Navy ERP PMO awards IBM $70.9M for functional expertise and production services

Contract Overview

Contract Amount: $70,891,223 ($70.9M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Defense

Start Date: 2012-02-27

End Date: 2014-09-27

Contract Duration: 943 days

Daily Burn Rate: $75.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: NAVY ENTERPRISE RESOURCE PLANNING (ERP) PROGRAM MANAGEMENT OFFICE - FUNCTIONAL EXPERTISE AND PRODUCTION SERVICES (FEPS)

Place of Performance

Location: ANNAPOLIS, ANNE ARUNDEL County, MARYLAND, 21401

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $70.9 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: NAVY ENTERPRISE RESOURCE PLANNING (ERP) PROGRAM MANAGEMENT OFFICE - FUNCTIONAL EXPERTISE AND PRODUCTION SERVICES (FEPS) Key points: 1. Contract provides essential support for the Navy's Enterprise Resource Planning (ERP) program. 2. IBM, a large established contractor, is performing this work. 3. The contract was awarded under full and open competition. 4. The contract type is Cost Plus Fixed Fee, which carries inherent cost risk. 5. The duration of the contract is over 2.5 years. 6. The contract is managed by the Department of the Navy.

Value Assessment

Rating: fair

This contract's value is difficult to benchmark without more detailed cost breakdowns. The Cost Plus Fixed Fee (CPFF) structure can lead to cost overruns if not managed tightly. While the total award amount is substantial, the per-year value is moderate for a program of this scope. Further analysis would require comparing specific labor rates and overhead costs to industry standards for similar ERP support services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded through full and open competition, indicating that multiple vendors had the opportunity to bid. The presence of two bidders suggests a reasonable level of competition for this specialized service. This competitive process is generally expected to yield a fair market price.

Taxpayer Impact: Taxpayers benefit from the competitive bidding process, which aims to ensure the government receives the best value for its investment.

Public Impact

The primary beneficiaries are the Department of the Navy and its personnel, who rely on the ERP system for financial and operational management. Services delivered include functional expertise and production support critical for the ERP system's ongoing operation and maintenance. The geographic impact is primarily within the Department of the Navy's operational footprint, likely supporting various naval bases and commands. Workforce implications include the employment of skilled professionals in IT, project management, and functional areas related to ERP systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contract type introduces potential for cost escalation if not rigorously managed.
The duration of the contract (over two years) means sustained financial commitment.
Reliance on a single large contractor for critical ERP functions could pose a risk if performance falters.

Positive Signals

Awarded through full and open competition, suggesting a competitive process.
The contractor, IBM, is a well-established entity with significant experience in large-scale IT projects.
The contract supports a critical Navy program (ERP), indicating strategic importance.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting large-scale enterprise resource planning (ERP) systems. The market for ERP implementation and support services is substantial, driven by government and commercial entities seeking to integrate business processes. Comparable spending benchmarks would involve looking at other large federal IT support contracts, particularly those focused on complex system management and modernization.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. The prime contractor is IBM, a large corporation. There is no explicit information regarding subcontracting plans for small businesses within this data, which could be a missed opportunity for small business participation in supporting a major federal program.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Navy's contracting officers and program managers. Accountability measures are inherent in the CPFF contract structure, requiring the contractor to justify costs and demonstrate progress towards fixed-fee milestones. Transparency is generally facilitated through contract award databases and reporting requirements, though detailed performance metrics may not always be publicly available.

Related Government Programs

Navy ERP Program
Department of Defense IT Modernization Efforts
Federal Enterprise Resource Planning Systems
Government IT Services Contracts

Risk Flags

Cost Plus Fixed Fee contract type requires diligent oversight to manage costs.
Potential for vendor lock-in due to single large contractor award.
Limited public information on specific performance metrics and value benchmarks.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $70.9 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. NAVY ENTERPRISE RESOURCE PLANNING (ERP) PROGRAM MANAGEMENT OFFICE - FUNCTIONAL EXPERTISE AND PRODUCTION SERVICES (FEPS)

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 (Department of the Navy).

What is the total obligated amount?

The obligated amount is $70.9 million.

What is the period of performance?

Start: 2012-02-27. End: 2014-09-27.

What is the historical spending trend for the Navy's ERP Program Management Office, and how does this award compare?

Analyzing historical spending for the Navy's ERP Program Management Office (PMO) is crucial for context. While this specific award totals $70.9 million, understanding the PMO's budget over several fiscal years would reveal if this represents a typical investment or a significant increase/decrease. For instance, if previous years saw spending in the hundreds of millions for similar functional expertise and production services, this $70.9 million award might indicate a scaling down or a shift in contracting strategy. Conversely, if historical spending was much lower, this could signal an expansion of the ERP program or increased reliance on external support. Without access to the PMO's full budget history and prior contract awards for FEPS or equivalent services, it's challenging to definitively benchmark this award's significance within the program's lifecycle and overall financial trajectory.

How does the Cost Plus Fixed Fee (CPFF) structure for this contract potentially impact cost control and value for money compared to other contract types?

The Cost Plus Fixed Fee (CPFF) contract structure for this $70.9 million award presents a mixed bag regarding cost control and value for money. In a CPFF contract, the government reimburses the contractor for allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not precisely defined or involves a high degree of uncertainty, such as research and development or complex system integration. While the fixed fee provides some incentive for the contractor to control costs (as it doesn't increase with higher expenses), the government bears the risk of cost overruns if actual costs exceed estimates. This contrasts with Firm-Fixed-Price (FFP) contracts, where the contractor assumes most cost risk and is incentivized to be highly efficient. For value for money, CPFF can be beneficial if it allows for necessary flexibility and innovation in a complex program like the Navy's ERP. However, it requires robust government oversight to ensure costs are reasonable and allocable, and that the fixed fee remains appropriate for the work performed. Without strong oversight, CPFF contracts can be more expensive than FFP for the government.

What is IBM's track record with large-scale federal IT programs, particularly ERP systems, and does it indicate a lower risk profile for this contract?

IBM has a long and extensive track record with large-scale federal IT programs, including numerous Enterprise Resource Planning (ERP) system implementations and support contracts across various government agencies. Their experience spans decades and includes work on complex systems for defense, civilian, and intelligence communities. This extensive background suggests a generally lower risk profile for this specific contract, as IBM possesses established methodologies, experienced personnel, and a deep understanding of the challenges inherent in managing and maintaining such critical infrastructure. However, past performance is not a guarantee of future success. Specific risks can still arise depending on the unique requirements of the Navy's ERP system, the specific team assigned to this contract, and the effectiveness of the government's oversight. A thorough review would involve examining IBM's performance on comparable Navy or DoD ERP contracts, looking for any past issues related to cost overruns, schedule delays, or performance deficiencies.

Given the 'Engineering Services' NAICS code (541330), how does this contract align with typical engineering service procurements in terms of scope and value?

The North American Industry Classification System (NAICS) code 541330, 'Engineering Services,' is broad and encompasses a wide range of activities. For this contract, it signifies that the services provided by IBM involve specialized technical expertise, analysis, and design related to the Navy's Enterprise Resource Planning (ERP) system. Typically, engineering services contracts can range significantly in value and scope. This $70.9 million award over approximately 2.5 years ($28.4 million annually) falls into the upper-middle tier for federal engineering services, suggesting a substantial and complex undertaking. It aligns with procurements for major system development, integration, or sustainment where deep technical knowledge is required. Compared to smaller, more focused engineering tasks, this contract's value and duration indicate a long-term, strategic support role for a critical IT infrastructure. The 'functional expertise and production services' aspect points towards ongoing operational support and enhancement rather than initial design or pure R&D.

What are the potential implications of this contract being awarded to a single large contractor like IBM, especially concerning future competition and innovation?

Awarding this $70.9 million contract to a single large contractor like IBM has several potential implications. On the positive side, it can lead to efficiencies through economies of scale and a deep, integrated understanding of the Navy's complex ERP system by a single entity. This can streamline operations and potentially reduce coordination overhead. However, it also presents risks. A sole large contractor may reduce future competitive pressure, potentially leading to higher prices in subsequent contract renewals or modifications if the incumbent's position becomes entrenched. It could also stifle innovation if the contractor becomes complacent or if alternative solutions from smaller, more agile companies are overlooked. Furthermore, a heavy reliance on one vendor can create vendor lock-in, making it difficult and costly for the Navy to switch providers or adopt new technologies if needed. The government must actively manage this relationship to ensure continued performance, fair pricing, and openness to innovation throughout the contract's life.

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: N0002411R3291

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DR, BETHESDA, MD, 08

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $76,231,737

Exercised Options: $75,581,058

Current Obligation: $70,891,223

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0017805D4364

IDV Type: IDC

Timeline