HHS awards $44.5M for Medicare Appeals System, with CGI Federal Inc. as prime contractor

Contract Overview

Contract Amount: $44,536,144 ($44.5M)

Contractor: CGI Federal Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2020-11-01

End Date: 2025-09-14

Contract Duration: 1,778 days

Daily Burn Rate: $25.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: TIME AND MATERIALS

Sector: IT

Official Description: MEDICARE APPEALS SYSTEM (MAS)

Place of Performance

Location: FAIRFAX, FAIRFAX County, VIRGINIA, 22033

State: Virginia Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $44.5 million to CGI FEDERAL INC. for work described as: MEDICARE APPEALS SYSTEM (MAS) Key points: 1. The contract value of $44.5 million over its period of performance suggests a significant investment in IT infrastructure for a critical government function. 2. The 'Other Computer Related Services' NAICS code indicates a broad scope, potentially encompassing software development, maintenance, and support. 3. The contract was awarded under full and open competition, suggesting a competitive bidding process that could lead to better pricing. 4. The delivery order award type implies this is part of a larger contract vehicle, potentially offering flexibility but also requiring careful management. 5. The Time and Materials (T&M) pricing structure, while common for IT services, can present cost control challenges if not closely monitored. 6. The contract duration of 1778 days (approximately 4.8 years) indicates a long-term need for these services.

Value Assessment

Rating: fair

Benchmarking the value of this $44.5 million contract is challenging without specific details on the scope of 'Medicare Appeals System' services. However, the Time and Materials pricing model, while flexible, carries inherent risks of cost overruns if not managed diligently. Comparing it to similar large-scale IT system development and maintenance contracts within HHS or other agencies would be necessary for a more precise value assessment. The number of bids received (2) under full and open competition is on the lower side for a contract of this magnitude, which could indicate potential limitations in the market or the complexity of the requirements.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit an offer. However, only two bids were received. This limited number of bidders, despite the open competition, might suggest that the market for this specific service is concentrated, or that the requirements were highly specialized, deterring a broader range of potential contractors. The competition level, while technically open, may not have driven the most aggressive pricing due to the limited number of participants.

Taxpayer Impact: While the contract was open to all, the low number of bids could mean taxpayers did not benefit from the full potential of market competition, potentially leading to a higher price than if more firms had vied for the work.

Public Impact

Beneficiaries of the Medicare program will experience improved efficiency and accuracy in the appeals process for claims and coverage decisions. The contract supports the Centers for Medicare and Medicaid Services (CMS) in its mission to administer the Medicare program effectively. The services delivered are crucial for maintaining the integrity and functionality of a core component of the U.S. healthcare system. The geographic impact is national, as the Medicare program serves beneficiaries across the United States. Workforce implications include the potential for employment opportunities within CGI Federal Inc. and its subcontractors, as well as for CMS staff interacting with the system.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The Time and Materials (T&M) pricing structure can lead to cost uncertainty and potential overruns if not rigorously managed and monitored.
A low number of bids (2) in a full and open competition may indicate limited market interest or high barriers to entry, potentially impacting price competitiveness.
The broad NAICS code 'Other Computer Related Services' could mask specific performance risks if the detailed scope of work is not clearly defined and managed.
The contract is a delivery order, suggesting it's part of a larger contract vehicle, which can sometimes lead to less direct oversight compared to a standalone contract.

Positive Signals

Awarded under full and open competition, which theoretically allows for the widest possible range of qualified contractors to compete.
The contract supports a critical government function (Medicare Appeals System), indicating a stable and important requirement.
The prime contractor, CGI Federal Inc., is a known entity in government IT services, suggesting a degree of established capability.
The contract duration of nearly five years allows for sustained development and support, potentially leading to a more robust and stable system.

Sector Analysis

The IT services sector, particularly within government contracting, is highly competitive and diverse. This contract falls under the 'Other Computer Related Services' category, which is broad and can encompass a wide range of IT solutions, from software development and integration to maintenance and support. The federal government is a significant consumer of IT services, with spending often concentrated in areas like defense, healthcare, and administrative systems. Comparable spending benchmarks would typically involve analyzing IT modernization projects or large-scale system maintenance contracts within agencies like HHS, CMS, or the Department of Veterans Affairs, often running into tens or hundreds of millions of dollars.

Small Business Impact

This contract does not indicate any specific small business set-aside provisions (ss: false, sb: false). Therefore, the primary contractor, CGI Federal Inc., is responsible for managing subcontracting opportunities. Without explicit set-aside goals, the extent to which small businesses will participate in fulfilling this contract is dependent on CGI Federal's subcontracting plan and the availability of qualified small business vendors for the required services. This could limit opportunities for small businesses unless actively pursued by the prime contractor.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Health and Human Services (HHS) and specifically the Centers for Medicare and Medicaid Services (CMS). As a delivery order under a larger contract vehicle, oversight might be distributed. Accountability measures would be defined in the contract's statement of work, performance standards, and delivery schedules. Transparency is generally facilitated through contract databases like FPDS, which provide basic award information. The specific Inspector General jurisdiction would be that of HHS, responsible for auditing and investigating fraud, waste, and abuse within the department's programs and contracts.

Related Government Programs

Medicare Modernization Act (MMA) IT Investments
Healthcare IT Modernization Programs
CMS Claims Processing Systems
Federal Health Architecture Initiatives
Health Insurance Portability and Accountability Act (HIPAA) Compliance Systems

Risk Flags

Potential for cost overruns due to T&M pricing
Limited competition (2 bidders) for a large contract
Broad NAICS code may obscure specific performance risks
Delivery Order structure may affect oversight clarity

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $44.5 million to CGI FEDERAL INC.. MEDICARE APPEALS SYSTEM (MAS)

Who is the contractor on this award?

The obligated recipient is CGI FEDERAL INC..

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Centers for Medicare and Medicaid Services).

What is the total obligated amount?

The obligated amount is $44.5 million.

What is the period of performance?

Start: 2020-11-01. End: 2025-09-14.

What is the specific scope of work for the Medicare Appeals System (MAS) and how does it align with CMS's strategic objectives?

The provided data does not detail the specific scope of work for the Medicare Appeals System (MAS). However, it is understood to be a critical IT system managed by the Centers for Medicare and Medicaid Services (CMS) that facilitates the process by which Medicare beneficiaries and providers can appeal decisions related to coverage, payment, and eligibility. This system is vital for ensuring fairness and due process within the Medicare program. CMS's strategic objectives typically include improving program integrity, enhancing beneficiary experience, and modernizing healthcare IT infrastructure. The MAS likely supports these objectives by providing an efficient, accurate, and transparent appeals process, thereby contributing to beneficiary satisfaction and the overall effectiveness of the Medicare program. Further analysis would require access to the contract's statement of work and CMS's documented strategic priorities.

How does the Time and Materials (T&M) pricing structure for this contract compare to fixed-price or cost-plus models for similar IT services?

Time and Materials (T&M) contracts, like the one awarded to CGI Federal Inc., offer flexibility by reimbursing the contractor for direct labor hours at specified hourly rates and for the actual cost of materials. This contrasts with fixed-price contracts, where the price is set regardless of the contractor's actual costs, and cost-plus contracts, where the contractor is reimbursed for allowable costs plus a fee (profit). T&M is often used when the scope of work is not clearly defined or is expected to evolve, as is common in IT development and maintenance. However, T&M contracts carry a higher risk of cost overruns for the government because the total cost is not predetermined. For similar IT services, fixed-price contracts offer greater cost certainty but require a very well-defined scope, while cost-plus contracts provide flexibility but also require robust oversight to control costs and ensure reasonable profit margins. The choice of T&M here suggests a need for adaptability in the MAS project, but necessitates stringent monitoring by CMS to manage expenditures effectively.

What are the potential risks associated with having only two bidders for a contract of this size and scope?

Having only two bidders for a contract valued at $44.5 million, even under full and open competition, presents several potential risks. Firstly, it suggests a lack of robust competition, which can lead to suboptimal pricing for the government. With fewer bidders, the incentive to offer the lowest possible price may be diminished. Secondly, it could indicate a concentrated market for these specific IT services, potentially giving the existing players more leverage. Thirdly, it raises questions about the accessibility of the federal contracting market for other capable firms; perhaps the requirements were overly restrictive, or the bidding process was perceived as too burdensome. This limited competition could also impact innovation, as fewer alternative approaches might be explored. Finally, if one of the bidders withdraws or is disqualified, the government is left with a single option, significantly weakening its negotiating position.

What is CGI Federal Inc.'s track record with similar large-scale IT contracts for the Department of Health and Human Services?

CGI Federal Inc. has a significant history of performing IT services for the Department of Health and Human Services (HHS) and its various agencies, including the Centers for Medicare and Medicaid Services (CMS). They have been involved in numerous contracts related to healthcare IT, claims processing, data management, and system modernization. For instance, CGI has held contracts related to the Medicare Part D program, Medicaid Information Technology Architecture (MITA) initiatives, and other critical health IT infrastructure. Their experience suggests a familiarity with the complex regulatory environment and technical requirements of federal health agencies. However, the specific performance history, including any past issues or successes on comparable projects, would require a deeper dive into contract performance reports, past performance evaluations, and any publicly available dispute or termination data associated with CGI Federal's prior HHS contracts.

How has federal spending on 'Other Computer Related Services' (NAICS 541519) evolved over the past five years, and where does this contract fit?

Federal spending under NAICS code 541519, 'Other Computer Related Services,' has generally seen a steady increase over the past five years, reflecting the government's ongoing reliance on IT modernization and specialized technical support across various agencies. This category is broad and encompasses services not elsewhere classified, often including IT consulting, system integration, custom software development, and IT infrastructure management. The $44.5 million award for the Medicare Appeals System (MAS) represents a significant, but not unprecedented, investment within this category. It aligns with the trend of agencies seeking to upgrade or maintain complex systems critical to their operations, particularly in sectors like healthcare where data management and processing are paramount. This contract's value places it in the mid-to-large tier for individual IT service awards within this NAICS code, underscoring the importance of the MAS to CMS's mission.

What are the implications of this contract being a 'Delivery Order' rather than a standalone contract?

The designation of this award as a 'Delivery Order' (aw: DELIVERY ORDER) indicates that it is a task order issued under a pre-existing indefinite-delivery, indefinite-quantity (IDIQ) contract or a similar type of multiple-award contract vehicle. This means that the foundational contract terms, conditions, and potentially some pricing structures were established previously, possibly through a separate competitive process. The implications of this are several: 1) Flexibility: Delivery orders allow agencies to procure services incrementally as needed, providing agility. 2) Streamlined Procurement: Issuing a delivery order is typically faster than conducting a full, new contract competition. 3) Oversight: Oversight might be distributed between the management of the parent IDIQ contract and the specific delivery order. 4) Competition: While the parent contract may have been competed, individual delivery orders might have limited competition or be awarded based on pre-negotiated terms. For taxpayers, this can mean faster service delivery but requires careful monitoring to ensure the cumulative cost of all delivery orders does not exceed expectations or represent poor value compared to a dedicated, standalone contract.

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: 2

Pricing Type: TIME AND MATERIALS (Y)

Evaluated Preference: NONE

Contractor Details

Address: 12601 FAIR LAKES CIR # 100, FAIRFAX, VA, 22033

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

Financial Breakdown

Contract Ceiling: $44,536,144

Exercised Options: $44,536,144

Current Obligation: $44,536,144

Actual Outlays: $38,072,564

Subaward Activity

Number of Subawards: 17

Total Subaward Amount: $3,898,718

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Parent Contract

Parent Award PIID: GS35F281DA

IDV Type: FSS

Timeline