalation if not managed tightly. Without detailed performance metrics or comparisons to industry benchmarks for similar ERP projects, assessing the true value-for-money is challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. This competitive process is generally expected to yield better pricing and service offerings. However, the number of bidders is not specified, which would provide further insight into the intensity of the competition. For a contract of this magnitude and technical complexity, the level of competition is a key factor in ensuring a fair price.

Taxpayer Impact: Full and open competition is favorable for taxpayers as it encourages multiple vendors to offer competitive bids, potentially driving down costs and improving service quality.

Public Impact

The primary beneficiaries are the U.S. Navy personnel who will utilize the enhanced Enterprise Resource Planning system. Services delivered include the deployment and ongoing sustainment of a critical IT system. The geographic impact is likely nationwide, supporting Navy operations across various bases and commands. Workforce implications may include the need for specialized IT personnel for implementation and maintenance, potentially impacting both government and contractor workforces.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus fixed-fee contracts can lead to cost overruns if not meticulously managed and overseen.
Lack of specific performance metrics makes it difficult to gauge the effectiveness and efficiency of the services rendered.
The long duration of the contract could lead to vendor lock-in, potentially reducing future competitive opportunities.
Sustainment costs over the life of the contract could exceed initial deployment estimates.

Positive Signals

Awarded through full and open competition, suggesting a competitive bidding process.
IBM is a large, established contractor with significant experience in large-scale IT deployments.
The contract addresses a critical need for ERP system deployment and sustainment within the Department of Defense.

Sector Analysis

This contract falls within the Information Technology sector, specifically focusing on enterprise resource planning (ERP) systems. The market for government IT services, particularly for large-scale system deployments and sustainment, is substantial. Comparable spending benchmarks would involve looking at other major ERP implementations within federal agencies, such as those for financial management or human resources. The trend in this sector is towards cloud-based solutions and integrated systems, making the sustainment aspect of this contract crucial for long-term operational efficiency.

Small Business Impact

There is no indication that this contract included small business set-asides. Given the scale and complexity of deploying and sustaining a Navy-wide ERP system, it is likely that the prime contractor, IBM, would subcontract portions of the work. The extent to which small businesses are involved as subcontractors would be a key factor in assessing the impact on the small business ecosystem. Without specific subcontracting plans or reporting, it's difficult to determine the direct benefit to small businesses.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, potentially involving the Defense Contract Management Agency (DCMA). The cost-plus fixed-fee structure necessitates rigorous financial oversight to ensure costs are reasonable and allocable. Transparency would depend on the public availability of performance reports and contract modifications. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract.

Related Government Programs

Navy Enterprise Resource Planning (ERP) Systems
Department of Defense IT Modernization Programs
Large-Scale System Deployment Contracts
Cost-Plus Fixed-Fee IT Contracts

Risk Flags

Cost Overrun Risk (CPFF)
Performance Measurement Gaps
Technological Obsolescence Risk
Long-Term Sustainment Cost Uncertainty

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $137.7 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. DEPLOYMENT AND SUSTAINMENT OF NAVY ERP

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 Contract Management Agency).

What is the total obligated amount?

The obligated amount is $137.7 million.

What is the period of performance?

Start: 2010-04-01. End: 2013-03-31.

What is IBM's track record with large-scale federal IT contracts, particularly ERP systems?

International Business Machines Corporation (IBM) has a long and extensive history of managing and executing large-scale IT contracts for the federal government, including numerous ERP system implementations and sustainment efforts across various agencies. Their experience spans complex projects involving financial management, human resources, supply chain, and other critical business functions. While specific performance details for each contract vary, IBM is generally recognized as a major player capable of handling the technical and logistical demands of such endeavors. However, like any large contractor, they have also faced scrutiny and challenges on specific projects regarding cost, schedule, and performance. A thorough review would require examining individual contract performance reports and any associated corrective actions or disputes.

How does the $137.7 million award compare to similar Navy ERP deployments?

Directly comparing the $137.7 million award for this specific Navy ERP deployment and sustainment contract to other Navy ERP projects is challenging without more granular data on the scope, complexity, and duration of those other projects. The total value of an ERP contract can fluctuate significantly based on the number of modules implemented, the number of users, the extent of customization required, and the length of the sustainment period. However, $137.7 million over three years represents a substantial investment, indicative of a significant undertaking. To provide a meaningful comparison, one would need to identify ERP contracts with similar functional requirements, user bases, and contract types within the Navy or other branches of the Department of Defense, and then analyze their total obligated amounts and performance periods.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for ERP deployment?

The primary risk associated with a Cost Plus Fixed Fee (CPFF) contract for ERP deployment is the potential for cost overruns. In a CPFF structure, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. While the fee is fixed, the total cost is variable. If the project encounters unforeseen technical challenges, scope creep, or inefficiencies, the total cost to the government can escalate significantly beyond initial estimates. This places a heavy burden on the government's oversight mechanisms to diligently monitor and control costs, ensuring that all expenditures are necessary, reasonable, and allocable to the contract. The contractor has less incentive to control costs compared to fixed-price contracts, as their profit margin is not directly tied to cost savings.

What does the 'Engineering Services' (NAICS 541330) classification imply for this contract?

The classification under NAICS code 541330, 'Engineering Services,' for this contract suggests that the core services procured involve the application of engineering principles and expertise. For an ERP deployment and sustainment, this could encompass a wide range of activities, including systems design, integration, technical analysis, project management, and potentially the development of custom solutions or interfaces. It implies that the contract requires specialized technical knowledge and problem-solving skills related to complex systems. While ERP systems are fundamentally IT solutions, the engineering services designation highlights the intricate design, integration, and optimization aspects involved in ensuring the system functions effectively within the Navy's operational environment.

How has IBM's performance on similar large-scale government IT contracts been historically evaluated?

IBM's historical performance on large-scale government IT contracts has been varied, reflecting the complexity and challenges inherent in such projects. While IBM has a strong reputation and a proven ability to deliver on many significant initiatives, there have also been instances where their performance has faced scrutiny. Reviews and evaluations of past contracts often highlight successes in complex system integrations and large-scale deployments, but also point to challenges related to cost control, schedule adherence, and scope management on certain projects. Publicly available contract data and Inspector General reports can offer insights into specific performance issues, disputes, or areas where corrective actions were required. A comprehensive assessment would necessitate a detailed review of multiple contract performance evaluations over time.

What are the potential long-term implications of sustaining an ERP system for over a decade?

Sustaining an ERP system for over a decade, as implied by the potential long-term nature of this contract, carries significant implications. Technologically, it means the system must remain adaptable to evolving hardware, software, and cybersecurity threats. This often requires ongoing upgrades, patches, and potentially major re-architectures to avoid obsolescence. Operationally, it ensures continuity and stability for critical business processes, but also risks entrenching legacy systems that may become inefficient or difficult to integrate with newer technologies. Financially, long-term sustainment contracts can represent a substantial and ongoing cost to the government, necessitating careful budgeting and continuous evaluation of value. Furthermore, it can lead to vendor lock-in, potentially limiting future competitive opportunities for modernization or replacement.

Industry Classification

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

Solicitation ID: N0002410R3187

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

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: $154,887,497

Exercised Options: $152,087,100

Current Obligation: $137,673,129

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0017805D4364

IDV Type: IDC

Timeline