Leidos Inc. awarded $93M for IT services by HHS, with a significant portion for computer systems design

Contract Overview

Contract Amount: $92,960,295 ($93.0M)

Contractor: Leidos, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2016-08-01

End Date: 2024-02-29

Contract Duration: 2,768 days

Daily Burn Rate: $33.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: IT

Official Description: IGF::OT::IGF NDW TASK ORDER AWARD

Place of Performance

Location: BETHESDA, MONTGOMERY County, MARYLAND, 20817

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $93.0 million to LEIDOS, INC. for work described as: IGF::OT::IGF NDW TASK ORDER AWARD Key points: 1. Contract value of $93M over its period of performance suggests a substantial IT services requirement. 2. The contract was awarded under full and open competition, indicating a broad market solicitation. 3. A Cost Plus Award Fee (CPA) pricing structure introduces performance incentives but can lead to cost uncertainty. 4. The duration of nearly 8 years (2768 days) points to a long-term, critical IT support need. 5. The primary NAICS code (541512) signifies a focus on computer systems design and related services. 6. The contract's geographic focus is Maryland (ST: MD, SN: MARYLAND).

Value Assessment

Rating: fair

Benchmarking the value of this $93M contract is challenging without specific service details and comparable contract data. However, the Cost Plus Award Fee (CPA) structure, while incentivizing performance, can sometimes lead to higher costs than fixed-price contracts if not managed tightly. The significant duration suggests a need for sustained services, and the value appears commensurate with long-term IT support for a large agency like CMS. Further analysis would require comparing the per-unit costs of specific services rendered against industry benchmarks.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'FULL AND OPEN COMPETITION,' indicating that the solicitation was made available to all responsible sources. The presence of 2 offers (NO: 2) suggests a moderate level of competition for this specific award. While full and open competition is generally preferred for maximizing price discovery, a low number of bids can sometimes indicate market limitations or specific technical requirements that narrow the field of potential contractors.

Taxpayer Impact: Taxpayers benefit from the potential for competitive pricing inherent in full and open competition. However, with only two offers received, the ultimate cost savings compared to a scenario with more bidders remain uncertain.

Public Impact

Beneficiaries include the Centers for Medicare and Medicaid Services (CMS) and potentially healthcare providers and beneficiaries who rely on the IT systems supported by these services. Services delivered likely encompass IT infrastructure management, system design, integration, and maintenance critical for CMS operations. The geographic impact is primarily within Maryland, where the contractor's operations are based. Workforce implications include employment opportunities for IT professionals within Leidos and potentially its subcontractors in the Maryland region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The Cost Plus Award Fee (CPA) structure can lead to cost overruns if performance metrics are not rigorously defined and monitored, potentially increasing the final cost to taxpayers.
A limited number of offers (2) in a full and open competition might suggest that the contract requirements are highly specialized or that the market for such services is concentrated, potentially limiting competitive pressure.
The long contract duration (nearly 8 years) increases the risk of technological obsolescence or shifts in agency needs that may not be fully captured in the initial contract terms.
Lack of specific details on the 'award fee' criteria makes it difficult to assess the effectiveness of performance incentives and their impact on value for money.

Positive Signals

Awarding under 'full and open competition' is a positive signal for maximizing potential bidder interest and achieving competitive pricing.
The contract's focus on 'Computer Systems Design Services' indicates support for critical IT infrastructure, which is essential for agency operations.
The long performance period suggests a stable, ongoing need for these services, providing continuity for CMS's IT operations.
The existence of an award fee component, if well-structured, can incentivize contractors to exceed performance expectations, potentially leading to higher quality service delivery.

Sector Analysis

The IT services sector is vast and highly competitive, with government contracts forming a significant portion of the market. This contract falls under computer systems design services, a sub-sector focused on planning and designing computer systems that integrate hardware, software, and communication technologies. The total government spending on IT services is in the hundreds of billions annually, with agencies like HHS being major consumers. This contract's value of $93M over nearly eight years is substantial but represents a small fraction of overall federal IT spending, fitting within the typical range for large-scale IT support contracts.

Small Business Impact

This contract does not appear to have a specific small business set-aside (SB: false, SS: false). While Leidos, Inc. is a large business, the contract's structure does not preclude the use of small business subcontractors. Analysis of subcontracting plans, if required, would be necessary to determine the extent of small business participation and its impact on the small business ecosystem. Without this information, it's difficult to assess the direct benefit to small businesses from this specific award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) contracting and program management offices. The Inspector General (IG) of HHS would have jurisdiction to investigate potential fraud, waste, or abuse. Transparency is facilitated through contract award databases like FPDS, which provide basic details. However, the specifics of performance monitoring and award fee determination under the CPA structure are internal to the agency and contractor, limiting public visibility into day-to-day oversight effectiveness.

Related Government Programs

HHS IT Modernization
CMS Health IT Services
Federal Civilian IT Contracts
Computer Systems Design Services Contracts
Cost Plus Award Fee Contracts

Risk Flags

Cost Overrun Risk (CPA Structure)
Limited Competition (2 Offers)
Technological Obsolescence Risk (Long Duration)
Performance Incentive Effectiveness Uncertainty

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $93.0 million to LEIDOS, INC.. IGF::OT::IGF NDW TASK ORDER AWARD

Who is the contractor on this award?

The obligated recipient is LEIDOS, 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 $93.0 million.

What is the period of performance?

Start: 2016-08-01. End: 2024-02-29.

What is Leidos, Inc.'s track record with federal IT service contracts, particularly with HHS and CMS?

Leidos, Inc. has a substantial history of securing and performing on federal IT service contracts across various agencies, including HHS and CMS. Their portfolio often includes complex system integration, cybersecurity, cloud migration, and data analytics services. Historically, Leidos has been a significant player in the federal IT landscape, often winning large, multi-year contracts. Performance reviews and past performance evaluations from previous government contracts are critical inputs during the source selection process for new awards. While specific details of past performance on similar CMS contracts would require deeper investigation into contract databases and performance reports, Leidos's continued success in winning large federal contracts suggests a generally positive track record in meeting government requirements, though like any large contractor, they may have faced challenges or criticisms on specific projects.

How does the $93M contract value compare to similar computer systems design services contracts awarded by HHS or CMS?

The $93M contract value for computer systems design services awarded to Leidos by CMS over a period of nearly eight years is substantial, aligning with the scale of IT support required for a major federal agency. To benchmark this value, one would typically compare it against other large, long-term IT support contracts within HHS or CMS, as well as similar contracts from other large civilian agencies. Contracts for enterprise IT infrastructure, system modernization, and comprehensive IT support often reach tens or hundreds of millions of dollars over their lifecycles. Given the critical nature of CMS's operations, which involve managing vast amounts of healthcare data and complex systems, a contract of this magnitude for design and related services is not unusual. However, a precise comparison would necessitate analyzing the specific scope of work, service level agreements, and pricing structures of comparable contracts.

What are the primary risks associated with a Cost Plus Award Fee (CPA) contract structure for this type of service?

The primary risks associated with a Cost Plus Award Fee (CPA) contract structure, such as the one awarded to Leidos, revolve around cost control and predictability. In a CPA contract, the contractor is reimbursed for allowable costs plus a fee that is composed of a fixed base fee and an award amount determined by meeting or exceeding specific performance objectives. The risk lies in the potential for costs to escalate beyond initial estimates if performance targets are ambitious or if the definition of 'allowable costs' is broad. For the government, there's a risk of paying a higher total price than anticipated if the contractor achieves high performance ratings, even if the services are delivered effectively. Conversely, poorly defined award criteria can lead to disputes or a lack of meaningful incentive. Effective oversight is crucial to ensure that costs are reasonable and that the award fee truly reflects exceptional performance.

How effective is 'full and open competition' likely to be in ensuring value for money when only two offers are received?

The effectiveness of 'full and open competition' in ensuring value for money is somewhat diminished when only two offers are received, as in this case. While the process itself is designed to attract the widest possible pool of bidders, a low number of responses can indicate several factors: the market for the specific services may be limited, the technical requirements might be highly specialized, or the contract terms (e.g., duration, pricing structure) may not be attractive to a broader range of companies. With only two bidders, the government has less leverage to negotiate favorable terms and pricing compared to a scenario with multiple competing proposals. The resulting price might be competitive between the two, but it doesn't necessarily represent the best possible value achievable if more bidders had participated. Therefore, while the process followed was correct, the outcome suggests that the competitive pressure might have been less intense than ideal.

What are the implications of the contract's long duration (nearly 8 years) for technological relevance and adaptability?

A contract duration of nearly eight years for IT services, particularly in computer systems design, carries inherent risks related to technological relevance and adaptability. The IT landscape evolves rapidly, with new hardware, software, and methodologies emerging constantly. A long-term contract might lock the government into specific technologies or approaches that could become outdated or less efficient over time. This necessitates robust contract management to incorporate necessary upgrades, changes, or pivots. Mechanisms like regular reviews, change order processes, and performance-based requirements that allow for flexibility are critical. If the contract is structured rigidly, it could hinder the agency's ability to adopt more innovative or cost-effective solutions that become available mid-contract, potentially leading to suboptimal performance or higher long-term costs due to maintaining legacy systems.

How does the NAICS code 541512 (Computer Systems Design Services) define the scope of work for this contract?

The North American Industry Classification System (NAICS) code 541512, 'Computer Systems Design Services,' defines the primary scope of this contract. This classification typically includes establishments primarily engaged in planning and designing computer systems that integrate hardware, software, and communication technologies. This can encompass a wide range of activities such as analyzing user requirements, designing and developing system architecture, developing and implementing software solutions, and providing IT infrastructure consulting. It often involves advising clients on the best use of information technology, designing and developing customized software, and integrating various hardware and software components into a cohesive system. For CMS, this likely translates to designing, developing, and integrating IT systems that support healthcare programs, data management, and operational efficiency.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Computer Systems Design 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

Solicitation ID: HHSM5002016RFP0006

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Leidos Holdings, Inc.

Address: 700 N FREDERICK AVE, GAITHERSBURG, MD, 20879

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

Financial Breakdown

Contract Ceiling: $99,044,326

Exercised Options: $92,960,295

Current Obligation: $92,960,295

Actual Outlays: $31,922,654

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS00Q09BGD0039

IDV Type: GWAC

Timeline