DoD's $214.6M insurance contract awarded to United Concordia for 8 months of coverage

Contract Overview

Contract Amount: $214,590,100 ($214.6M)

Contractor: United Concordia Companies, Inc.

Awarding Agency: Department of Defense

Start Date: 2009-01-28

End Date: 2009-09-30

Contract Duration: 245 days

Daily Burn Rate: $875.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIXED PRICE AWARD FEE

Sector: Healthcare

Official Description: OP-4, FY09 DELIVERY ORDER FOR PERIOD OF FEBRUARY 1, 2009 THROUGH SEPTEMBER 30, 2009.

Place of Performance

Location: HARRISBURG, DAUPHIN County, PENNSYLVANIA, 17110

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $214.6 million to UNITED CONCORDIA COMPANIES, INC. for work described as: OP-4, FY09 DELIVERY ORDER FOR PERIOD OF FEBRUARY 1, 2009 THROUGH SEPTEMBER 30, 2009. Key points: 1. Contract value represents a significant investment in health insurance services for military personnel. 2. Awarded via full and open competition, suggesting a robust market for these services. 3. Short performance period (8 months) may indicate a bridge contract or specific, time-bound need. 4. Fixed Price Award Fee structure incentivizes performance while managing cost certainty. 5. The Defense Health Agency's reliance on private carriers highlights the role of external providers in military healthcare. 6. This contract falls within the Direct Health and Medical Insurance Carriers sector.

Value Assessment

Rating: good

The contract value of $214.6 million for an 8-month period equates to approximately $26.8 million per month. Benchmarking this against similar large-scale health insurance contracts for federal employees or military personnel would be necessary for a precise value-for-money assessment. However, given the specialized nature of military health insurance and the scope of services typically covered, the pricing appears within a reasonable range for a contract of this magnitude and duration. The fixed-price award fee structure suggests an expectation of cost control by the government, with potential for contractor bonuses tied to performance metrics.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified vendors were likely solicited and allowed to bid. The presence of 3 bidders (no) suggests a competitive environment, which generally benefits the government by driving down prices and improving service offerings. The specific details of the bidding process, such as the number of proposals received and the evaluation criteria, would provide further insight into the effectiveness of the competition.

Taxpayer Impact: Full and open competition typically leads to better pricing for taxpayers as it encourages a wider range of providers to offer their best terms. This process helps ensure the government is not overpaying for essential services.

Public Impact

Beneficiaries include active duty military personnel, their families, and potentially retirees covered under the TRICARE program in the specified region. Services delivered encompass direct health and medical insurance coverage, including claims processing, network management, and potentially case management. The geographic impact is likely concentrated within Pennsylvania, where United Concordia is headquartered and operates, though the scope of coverage may extend beyond this. Workforce implications include the employment of administrative staff, claims processors, medical professionals, and support personnel by United Concordia to fulfill the contract.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Short contract duration (8 months) could indicate potential instability or a need for frequent re-competition, leading to administrative overhead.
Reliance on a single delivery order for a substantial amount may warrant scrutiny of the overall contract vehicle's flexibility and long-term planning.
The fixed-price award fee structure, while incentivizing, can sometimes lead to disputes over performance metrics and fee determination.

Positive Signals

Awarded through full and open competition, suggesting a healthy market and potentially competitive pricing.
The fixed-price award fee structure aims to balance cost control with performance incentives.
United Concordia is a known entity in the health insurance market, potentially bringing established infrastructure and expertise.

Sector Analysis

The health insurance sector is a critical component of the broader healthcare industry, with significant government spending directed towards providing coverage for federal employees, military personnel, and veterans. This contract falls under the Direct Health and Medical Insurance Carriers sub-sector (NAICS 524114). The market is characterized by large, established players and is subject to extensive regulation. Government contracts in this space often involve complex service level agreements and require specialized administrative capabilities.

Small Business Impact

There is no indication from the provided data that this contract included small business set-asides or subcontracting requirements. United Concordia Companies, Inc. is a large corporation, suggesting the primary award was not aimed at small business participation. Further analysis would be needed to determine if any subcontracting opportunities were mandated or voluntarily pursued by the prime contractor.

Oversight & Accountability

Oversight for this contract would primarily reside with the Defense Health Agency (DHA), a component of the Department of Defense. The DHA is responsible for managing TRICARE, the healthcare program for the U.S. Armed Forces. Accountability measures would be embedded in the contract's performance standards and the award fee structure. Transparency is generally maintained through contract award databases, though specific performance metrics and detailed financial breakdowns may be considered sensitive.

Related Government Programs

TRICARE Prime
Federal Employee Health Benefits (FEHB) Program
Department of Veterans Affairs (VA) Health Care Programs
Medicaid
Medicare

Risk Flags

Short performance period may indicate a stop-gap measure or potential for future contract instability.
Award fee structure requires careful monitoring of performance metrics to ensure value for money.
Reliance on large, single delivery orders can sometimes mask underlying issues with contract management or planning.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $214.6 million to UNITED CONCORDIA COMPANIES, INC.. OP-4, FY09 DELIVERY ORDER FOR PERIOD OF FEBRUARY 1, 2009 THROUGH SEPTEMBER 30, 2009.

Who is the contractor on this award?

The obligated recipient is UNITED CONCORDIA COMPANIES, INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Health Agency).

What is the total obligated amount?

The obligated amount is $214.6 million.

What is the period of performance?

Start: 2009-01-28. End: 2009-09-30.

What is the historical spending pattern for United Concordia Companies, Inc. with the Department of Defense?

Analyzing historical spending with United Concordia reveals a long-standing relationship with the Department of Defense, particularly through the Defense Health Agency and its predecessors. Prior to this specific delivery order in FY09, there were likely numerous other contracts and task orders issued for various health insurance and dental services. The total value of contracts awarded to United Concordia by the DoD over the years would provide context for the scale of this particular $214.6 million award. Examining trends in contract types (e.g., fixed-price vs. cost-plus), competition levels, and performance outcomes across these historical awards would offer insights into the government's evolving needs and the contractor's consistent or changing performance. Without access to a comprehensive database of all past awards, a precise historical spending figure is difficult to ascertain, but the longevity of the relationship suggests significant cumulative value.

How does the per-member-per-month (PMPM) cost of this contract compare to other TRICARE contracts or commercial insurance benchmarks?

To compare the PMPM cost, we first need to estimate the number of covered lives. Assuming this contract covers a significant portion of military personnel and their families in a specific region, the number of members could range from tens of thousands to over a hundred thousand. If we estimate, for example, 100,000 members, the PMPM cost would be approximately $214.6 million / 8 months / 100,000 members = $268.25 PMPM. This figure needs to be compared against benchmarks for similar TRICARE contracts (e.g., TRICARE East, TRICARE West) and commercial group health insurance plans. Commercial PMPM costs can vary widely based on age demographics, benefit richness, and geographic location, but often range from $300 to $700+. TRICARE contracts, due to their specific population and negotiated rates, might fall within or below this range. A detailed comparison would require access to specific PMPM data for comparable contracts and a clear understanding of the benefit structure offered under this $214.6 million award.

What specific performance metrics were used to determine the 'Award Fee' component of this contract?

The 'Award Fee' component of this contract implies that a portion of the total payment was contingent upon the contractor meeting or exceeding specific performance standards established by the Defense Health Agency (DHA). While the exact metrics are not detailed in the provided data, typical performance areas for health insurance contracts include claims processing timeliness and accuracy, network adequacy and accessibility, beneficiary satisfaction, compliance with regulations, and responsiveness to DHA inquiries. The DHA would have likely established a rating system (e.g., excellent, good, fair) for each performance area, with corresponding fee percentages. United Concordia would have submitted performance reports, and the DHA contracting officer would have evaluated these against the defined metrics to determine the amount of award fee earned. The 'fixed price' aspect suggests the base amount was fixed, but the total compensation could vary based on the earned award fee.

What is the typical duration and value of delivery orders issued under the contract vehicle this order was placed against?

This specific award is a delivery order (DO) under a larger contract vehicle, likely an Indefinite Delivery/Indefinite Quantity (IDIQ) contract or a similar master agreement. The duration of this particular DO is 8 months (February 1, 2009, through September 30, 2009), and its value is $214.6 million. Delivery orders under IDIQ contracts can vary significantly in duration and value, depending on the specific needs of the agency at the time of issuance. Some DOs might be for short-term, urgent requirements, while others could be for longer-term sustainment. The value can range from small purchases to substantial multi-million dollar orders. The fact that this DO represents a significant portion of the potential contract value suggests it was a major requirement. Understanding the overall ceiling value and ordering period of the parent contract would provide better context for this single DO's size and duration.

What are the potential risks associated with a fixed-price award fee contract structure for health insurance services?

Fixed-price award fee contracts, while aiming for cost control and performance incentives, carry inherent risks. For the government, a primary risk is that the contractor might focus excessively on achieving the award fee metrics at the expense of other crucial, unmeasured aspects of service quality or long-term relationship building. There's also a risk of disputes arising over the interpretation of performance standards and the fairness of the award fee determination, potentially leading to protests or litigation. For the contractor, the risk lies in underestimating the costs required to achieve the higher performance levels needed for a substantial award fee, potentially eroding profit margins. If the performance standards are unclear or unattainable, the contractor may receive little to no award fee, impacting their financial projections. Ensuring clear, objective, and measurable performance standards is critical to mitigating these risks for both parties.

Industry Classification

NAICS: Finance and Insurance › Insurance Carriers › Direct Health and Medical Insurance Carriers

Product/Service Code: MEDICAL SERVICES › MEDICAL, DENTAL, AND SURGICAL SVCS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 3

Pricing Type: FIXED PRICE AWARD FEE (M)

Evaluated Preference: NONE

Contractor Details

Parent Company: Highmark Inc (UEI: 067096644)

Address: 4401 DEER PATH ROAD, HARRISBURG, PA, 17110

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $214,590,100

Exercised Options: $214,590,100

Current Obligation: $214,590,100

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: H9400205D0001

IDV Type: IDC

Timeline