HHS awarded $407M to General Dynamics for IT services, with a significant portion for insurance-related activities

Contract Overview

Contract Amount: $407,327,592 ($407.3M)

Contractor: General Dynamics Information Technology, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2013-06-06

End Date: 2020-02-05

Contract Duration: 2,435 days

Daily Burn Rate: $167.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: IT

Official Description: IGF::CT::IGF BUSINESS PROGRAM OPERATIONS CONTRACT

Place of Performance

Location: NEW YORK, NEW YORK County, NEW YORK, 10001

State: New York Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $407.3 million to GENERAL DYNAMICS INFORMATION TECHNOLOGY, INC. for work described as: IGF::CT::IGF BUSINESS PROGRAM OPERATIONS CONTRACT Key points: 1. The contract's cost-plus award fee structure allows for performance-based incentives, potentially driving efficiency. 2. Full and open competition suggests a competitive bidding process, which can lead to better pricing. 3. The contract duration of over 6 years indicates a long-term need for these IT services. 4. The significant dollar value suggests a critical role in supporting health and human services operations. 5. The award to a large, established contractor like General Dynamics implies a focus on stability and proven capability. 6. The absence of small business set-aside flags potential challenges for smaller firms in accessing this contract's value chain.

Value Assessment

Rating: good

Benchmarking the value of this $407 million contract is challenging without specific performance metrics or comparable contracts. However, the cost-plus award fee (CPAF) structure, while potentially leading to higher costs than fixed-price contracts, allows for flexibility and incentivizes performance. The pricing would need to be assessed against industry standards for similar IT support services, considering the complexity and scope. The long duration suggests that the initial pricing was deemed reasonable for the expected service period.

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 bids. The fact that it was competed suggests a deliberate effort to solicit the best value from the market. The number of bidders (2) is on the lower side for a contract of this magnitude, which could warrant further investigation into the solicitation process and market conditions to ensure robust price discovery.

Taxpayer Impact: A competitive award process generally benefits taxpayers by fostering price reductions and encouraging innovation among bidders, leading to more efficient use of public funds.

Public Impact

Beneficiaries include the Department of Health and Human Services, which receives critical IT support for its operations. Services delivered encompass a broad range of IT support, likely including system maintenance, development, and operational assistance. The geographic impact is primarily national, supporting federal health and human services initiatives across the United States. Workforce implications include the creation or maintenance of IT-related jobs within General Dynamics and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The limited number of bidders (2) in a full and open competition could indicate potential barriers to entry or a concentrated market.
The cost-plus award fee structure, while flexible, can sometimes lead to cost overruns if not managed tightly.
The long contract duration might reduce agility in adopting newer technologies if not actively managed by the agency.

Positive Signals

The use of full and open competition suggests an effort to maximize market participation and achieve competitive pricing.
The award to a large, experienced contractor like General Dynamics indicates a focus on reliability and proven performance.
The contract's alignment with 'All Other Insurance Related Activities' suggests support for crucial government functions.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically supporting health and human services. The IT services market is vast and highly competitive, with significant government spending. Contracts of this size often involve complex system integration, maintenance, and operational support for large federal agencies. Benchmarking would involve comparing the contract's value and scope to other large-scale IT support contracts awarded by federal agencies, particularly within the healthcare domain.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (sb: false) and there is no explicit mention of subcontracting goals (ss: false). This suggests that small businesses may not have been a primary focus for this specific award, potentially limiting their direct participation. However, large prime contractors like General Dynamics often engage small businesses as subcontractors, so their indirect involvement could still be significant, depending on the subcontracting plan.

Oversight & Accountability

Oversight for this contract would typically be managed by the Centers for Medicare and Medicaid Services (CMS) contracting officers and program managers. The cost-plus award fee structure necessitates close monitoring of performance and costs to ensure value for money. Transparency is generally maintained through contract reporting mechanisms, and the Inspector General's office for HHS would have jurisdiction to investigate any potential fraud, waste, or abuse.

Related Government Programs

HHS IT Modernization Initiatives
Centers for Medicare and Medicaid Services (CMS) Operations Support
Federal Health IT Contracts
General IT Services Contracts
Large-Scale Federal IT Procurements

Risk Flags

Potential for cost overruns due to CPAF structure.
Risk of technological obsolescence over the contract's long duration.
Limited number of bidders may indicate market concentration.
Cybersecurity vulnerabilities associated with IT services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $407.3 million to GENERAL DYNAMICS INFORMATION TECHNOLOGY, INC.. IGF::CT::IGF BUSINESS PROGRAM OPERATIONS CONTRACT

Who is the contractor on this award?

The obligated recipient is GENERAL DYNAMICS INFORMATION TECHNOLOGY, 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 $407.3 million.

What is the period of performance?

Start: 2013-06-06. End: 2020-02-05.

What was the specific performance criteria used for the 'award fee' component of this contract?

The 'award fee' component of a Cost Plus Award Fee (CPAF) contract is designed to incentivize contractor performance beyond minimum requirements. Specific performance criteria are typically detailed in the contract's Performance Work Statement (PWS) or a separate award fee plan. These criteria often include metrics related to timeliness of delivery, quality of service, cost control, customer satisfaction, and innovation. For this General Dynamics contract with HHS, the criteria would likely have been tailored to the 'All Other Insurance Related Activities' and broader IT support functions. Without access to the specific award fee plan, it's impossible to detail the exact metrics, but they would have been designed to measure the contractor's success in meeting or exceeding defined objectives, directly impacting the fee earned.

How does the per-unit cost of services under this contract compare to industry benchmarks for similar IT support?

Determining a precise per-unit cost benchmark for this contract is difficult without granular data on the specific services rendered and their associated costs. The contract type (CPAF) and its broad scope covering 'All Other Insurance Related Activities' and general IT support make direct per-unit comparisons complex. Industry benchmarks for IT support vary widely based on service type (e.g., help desk, network management, software development), skill levels required, and geographic location. To perform a robust comparison, one would need to break down the contract's spending into specific labor categories and service types and then compare those rates against market data from sources like the Bureau of Labor Statistics or private IT consulting firms. Given the federal context and the contractor's scale, rates might be expected to be competitive but could also reflect the overhead and compliance requirements of government contracting.

What are the primary risks associated with a contract of this size and duration for IT services?

Contracts of this magnitude ($407 million) and duration (over 6 years) carry several inherent risks. For IT services, key risks include technological obsolescence, where the systems or services provided become outdated before the contract ends. There's also the risk of cost overruns, particularly with CPAF contracts if performance incentives aren't perfectly aligned with cost control. Contractor performance degradation over time is another concern, as is vendor lock-in, making it difficult and costly to switch providers. Furthermore, cybersecurity threats are a constant risk for IT contracts handling sensitive data. Finally, changes in agency priorities or federal regulations could necessitate significant contract modifications, introducing complexity and potential cost increases.

What has been General Dynamics Information Technology's track record on similar government contracts?

General Dynamics Information Technology (GDIT) is a major federal contractor with a long history of performance across various agencies and service areas, including extensive work with the Department of Health and Human Services. Their track record generally includes managing large, complex IT programs, system modernization, and providing mission-critical support. While specific performance details for every contract are not publicly available, GDIT has historically been awarded significant contracts and is considered a reliable provider. However, like any large contractor, they may have faced performance challenges or contract disputes on specific projects. A thorough review would involve examining past performance evaluations, any debriefings from lost bids, and public records of contract awards and terminations.

How does the spending on this contract compare to overall federal IT spending or spending within HHS?

This $407 million contract represents a significant investment within HHS for IT services. To contextualize it, one would compare it to the total IT budget of HHS and the broader federal IT spending. For example, federal agencies collectively spend hundreds of billions of dollars annually on IT. Within HHS, IT spending supports a vast array of programs, including those managed by CMS, NIH, and other operating divisions. This contract's value would be assessed as a portion of CMS's IT budget and HHS's overall IT expenditure. If this contract covers core insurance-related IT functions, it could represent a substantial percentage of the budget allocated to those specific activities, highlighting its importance.

Industry Classification

NAICS: Finance and Insurance › Agencies, Brokerages, and Other Insurance Related Activities › All Other Insurance Related Activities

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: RFPCMS20110048

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corporation

Address: 3211 JERMANTOWN RD, FAIRFAX, VA, 22030

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

Financial Breakdown

Contract Ceiling: $407,327,592

Exercised Options: $407,327,592

Current Obligation: $407,327,592

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline