IBM's $93M contract for IRS critical IT functions shows fair value, but limited competition raises concerns

Contract Overview

Contract Amount: $92,970,950 ($93.0M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of the Treasury

Start Date: 2015-09-09

End Date: 2021-03-13

Contract Duration: 2,012 days

Daily Burn Rate: $46.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: IGF::CT::IGF FOR CRITICAL FUNCTIONS - ACA COVERAGE DATA RESPOSITORY DATABASE AND INFORMATION RETURNS DATABASE.

Place of Performance

Location: LANHAM, PRINCE GEORGES County, MARYLAND, 20706

State: Maryland Government Spending

Plain-Language Summary

Department of the Treasury obligated $93.0 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: IGF::CT::IGF FOR CRITICAL FUNCTIONS - ACA COVERAGE DATA RESPOSITORY DATABASE AND INFORMATION RETURNS DATABASE. Key points: 1. Value for money appears reasonable given the scope of critical IT infrastructure support. 2. Competition was limited, potentially impacting price discovery and overall cost-effectiveness. 3. Risk indicators are moderate, with a focus on maintaining essential government IT systems. 4. Performance context involves long-term support for vital IRS data repositories. 5. Sector positioning is within the government IT services market, a common area for large contractors.

Value Assessment

Rating: good

The contract's value of approximately $93 million over its period of performance appears reasonable for supporting critical IT functions for the IRS. Benchmarking against similar large-scale IT support contracts for federal agencies suggests that the pricing is within an expected range. However, without more granular data on specific services and labor rates, a definitive value-for-money assessment is challenging. The fixed-fee component provides some cost control, but the cost-plus nature allows for flexibility in addressing unforeseen technical needs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely considered. The presence of a single award, however, suggests that IBM was the most advantageous offer. The level of competition, while broad initially, resulted in a single prime contractor, which is typical for complex, long-term IT infrastructure projects. This approach aims to ensure the best value is obtained through a structured evaluation process.

Taxpayer Impact: Full and open competition is generally beneficial for taxpayers as it encourages a wider range of potential solutions and drives competitive pricing. While this specific award went to one contractor, the initial competitive process helps ensure that the selected vendor offers the best combination of technical capability and cost.

Public Impact

Taxpayers benefit from the reliable operation of critical IRS data repositories, ensuring accurate tax processing and information returns. The contract delivers essential IT infrastructure support, database management, and information technology services to the Internal Revenue Service. The geographic impact is national, as the IRS serves all taxpayers across the United States. Workforce implications include the employment of IT professionals by IBM and potentially its subcontractors to fulfill the contract requirements.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in due to the specialized nature of critical IT systems.
Reliance on a single contractor for essential services could pose risks if performance degrades.
Cost overruns are possible with cost-plus contracts if not managed rigorously.

Positive Signals

IBM's established track record in large-scale government IT projects.
The contract's focus on maintaining critical infrastructure ensures continuity of essential government services.
The fixed-fee component provides a degree of cost predictability for the government.

Sector Analysis

This contract falls within the government IT services sector, a significant segment of federal spending. The market is characterized by large, established players like IBM, alongside a growing number of specialized firms. Federal agencies increasingly rely on contractors for complex IT operations, data management, and cybersecurity. Comparable spending benchmarks for similar IT infrastructure support contracts often range in the tens to hundreds of millions of dollars, depending on the scope and duration.

Small Business Impact

While this contract was awarded to IBM, there is no explicit indication of a small business set-aside. Large prime contracts like this often involve subcontracting opportunities, which could potentially benefit small businesses. However, the extent of small business participation is not detailed in the provided data. Agencies are encouraged to ensure small businesses have opportunities to participate in the federal supply chain, even on large prime contracts.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and program managers within the IRS. The contract's cost-plus-fixed-fee structure necessitates diligent monitoring of expenditures and performance to ensure compliance and value. Inspector General jurisdiction would likely apply to investigations of fraud, waste, or abuse related to the contract. Transparency is generally maintained through contract award databases and reporting requirements.

Related Government Programs

IRS IT Modernization Initiatives
Federal Civilian IT Infrastructure Support
Large-Scale Database Management Contracts
Government Information Technology Services

Risk Flags

Potential for cost overruns due to CPFF structure.
Reliance on a single vendor for critical functions.
Need for robust oversight to ensure value for money.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $93.0 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. IGF::CT::IGF FOR CRITICAL FUNCTIONS - ACA COVERAGE DATA RESPOSITORY DATABASE AND INFORMATION RETURNS DATABASE.

Who is the contractor on this award?

The obligated recipient is INTERNATIONAL BUSINESS MACHINES CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of the Treasury (Internal Revenue Service).

What is the total obligated amount?

The obligated amount is $93.0 million.

What is the period of performance?

Start: 2015-09-09. End: 2021-03-13.

What is IBM's track record with the IRS and similar federal agencies for IT support contracts?

IBM has a long history of providing IT services to the federal government, including extensive work with the IRS and other agencies like the Department of Defense and NASA. Their track record typically involves managing large, complex IT infrastructures, developing and maintaining critical systems, and providing cybersecurity solutions. For the IRS specifically, IBM has been involved in various projects related to tax processing, data management, and modernization efforts. While generally considered a reliable large contractor, performance can vary across specific contracts, with occasional reviews highlighting areas for improvement in project management or cost control, as is common with many large IT service providers operating at this scale.

How does the $93 million contract value compare to other IRS IT support contracts?

The $93 million contract value for IGF::CT::IGF FOR CRITICAL FUNCTIONS - ACA COVERAGE DATA RESPOSITORY DATABASE AND INFORMATION RETURNS DATABASE is substantial, reflecting the critical nature and long duration of the services provided. Comparing it to other IRS IT contracts requires access to a broader dataset of historical and current procurements. However, based on general knowledge of federal IT spending, contracts in the range of $10-100 million are common for significant IT infrastructure support, system development, or maintenance over multi-year periods. Larger, agency-wide modernization efforts can easily exceed this amount. This specific contract appears to be a significant but not unprecedented investment for maintaining core IRS IT operations.

What are the primary risks associated with this type of cost-plus-fixed-fee contract for critical IT functions?

Cost-plus-fixed-fee (CPFF) contracts, while offering flexibility for evolving technical requirements, carry inherent risks. For the government, the primary risk is potential cost overruns if the contractor's actual costs exceed initial estimates significantly, although the fixed fee provides some predictability. There's also a risk of scope creep if requirements are not tightly managed. For the contractor, the risk lies in underestimating costs, which could reduce their profit margin. Effective oversight, robust cost tracking, and clear performance metrics are crucial to mitigate these risks and ensure the government receives good value. The CPFF structure requires diligent management to prevent inefficiencies from being passed on.

How effective has IBM been in delivering similar IT services to the federal government in terms of performance and meeting deadlines?

IBM's performance in delivering IT services to the federal government is generally characterized by its capacity to handle large, complex projects. Reviews and contract performance reports (like CPARs) for IBM's federal contracts often indicate successful delivery of technical requirements, though sometimes with notes on schedule adherence or communication. For critical infrastructure, reliability and uptime are paramount, and IBM typically meets these baseline expectations. However, like any major contractor, there can be instances where specific projects face challenges related to scope changes, integration complexities, or resource allocation. Overall, IBM is considered a capable provider for large-scale government IT needs, but continuous monitoring is essential.

What are the historical spending patterns for IT support services at the IRS, and how does this contract fit in?

The IRS has consistently allocated significant portions of its budget to IT operations and modernization over the years. Historical spending patterns show a trend towards outsourcing complex IT functions to large contractors to leverage specialized expertise and manage costs. Contracts for maintaining core systems, processing tax data, and enhancing cybersecurity are recurring expenditures. This $93 million contract for critical functions fits within this pattern as a substantial investment in ensuring the stability and functionality of essential IRS IT infrastructure. It represents a significant, but not outlier, expenditure within the broader context of the IRS's ongoing IT needs and modernization efforts.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Other Computer Related 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: TTN 4230

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DR, BETHESDA, MD, 20817

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

Financial Breakdown

Contract Ceiling: $103,137,555

Exercised Options: $101,651,043

Current Obligation: $92,970,950

Actual Outlays: $21,091,724

Subaward Activity

Number of Subawards: 65

Total Subaward Amount: $8,759,837

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: TIRNO11D00022

IDV Type: IDC

Timeline