IBM awarded $315M for Army's GFEBS sustainment, a large IT services contract

Contract Overview

Contract Amount: $315,490,272 ($315.5M)

Contractor: International Business Machines Corporation

Awarding Agency: Department of Defense

Start Date: 2016-12-22

End Date: 2022-01-31

Contract Duration: 1,866 days

Daily Burn Rate: $169.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: IGF::OT::IGF GENERAL FUND ENTERPRISE SYSTEM (GFEBS) SUSTAINMENT AWARD

Place of Performance

Location: BETHESDA, MONTGOMERY County, MARYLAND, 20817

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $315.5 million to INTERNATIONAL BUSINESS MACHINES CORPORATION for work described as: IGF::OT::IGF GENERAL FUND ENTERPRISE SYSTEM (GFEBS) SUSTAINMENT AWARD Key points: 1. Contract value represents a significant investment in enterprise resource planning (ERP) systems. 2. The award was made under full and open competition, suggesting a robust bidding process. 3. Duration of over 5 years indicates a long-term need for these IT services. 4. The contract is for Computer Systems Design Services, a critical area for government IT. 5. IBM's extensive experience in large-scale IT projects positions them as a capable provider. 6. The firm fixed-price nature of the contract aims to control costs and manage financial risk.

Value Assessment

Rating: good

The contract value of $315.5 million over approximately 5 years for ERP sustainment is substantial. Benchmarking against similar large-scale government IT sustainment contracts, this award appears to be within a reasonable range for the scope of services. The firm fixed-price structure suggests an effort to ensure predictable costs for the government, though the total value is high due to the extended duration and complexity of maintaining a system like GFEBS. Without specific per-unit cost data, a precise value-for-money assessment is challenging, but the competitive award process provides some assurance.

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 a bid. The presence of 5 bidders suggests a healthy level of competition for this significant IT services requirement. A competitive process like this is generally expected to drive down prices and encourage innovative solutions, leading to better value for the government compared to sole-source or limited competition awards.

Taxpayer Impact: Taxpayers benefit from the competitive nature of this award, as it likely resulted in a more favorable price and better service terms than would have been achievable through a less competitive procurement. The multiple bids provide a benchmark for fair pricing.

Public Impact

The primary beneficiaries are the Department of the Army and its personnel, who rely on the GFEBS for financial management and operational support. The services delivered include sustainment, maintenance, and potentially enhancements for the General Fund Enterprise Business System. The geographic impact is nationwide, supporting Army operations across various installations and commands. This contract supports a significant IT workforce, likely involving specialized skills in systems administration, software development, and cybersecurity.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long-term sustainment contracts can sometimes lead to vendor lock-in, potentially limiting future flexibility or cost-saving opportunities.
The sheer scale and complexity of GFEBS sustainment present inherent risks of performance issues or cost overruns, despite the fixed-price structure.
Reliance on a single contractor for such a critical system requires robust oversight to ensure continued security and operational integrity.

Positive Signals

Awarded through full and open competition, indicating a strong market response and potential for competitive pricing.
The firm fixed-price contract type provides cost certainty for the government over the contract period.
IBM's established track record in large-scale government IT projects suggests a high likelihood of successful performance.
The contract duration of over 5 years demonstrates a commitment to stable, long-term support for a vital system.

Sector Analysis

This contract falls within the Information Technology sector, specifically focusing on enterprise resource planning (ERP) system sustainment. The market for government IT services, particularly for large, complex systems like GFEBS, is substantial and highly competitive. Major IT service providers like IBM compete for these long-term contracts, which often involve significant dollar values and require deep technical expertise. Comparable spending benchmarks for similar ERP sustainment contracts within the federal government would likely be in the hundreds of millions of dollars over several years.

Small Business Impact

This contract was not awarded as a small business set-aside, and there is no indication of specific subcontracting goals for small businesses in the provided data. As a large prime contract awarded to IBM, the primary impact on small businesses would be through potential subcontracting opportunities. The extent to which IBM engages small businesses for specialized services or support will determine the direct impact on the small business ecosystem for this particular award.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Army's contracting and program management offices. Accountability measures are inherent in the firm fixed-price contract terms, with penalties or remedies for non-performance. Transparency is facilitated by the contract award being publicly available through federal procurement databases. While specific Inspector General (IG) jurisdiction isn't detailed, the Department of Defense IG typically has oversight over major defense contracts.

Related Government Programs

Army Financial Management Systems
Enterprise Resource Planning (ERP) Systems
Defense Business Systems
IT Services Contracts
Major IT Investments

Risk Flags

Long-term contract duration
High contract value
Critical system sustainment

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $315.5 million to INTERNATIONAL BUSINESS MACHINES CORPORATION. IGF::OT::IGF GENERAL FUND ENTERPRISE SYSTEM (GFEBS) SUSTAINMENT AWARD

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 Army).

What is the total obligated amount?

The obligated amount is $315.5 million.

What is the period of performance?

Start: 2016-12-22. End: 2022-01-31.

What is IBM's track record with large federal IT sustainment contracts?

IBM has a long and extensive history of managing and sustaining large-scale IT systems for various federal agencies, including the Department of Defense. They are a major player in the federal IT services market, consistently winning significant contracts for areas such as cloud computing, cybersecurity, enterprise resource planning (ERP), and data analytics. Their track record includes managing complex systems with multi-year durations and substantial budgets, similar to the GFEBS sustainment award. While specific performance metrics for all past contracts are not publicly detailed, their continued success in winning competitive bids suggests a generally positive performance history and a strong capability to deliver on complex IT requirements for the government.

How does the $315.5 million value compare to other federal IT sustainment contracts?

The $315.5 million value for a 5-year sustainment contract for a critical system like the Army's GFEBS is substantial but falls within the expected range for major federal IT procurements. Large-scale sustainment contracts for enterprise resource planning (ERP) systems, especially within the Department of Defense, often run into hundreds of millions of dollars due to the complexity, scope, and duration of support required. For instance, similar sustainment contracts for other large federal ERP systems or core IT infrastructure have also been awarded in the tens to hundreds of millions of dollars over similar timeframes. The value is indicative of the critical nature and extensive functionality of the GFEBS.

What are the primary risks associated with a contract of this nature and duration?

The primary risks associated with a long-term IT sustainment contract like this include potential cost overruns if the fixed-price model doesn't adequately account for unforeseen technical challenges or scope creep, although the fixed-price nature aims to mitigate this. There's also a risk of vendor lock-in, where the government becomes overly dependent on IBM, potentially limiting future flexibility or negotiation power. Performance risks, such as system downtime, security vulnerabilities, or failure to meet service level agreements, are inherent in managing complex IT systems. Furthermore, changes in technology or government requirements over the contract's 5-year lifespan could necessitate costly modifications or lead to system obsolescence if not managed proactively.

How effective is a firm fixed-price contract for managing IT sustainment?

A firm fixed-price (FFP) contract is generally considered effective for managing IT sustainment when the scope of work is well-defined and risks are understood. It provides the government with cost certainty, as the contractor assumes most of the risk for cost overruns. This structure incentivizes the contractor to control costs and improve efficiency to maximize profit. For sustainment, where the core services are ongoing maintenance and support, FFP can be suitable. However, if significant unforeseen technical issues arise or if the government requires substantial changes to the system, an FFP contract might become less flexible, potentially leading to change order negotiations or disputes. Its effectiveness hinges on accurate initial scope definition and robust contract management.

What is the historical spending trend for GFEBS sustainment or similar Army IT systems?

Historical spending on the General Fund Enterprise Business System (GFEBS) and similar Army IT systems has been significant, reflecting the critical role these platforms play in financial management and operations. While specific year-over-year sustainment costs for GFEBS prior to this award are not detailed in the provided data, the initial development and implementation phases of such large ERP systems often involve hundreds of millions of dollars. Subsequent sustainment contracts, like this $315.5 million award over five years, represent a substantial ongoing investment. The Army, like other branches of the DoD, consistently invests heavily in modernizing and maintaining its IT infrastructure, with sustainment often representing a significant portion of the total lifecycle cost for major systems.

Industry Classification

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

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W52P1J15R0003

Offers Received: 5

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 6710 ROCKLEDGE DRIVE, BETHESDA, MD, 20817

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: $315,490,272

Exercised Options: $315,490,272

Current Obligation: $315,490,272

Actual Outlays: $4,019,409

Subaward Activity

Number of Subawards: 58

Total Subaward Amount: $55,395,128

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline