HHS awards $207M IT services contract to CGI Federal, spanning nearly 6 years

Contract Overview

Contract Amount: $207,178,235 ($207.2M)

Contractor: CGI Federal 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: $104.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS AWARD FEE

Sector: IT

Official Description: NEW TASK ORDER

Place of Performance

Location: WINDSOR MILL, BALTIMORE County, MARYLAND, 21244

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $207.2 million to CGI FEDERAL INC. for work described as: NEW TASK ORDER Key points: 1. Contract value represents a significant investment in IT modernization for CMS. 2. The duration of the contract suggests a need for sustained IT support and development. 3. The award to a large, established contractor like CGI Federal indicates a focus on proven capabilities. 4. The 'Cost Plus Award Fee' structure incentivizes performance but requires careful oversight. 5. The contract's scope in 'Computer Systems Design Services' is broad, covering critical IT functions. 6. The absence of small business set-aside flags potential challenges for smaller firms in subcontracting. 7. The contract's value is substantial within the context of federal IT spending.

Value Assessment

Rating: good

The contract's total value of $207 million over approximately 5.5 years averages around $37.6 million annually. This figure needs to be benchmarked against similar large-scale IT service contracts awarded by CMS or other federal health agencies. Without specific per-unit cost data or detailed service breakdowns, a precise value-for-money assessment is challenging. However, the duration and scope suggest a comprehensive IT support requirement, and the 'Cost Plus Award Fee' structure aims to align contractor performance with agency goals, potentially driving good value if managed effectively.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'Full and Open Competition,' indicating that all responsible sources were permitted to submit offers. While the number of bidders is not explicitly stated (only 'no' is 4, which likely refers to the number of offers received or task orders), this competitive approach is generally favorable for price discovery and ensuring a wide range of capabilities are considered. The agency likely sought a contractor with extensive experience in complex IT systems design and support.

Taxpayer Impact: A full and open competition generally benefits taxpayers by fostering a competitive environment that can lead to more favorable pricing and innovative solutions, preventing potential overcharges associated with less competitive procurement methods.

Public Impact

Beneficiaries include Medicare and Medicaid beneficiaries who rely on the underlying IT systems for program administration and access to services. The contract delivers essential computer systems design and related services to support the operational integrity of CMS programs. The geographic impact is national, as CMS operates nationwide, and the IT systems supported are critical for all states and territories. Workforce implications include employment opportunities for IT professionals within CGI Federal and potentially its subcontractors, as well as the CMS staff who manage and utilize these systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee contracts require robust oversight to ensure the 'award' portion is justified by exceptional performance and not simply a mechanism for higher profit.
The long duration of the contract (nearly 6 years) could lead to vendor lock-in if not managed with clear performance metrics and exit strategies.
The broad scope of 'Computer Systems Design Services' may present challenges in precisely defining and measuring deliverables, potentially leading to scope creep if not tightly managed.

Positive Signals

The award to CGI Federal, a large and experienced contractor, suggests a high likelihood of technical capability and project execution success.
The 'Full and Open Competition' process indicates a thorough evaluation of potential offerors, aiming to secure the best value.
The 'Cost Plus Award Fee' structure, when properly administered, can incentivize superior performance and align contractor efforts with agency objectives.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically focusing on computer systems design and related services. The federal IT market is substantial, with agencies like HHS being major spenders. This contract likely supports the complex infrastructure and software development required for managing massive healthcare programs like Medicare and Medicaid. Comparable spending benchmarks would involve looking at other large IT service contracts awarded to system integrators and IT service providers supporting federal health agencies or large-scale government IT modernization efforts.

Small Business Impact

The contract was not awarded as a small business set-aside, and the 'sb' field is false, indicating no specific small business preference was applied in the prime contract award. This suggests that large businesses were expected to compete and potentially perform the majority of the work. While CGI Federal may engage small businesses as subcontractors, the lack of a prime set-aside means direct opportunities for small businesses to win this prime contract were limited. The impact on the small business ecosystem depends heavily on CGI Federal's subcontracting plans and adherence to small business utilization goals.

Oversight & Accountability

Oversight for this contract would primarily reside with the Centers for Medicare and Medicaid Services (CMS) contracting officers and program managers. The 'Cost Plus Award Fee' structure necessitates rigorous performance monitoring and evaluation to justify any award fees paid. Transparency is typically managed through contract reporting requirements and potentially through public contract databases, though detailed performance metrics may be sensitive. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

CMS IT Modernization Initiatives
Federal Health IT Services
Large-Scale IT Systems Integration Contracts
Department of Health and Human Services IT Support
Cost-Plus Award Fee Contracts

Risk Flags

Potential for cost overruns in CPAF structure
Difficulty in objectively measuring performance for award fees
Risk of vendor lock-in due to long contract duration
Ensuring adequate small business subcontracting opportunities

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $207.2 million to CGI FEDERAL INC.. NEW TASK ORDER

Who is the contractor on this award?

The obligated recipient is CGI FEDERAL 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 $207.2 million.

What is the period of performance?

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

What is CGI Federal's track record with similar large-scale IT service contracts within the federal government, particularly with HHS or CMS?

CGI Federal has a significant history of performing IT services for various U.S. federal agencies, including extensive work with the Department of Health and Human Services (HHS) and its sub-agencies like the Centers for Medicare and Medicaid Services (CMS). They have been involved in numerous large contracts related to system modernization, IT infrastructure support, and software development. For instance, CGI has previously held contracts for managing aspects of healthcare.gov, supporting financial systems, and providing enterprise IT services. Their track record generally indicates experience with complex, high-value projects, though like any large contractor, specific contract performance can vary. Assessing their performance on this particular $207 million contract would require examining CMS's performance evaluations and any associated award fee determinations over its duration.

How does the average annual value of this contract ($37.6M) compare to other major IT service contracts awarded by CMS or HHS in recent years?

An average annual value of approximately $37.6 million for IT services places this contract within the upper tier of federal IT procurements, particularly within the health sector. Major IT modernization and sustainment contracts for agencies like CMS often range from tens to hundreds of millions of dollars annually. For context, other large contracts supporting Medicare, Medicaid, or other HHS IT infrastructure and data management systems frequently fall into this spending category. Benchmarking against specific, comparable contracts (e.g., those for electronic health records support, claims processing systems, or large data analytics platforms) would provide a clearer picture. However, $37.6M annually is indicative of a substantial, mission-critical IT support requirement.

What are the primary risks associated with a 'Cost Plus Award Fee' (CPAF) contract structure for a project of this magnitude and duration?

The primary risks with a CPAF structure for a large, long-term IT contract like this revolve around cost control and performance definition. For the government, there's a risk that costs could escalate beyond initial projections, and the 'award fee' component, intended to incentivize exceptional performance, might be awarded too liberally or based on subjective criteria, leading to higher overall costs without commensurate value. Defining 'exceptional performance' clearly and objectively is crucial but challenging. For the contractor, the risk lies in not meeting the stringent performance criteria required to earn the full award fee, potentially impacting profitability. Effective oversight, robust performance metrics, and clear communication channels are essential to mitigate these risks and ensure the CPAF structure truly drives value for the taxpayer.

Given the 'Computer Systems Design Services' classification, what specific types of IT work are likely encompassed by this contract?

The 'Computer Systems Design Services' (NAICS code 541512) classification is broad and typically encompasses a wide range of IT-related activities. For a contract of this magnitude at CMS, it likely includes the design, development, integration, and maintenance of complex IT systems. This could involve software engineering, application development, database management, system architecture design, network infrastructure planning, cybersecurity integration, cloud computing services, and IT project management. It may also extend to business process re-engineering supported by IT solutions, data analytics platform development, and ensuring the interoperability of various CMS systems. The specific tasks would be detailed in the contract's Statement of Work (SOW).

What does the duration of nearly 6 years (1979 days) imply about the nature of the IT services required by CMS?

A contract duration of nearly six years strongly suggests that CMS requires long-term, sustained support for critical IT functions rather than short-term, project-specific solutions. This duration implies a need for ongoing system maintenance, continuous improvement, modernization efforts, and potentially the development of new capabilities over an extended period. It indicates that the services are fundamental to CMS's operations and are not easily replaceable or transferable in the short term. Such long-term contracts are often used for core IT infrastructure, large application sustainment, or strategic IT development initiatives where stability, deep institutional knowledge, and a consistent vendor relationship are prioritized to ensure program continuity and effectiveness.

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 AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: CGI Inc

Address: 12601 FAIR LAKES CIR, FAIRFAX, VA, 22033

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $265,487,920

Exercised Options: $207,178,235

Current Obligation: $207,178,235

Actual Outlays: $975,224

Subaward Activity

Number of Subawards: 366

Total Subaward Amount: $677,970,723

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: HHSM500200700015I

IDV Type: IDC

Timeline