Treasury's $80M IT services contract with Northrop Grumman shows fair value, but limited competition raises concerns

Contract Overview

Contract Amount: $79,954,150 ($80.0M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of the Treasury

Start Date: 2012-01-01

End Date: 2016-06-30

Contract Duration: 1,642 days

Daily Burn Rate: $48.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: CRITICAL - PRPS CONTRACT

Place of Performance

Location: CHANTILLY, FAIRFAX County, VIRGINIA, 20151

State: Virginia Government Spending

Plain-Language Summary

Department of the Treasury obligated $80.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: CRITICAL - PRPS CONTRACT Key points: 1. Contract value appears reasonable given the duration and scope of IT services. 2. Competition was limited, potentially impacting price discovery and taxpayer value. 3. Northrop Grumman has a strong track record, but this specific contract's performance needs context. 4. The contract falls within the 'Other Computer Related Services' category, a common area for federal IT spending. 5. This contract represents a small fraction of overall federal IT expenditures. 6. The fixed-price nature of the contract shifts performance risk to the contractor.

Value Assessment

Rating: fair

The contract's total value of approximately $80 million over roughly four years suggests a moderate annual spend. Benchmarking against similar IT services contracts for the IRS or Treasury would be necessary for a definitive value assessment. However, the fixed-price structure generally indicates a pre-negotiated value, and the duration implies a significant, ongoing need for these services. Without more granular data on the specific services rendered and comparable market rates, a precise value-for-money judgment is challenging, but the overall spend seems within a plausible range for complex IT support.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. The presence of three bidders suggests a degree of competition, though the specific number doesn't inherently guarantee optimal price discovery. The fact that it was competed openly is a positive sign for fairness and potential cost savings compared to sole-source awards. Further analysis would involve examining the number of proposals received and the evaluation criteria used to ensure a robust competitive process.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a competitive environment that can drive down prices and encourage innovation. It ensures that the government is not locked into a single provider, allowing for better price negotiation and a wider pool of potential service providers.

Public Impact

The Internal Revenue Service (IRS) benefits from enhanced IT infrastructure and support services. Services delivered likely include system maintenance, upgrades, and potentially new IT development. The primary geographic impact is within the IRS's operational centers, likely concentrated in Virginia. The contract supports a workforce of IT professionals, both within the contractor and potentially within the IRS through knowledge transfer.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited number of bidders in a large IT contract could indicate barriers to entry or pre-qualification challenges.
The duration of the contract (over 4 years) means potential for cost overruns if not managed tightly.
Reliance on a single large contractor for critical IT services can create vendor lock-in risks.

Positive Signals

Awarded through full and open competition, suggesting a fair and transparent process.
Fixed-price contract shifts performance risk to the contractor, potentially protecting the government from cost overruns.
Northrop Grumman is a large, established defense and aerospace contractor with significant IT capabilities.

Sector Analysis

This contract falls under the broad 'Information Technology Services' sector, specifically 'Other Computer Related Services'. This sector is a significant portion of federal spending, encompassing a wide range of IT support, consulting, and development. The market is characterized by large prime contractors like Northrop Grumman, as well as numerous specialized small and medium-sized businesses. Federal IT spending benchmarks vary widely by service type, but contracts of this magnitude are common for supporting large agency operations.

Small Business Impact

The contract data indicates that small business participation was not a primary focus, as the 'ss' (small business set-aside) flag is false and the 'sb' (small business) flag is also false. This suggests the contract was not specifically set aside for small businesses. While Northrop Grumman is a large business, there may be opportunities for small businesses to participate as subcontractors. However, the absence of explicit small business goals or set-asides means their inclusion is not guaranteed and depends on the prime contractor's subcontracting strategy.

Oversight & Accountability

Oversight for this contract would primarily reside with the contracting officers and program managers within the IRS and the Department of the Treasury. Accountability measures are typically embedded in the contract's performance work statement, including service level agreements and reporting requirements. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply if any allegations of fraud, waste, or abuse arise during the contract's performance.

Related Government Programs

IRS IT Modernization Efforts
Treasury Department IT Infrastructure Support
Federal Civilian Agency IT Services
Northrop Grumman Government Contracts

Risk Flags

Potential for vendor lock-in due to long-term IT services contract.
Limited competition may have resulted in suboptimal pricing.
Cybersecurity risks inherent in managing critical IRS IT systems.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $80.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. CRITICAL - PRPS CONTRACT

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS 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 $80.0 million.

What is the period of performance?

Start: 2012-01-01. End: 2016-06-30.

What specific IT services were provided under this contract?

While the contract falls under NAICS code 541519 (Other Computer Related Services), the specific services rendered are not detailed in the provided data. Typically, this category can encompass a wide array of IT support, including but not limited to network management, system administration, software maintenance and support, IT consulting, cybersecurity services, and data center operations. For the IRS, these services are critical for maintaining the operational integrity of tax processing systems, taxpayer databases, and internal agency IT infrastructure. A deeper dive into the contract's Performance Work Statement (PWS) or Statement of Work (SOW) would be required to ascertain the precise deliverables and scope of services.

How does the $80 million contract value compare to similar IRS IT contracts?

Comparing the $80 million total contract value requires context regarding the contract's duration and the specific IT services procured. This contract spanned approximately 4 years (from Jan 2012 to June 2016), equating to an average annual spend of roughly $20 million. The IRS procures a vast range of IT services, from large-scale system development to specialized support. Without knowing the exact nature of the services (e.g., infrastructure, software development, cybersecurity), direct comparison is difficult. However, $20 million annually for IT services is a substantial but not uncommon figure for a large agency like the IRS, which manages highly complex and critical systems. Benchmarking against other contracts for similar services (e.g., network operations, application support) awarded during the same period would provide a more accurate assessment of value.

What are the key performance indicators (KPIs) associated with this contract?

The provided data does not explicitly list the Key Performance Indicators (KPIs) for this contract. However, for an IT services contract of this nature, typical KPIs would likely include metrics related to system uptime and availability, response times for issue resolution, successful completion of maintenance tasks, adherence to security protocols, and project delivery timelines if development work was included. The contract's fixed-price nature suggests that performance standards would be clearly defined in the Performance Work Statement (PWS), with potential penalties for non-performance or incentives for exceeding expectations. The contracting officer's representative (COR) would be responsible for monitoring these KPIs.

What is Northrop Grumman's track record with the IRS and Treasury?

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience providing IT and other services to various U.S. government agencies, including the IRS and Treasury. While this specific contract data doesn't detail their overall performance history, Northrop Grumman has historically held numerous large contracts with these departments. Their track record generally involves complex system integration, cybersecurity, and IT infrastructure support. Assessing their performance on this specific $80 million contract would require reviewing past performance evaluations, any contract disputes, and user feedback from the IRS program office. Generally, large contractors like Northrop Grumman are expected to meet stringent performance requirements.

Were there any significant risks identified or managed during the contract period?

The provided summary data does not detail specific risks identified or managed during the contract's performance period (2012-2016). However, common risks associated with large IT service contracts include cybersecurity threats, system integration challenges, vendor performance issues, cost overruns (less likely with fixed-price), and scope creep. Given the nature of IRS systems, cybersecurity risks would likely have been a paramount concern. The contract's full and open competition and fixed-price structure suggest an attempt to mitigate some financial and performance risks. Effective risk management would have involved proactive identification, mitigation planning, and continuous monitoring by both the contractor and the government.

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

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 4807 STONECROFT BLVD, CHANTILLY, VA, 20151

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

Financial Breakdown

Contract Ceiling: $81,663,731

Exercised Options: $80,131,008

Current Obligation: $79,954,150

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: TIRNO11D00027

IDV Type: IDC

Timeline