OptumServe Technology Services awarded $69.2M for computer systems design, highlighting a long-term contract with significant duration

Contract Overview

Contract Amount: $69,229,696 ($69.2M)

Contractor: Optumserve Technology Services, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2009-12-23

End Date: 2015-02-20

Contract Duration: 1,885 days

Daily Burn Rate: $36.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: IT

Official Description: SINGLE TESTING CONTRACTOR

Place of Performance

Location: GAITHERSBURG, MONTGOMERY County, MARYLAND, 20878

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $69.2 million to OPTUMSERVE TECHNOLOGY SERVICES, INC. for work described as: SINGLE TESTING CONTRACTOR Key points: 1. The contract's duration of 1885 days suggests a need for sustained support in computer systems design. 2. Awarded under full and open competition, this contract likely benefited from a competitive bidding process. 3. The Cost Plus Award Fee (CPAF) pricing structure incentivizes performance but requires careful oversight to manage costs. 4. The contract's value of $69.2 million places it in the mid-to-large tier for IT services within the federal government. 5. Performance was delivered in Maryland, indicating a specific geographic focus for these services. 6. The absence of small business set-aside flags suggests the primary contractor is not a small business, and subcontracting opportunities may be limited.

Value Assessment

Rating: good

The contract's total value of $69.2 million over approximately five years averages to about $13.8 million annually. This figure appears reasonable for complex computer systems design services, especially considering the Cost Plus Award Fee structure which allows for adjustments based on performance. Benchmarking against similar large-scale IT contracts within the federal government suggests this pricing is within expected ranges, though specific performance metrics would be needed for a definitive value assessment. The contract's duration and scope imply a significant investment in maintaining and potentially upgrading critical systems.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded through a full and open competition, indicating that all responsible sources were permitted to submit bids. This approach typically fosters a robust bidding environment, potentially leading to better pricing and innovative solutions. The fact that it was competed openly suggests that the agency sought the best value from the widest possible pool of qualified contractors. The number of bidders is not specified, but the open competition itself is a positive indicator for price discovery and market responsiveness.

Taxpayer Impact: Taxpayers benefit from full and open competition as it generally drives down costs and increases the likelihood of receiving high-quality services at a fair price. This method ensures that the government is not limited to a select few providers, promoting a more efficient use of public funds.

Public Impact

The Centers for Medicare and Medicaid Services (CMS) benefits from enhanced computer systems design and support, crucial for managing healthcare programs. Beneficiaries of federal healthcare programs likely experience improved service delivery due to more robust and efficient IT infrastructure. The contract supports IT professionals and related roles within the contractor's organization, contributing to the tech workforce. Services are geographically focused in Maryland, impacting the local IT service sector and potentially creating or sustaining jobs in that region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee contracts require diligent oversight to ensure costs remain reasonable and that award fees are justified by performance.
The extended duration of the contract could lead to vendor lock-in if not managed carefully, potentially limiting future flexibility.
Reliance on a single contractor for critical systems design over a long period may pose risks if the contractor's capabilities degrade or strategic priorities shift.

Positive Signals

Awarded under full and open competition, suggesting a competitive process that likely secured favorable terms.
The Cost Plus Award Fee structure incentivizes high performance, potentially leading to superior outcomes for the agency.
The contract's significant value and duration indicate a strong need and likely successful delivery of essential IT services.

Sector Analysis

This contract falls within the Computer Systems Design Services sector, a critical component of the broader Information Technology (IT) industry. This sector is characterized by high demand for specialized expertise in software development, system integration, and IT infrastructure management. Federal spending in this area is substantial, supporting a wide range of government functions from defense and intelligence to healthcare and citizen services. Comparable contracts often involve significant dollar values and long performance periods, reflecting the complexity and criticality of the systems being designed and maintained.

Small Business Impact

The data indicates this contract was not set aside for small businesses, nor does it explicitly mention subcontracting goals for small businesses. This suggests that the primary focus was on securing the best technical solution and price from the broader market. While this may limit direct opportunities for small businesses as prime contractors on this specific award, it does not preclude them from potentially participating as subcontractors if the prime contractor chooses to engage them. The overall impact on the small business ecosystem would depend on the prime contractor's subcontracting strategy and the availability of other federal contracts specifically targeting small businesses.

Oversight & Accountability

Oversight for this contract would primarily reside with the contracting officer and the relevant program officials within the Centers for Medicare and Medicaid Services (CMS). As a Cost Plus Award Fee (CPAF) contract, rigorous monitoring of costs, performance against defined criteria, and justification for award fees is essential. Transparency is typically managed through contract reporting mechanisms and agency oversight processes. Inspector General jurisdiction would apply if any investigations into fraud, waste, or abuse related to the contract were initiated.

Related Government Programs

IT Services
Computer Systems Design
Healthcare IT
Federal IT Procurement
Centers for Medicare and Medicaid Services Contracts

Risk Flags

Cost Plus Award Fee (CPAF) requires robust oversight to manage costs and ensure performance justification.
Long contract duration may present risks of vendor lock-in or reduced flexibility over time.
Lack of explicit small business subcontracting goals could limit opportunities for smaller firms.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $69.2 million to OPTUMSERVE TECHNOLOGY SERVICES, INC.. SINGLE TESTING CONTRACTOR

Who is the contractor on this award?

The obligated recipient is OPTUMSERVE TECHNOLOGY SERVICES, 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 $69.2 million.

What is the period of performance?

Start: 2009-12-23. End: 2015-02-20.

What was the contractor's performance history prior to this award?

Information regarding OptumServe Technology Services, Inc.'s specific performance history prior to this particular contract award is not detailed in the provided data. However, the fact that they were awarded a significant, long-term contract through full and open competition by the Centers for Medicare and Medicaid Services (CMS) suggests a level of capability and trust established with the agency or demonstrated during the bidding process. A comprehensive assessment would require reviewing past performance evaluations, any debriefings from previous solicitations, and their overall track record on government contracts, particularly those involving complex IT systems design and implementation. Agencies typically maintain performance records that inform future source selections.

How does the average annual cost compare to similar federal IT contracts?

The average annual cost for this contract is approximately $13.8 million ($69.2 million / 5 years). Benchmarking this against similar federal IT contracts for Computer Systems Design Services requires access to a broader dataset of contract awards. However, for a contract of this duration and scope, involving a major health agency like CMS, this annual figure is generally considered within a reasonable range for complex IT solutions. Contracts for large-scale system design, integration, and maintenance often command significant budgets. Factors such as the specific technologies involved, the level of customization required, and the security protocols mandated would influence the precise comparison. Without specific details on the deliverables and the competitive landscape at the time of award, a definitive value-for-money assessment is challenging, but the figure does not immediately appear anomalous for its category.

What are the primary risks associated with a Cost Plus Award Fee (CPAF) contract structure?

The primary risks associated with a Cost Plus Award Fee (CPAF) contract structure revolve around cost control and the potential for contractor inefficiency. While CPAF incentivizes performance through award fees, it also allows the contractor to recoup allowable costs, which can sometimes be higher than anticipated if not managed diligently. The risk for the government lies in ensuring that costs are reasonable and allocable, and that the award fee criteria are objective, measurable, and directly tied to desired outcomes. Without robust oversight and clearly defined performance metrics, there's a risk that costs could escalate, or that award fees might be paid for performance that doesn't fully justify the expense. Conversely, poorly defined criteria could lead to disputes or failure to motivate optimal performance.

How effective has CMS been in managing long-term IT contracts like this one?

Assessing the overall effectiveness of CMS in managing long-term IT contracts requires a review of multiple contracts and their performance histories, which is beyond the scope of the provided data. However, CMS, like many large federal agencies, relies heavily on IT systems to manage critical healthcare programs, indicating a significant operational need for effective contract management. Long-term contracts are often necessary for complex IT projects that require sustained development, integration, and maintenance. The success of such contracts hinges on strong program management, clear communication, rigorous oversight of performance and costs, and adaptability to evolving technological landscapes and policy changes. CMS's continued operation of complex systems suggests a functional, albeit potentially improvable, approach to managing its IT portfolio.

What is the historical spending trend for Computer Systems Design Services at CMS?

The provided data focuses on a single contract award and does not offer historical spending trends for Computer Systems Design Services at CMS. To analyze historical spending, one would need access to CMS's procurement data over several fiscal years, broken down by service category (like NAICS code 541512 for Computer Systems Design Services) and potentially by contract type and awardee. Such an analysis would reveal whether spending in this area has been increasing, decreasing, or remaining stable, and identify major contractors or contract vehicles utilized. Understanding these trends is crucial for budget planning, identifying potential market consolidation, and assessing the agency's reliance on external IT services.

What is the potential impact of this contract on future IT procurements within CMS?

This contract, awarded through full and open competition for Computer Systems Design Services, could influence future IT procurements at CMS by setting a precedent for contract structure, performance expectations, and pricing benchmarks. The success or challenges encountered with this specific Cost Plus Award Fee contract may inform CMS's approach to similar future acquisitions. If the contract proves highly successful, it might encourage the use of CPAF for other complex IT projects. Conversely, any identified issues could lead CMS to favor different contract types or refine its performance metrics. The substantial value and duration also signal CMS's ongoing commitment to investing in its IT infrastructure, potentially indicating a sustained demand for such services.

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

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Unitedhealth Group Incorporated

Address: 10480 LITTLE PATUXENT PKWY SUITE 310, COLUMBIA, MD, 21044

Business Categories: 8(a) Program Participant, Category Business, Minority Owned Business, Not Designated a Small Business, Self-Certified Small Disadvantaged Business, Small Business, Small Disadvantaged Business, Special Designations, Indian (Subcontinent) American Owned Business

Financial Breakdown

Contract Ceiling: $96,347,093

Exercised Options: $69,229,696

Current Obligation: $69,229,696

Actual Outlays: $-755,114

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Parent Contract

Parent Award PIID: HHSM500200700024I

IDV Type: IDC

Timeline