5-BAFO-Attachment 9 - BPM004453 Offeror Questionnaire.pdf

Attachment 9 – Offeror Questionnaire Solicitation No. BPM004453

DCS IT Maintenance and Operating Services

State of Arizona Department of Child Safety

Office of Procurement & Contracts

3003 N. Central Avenue Phoenix, AZ 85012

Table of Contents Page 1 of 131 3

A v a i l a b l e o n l i n e a t : A P P . A Z . g o v

Offeror Questionnaire

TABLE OF CONTENTS

OFFEROR QUESTIONNAIRE

EXPERIENCE AND CAPACITY QUESTIONNAIRE

METHODOLOGY AND APPROACH QUESTIONNAIRE

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Office of Procurement & Contracts

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Experience and Capacity Questionnaire

The Offeror shall provide a concise narrative response to each question that explains exactly how the Offeror plans to meet each of the requirements described Part 1, Section 1-A Scope of Work. The Offeror is expected to provide a concise narrative response that clearly explains exactly how the Offeror plans to meet each of the requirements described.

Where appropriate, the Offeror is encouraged to provide examples of how and where similar requirements are being met with other clients. The Offeror should use illustrations, diagrams, screenshots and/or other sample material to provide additional clarity. The narrative shall include a response to all elements stated or referred to in each item. If there is a question that is not applicable to the services required by the Scope of Work, you may mark it N/A.

Offerors are highly discouraged from using ‘boilerplate’ language or other extraneous generic marketing materials that either do not directly pertain to the requirements of this RFP or to the goals and objectives of DCS. It is not sufficient to simply restate a requirement or to provide promotional material that does not materially support the Contractor’s response and superfluous or unnecessarily verbose responses are discouraged.

EXPERIENCE AND CAPACITY QUESTIONS:

Question 1: Company Profile. The Offeror must include a narrative description of its organization. The narrative must include the following:

1.1 Brief overview of business operations, with an emphasis on experience in regard to the scope of work;

1.2 Date established;

1.3 Ownership (public, partnership, subsidiary, etc.);

1.4 Location in which the Offeror is incorporated;

1.5 Address of “Main Office” (e.g. Corporate Headquarters and any satellite offices responsible for performance of proposed tasks;

1.6 Offeror's organizational chart relevant to the Contract, specifically identifying the key point of contact for all questions related to the submitted offer;

1.7 Full disclosure of any potential conflict of interest between the Offeror and any State employee who functions or has responsibilities in the review or approval of the undertaking or carrying out of the Contract;

1.8 A Statement of whether, in the last five (5) years, the Offeror has filed (or had filed against it) any bankruptcy or insolvency proceeding, whether voluntary or involuntary, or undergone the appointment of a receiver, trustee, or assignee for the benefit of creditors, and if so, an explanation providing relevant details and current status;

1.9 A Statement of whether there are any pending Securities Exchange Commission investigations involving the Offeror, and if such are pending or in progress, an explanation providing relevant details and an attached opinion of counsel as to whether the pending investigation(s) may impair the Offeror’s performance in a Contract under this RFP;

1.10 A Statement documenting all open or pending litigation initiated by Offeror or where Offeror is a defendant or party in any litigation that may have a material impact on Offeror’s ability to deliver the contracted services;

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1.11 A Statement documenting all open or pending litigation initiated by Offeror or where Offeror is a defendant or party in any litigation with a Public sector client;

1.12 Full disclosure of any Public Sector contracts terminated for cause or convenience in the past five (5) years; and,

1.13 Full disclosure of any criminal or civil offense.

1.14 Offeror shall provide evidence of any Arizona required business license to provide these services.

1.15 Offeror shall provide copies of any professional or industry certifications that represent the services detailed in this RFP.

Offeror Response:

1.1 IBM has been a trusted partner providing consulting services and technical solutions for public sector health and human service (HHS) social program clients for over 100 years. In 1918, IBM started working with one of the European pension agencies as WWI was ending. The Social Security Administration was our first client in the United States in 1934. Today, we have clients in 170 countries and virtually every state relies upon IBM products and solutions to deliver their health and human services and social programs. We also have a global team that continuously knits together ideas and best practices accumulated from our work with clients around the world that often serves to benefit our existing HHS clients.

Aligned to our corporate values of trust and transparency, our teams have worked judiciously to create trusted and transparent relationships with each of our clients – many resulting in long lasting, incredibly effective partnerships to explore innovation in the HHS space. Our HHS clients know that they can count on us with their everyday challenges, such as the need to access the right elements of data to create a holistic view of their clients, resulting in better service care and delivery. Our HHS clients also know that they can count on us in their times of crisis, such as leaning on us to co-create a COVID return to work plan for employers and their employees or co-create a solution that supports caseworker decision-making when a natural disaster rapidly broadens the pool of those in need of services.

Of particular relevance to this solicitation and similarity to AZ DCS’ scope of work, IBM is the long-time M&O and Enhancements provider for the Florida Department of Children and Families’ Florida Safe Families Network (FSFN) application and also California’s Child Welfare Services/Case Management System (CWS/CMS) application. In the last 5 years, IBM has also helped HHS clients modernize their service delivery models with technology enablers that more rapidly connect citizens-in-need to critical services in California counties such as Sonoma, San Diego, and Orange County.

Our HHS solutions have also helped millions of New Yorkers more successfully access city services and program information through IBM’s work to modernize the city’s 311 system.

Like the system referenced in this RFP, many of the systems referenced above demand 24/7/365 reliability. They must be intuitive and practical for users of all backgrounds or experience levels, not just the tech-savvy few. They must first be designed hand-in-hand with business stakeholders that include executives, administrators, and a diverse representation of front-line workforce roles. IBM believes this is absolutely essential to achieve a system that meets the needs of the workforce and can be more seamlessly adopted, avoiding unnecessary interruption in the service provisions critical to many.

In working with IBM, Arizona will benefit from experienced staff with domain expertise and a proven track record of delivering reliable, usable, and high-performing products as well as maintaining and enhancing your existing Guardian systems. Arizona will also benefit from a dedicated partnership with IBM who shares the child welfare mission and CCWIS vision for designing and implementing a technical solution that better equips the agency’s workforce. IBM is comprised of inclusive innovators who will work with Arizona stakeholders to understand how cutting-edge technologies can be applied to improve the Department of Child Services’ ability to strengthen families, ensure the safety of children, and help them achieve permanency.

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In a broader view of the IBM organization and business operations, IBM Consulting helps clients design and build open, hybrid cloud architectures and optimize key workflows and business processes. Our Consulting organization comprises three focused divisions:

§ Business Transformation services enable clients to apply IBM and ecosystem partner technologies at scale to transform key workflows, processes, and domains.

§ Technology Consulting helps clients to architect and implement cloud platforms and strategies to transform their enterprise experience and enable innovation.

§ Application Operations focuses on application and cloud platform services required to operationalize and run hybrid cloud platforms. It facilitates clients’ efforts to manage, optimize, and orchestrate application and data workloads across environments through both custom applications and independent software vendor and enterprise resource planning packages.

Figure 1: IBM Consulting divisions and capabilities

IBM’s Application Operations division will be responsible for operating and maintaining the AZ DCS Guardian Case Management System and delivering the services required in this RFP. Our Application Operations consultants bring deep business transformation and industry experience, knowledge and experience with cloud technologies and ecosystem partner solutions, and decades of IT project delivery and support experience.

IBM Consulting has the required credentials, experience, and key expertise to support the scope of the AZ DCS Guardian Service case management system, with over a decade of Dynamics 365 implementation experience and our consultants have over 20,000 Azure Certifications. IBM is one of the few companies in the world that is a Gold Partner in all the Microsoft disciplines (Cloud Business Applications, Cloud Platform, and Security) required to successfully support the Guardian application.

1. Microsoft Gold Partner: IBM is the world’s largest Microsoft partner, with 1,000+ successfully completed migrations and modernizations in the last 12 months alone. A Microsoft Gold partner is a partner committed to earning the highest level of company customer care and collaborative relationship with Microsoft. IBM is proud to be a Gold Partner in the relevant competencies:

§ Gold Cloud Platform § Gold Cloud Business Applications

§ Gold DevOps § Gold Application Integration

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§ Gold Security § Gold Application Development § Gold Project and Portfolio Management § Gold Data Platform

§ Gold Data Analytics § Gold Enterprise Mobility Management § Gold Small and Midmarket Cloud Solutions

§ Gold Communications § Gold Collaboration and Content § Gold Datacenter § Gold Cloud Productivity

§ Gold Messaging § Gold Windows and Devices

2. Child Welfare Expertise: IBM provides operations and maintenance support of child welfare systems for two of the largest states in the country, serving populations of more than 30,000 users. We understand the critical nature of these systems and the impact they have on the safety and well-being of children and families.

3. Presence and Longevity: IBM has the capabilities to meet industry and market needs locally, regionally, and globally. Our company has a long history and yet has continued to evolve, transforming over decades, refocusing, and integrating the latest technologies into our thinking and offerings, to provide greater value for our clients.

4. Managed Service Capability: Our offerings and service lines are organized to meet client needs at different phase their transformation journey, from consult, to implement, to manage, to operations and maintenance. Our clients trust IBM to continuously deliver value through our Application Managed Services. 95% of our clients continue to use IBM for managed services, renewing project work year over year.

5. Program Management Services: Unique to IBM Consulting is the end-to-end nature of our engagement and delivery methods. Through IBM Garage and Dynamic Delivery, we integrate technology foundations on the cloud with virtualized Agile methods and practices. IBM assures quality throughout the project lifecycle with standard methods and tooling for managing complexity within an integrated partner ecosystem.

1.2-1.5 IBM incorporated in the State of New York on June 16, 1911. IBM is a widely held, publicly traded company listed on the New York Stock Exchange with corporate headquarters at 1 New Orchard Road, Armonk, New York 10504.

1.6 IBM Consulting’s organizational chart and key contacts to support the AZ DCS Guardian system is provided here:

Figure 2: IBM Organizational Chart

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1.7-1.15 IBM is not aware of and does not foresee any conflict of interest with AZ State employee pertaining to the review or approval of our proposal or the carrying out of the commitments in the Contract. IBM does not make the details of past, pending, or current litigation generally available. However, IBM has not filed for bankruptcy and represents that there is no pending litigation that would prevent IBM from discharging its obligations under a contract finally awarded to IBM, including obligations related to the provisions of IBM products and services thereunder. Legal disclosure information that does exist is available in Form 10-K, Part I, Item 3 - legal proceedings in the annual report filed with the Securities and Exchange Commission. Please refer to the following website for more information:

www.ibm.com/annualreport. It is not IBM policy to make public the details regarding contracts that may have been terminated for default. However, IBM is not aware of any issue or situation that would prohibit IBM from complying with the terms of a contract awarded to IBM resulting from this RFP.

IBM is licensed to conduct business in the State of Arizona. Our business license is provided here:

Figure 3: IBM Certificate to Conduct Business in the State of Arizona

Arizona Corporation Commission https://ecorp.azcc.gov/BusinessSearch/BusinessInfo?entityNumber=F00436811[7/16/2022 5:14:17 PM]

ENTITY INFORMATION

Search Date and Time: 7/16/2022 3:13:15 PM

Title Name Attention Address Date of Taking Office

Last Updated

Entity Details

Entity Name: INTERNATIONAL BUSINESS

MACHINES CORPORATION

Entity ID: F00436811

Entity Type: Foreign For-Profit (Business) Corporation

Entity Status: Active

Formation Date: 9/7/1989 Reason for Status: In Good Standing

Approval Date: 9/7/1989 Status Date:

Original Incorporation Date:

9/7/1989 Life Period: Perpetual

Business Type: TECHNOLOGY

(COMPUTERS)

Last Annual Report Filed:

Domicile State: New York Annual Report Due Date:

11/7/2022

Years Due:

Original Publish Date: 10/19/1989

Statutory Agent Information

Name: C T CORPORATION

SYSTEM

Appointed Status: Active

Attention:

Address: 3800 North Central Avenue, SUITE 460 , PHOENIX, AZ

85012, USA

Agent Last Updated: 1/19/2022 E-mail:

Attention: Mailing Address:

County: Maricopa

Principal Information

Privacy Policy ǀ Contact Us

ACC

eCorp Search File FAQ

DCS IT Maintenance and Operating Services

State of Arizona Department of Child Safety

Office of Procurement & Contracts

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Also, please see attachment 7 supplement from Microsoft attesting to the Microsoft Gold Partner certifications noted earlier.

Question 2: Company Experience. Describe specifically Offeror is especially qualified to deliver the best possible solution to the DCS. Keep corporate ‘boilerplate’ language and materials to a minimum. Describe Offeror’s understanding of the requirements and DCS challenges as they have been described in this RFP and address the following:

2.1 What market(s) are your current clients primarily in?

2.2 What experience do you have serving clients in Business Markets within the State of Arizona?

2.3 What is the range in size of your current clients?

2.4 What is your company’s vision for the future of public safety communications?

2.5 How long have you provided goods/services to your longest tenured client?

2.6 Have you had clients cancel contracts? If so, how many in the last three years and why?

2.7 With what relevant trade, professional, or standards associations are you involved? How does this participation give you an advantage over your competition?

2.8 What, if any, similar contracts (size, scope, content) has your company been awarded in the last 12 months?

2.9 Describe the personnel that your company has within the state of Arizona and available to support this project.

Offeror Response:

2.1 Markets Served

In the broadest view, IBM is a global company that provides services and technology to clients across sectors, including:

Financial Services (Banking, Financial Markets, Insurance); Public (Government, Healthcare, Life Sciences); Industrial (Aerospace and Defense, Automotive, Chemical and Petroleum, Electronics); Distribution (Consumer Products, Retail, Travel and Transportation); Communications (Telecommunications, Media and Entertainment, Energy and Utilities) and Small and Medium Businesses (companies with less than 1,000 employees).

Relevant to Arizona DCS, IBM brings deep experience implementing, maintaining, operating, and enhancing health and human services systems for clients in California, Florida, North and South Carolina, and Washington. In each of these states, we engage with local stakeholders to tackle the unique problems of their environment. At the same time, our broad reach and history as a primary vendor of HHS systems allows states to benefit from the lessons learned in similar engagements, whether that means reliably complying with federal mandates and funding requirements, managing the complexities of Big Data, or designing and enhancing systems in a way that excites end-users and improves their work experience.

2.2 Markets in State of Arizona

IBM has provided services to both Public and Private Business Markets in the State of Arizona. Highlights of some active clients include:

§ Cloud Hosting Services within IBM’s Smart Cloud for Government

§ Microsoft Dynamics Operations and Maintenance Support

§ Microsoft Dynamics Major Enhancement Support

Details of the State of Arizona Department of Transportation (ADOT) Project

§ For over 20 years, IBM has provided application development, maintenance, and operation services for the ServiceArizona project. This has included over 35 motor vehicle applications and services to Arizona constituents

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Office of Procurement & Contracts

Page 8 of 131 3 through a public anonymous web portal. ServiceArizona also includes a number of business portals providing numerous motor vehicle related services to various Arizona businesses.

§ The implementation of each of these portals reflects IBM’s deep experience in working with State of Arizona and understanding the needs of their business customers. IBM’s technical experience and business knowledge has resulted in a trust that Arizona MVD has had in IBM for decades. The ServiceArizona business portals boast production-hardened code that has been in service for many years, and ServiceArizona business portals are secured by a custom Secure Access Gateway production that manages portal access.

2.3 Client Size

IBM has one of the largest customer bases in world, serving businesses of sizes from scrappy startups to national governments and beyond. To each of these relationships, IBM brings the experience and knowledge of a large-scale vendor yet focuses on the unique needs of each client to build the trust and transparency that achievement requires.

2.4 View of Public Safety communication

Our ultimate vision, like Arizona DCS’s vision, is for no child to ever be left in a home that will harm them, nor improperly taken from a home in which they safely belonged. At the core of realizing that vision is empowering workers through data.

In IBM’s view, data can be leveraged as a weapon in the daily battle to make communities safer and more prosperous.

First responders, including child welfare workers, need data in the right format, at the right time. Data should equip first responders to make faster decisions, better decisions. It should help them accomplish in a day what used to require a week. Most of all, data should make a first responder confident: for DCS frontline workers - confident that they possess the full picture of a child’s life, past and present—and confident that they can support and empower their well-being for the future.

For AZ DCS, this data perspective has a more specific meaning. It means integrating data from all the systems that touch a child’s life: schools, mental and physical health services, juvenile justice, and more. Aligned to CCWIS compliance, powerful integration could give AZ DCS workers greater flexibility, and elevate their ability to act beyond punitive measures, forging stronger lines of communication with other state agencies to connect struggling families to help and prevent abuse before it happens. At the department level, data should help administrators see patterns across communities, and empower frontline providers to create business rules that enhance their ability to serve clients, rather than conflict with existing ways of working.

All of this relies on a platform that responsive to users and adaptable to their needs, so that workers can feel comfortable and confident in their tools. IBM achieved this level of responsiveness with the Florida Safe Families Network System (FSFN), Florida’s child welfare application. Taking over the incumbent 10 years ago, IBM inherited a service ticket backlog of 22,000. Applying an innovative Agile approach, the IBM team was able to reduce the ticket backlog to less than 100 tickets in a relatively short period of time. This continued Agile approach to M&O responsibilities continues to be used today and has allowed support of system issues to be rendered immediately which has increased worker satisfaction and confidence in the system. IBM has also delivered over 29 major improvements to the FSFN application while reducing downtime to negligible levels. This has also served to increase worker confidence in a system that is being designed and is available to better support their needs. These achievements are early, necessary steps in creating a platform that can support our ultimate vision.

2.5 Longest Tenured Client

IBM is a company that incorporated in 1911 and to date, serves thousands of clients across a myriad of industries. Most relevant longest tenured HHS client with a similar scope to AZ DCS would be California Child Welfare System/Case Management (CWS/CMS) system. IBM signed a contract in 1992 for the development and maintenance of the CWS/CMS child welfare application designed to meet the business needs of the workforce and aligned to federal child welfare legislation to maximize federal funding participation dollars. IBM continues this successful partnership with the state of

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California 30 years later. Not only does IBM continue to support maintenance, operations, and enhancement requests but proactively brings forth innovative thought leadership to support modernization. The state of Florida Department of Children and Families is another example of a long tenured client with similar scope to AZ DCS. Recently winning a competitive procurement, IBM’s role as M&O and Enhancements vendor to the state’s SACWIS has been extended beyond our previous 10 years serving the state with impressive success metrics.

2.6 Canceled Contracts in last 3 years

It is not IBM policy to make public the details regarding contracts that may have been terminated for default. However, IBM is not aware of anything that would prohibit IBM from complying with the terms of a contract awarded to IBM because of this RFP.

2.7 Relevant Trade Associations

IBM is represented in several trade associations that would provide direct benefits to Arizona DCS.

1. Microsoft Managed Services Provider and Gold Partner for Cloud Business Applications: Our strategic partnership with Microsoft enables IBM to gain insight into product direction and access training for our teams to maintain skills and develop focused solutions. A Microsoft Gold partner is a partner committed to earning the highest level of company customer care and collaborative relationship with Microsoft which are benefits we can pass along to our clients.

2. American Public Human Services Association (APHSA) Strategic Industry Partner: APHSA is a bipartisan, nonprofit membership organization representing state and local health and human service agencies through their top-level leadership. APHSA seeks to influence modern policies and practices that support the health and well-being of all children and families that lead to stronger communities. Members are HHS experts to include health and human services IT systems, performance measurement and data analysis, workforce development and training and legal dimensions of the field. Through IBM’s APHSA membership, IBM team members share and are exposed to best practices, trends, policy guidance, and lessons learned within health and human services across the country.

3. National Association of Medicaid Directors: IBM HHS subject matter experts participate as members which provides the team with a deeper understanding of the impacts of access to quality care for children in the child welfare system.

2.8 What, if any, similar contracts (size, scope, content) has your company been awarded in the last 12 months?

Child Welfare

IBM was awarded the contract for the Florida Department of Children and Families’ Florida Safe Family Network (FSFN) Support Services in March 2022.

The Florida Department of Children and Families (DCF) consists of more than 10,000 employees across the state whose mission is to protect the vulnerable, promote strong and economically self-sufficient families, and advance personal and family recovery and resiliency. Workers heavily depend upon the Florida Safe Families Network (FSFN) application that has been designed and developed to meet the State of Florida’s mission-critical requirements for a child welfare system and meet Federal reporting requirements for child protection, foster care, and adoption. With the need for consistent up-time 24/7, DCF sought a qualified vendor to maintain, enhance, and modernize the system that not only supports, but empowers workers to mission-driven results.

The contract awarded requires IBM to adhere to the following:

§ Fully maintain and support a high availability child welfare system for a tier-one state

§ Work with the Department to define and deliver large scale system enhancements approved by the Florida Legislature and the Department for Children and Families

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§ Complete the functional modifications necessary to progress toward achievement of federal CCWIS compliance and assist, as necessary, in gathering information from Providers for migrating the FSFN application to a hosted platform and gathering approaches, options, and innovative ideas to achieve the migration

2.9 Describe the personnel that your company has within the state of Arizona and available to support this project.

IBM is a company with approximately 345,000 employees globally, which provides a considerable pool of resources in which to select the best suited resources for each project. While IBM does have employees residing in Arizona that will be considered for staffing Arizona projects, it is our best-practice approach to identify resources that have the right skills for the roles needed and who we feel confident will drive our team to meet the goals of the project, regardless of location. For AZ DCS, we desire to bring the best skill level and experience for public sector project leadership, Microsoft Dynamics applications, child welfare business processes and CCWIS knowledge as well as those skilled in human centered design. IBM commits to bringing forth Arizona resources when deemed as a best choice. For those not local to the state, IBM commits to a remote or on-site employee that we feel best meets the needs for AZ DCS goals.

Question 3: Financial/Accounting Information. Provide evidence of financial stability and capability to fund all costs associated with providing the services throughout the term of the Contract. The latest two (2) years audited annual financial statements including Total Revenue, Net Income, and Total Assets must be submitted with the Offeror’s proposal. If audited financial data is unavailable, explain in full the reason, and provide the latest non-audited financial information to include Balance Sheet, Income Statement, as well as Statements of Cash Flows and Change in Financial Position. Include information to attest to the accuracy of the information provided.

Provide information regarding any irregularities that were discovered in any accounts maintained by the Offeror on behalf of others. Describe the circumstances and disposition of the irregularities.

Offeror Response:

Please find IBM’s Consolidated Income Statement below.

3.1 Consolidated Income Statement

Source: 2021 IBM Annual Report, page 62

Table 1: Consolidated Income Statement

($ in millions except per share amounts)

For the year ended December 31: Notes 2021 2020 * 2019 *

Revenue Services

$29,225

$27,626

$ 29,141

Sales 27,346 26,569 ** 27,357 ** Financing 780 984 ** 1,216 **

Total revenue D 57,350 55,179 57,714 Cost

Services

19,147

17,689

19,009 Sales 6,184 6,048 ** 6,467 ** Financing 534 577 ** 704 **

Total cost 25,865 24,314 26,181 Gross profit 31,486 30,865 31,533 Expense and other (income)

Selling, general and administrative

18,745

20,561

18,724 Research, development and engineering G 6,488 6,262 5,910 Intellectual property and custom development income (612) (620) (639) Other (income) and expense 873 802 (1,012) Interest expense Q&U 1,155 1,288 1,344

Total expense and other (income) 26,649 28,293 24,327 Income from continuing operations before income taxes 4,837 2,572 7,206 Provision for/(benefit from) income taxes H 124 (1,360) 60

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Income from continuing operations 4,712 3,932 7,146 Income/(loss) from discontinued operations, net of tax C 1,030 1,658 2,285 Net income $ 5,743 $ 5,590 $ 9,431 Earnings/(loss) per share of common stock

Assuming dilution

Continuing operations I $ 5.21 $ 4.38 $ 8.00 Discontinued operations I 1.14 1.85 2.56

Total I $ 6.35 $ 6.23 $ 10.56 Basic

Continuing operations

I

$ 5.26

$ 4.42

$ 8.05

Discontinued operations I 1.15 1.86 2.58 Total I $ 6.41 $ 6.28 $ 10.63

Weighted-average number of common shares outstanding Assuming dilution 904,641,001 896,563,971 892,813,376 Basic 895,990,771 890,348,679 887,235,105

* Reclassified to reflect discontinued operations presentation.

** Reclassified to conform to 2021 presentation. Amounts may not add due to rounding.

Section 3.1.1 Consolidated Balance Sheet

Source: 2021 IBM Annual Report, page 64

Table 2: Consolidated Balance Sheet Consolidated Balance Sheet International Business Machines Corporation and Subsidiary Companies ($ in millions except per share amounts)

At December 31: 2021 2020 * Assets Current assets

Cash and cash equivalents $ 6,650 $ 13,188 Restricted cash 307 463 Marketable securities 600 600 Notes and accounts receivable—trade (net of allowances of $218 in 2021 and $260 in 2020) 6,754 5,790 Short-term financing receivables

Held for investment (net of allowances of $176 in 2021 and $218 in 2020) 7,221 10,509 ** Held for sale 793 383 **

Other accounts receivable (net of allowances of $24 in 2021 and $25 in 2020) 1,002 695 Inventory 1,649 1,812 Deferred costs 1,097 1,018 Prepaid expenses and other current assets 3,466 2,089 Current assets of discontinued operations — 2,618

Total current assets 29,539 39,165 Property, plant and equipment 20,085 20,100

Less: Accumulated depreciation 14,390 13,895 Property, plant and equipment—net 5,694 6,205 Operating right-of-use assets—net 3,222 3,566 Long-term financing receivables (net of allowances of $25 in 2021 and $45 in 2020) 5,425 7,086 Prepaid pension assets 9,850 7,557 Deferred costs 924 1,150 Deferred taxes 7,370 8,404 Goodwill 55,643 53,765 Intangible assets—net 12,511 13,739 Investments and sundry assets 1,823 2,187 Non-current assets of discontinued operations — 13,147 Total assets $ 132,001 $ 155,971 Liabilities and equity Current liabilities

Taxes $ 2,289 $ 3,198 Short-term debt 6,787 7,116 Accounts payable 3,955 4,033 Compensation and benefits 3,204 3,056

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Deferred income 12,518 11,980 Operating lease liabilities 974 1,035 Other accrued expenses and liabilities 3,892 5,632 Current liabilities of discontinued operations — 3,820

Total current liabilities 33,619 39,869 Long-term debt 44,917 54,217 Retirement and non-pension postretirement benefit obligations 14,435 17,184 Deferred income 3,577 3,758 Operating lease liabilities 2,462 2,720 Other liabilities 13,996 14,180 Non-current liabilities of discontinued operations — 3,317 Total liabilities 113,005 135,244 Commitments and Contingencies Equity IBM stockholders' equity

Common stock, par value $.20 per share, and additional paid-in capital 57,319 56,556 Shares authorized: 4,687,500,000 Shares issued (2021—2,248,577,848; 2020—2,242,969,004)

154,209 162,717 (169,392) (169,339) (23,234) (29,337) 18,901 20,597

95 129 18,996 20,727 $ 132,001 $ 155,971

Section 3.1.2 Consolidated Statement of Cash Flows

Source: 2021 Annual Report, page 65

Table 3: Consolidated Statement of Cash Flows Consolidated Statement of Cash Flows International Business Machines Corporation and Subsidiary Companies

($ in millions)

For the year ended December 31: 2021 2020 2019 Cash flows from operating activities Net income

$ 5,743

$ 5,590

$ 9,431

Adjustments to reconcile net income to cash provided by operating activities Depreciation 3,888 4,227 4,209 Amortization of intangibles 2,529 2,468 1,850 Stock-based compensation 982 937 679 Deferred taxes (2,001) (3,203) (1,527) Net (gain)/loss on asset sales and other (307) (70) (1,096)

Change in operating assets and liabilities, net of acquisitions/divestitures

Receivables (including financing receivables) 1,372 5,297 502 Retirement related 1,038 936 301 Inventory 138 (209) 67 Other assets/other liabilities (671) 2,087 858 Accounts payable 85 138 (503)

Net cash provided by operating activities 12,796 18,197 14,770 Cash flows from investing activities Payments for property, plant and equipment

(2,062)

(2,618)

(2,286)

Proceeds from disposition of property, plant and equipment 387 188 537 Investment in software (706) (612) (621) Purchases of marketable securities and other investments (3,561) (6,246) (3,693) Proceeds from disposition of marketable securities and other investments 3,147 5,618 3,961 Non-operating finance receivables—net 0 475 6,720 Acquisition of businesses, net of cash acquired (3,293) (336) (32,630) Divestiture of businesses, net of cash transferred 114 503 1,076 Net cash provided by/(used in) investing activities (5,975) (3,028) (26,936)

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Cash flows from financing activities Proceeds from new debt

10,504

31,825

Payments to settle debt (8,597) (13,365) (12,944) Short-term borrowings/(repayments) less than 90 days—net (40) (853) (2,597) Common stock repurchases — — (1,361) Common stock repurchases for tax withholdings (319) (302) (272) Financing—other 70 92 99 Distribution from Kyndryl* 879 — — Cash dividends paid (5,869) (5,797) (5,707) Net cash provided by/(used in) financing activities (13,354) (9,721) 9,042 Effect of exchange rate changes on cash, cash equivalents and restricted cash (185) (87) (167) Net change in cash, cash equivalents and restricted cash (6,718) 5,361 (3,290) Cash, cash equivalents and restricted cash at January 1 13,675 8,314 11,604 Cash, cash equivalents and restricted cash at December 31 $ 6,957 $ 13,675 $ 8,314 Supplemental data Income taxes paid—net of refunds received $ 2,103 $ 2,253 $ 2,091 Interest paid on debt $ 1,512 $ 1,830 $ 1,685

* Represents $879 million net cash proceeds from Kyndryl dividend payments to IBM, funded from the proceeds of $2.9 billion of debt issued and retained by Kyndryl.

Cash flows above are presented on an IBM consolidated basis and therefore, also include $24 million of cash and cash equivalents presented in current assets of discontinued operations in the IBM Consolidated Balance Sheet as of December 31, 2020. Refer to note C, “Separation of Kyndryl,” for additional information related to cash flows from Kyndryl discontinued operations.

Amounts may not add due to rounding.

Section 3.1.3 Research, Development, and Engineering

Source: 2021 Annual Report, page 22

Table 4: Research, Development, and Engineering

For the year ended December 31:

Yr.-to-Yr.

Percent Change

Total research, development and engineering $6,488 $6,262 3.6 %

Research, development and engineering (RD&E) expense increased 3.6 percent in 2021 versus 2020, reflecting our continuing investment in innovation as we increase spending in areas including quantum, hybrid cloud and AI. The year-to-year increase was primarily driven by higher spending (2 points) and the effects of currency (1 point).

Section 3.1.4 Financial Highlights

Source: 2021 Annual Report, page 8

Table 5: Financial Highlights

FINANCIAL HIGHLIGHTS

($ and shares in millions except per share amounts)

For year ended December 31:

Yr.-to-Yr.

Percent/Margin

Change

Revenue $ 57,350 $ 55,179 3.9 %*

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Gross profit margin 54.9 % 55.9 % (1.0)pts.

Total expense and other (income) $ 26,649 $ 28,293 ** (5.8)% Income from continuing operations before income taxes $ 4,837 $ 2,572 ** 88.0 % Provision for/(benefit from) income taxes from continuing operations

$ 124 $ (1,360) NM

Income from continuing operations $ 4,712 $ 3,932 ** 19.8 % Income from continuing operations margin 8.2 % 7.1 % 1.1 pts.

Income from discontinued operations, net of tax $ 1,030 $ 1,658 � (37.9)% Net income $ 5,743 $ 5,590 2.7 % Earnings per share from continuing operations– assuming dilution

$ 5.21 $ 4.38 ** 18.9 %

Consolidated earnings per share–assuming dilution $ 6.35 $ 6.23 1.9 % Weighted-average shares outstanding–assuming dilution 904.6 896.6 0.9 % Assets�� $132,001 $155,971 (15.4)% Liabilities�� $113,005 $135,244 (16.4)% Equity�� $ 18,996 $ 20,727 (8.4)%

* 2.7 percent adjusted for currency.

** Includes a $1.5 billion pre-tax charge for structural actions in the fourth quarter resulting in an impact to diluted earnings per share from continuing operations of ($1.33).

§ Includes a $0.6 billion pre-tax charge for structural actions in the fourth quarter resulting in an impact to diluted earnings per share from discontinued operations of ($0.51).

§ At December 31. Discontinued operations are included in 2020 balances. NM–Not meaningful

Investment Rating

Source: 2021 IBM Annual Report, page 47

The indenture governing our debt securities and our various credit facilities each contain significant covenants which obligate the company to promptly pay principal and interest, limit the aggregate amount of secured indebtedness and sale and leaseback transactions to 10 percent of IBM’s consolidated net tangible assets, and restrict our ability to merge or consolidate unless certain conditions are met. The credit facilities also include a covenant on our consolidated net interest expense ratio, which cannot be less than 2.20 to 1.0, as well as a cross default provision with respect to other defaulted indebtedness of at least $500 million.

We are in compliance with all of our significant debt covenants and provide periodic certification to our lenders. The failure to comply with debt covenants could constitute an event of default with respect to our debt to which such provisions apply. If certain events of default were to occur, the principal and interest on the debt to which such event of default applied would become immediately due and payable.

We do not have “ratings trigger” provisions in our debt covenants or documentation, which would allow the holders to declare an event of default and seek to accelerate payments thereunder in the event of a change in credit rating. Our contractual agreements governing derivative instruments contain standard market clauses which can trigger the termination of the agreement if IBM’s credit rating were to fall below investment grade. At December 31, 2021, the fair value of those instruments that were in a liability position was $162 million, before any applicable netting, and this position is subject to fluctuations in fair value period to period based on the level of the company’s outstanding instruments and market conditions. We have no other contractual arrangements that, in the event of a change in credit rating, would result in a material adverse effect on our financial position or liquidity.

The major ratings agencies ratings on our debt securities on December 31, 2021 were as follows:

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Table 6: Credit Rating

Standard and Poor’s

Moody’s Investors

Service IBM Ratings

Senior long-term debt A- A3 Commercial paper A-2 Prime-2

IBM has ample financial flexibility, supported by our strong liquidity position and cash flows, to operate at a single A credit rating. Debt levels have decreased $9.6 billion from December 31, 2020, and $21.3 billion from our peak levels at June 30, 2019 (immediately preceding the Red Hat acquisition).

Question 4: Use of On-Shore and Off-Shore Resource. Describe how the project will be staffed and if resources located outside of the United States will be used. Describe how remote resources are supervised and managed and how they will interact with DCS resources considering any time zone issues. Describe how security and other compliance requirements are maintained with a remote / off-shore workforce.

Offeror Response:

IBM will leverage offshore resources in Operational Support Services, Routine Application Support and Minor Development Services, Major Enhancements, Business Analytics & Reporting and Program Management services. IBM will adhere to the data and security requirement defined by AZ DCS through Program Management Services and Security Services to enforce compliance by team. The team will use the data obfuscation tools and only access nonproduction environment. IBM has implemented numerous programs in a blended approach including our successful work with the NYC 311 modernization project and also with the Florida Department of Children and Families Florida Safe Families Network (FSFN) project. IBM will work with AZ DCS to optimize the mix to provide the cost efficiencies of the offshore resources while delivering the key enhancements and insights needed to achieve the functional goals of the application.

Each team will be staffed with US based resources that will provide technical and business leadership and will serve as the points of contact to AZ DCS and interface with the team members offshore. IBM has a leadership structure in place in our offshore centers that provide the necessary oversight, guidance, and enforcement of security policies.

IBM will have offshore team during the steady state in Major Enhancements and Business Analytics portfolios. In the other portfolios, IBM will work on stabilizing the system and creating test data in the first 18 months of steady state before moving work offshore. Each portfolio will have one offshore lead who will be reporting into the respective onshore service portfolio manager. Stand-up calls with all the team members, including offshore, helps us to confirm the progress and mitigate issues or risks identified by the team.

BEST PRACTICES/ IBM EXPERIENCES

1. Examine work practices to determine which are best suited for offshore delivery

2. Assess AZ DCS’ enterprise’s tools and platforms. They should be enabled for seamless operations across locations, and scalable and interoperable for deployment.

3. Perform a security audit. Create an action plan to plug gaps in the policies, processes, and controls to address compliance mandates, regulatory requirements, and data privacy guidelines.

4. Develop global standards for talent management. This talent can be a combination of in-house experienced professionals and highly skilled, experienced vendors who can help with standards and speed.

5. Establish processes for ubiquitous knowledge management via a digital e-learning platform.

6. Emphasize strong governance through digital dashboards, enabled by a platform to foster transparency and collaboration. This includes establishing the right metrics on key activities to proactively mitigate risks, build resilience, and accelerate your digital transformation agenda.

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IBM utilizes offshore team in multiple accounts in all the Industries. AZ DCS will have access to the offshore team. There The working hours between onsite and offshore teams will have some overlap, the amount of which will be defined during Transition and reviewed periodically.

Question 5: Use of Subcontractors. Provide an overview how subcontractors will be used. Explain the primary roles and responsibilities of each proposed subcontractor and describe how subcontractor management and oversight is accomplished.

Include a diagram that clearly shows the relationships between the prime contractor and any planned subcontractor(s).

Offeror Response:

While IBM has broad capabilities to meet the requirements and needs of AZ DCS, IBM is also committed to diversity.

IBM's Supplier Diversity Program ensures that diverse businesses have the opportunity to participate in all areas of IBM's marketing, procurement, and contracting activities. This policy applies to all firms or institutions regardless of the business owner's race, color, religion, gender, gender identity or expression, sexual orientation, national origin, disability, age, or status as a special disabled veteran or other veteran. Establishing the direction for IBM is Corporate Policy 137, IBM's commitment to diverse business relationships. IBM has long recognized that diversity is critical to fostering innovation and delivering exceptional value to clients.

For this opportunity, we are proud to team with two firms, who will be available to augment the current staffing plan:

1. RevTech which is a Woman Owned Service-Disabled Veteran Owned Small Business

2. SLG Innovation which is a Minority Business Enterprise (MBE)

The solution oriented SDVOSB, is a Woman Owned Service- Disabled Veteran Owned Small Business (WOSDVOSB) registered in the State of Arizona as REV LLC Arizona ID#23099967. Founded by former MS executives, they bring extraordinary capabilities across the Microsoft Dynamics 365 platform. They will support both Routine Services and Major Enhancements teams in various roles including Solution Architecture, Business Analysts, Development as well as serve as Surge Support. RevTech also participates in IBM’s Mentor/Protégé program that supports growth.

SLG Innovation was founded in 2010 in Chicago, Illinois and is a Minority Business Enterprise (MBE) provider through the National Minority Supplier Development Council (NMSDC). SLG Innovation has over 11 years providing IT Services across the major Health and Human Services programs such as Child Welfare, Integrated Eligibility, Medicaid, Child Support, WIC and Child Care. SLG Innovation provides IT Services, with specific emphasis on public Health and Human Services sector, for the entire solution lifecycle – from enterprise architecture through application management, infrastructure support, data analytics, call center support, training, security compliance and administration support. SLG will support the IBM Team by providing the CCWIS Subject Matter Expertise, CCWIS Data Quality and Integration Support and Training Consultants.

Our two subcontractors, RevTech and SLG Innovation, supplement the IBM team assigned to this engagement. The IBM Client Partner Executive is the single point of contact for the State for all IBM resources and subcontractors. IBM takes full responsibility in the event an IBM resource or a subcontractor resource fails to deliver. If such an event occurs, the respective IBM Portfolio manager logs an issue, identify the next steps, and develops a plan to remediate for AZ DCS’ approval.

Question 6: Staffing Plan Provide an organization chart and position descriptions for each of the positions being proposed.

For each position, describe where the person performing that task will be physically located and the reporting and management

IBM has partnered with RevTech on multiple programs including the State of New Jersey to deliver a Dynamics 365 Portal and Case Management solution to enable residents to receive utility assistance from the American Rescue Plan Act.

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