IRS e-filing platform contract awarded to IBM for over $68.8 million, spanning four years

Contract Overview

Contract Amount: $68,816,547 ($68.8M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of the Treasury

Start Date: 2016-09-30

End Date: 2020-09-30

Contract Duration: 1,461 days

Daily Burn Rate: $47.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: IGF::CT::IGF FOR CRITICAL FUNCTIONS - TO PROVIDE AN INTERNET BASED E-FILING PLATFORM THAT ANY IRS FORM CAN USE. MEF IS A WEB BASED PLATFORM FOR FILING IRS TAX RETURNS, INFORMATION RETURNS, FORMS, AND SCHEDULES VIA THE INTERNET. MEF ALSO PROVIDES FUNCTIONALITY FOR SINGLE-POINT TRANSMISSION AND ACKNOWLEDGEMENT OF STATE RETURNS FOR REGISTERED THIRD PARTIES, ORIGINATORS, TRANSMITTERS, AND STATE AGENCIES, COLLECTIVELY KNOWN AS TRADING PARTNERS.

Place of Performance

Location: FAIRFAX, FAIRFAX County, VIRGINIA, 22033

State: Virginia Government Spending

Plain-Language Summary

Department of the Treasury obligated $68.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: IGF::CT::IGF FOR CRITICAL FUNCTIONS - TO PROVIDE AN INTERNET BASED E-FILING PLATFORM THAT ANY IRS FORM CAN USE. MEF IS A WEB BASED PLATFORM FOR FILING IRS TAX RETURNS, INFORMATION RETURNS, FORMS, AND SCHEDULES VIA THE INTERNET. MEF ALSO PROVIDES FUNCTIONALITY FOR SINGLE-POINT TRA… Key points: 1. The contract's value of over $68.8 million for a four-year period suggests a significant investment in critical IRS functions. 2. The platform's scope, encompassing e-filing for all IRS forms and state return transmission, indicates a broad impact on tax processing. 3. The use of a firm-fixed-price contract type aims to provide cost certainty for the government. 4. The contract was awarded under full and open competition, implying a potentially competitive bidding process. 5. The duration of the contract (1461 days) suggests a need for sustained service delivery and platform development. 6. The North American Industry Classification System (NAICS) code 541519 points to a focus on 'Other Computer Related Services'.

Value Assessment

Rating: good

The total contract value of $68.8 million over four years averages to approximately $17.2 million annually. This figure needs to be benchmarked against similar government IT platforms for critical functions to fully assess value for money. Given the complexity and criticality of the IRS e-filing system, this investment appears reasonable, assuming the platform delivers robust performance and security. The firm-fixed-price structure helps manage cost overruns.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit a bid. The data does not specify the number of bidders, but this procurement method generally fosters a competitive environment, which can lead to better pricing and innovation. The IRS's choice of this method suggests confidence in the market's ability to provide suitable solutions.

Taxpayer Impact: A full and open competition is beneficial for taxpayers as it increases the likelihood of securing the best possible price and service for essential government functions like tax processing.

Public Impact

Taxpayers benefit from a reliable and accessible internet-based platform for filing their tax returns. The Internal Revenue Service (IRS) benefits from an efficient and modern system for processing tax information. The platform facilitates the transmission and acknowledgment of state tax returns, benefiting state revenue agencies. Third-party tax preparers and software developers benefit from a standardized platform for electronic filing. The contract supports the modernization of tax administration, potentially leading to improved compliance and revenue collection.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in if the platform becomes highly specialized and difficult to transition away from.
Reliance on a single contractor for a critical national infrastructure could pose a risk if the contractor faces financial instability or operational issues.
The long-term sustainability and adaptability of the platform to evolving tax laws and technologies require ongoing monitoring.

Positive Signals

The use of a firm-fixed-price contract provides cost predictability for the government.
Awarding under full and open competition suggests a robust market engagement and potential for competitive pricing.
The contract's focus on critical IRS functions highlights its importance to national tax administration.

Sector Analysis

The Information Technology sector, specifically focusing on software development and IT services, is a significant area of federal spending. Contracts like this, for critical infrastructure such as tax processing, are common across various agencies. The market for such services is competitive, with large system integrators and specialized software firms vying for government business. Benchmarking this contract's value would involve comparing it to other large-scale government IT system development and maintenance contracts.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). While this specific contract may not directly involve small business set-asides, large IT contracts often have subcontracting requirements. It is possible that IBM, as the prime contractor, may engage small businesses for specific components or services, contributing to the small business ecosystem. However, without explicit subcontracting data, the direct impact on small businesses remains unclear.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Internal Revenue Service (IRS) contracting officers and program managers. The Treasury Inspector General for Tax Administration (TIGTA) would likely have audit and investigative jurisdiction over this contract, ensuring compliance, identifying waste, fraud, and abuse, and assessing program effectiveness. Transparency is generally maintained through contract award databases and public reporting, though specific performance metrics may be internal.

Related Government Programs

IRS Taxpayer Advocate Service
IRS Modernization and Information Technology Services
Federal IT Modernization Programs
Government Cloud Computing Services

Risk Flags

Critical Infrastructure Reliance
Cybersecurity Risk
Long-Term System Maintainability
Contractor Performance Monitoring

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $68.8 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. IGF::CT::IGF FOR CRITICAL FUNCTIONS - TO PROVIDE AN INTERNET BASED E-FILING PLATFORM THAT ANY IRS FORM CAN USE. MEF IS A WEB BASED PLATFORM FOR FILING IRS TAX RETURNS, INFORMATION RETURNS, FORMS, AND SCHEDULES VIA THE INTERNET. MEF ALSO PROVIDES FUNCTIONALITY FOR SINGLE-POINT TRANSMISSION AND ACKNOWLEDGEMENT OF STATE RETURNS FOR REGISTERED THIRD PARTIES, ORIGINATORS, TRANSMITTERS, AND STATE AGENCIES, COLLECTIVELY KNOWN AS TRADING PARTNERS.

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 $68.8 million.

What is the period of performance?

Start: 2016-09-30. End: 2020-09-30.

What is the track record of International Business Machines Corporation (IBM) in delivering large-scale IT systems for government agencies, particularly for tax administration?

IBM has a long and extensive history of providing IT services and solutions to government agencies, including the federal government. They have been involved in numerous large-scale projects, encompassing infrastructure, software development, cloud services, and data analytics. For tax administration specifically, IBM has had contracts with various tax authorities globally and within the U.S. Their experience includes developing and maintaining complex systems that handle sensitive data and high transaction volumes. However, like any large contractor, their performance can vary across projects, and specific contract performance reviews would be necessary for a detailed assessment. Past performance data, available through sources like the Federal Procurement Data System (FPDS), would offer insights into their success rates, any disputes, or contract modifications on similar projects.

How does the annual cost of this contract compare to similar federal IT e-filing or tax processing platforms?

The annual cost for this contract averages approximately $17.2 million ($68.8M / 4 years). Comparing this to similar federal IT platforms requires access to detailed data on other large-scale government IT systems, particularly those related to financial processing, citizen services, or tax administration. Publicly available data often lacks the granularity to make direct comparisons on a per-user or per-transaction basis. However, general benchmarks for large enterprise IT systems suggest that costs can range widely based on complexity, scope, and the level of customization required. For a critical system like the IRS e-filing platform, which handles millions of transactions and ensures data security, an annual investment in this range is not uncommon. A more precise comparison would involve analyzing contracts for systems like the Social Security Administration's IT infrastructure or the Department of Justice's case management systems, considering their respective user bases and functional requirements.

What are the primary risks associated with relying on IBM for the IRS e-filing platform, and what mitigation strategies are likely in place?

Primary risks include potential performance issues, cybersecurity vulnerabilities, vendor lock-in, and the contractor's financial stability. If IBM experiences significant operational failures, it could disrupt tax filing for millions of Americans and impact government revenue collection. Cybersecurity threats are a constant concern for any system handling sensitive financial data. Vendor lock-in can make future transitions or upgrades costly and complex. Mitigation strategies likely include robust Service Level Agreements (SLAs) with penalties for non-performance, stringent cybersecurity requirements and regular audits, phased transition plans for future contract renewals, and continuous monitoring of the contractor's financial health and performance. The IRS would also maintain contingency plans and potentially develop in-house expertise to reduce reliance.

How effective has the IRS e-filing platform been in meeting its objectives, based on historical performance or user feedback?

Assessing the effectiveness of the IRS e-filing platform requires access to specific performance metrics and user feedback data, which are not detailed in the provided contract information. Generally, the IRS has seen a significant increase in e-filing adoption over the years, indicating the platform's success in encouraging electronic submissions. The platform's ability to handle a high volume of returns, provide acknowledgments, and integrate with state systems are key indicators of effectiveness. However, challenges can arise, such as system downtimes during peak filing periods, issues with specific form submissions, or user interface complexities. The Treasury Inspector General for Tax Administration (TIGTA) often publishes reports that may contain assessments of system performance and recommendations for improvement, which would provide a more concrete measure of effectiveness.

What has been the historical spending pattern for the IRS e-filing platform or similar systems over the past five years?

The provided data covers a single contract award from September 30, 2016, to September 30, 2020, with a total value of $68.8 million. To understand historical spending patterns, one would need to examine prior contracts for the same or predecessor systems, as well as subsequent contracts awarded after 2020. This would involve querying federal procurement databases for all contracts related to the IRS e-filing platform or its core functionalities over a longer period. It's likely that spending has been consistent, reflecting the ongoing need for maintenance, upgrades, and operational support of a critical national system. Fluctuations might occur due to major system overhauls, technology shifts, or changes in filing requirements.

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#4241

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

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: $138,064,770

Exercised Options: $73,704,689

Current Obligation: $68,816,547

Actual Outlays: $21,613,128

Subaward Activity

Number of Subawards: 65

Total Subaward Amount: $11,434,234

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