HHS awards $1.22B contract for eligibility support services to Serco Inc

Contract Overview

Contract Amount: $1,222,833,494 ($1.2B)

Contractor: Serco Inc

Awarding Agency: Department of Health and Human Services

Start Date: 2013-07-01

End Date: 2018-06-30

Contract Duration: 1,825 days

Daily Burn Rate: $670.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: IGF::OT::IGF-PPHF-2013-ELIGIBILITY SUPPORT

Place of Performance

Location: ROGERS, BENTON County, ARKANSAS, 72756

State: Arkansas Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $1.22 billion to SERCO INC for work described as: IGF::OT::IGF-PPHF-2013-ELIGIBILITY SUPPORT Key points: 1. Contract awarded through full and open competition, suggesting a robust market. 2. The contract duration of 5 years indicates a significant, long-term need for these services. 3. The administrative management and general management consulting services are critical for program operations. 4. The contract type (Cost Plus Fixed Fee) can lead to cost overruns if not managed carefully. 5. The base contract value is substantial, requiring diligent oversight to ensure value for money. 6. The geographic scope appears to be Arkansas, based on the state notification.

Value Assessment

Rating: fair

The contract value of $1.22 billion over five years for administrative management and general management consulting services is significant. Benchmarking this against similar large-scale government contracts for eligibility support is challenging without more specific service details. However, the Cost Plus Fixed Fee (CPFF) contract type introduces inherent risk for cost control, as contractor profit is guaranteed while costs are reimbursed. This necessitates strong government oversight to ensure the fixed fee remains reasonable and that costs are controlled effectively to achieve value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple vendors were likely invited to bid. The presence of four bidders (no) suggests a competitive environment, which generally benefits price discovery and can lead to more favorable terms for the government. The specific details of the bidding process and the evaluation criteria would provide further insight into the effectiveness of this competition in securing the best value.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it encourages a wider range of offers, potentially driving down costs and improving service quality through market forces.

Public Impact

Beneficiaries include individuals seeking eligibility for health and human services programs. Services delivered are crucial for the efficient administration and operation of these programs. The geographic impact is noted as Arkansas (AR), suggesting a focus on state-level operations. Workforce implications include potential job creation by the contractor and impacts on government personnel managing the contract.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contract type carries a risk of cost escalation if not rigorously managed.
The large contract value necessitates robust oversight to prevent waste, fraud, and abuse.
Limited information on specific performance metrics makes it difficult to assess service effectiveness independently.

Positive Signals

Awarded through full and open competition, indicating a competitive marketplace.
The contract duration suggests a stable, long-term need and commitment to service delivery.
The contractor, Serco Inc., has experience in government contracting, potentially bringing established expertise.

Sector Analysis

The administrative management and general management consulting services sector is a significant part of government contracting. This contract falls within the broader professional services category, which supports various government functions. The market for such services is competitive, with numerous firms offering expertise in program management, administrative support, and operational efficiency. The size of this contract suggests it is a major award within this specific niche, likely supporting a critical government function.

Small Business Impact

The data indicates that small business participation (ss: false, sb: false) was not a primary set-aside consideration for this contract. While there is no explicit small business set-aside, the prime contractor, Serco Inc., may engage small businesses as subcontractors. The extent of subcontracting to small businesses would need further investigation to determine the overall impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily reside with the Centers for Medicare and Medicaid Services (CMS) within the Department of Health and Human Services. Given the contract's value and nature, regular performance reviews, financial audits, and adherence to contractual terms are expected. The Inspector General's office for HHS would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Medicaid Eligibility Determination
Health Insurance Marketplace Support
Federal Program Administration
Government Consulting Services
Administrative Support Contracts

Risk Flags

Cost Overrun Risk (CPFF Contract Type)
Performance Monitoring Challenges
Contractor Dependency Risk
Knowledge Transfer Risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $1.22 billion to SERCO INC. IGF::OT::IGF-PPHF-2013-ELIGIBILITY SUPPORT

Who is the contractor on this award?

The obligated recipient is SERCO 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 $1.22 billion.

What is the period of performance?

Start: 2013-07-01. End: 2018-06-30.

What is Serco Inc.'s track record with similar large-scale government contracts, particularly in eligibility support or administrative management?

Serco Inc. has a significant history of performing large government contracts across various agencies, including defense, health, and transportation. They have been involved in managing complex administrative and operational services for government programs. For instance, they have held contracts related to call centers, citizen services, and program administration. While specific details on their performance in eligibility support for CMS are not provided here, their general experience suggests a capacity to handle large, complex contracts. A deeper dive into past performance reviews, any penalties, or awards related to their previous government work would offer a more comprehensive understanding of their reliability and effectiveness in similar roles.

How does the Cost Plus Fixed Fee (CPFF) structure for this contract compare to industry standards for similar services, and what are the associated risks?

The Cost Plus Fixed Fee (CPFF) contract type is common in government contracting when the scope of work is well-defined but costs are uncertain, or when innovation is required. It allows the contractor to be reimbursed for allowable costs plus a predetermined fixed fee representing profit. While it can incentivize efficiency, it also carries risks for the government. If costs escalate beyond initial estimates, the government pays more, and the fixed fee, as a percentage of total costs, can become disproportionately high. Effective oversight is crucial to scrutinize costs, ensure the fixed fee is reasonable, and prevent contractor overspending. Benchmarking this fee against similar CPFF contracts for administrative services would be necessary to assess its fairness.

What are the key performance indicators (KPIs) used to measure the success of this contract, and how is performance being monitored?

Specific Key Performance Indicators (KPIs) for this contract are not detailed in the provided data. However, for eligibility support services, typical KPIs would likely include metrics such as application processing times, accuracy rates in eligibility determinations, customer satisfaction scores (if applicable), system uptime, and compliance with regulatory requirements. The Centers for Medicare and Medicaid Services (CMS) would be responsible for establishing and monitoring these KPIs through regular performance reviews, data reporting from the contractor, and potentially site visits or audits. The effectiveness of the contract hinges on robust monitoring of these metrics to ensure the contractor is meeting its obligations and delivering value.

What is the historical spending trend for eligibility support services within HHS or CMS, and how does this $1.22 billion award fit into that pattern?

Historical spending on eligibility support services within HHS and CMS is substantial, given the scale of programs like Medicaid and the Affordable Care Act marketplaces. While precise historical figures for this specific contract's function are not provided, it is reasonable to assume that significant investments have been made annually to manage these complex processes. A $1.22 billion award over five years represents an average of approximately $244 million per year. This figure needs to be compared against previous contract values for similar services to determine if it represents an increase, decrease, or stable level of spending. Understanding this trend is key to assessing whether this award is in line with past budgetary allocations or signifies a shift in investment.

What are the potential risks associated with outsourcing critical administrative functions like eligibility determination to a single large contractor like Serco Inc.?

Outsourcing critical administrative functions carries several potential risks. A primary concern is over-reliance on a single contractor, which can reduce the government's flexibility and bargaining power. If the contractor underperforms or faces financial difficulties, it could disrupt essential services. There's also a risk of knowledge loss within the government, as institutional expertise may diminish. Furthermore, managing a large, complex contract requires significant government oversight resources to ensure accountability, prevent fraud, and maintain service quality. The CPFF structure adds a layer of financial risk, as mentioned previously. Mitigating these risks involves strong contract management, clear performance expectations, and contingency planning.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Management, Scientific, and Technical Consulting Services › Administrative Management and General Management Consulting Services

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: HHSM5002012RFP0002

Offers Received: 4

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Serco Group PLC

Address: 1818 LIBRARY ST STE 1000, RESTON, VA, 20190

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

Financial Breakdown

Contract Ceiling: $1,263,363,023

Exercised Options: $1,222,833,494

Current Obligation: $1,222,833,494

Subaward Activity

Number of Subawards: 96

Total Subaward Amount: $94,705,052

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline