HHS's $174M Data Service Hub contract awarded to OptumServe for IT systems design

Contract Overview

Contract Amount: $174,070,772 ($174.1M)

Contractor: Optumserve Technology Services, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2011-09-30

End Date: 2017-03-01

Contract Duration: 1,979 days

Daily Burn Rate: $88.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: DATA SERVICE HUB

Place of Performance

Location: WINDSOR MILL, BALTIMORE County, MARYLAND, 21244

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $174.1 million to OPTUMSERVE TECHNOLOGY SERVICES, INC. for work described as: DATA SERVICE HUB Key points: 1. Contract value represents significant investment in IT infrastructure. 2. Sole awardee suggests potential for concentrated risk or specialized capability. 3. Long duration indicates a critical, ongoing need for these services. 4. Fixed-fee structure aims to control costs, but requires careful scope management. 5. The contract's performance context is vital for understanding its overall success. 6. This falls within the broader IT services sector for government operations.

Value Assessment

Rating: fair

The total award of $174 million over approximately 5.5 years for computer systems design services is substantial. Benchmarking this against similar large-scale IT system development contracts within HHS or other agencies is challenging without more granular data on scope and deliverables. The Cost Plus Fixed Fee (CPFF) pricing structure can lead to cost overruns if not managed tightly, but it also allows for flexibility in evolving IT projects. Without specific performance metrics or comparisons to industry benchmarks for similar system designs, a definitive value-for-money assessment is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. The presence of four bidders (no=4) suggests a reasonable level of competition for this significant IT services contract. This level of competition is generally positive for price discovery and ensuring the government receives competitive offers, although the specific dynamics of the bidding process are not detailed.

Taxpayer Impact: A competitive award process helps ensure taxpayer dollars are used efficiently by driving down prices and encouraging innovation from multiple vendors.

Public Impact

Beneficiaries include federal agencies relying on the Data Service Hub for IT support. Services delivered encompass computer systems design and related IT functions. Geographic impact is likely national, supporting federal operations across the US. Workforce implications include IT professionals employed by the contractor and potentially government oversight staff.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in due to the long-term nature and specialized services.
Cost escalation risks inherent in CPFF contracts if scope management is weak.
Dependence on a single contractor for critical IT infrastructure.

Positive Signals

Awarded through full and open competition, suggesting a robust selection process.
Long contract duration implies a stable, ongoing need met by the contractor.
Fixed fee component provides some cost predictability.

Sector Analysis

This contract falls within the government's Information Technology (IT) services sector, specifically focusing on computer systems design. This is a critical area for federal agencies, encompassing the development, integration, and maintenance of complex IT systems. The market for government IT services is substantial, with numerous large and small businesses competing for contracts. Benchmarks for similar system design contracts would typically consider factors like system complexity, user base, and integration requirements.

Small Business Impact

The contract was not set aside for small businesses (sb=false), and there is no explicit information provided regarding subcontracting plans. This suggests that the primary award went to a large business, and opportunities for small businesses would likely be through subcontracting if initiated by the prime contractor. Further analysis would be needed to determine if small business participation was a requirement or a factor in the evaluation.

Oversight & Accountability

Oversight mechanisms for this contract would typically involve the Contracting Officer's Representative (COR) and program managers within CMS. Accountability measures are usually tied to performance metrics outlined in the contract's Statement of Work (SOW) and delivery schedules. Transparency is often facilitated through contract award databases and reporting requirements, though detailed operational oversight information is usually internal.

Related Government Programs

Healthcare IT Modernization Programs
Federal Civilian IT Infrastructure Support
Data Management and Analytics Services
Centers for Medicare and Medicaid Services (CMS) IT Contracts

Risk Flags

Potential for cost overruns due to CPFF structure
Risk of technological obsolescence over the contract's long duration
Dependence on a single contractor for critical IT services

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $174.1 million to OPTUMSERVE TECHNOLOGY SERVICES, INC.. DATA SERVICE HUB

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 $174.1 million.

What is the period of performance?

Start: 2011-09-30. End: 2017-03-01.

What is the track record of OptumServe Technology Services, Inc. with similar large-scale federal IT contracts?

OptumServe Technology Services, Inc., a subsidiary of UnitedHealth Group, has a significant history of performing large federal IT contracts, particularly within the Department of Defense and Health and Human Services. They have been involved in major health IT initiatives, including electronic health records (EHR) and data management systems. Their experience often centers on complex system integration, cloud migration, and providing IT support services to government agencies. While specific performance details for each contract are not publicly detailed, their sustained presence in the federal IT landscape suggests a capacity to manage substantial projects. However, like any large contractor, they may have faced scrutiny or challenges on specific contracts, which would require a deeper dive into contract performance reports and Inspector General findings.

How does the $174 million total award compare to other large federal IT system design contracts?

A total award of $174 million over approximately 5.5 years for computer systems design services places this contract in the mid-to-large tier for federal IT projects. Many large-scale federal IT system modernizations or new developments can range from hundreds of millions to billions of dollars. For instance, major EHR system deployments or enterprise resource planning (ERP) implementations often exceed this figure significantly. However, compared to contracts focused solely on IT support or maintenance, $174 million for system design indicates a substantial undertaking. The value is also influenced by the specific complexity, novelty of the technology, and the criticality of the system being designed. Without knowing the exact scope and deliverables of the Data Service Hub, direct comparison is limited, but it represents a significant investment in IT capability.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract of this magnitude?

The primary risks associated with a Cost Plus Fixed Fee (CPFF) contract of this magnitude revolve around cost control and scope creep. While the fixed fee provides the contractor with a defined profit margin, the 'cost plus' element means the government reimburses the contractor for allowable costs incurred. If the project's scope expands beyond initial estimates, or if inefficiencies arise in execution, the total cost to the government can escalate significantly, potentially exceeding initial budget projections. Effective oversight, rigorous change control processes, and detailed cost tracking are crucial to mitigate these risks. The contractor also faces risk if they cannot complete the work within the estimated costs, as their fee is fixed, but the government bears the brunt of cost overruns.

How effective are full and open competitions in ensuring value for money for large IT contracts?

Full and open competition is generally considered the most effective method for ensuring value for money in large federal IT contracts. By allowing all responsible sources to submit bids, it fosters a competitive environment that encourages vendors to offer their best pricing and innovative solutions. This broad competition increases the likelihood that the government will receive proposals that are technically sound and economically advantageous. The presence of multiple bidders, as indicated by 'no=4' in this case, provides a basis for comparison and negotiation, driving down costs. However, the effectiveness is contingent on the clarity of the solicitation, the evaluation criteria, and the government's ability to properly assess proposals. A poorly defined requirement or evaluation process can still lead to suboptimal outcomes even with open competition.

What are the implications of a long contract duration (1979 days) for IT system development?

A long contract duration, such as the 1979 days (approximately 5.5 years) for this IT system design contract, has several implications. Firstly, it suggests the project is complex, long-term, and critical to the agency's operations, requiring sustained development and potentially evolution over time. Secondly, it allows the contractor to build deep expertise and institutional knowledge regarding the system and agency needs. However, it also introduces risks related to technological obsolescence, as IT landscapes change rapidly. The government must ensure robust contract management to adapt to evolving requirements and technologies throughout the contract's life. Furthermore, long durations can sometimes lead to complacency or reduced urgency if not actively managed with clear milestones and performance reviews.

Industry Classification

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

Product/Service Code: INFORMATION TECHNOLOGY EQUIPMENT (INCLD FIRMWARE) SOFTWARE,SUPPLIES& SUPPORT EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 4

Pricing Type: COST PLUS FIXED FEE (U)

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: $190,411,808

Exercised Options: $174,070,772

Current Obligation: $174,070,772

Actual Outlays: $-1,272,051

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HHSM500200700024I

IDV Type: IDC

Timeline