VA awards $524M contract to Optum for health insurance carrier services, with a $14.4M delivery order

Contract Overview

Contract Amount: $5,241,285,242 ($5.2B)

Contractor: Optum Public Sector Solutions, Inc.

Awarding Agency: Department of Veterans Affairs

Start Date: 2021-10-01

End Date: 2022-09-30

Contract Duration: 364 days

Daily Burn Rate: $14.4M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: CCN REGION 3 EXPRESS REPORT

Place of Performance

Location: FREDERICKSBURG, SPOTSYLVANIA County, VIRGINIA, 22408

State: Virginia Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $5.24 billion to OPTUM PUBLIC SECTOR SOLUTIONS, INC. for work described as: CCN REGION 3 EXPRESS REPORT Key points: 1. Contract value of over $524 million indicates a significant investment in health insurance carrier services. 2. The contract was awarded through full and open competition, suggesting a robust bidding process. 3. A single delivery order of $14.4 million was issued, representing a portion of the total contract value. 4. The contract duration of 364 days aligns with typical service delivery periods for such agreements. 5. The primary agency is the Department of Veterans Affairs, highlighting a focus on veteran healthcare. 6. The North American Industry Classification System (NAICS) code 524114 points to specific health insurance carrier operations.

Value Assessment

Rating: good

The total contract value of $524 million for health insurance carrier services is substantial. Benchmarking against similar contracts within the VA or other federal agencies for direct health and medical insurance would provide a clearer picture of value for money. The single delivery order of $14.4 million suggests this is an initial or partial tasking under the larger contract. Without more granular data on the specific services rendered and their unit costs, a precise value-for-money assessment is challenging, but the competitive award process is a positive indicator.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded through full and open competition, indicating that all responsible sources were permitted to submit a bid. This method typically fosters a competitive environment, encouraging multiple bidders to offer their best pricing and services. The specific number of bidders is not provided, but the 'full and open' designation suggests a healthy level of competition was sought and likely achieved, which is beneficial for price discovery.

Taxpayer Impact: Full and open competition generally leads to better price discovery and potentially lower costs for taxpayers, as multiple companies vie for the contract. This approach ensures that the government is not limited to a single provider, increasing the likelihood of securing services at a competitive rate.

Public Impact

Veterans will benefit from the health insurance carrier services provided under this contract. The services delivered are expected to support the Department of Veterans Affairs' mission to provide healthcare to eligible individuals. The contract is managed by the VA, with operations likely impacting veterans across Virginia and potentially nationwide. The contract supports the healthcare sector by engaging a private insurance carrier to supplement VA services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of specific details on the scope of services within the $14.4M delivery order.
Absence of data on the number of bidders in the full and open competition.
No information on performance metrics or quality assurance for the services rendered.
Unclear if small businesses were involved as subcontractors.

Positive Signals

Awarded through full and open competition, suggesting a fair and competitive process.
Contract is with a known entity, Optum Public Sector Solutions, Inc., implying some level of established capability.
The contract is firm fixed price, which helps in budget predictability.
The Department of Veterans Affairs is the awarding agency, indicating a focus on veteran healthcare needs.

Sector Analysis

The healthcare insurance industry is a large and complex sector. This contract falls under the Direct Health and Medical Insurance Carriers (NAICS 524114) category. The federal government, particularly agencies like the VA, are significant purchasers of healthcare services and insurance. Spending in this area is driven by the need to provide comprehensive care to beneficiaries, often supplementing direct government provision. Comparable spending benchmarks would involve looking at other large-scale health insurance contracts awarded by federal agencies or large state Medicaid programs.

Small Business Impact

The provided data indicates that small business set-asides were not utilized for this contract (ss: false, sb: false). This suggests the contract was not specifically targeted towards small businesses. While there's no explicit mention of subcontracting requirements, large contracts like this often include provisions for small business participation. Further analysis would be needed to determine if Optum has subcontracting plans or if small businesses are indirectly benefiting from this award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Veterans Affairs' contracting and program management offices. Accountability measures are typically embedded within the contract terms, including performance standards and reporting requirements. Transparency is facilitated through contract databases like FPDS. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected in the execution of this contract.

Related Government Programs

Department of Veterans Affairs Healthcare Services
Federal Health Insurance Contracts
Medical Insurance Carriers
Government Health Benefit Programs

Risk Flags

Potential for scope creep in large service contracts.
Ensuring data security and privacy for sensitive health information.
Effectiveness of network adequacy and provider access.
Integration challenges with existing VA systems.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $5.24 billion to OPTUM PUBLIC SECTOR SOLUTIONS, INC.. CCN REGION 3 EXPRESS REPORT

Who is the contractor on this award?

The obligated recipient is OPTUM PUBLIC SECTOR SOLUTIONS, INC..

Which agency awarded this contract?

Awarding agency: Department of Veterans Affairs (Department of Veterans Affairs).

What is the total obligated amount?

The obligated amount is $5.24 billion.

What is the period of performance?

Start: 2021-10-01. End: 2022-09-30.

What specific health insurance services does Optum Public Sector Solutions, Inc. provide under this contract?

The contract is categorized under NAICS code 524114, which pertains to Direct Health and Medical Insurance Carriers. This generally includes services such as underwriting, marketing, and administration of health insurance policies. For the Department of Veterans Affairs, this could encompass a range of services like processing claims, managing provider networks, offering specialized health plans, or facilitating access to care through a network of civilian healthcare providers. The specific details of the services are not elaborated in the provided data, but the contract's purpose is to leverage Optum's expertise in managing health insurance operations to support the VA's mission.

How does the $14.4 million delivery order compare to the overall contract value and typical tasking for this type of service?

The $14.4 million delivery order represents approximately 2.7% of the total contract value of $524 million. This is a relatively small portion of the overall contract. For a contract of this magnitude and duration (364 days), a single delivery order of this size could represent an initial phase of work, a specific project, or a particular service component. Without knowing the total number of delivery orders anticipated or the specific services each order covers, it's difficult to definitively assess if this is typical. However, it suggests that the majority of the contract's value is yet to be allocated through subsequent delivery orders or task assignments.

What is the track record of Optum Public Sector Solutions, Inc. with the Department of Veterans Affairs and similar federal contracts?

Optum Public Sector Solutions, Inc. is a known entity within the federal contracting space, particularly in healthcare. As a subsidiary of UnitedHealth Group, it has extensive experience in managing health insurance and healthcare services. While specific details of their past performance with the VA are not provided in this data snippet, Optum has historically been awarded numerous contracts by various federal agencies, including the Department of Defense and the Centers for Medicare & Medicaid Services, for health IT, claims processing, and managed care services. Their established presence suggests a level of capability and experience relevant to this contract.

Are there any identified risks associated with this contract, such as performance issues or cost overruns, based on the provided data?

The provided data does not explicitly detail any performance issues or cost overruns associated with this contract. However, general risks inherent in large healthcare contracts include potential for scope creep, challenges in integrating systems, ensuring data privacy and security, and managing complex provider networks. The firm fixed-price nature of the contract helps mitigate cost overrun risks for the government, as the price is set. Potential risks would be more thoroughly assessed through contract performance reports, oversight reviews, and any available Inspector General findings, which are not included here.

How does this contract's spending compare to historical VA spending on health insurance carrier services?

To compare this contract's spending ($524 million) to historical VA spending, one would need access to historical contract data for similar services. The NAICS code 524114 (Direct Health and Medical Insurance Carriers) provides a specific category for comparison. Analyzing past awards under this code by the VA, or similar codes related to health benefits administration and managed care, would reveal trends in spending levels, contract durations, and the types of services procured. Without that historical data, it's challenging to determine if this award represents an increase, decrease, or stable level of spending for the VA in this area.

Industry Classification

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

Product/Service Code: MEDICAL SERVICES › GENERAL HEALTH CARE SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Optum Labs Topaz Inc

Address: 800 KING FARM BLVD STE 500, ROCKVILLE, MD, 20850

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

Financial Breakdown

Contract Ceiling: $5,241,285,242

Exercised Options: $5,241,285,242

Current Obligation: $5,241,285,242

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 36C79119D0006

IDV Type: IDC

Timeline