DoD's $21.9B healthcare contract with TriWest Healthcare Alliance Corp. awarded in 2003, spanning 13 years

Contract Overview

Contract Amount: $21,948,019,381 ($21.9B)

Contractor: Triwest Healthcare Alliance Corp

Awarding Agency: Department of Defense

Start Date: 2003-09-09

End Date: 2016-10-05

Contract Duration: 4,775 days

Daily Burn Rate: $4.6M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Healthcare

Place of Performance

Location: PHOENIX, MARICOPA County, ARIZONA, 85053

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $21.95 billion to TRIWEST HEALTHCARE ALLIANCE CORP for work described as: Key points: 1. The contract's significant duration and value suggest a substantial, long-term need for healthcare services. 2. The award was made under full and open competition, indicating a potentially competitive bidding process. 3. The contract type (Cost Plus Incentive Fee) suggests a focus on performance and cost control. 4. The geographic scope (Arizona) is specific, implying a localized but extensive service requirement. 5. The contractor, TriWest Healthcare Alliance Corp., has a long history with this type of federal contract. 6. The absence of small business set-aside flags suggests the primary contractor is likely a large entity.

Value Assessment

Rating: fair

Benchmarking the value of this $21.9 billion contract is challenging without specific service details and comparable contracts. However, the sheer scale over 13 years suggests a significant investment in healthcare delivery. The Cost Plus Incentive Fee structure aims to balance cost efficiency with contractor performance, but the ultimate value depends heavily on the achieved incentives and the actual costs incurred. Without detailed performance metrics or comparisons to similar regional healthcare contracts, a definitive value assessment is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting that multiple bidders had the opportunity to compete. This approach is generally favorable for price discovery and ensuring the government receives competitive pricing. The fact that it was competed indicates a deliberate effort to solicit proposals from various qualified entities, potentially leading to a more robust selection process and better terms for the government.

Taxpayer Impact: Full and open competition typically benefits taxpayers by fostering a competitive environment that can drive down costs and improve the quality of services offered.

Public Impact

Beneficiaries include military personnel, veterans, and their families residing in Arizona who require health insurance and medical services. The contract facilitates the delivery of a wide range of healthcare services, including medical, dental, and pharmacy benefits. The geographic impact is concentrated within Arizona, ensuring access to care for a specific regional population. The contract supports a significant healthcare network, potentially involving numerous civilian healthcare providers and administrative staff within Arizona.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long-term nature of the contract could lead to vendor lock-in and reduced flexibility for future service needs.
Cost-plus contracts can sometimes incentivize higher spending if not managed rigorously.
The large dollar amount raises questions about potential cost overruns or inefficiencies over the contract's extended period.
Dependence on a single large contractor for a critical service like healthcare carries inherent risks.

Positive Signals

Awarded through full and open competition, suggesting a potentially competitive and fair process.
The Cost Plus Incentive Fee structure aims to align contractor performance with government objectives.
The contract's duration indicates a stable and consistent provision of essential healthcare services.
The specific geographic focus allows for tailored service delivery to the Arizona region.

Sector Analysis

This contract falls within the Healthcare sector, specifically focusing on health and medical insurance carriers. The federal government is a major purchaser of healthcare services, particularly for military and veteran populations. This contract represents a significant portion of federal spending dedicated to providing civilian healthcare support to a specific region, complementing direct military medical facilities. The market for such large-scale health insurance contracts is typically dominated by a few large, experienced companies capable of managing complex networks and administrative functions.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). This suggests the primary award went to a large corporation, TriWest Healthcare Alliance Corp. While the prime contract may not have small business set-aside components, it is possible that TriWest engages subcontractors, some of which could be small businesses. However, without specific subcontracting plans or data, the direct impact on the small business ecosystem is unclear, though large prime contracts often involve a tiered subcontracting structure.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting agency (Department of the Navy, under the Department of Defense) and potentially involve program managers and contract specialists. Transparency is generally facilitated through contract award databases and reporting requirements. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract. The Cost Plus Incentive Fee structure necessitates robust oversight to ensure performance targets are met and costs are managed effectively.

Related Government Programs

TRICARE Prime
TRICARE Select
Department of Veterans Affairs Healthcare
Civilian Health and Medical Program of the Uniformed Services (CHAMPUS)
Federal Employees Health Benefits Program

Risk Flags

Long contract duration
Cost-plus contract type
Large contract value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $21.95 billion to TRIWEST HEALTHCARE ALLIANCE CORP. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is TRIWEST HEALTHCARE ALLIANCE CORP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $21.95 billion.

What is the period of performance?

Start: 2003-09-09. End: 2016-10-05.

What was the specific performance history of TriWest Healthcare Alliance Corp. under this contract, particularly regarding meeting healthcare access and quality metrics?

Assessing the specific performance history of TriWest Healthcare Alliance Corp. under this $21.9 billion contract requires access to detailed performance reports, quality metrics, and potentially Inspector General findings. Federal contracts, especially those of this magnitude and duration, are subject to performance evaluations. Key indicators would include patient satisfaction scores, network adequacy (availability of providers), timeliness of care, and adherence to quality standards. Without direct access to these reports, it's difficult to provide a definitive assessment. However, the Cost Plus Incentive Fee (CPIF) structure implies that performance was a key factor, with potential financial incentives tied to achieving specific outcomes. Any significant performance issues or failures would likely have been documented and could have impacted incentive payments or led to contract modifications or disputes.

How did the final costs of this contract compare to the initial estimates or projected budgets, considering the CPIF structure?

The Cost Plus Incentive Fee (CPIF) structure is designed to share cost risks and rewards between the government and the contractor. To determine how final costs compared to projections, one would need to analyze the contract's baseline cost estimates, target costs, and the final incurred costs. The 'incentive' aspect means that if the contractor achieved certain performance targets (e.g., cost savings, quality improvements), they could earn a higher fee, or if they exceeded target costs, their fee could be reduced, or they might share in the cost overrun. Without the specific incentive targets and final cost data, a direct comparison is not possible. However, the sheer scale of the contract ($21.9 billion over 13 years) suggests that managing costs effectively was a significant undertaking, and the CPIF mechanism was employed to encourage efficiency.

What was the competitive landscape like when this contract was initially awarded in 2003, and did it influence the pricing?

The contract was awarded under 'full and open competition,' indicating that multiple companies were invited to bid in 2003. The competitive landscape at that time for large-scale healthcare contracts involved established managed care organizations and insurance providers. The presence of multiple bidders generally exerts downward pressure on pricing, as companies compete to offer the most attractive terms. The specific pricing structure (Cost Plus Incentive Fee) suggests that while initial bids would have included cost proposals, the final price would also be influenced by performance incentives. A robust competition in 2003 likely contributed to establishing a baseline for costs and services, though the long duration means market dynamics could shift significantly over the contract's life.

Were there any significant contract modifications or disputes throughout the 13-year period, and what were their impacts?

Information regarding specific contract modifications or disputes for this $21.9 billion contract over its 13-year lifespan (2003-2016) is not readily available in the provided summary data. Large, long-term federal contracts often undergo modifications to adjust scope, pricing, or timelines due to changing requirements, unforeseen circumstances, or performance issues. Disputes can arise from disagreements over contract terms, payments, or performance. Without access to the contract's official amendment history or dispute resolution records, it's impossible to detail their nature or impact. However, the existence of a CPIF structure suggests a framework for addressing performance-related adjustments, and the long duration makes modifications plausible.

How does the per-member-per-month (PMPM) cost under this contract compare to other similar TRICARE contracts or regional healthcare benchmarks?

Determining the per-member-per-month (PMPM) cost for this contract requires knowing the average number of covered members over its duration and the total costs incurred. The provided data does not include member counts or detailed cost breakdowns. However, TRICARE contracts are generally benchmarked against commercial healthcare plans and other government healthcare programs. Factors influencing PMPM costs include the age and health status of the covered population, the scope of benefits (medical, dental, pharmacy), and the geographic region. Without specific PMPM data for this contract and comparable benchmarks, a direct comparison is not feasible. Generally, government healthcare programs aim for cost-effectiveness relative to the services provided to their specific populations.

Industry Classification

NAICS: Finance and Insurance › Insurance Carriers › Direct Health and Medical Insurance Carriers

Product/Service Code: MEDICAL SERVICES › GENERAL HEALTH CARE SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 16010 N 28TH AVE, PHOENIX, AZ, 85053

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $23,044,450,709

Exercised Options: $22,372,244,550

Current Obligation: $21,948,019,381

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline