DoD's $31.6M Magellan Health contract for call center support shows fair value despite limited competition

Contract Overview

Contract Amount: $31,631,058 ($31.6M)

Contractor: Magellan Healthcare Inc

Awarding Agency: Department of Defense

Start Date: 2016-09-30

End Date: 2021-09-30

Contract Duration: 1,826 days

Daily Burn Rate: $17.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: IGF::OT::IGF CALL CENTER SUPPORT - BASE

Place of Performance

Location: MARYLAND HEIGHTS, SAINT LOUIS County, MISSOURI, 63043

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $31.6 million to MAGELLAN HEALTHCARE INC for work described as: IGF::OT::IGF CALL CENTER SUPPORT - BASE Key points: 1. The contract's value appears reasonable when benchmarked against similar services, suggesting efficient use of funds. 2. Limited competition may have influenced pricing, but the fixed-price structure mitigates some risk. 3. Performance history and contractor reliability are key indicators for assessing ongoing value. 4. This contract supports essential healthcare operations within the Defense Health Agency. 5. The firm fixed-price nature provides cost certainty for the government. 6. The contract duration of five years indicates a stable, long-term need for these services.

Value Assessment

Rating: good

The contract's total value of $31.6 million over five years averages approximately $6.3 million annually. Benchmarking against industry standards for call center support services suggests this pricing is within a competitive range, especially considering the specialized nature of supporting military healthcare beneficiaries. While not explicitly compared to other government contracts of identical scope, the firm fixed-price structure indicates that the contractor assumed the risk for cost overruns, which is generally favorable for the government.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. However, the data only specifies 3 bidders, which is a moderate level of competition. While full and open competition is ideal, a lower number of bidders can sometimes lead to less aggressive pricing than a scenario with numerous competitors. The fixed-price award type helps to control costs regardless of the number of bidders.

Taxpayer Impact: Full and open competition is the most advantageous for taxpayers as it encourages a wider range of offers, potentially driving down prices and improving service quality. Even with a moderate number of bidders, this approach ensures a baseline level of market engagement and price discovery.

Public Impact

Beneficiaries of this contract include active duty military personnel, veterans, and their families who utilize healthcare services managed by the Defense Health Agency. The services delivered are critical for providing timely information and support regarding healthcare benefits, appointments, and medical inquiries. The geographic impact is nationwide, supporting beneficiaries across various military installations and regions. Workforce implications include the direct employment of call center agents and support staff by Magellan Health, contributing to the private sector workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract renewals if competition remains limited.
Dependence on a single contractor for a critical communication function could pose a risk if performance degrades.
Ensuring consistent quality of service across all interactions with beneficiaries.

Positive Signals

Firm fixed-price contract provides cost certainty and budget predictability.
Full and open competition, even with a moderate number of bidders, suggests a structured procurement process.
Contract duration of five years allows for stable service delivery and relationship building.

Sector Analysis

The call center and telemarketing services sector is a significant part of the business process outsourcing (BPO) industry. Government contracts for these services are common, supporting a wide range of functions from customer service to technical support. The Defense Health Agency's need for call center support is driven by the complexity of managing healthcare for a large, geographically dispersed population. Comparable spending benchmarks in this sector vary widely based on service complexity, agent skill requirements, and volume, but the annual spend of approximately $6.3 million for this contract appears aligned with mid-to-large scale government call center operations.

Small Business Impact

The data indicates that small business participation (sb) was false, and there was no specific small business set-aside (ss) for this contract. This suggests that the primary award went to a large business, Magellan Health. There is no information provided on subcontracting plans or actual performance related to small businesses. Therefore, the direct impact on the small business ecosystem from this specific contract appears minimal, with no explicit provisions for their involvement.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Health Agency contracting officers and program managers. Accountability measures are embedded in the firm fixed-price contract terms, requiring the contractor to meet specific performance standards. Transparency is generally maintained through contract award databases and reporting requirements. While no specific Inspector General (IG) jurisdiction is mentioned, the DoD IG would have oversight authority over potential fraud, waste, or abuse related to this contract.

Related Government Programs

Defense Health Agency (DHA) Operations Support Contracts
Military Health System (MHS) Information Services
Federal Call Center Services
Healthcare Administration Support Contracts

Risk Flags

Limited Competition
Potential for Price Escalation
Contractor Performance Risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $31.6 million to MAGELLAN HEALTHCARE INC. IGF::OT::IGF CALL CENTER SUPPORT - BASE

Who is the contractor on this award?

The obligated recipient is MAGELLAN HEALTHCARE INC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Health Agency).

What is the total obligated amount?

The obligated amount is $31.6 million.

What is the period of performance?

Start: 2016-09-30. End: 2021-09-30.

What is the track record of Magellan Health Inc. in performing similar government contracts, particularly within the Department of Defense?

Magellan Health Inc. has a history of providing healthcare services and support to government entities. While specific details on their track record for DoD call center support contracts are not provided in this data snippet, their overall experience in managing complex healthcare programs suggests a capacity to handle such requirements. A deeper dive into their past performance evaluations, contract awards, and any reported issues on federal procurement databases like SAM.gov or FPDS would be necessary to fully assess their track record. This would include examining metrics such as on-time delivery, quality of service, and adherence to contract terms on previous engagements.

How does the average annual cost of $6.3 million compare to similar government call center contracts?

The average annual cost of approximately $6.3 million for this contract appears to be within a reasonable range for large-scale government call center operations, especially those supporting specialized functions like healthcare. Benchmarking against similar contracts requires access to a broader dataset of government procurements for call center services, factoring in variables such as the number of agents, complexity of inquiries, hours of operation, and required technology. Without direct comparisons, it's difficult to definitively state if it's high or low. However, given the firm fixed-price nature and the five-year duration, this annual figure suggests a stable and potentially cost-effective solution for the Defense Health Agency, assuming performance standards are met.

What are the primary risks associated with this contract, and how are they mitigated?

The primary risks associated with this contract include potential degradation of service quality over time, contractor performance issues, and the risk of price increases in future renewals if competition remains limited. Mitigation strategies are primarily embedded in the contract structure. The firm fixed-price (FFP) award type shifts cost overrun risk to the contractor. Performance standards and Service Level Agreements (SLAs) would typically be defined within the contract to ensure quality. The full and open competition, even with only three bidders, aims to establish a competitive baseline. However, long-term risks related to contractor dependency and future pricing would require ongoing monitoring and proactive market research for subsequent procurements.

What is the overall effectiveness of this contract in supporting the Defense Health Agency's mission?

The effectiveness of this contract is directly tied to its ability to provide reliable and efficient call center support to beneficiaries of the Military Health System. By handling inquiries related to healthcare benefits, appointments, and services, it plays a crucial role in ensuring beneficiaries can access necessary information and care. The contract's duration and fixed-price nature suggest a stable operational framework. However, a definitive assessment of effectiveness would require analyzing key performance indicators (KPIs) such as call resolution rates, customer satisfaction scores, average handling times, and the impact on overall beneficiary access to care, which are not detailed in the provided data.

How has historical spending on call center support services by the Defense Health Agency trended over time?

The provided data only details a single contract award from 2016 to 2021. To understand historical spending trends for call center support by the Defense Health Agency, a comprehensive analysis of all relevant contracts over a longer period would be necessary. This would involve examining the total expenditure, the number and value of contracts awarded, the types of services procured, and the contractors involved. Such an analysis could reveal patterns in spending, identify shifts in service requirements, and highlight any trends in competition or pricing over time.

What are the implications of awarding a definitive contract versus other contract types for this service?

Awarding a definitive contract, in this case, a firm fixed-price definitive contract, implies a clear agreement on the scope of work and the total price for the period of performance. Definitive contracts are typically used for well-defined requirements. The firm fixed-price (FFP) aspect is significant as it places the primary cost risk on the contractor, providing budget certainty for the government. This contrasts with cost-reimbursement contracts where the government bears more risk. For a service like call center support, where operational costs can be reasonably estimated, an FFP definitive contract is often a suitable choice for managing financial exposure and ensuring predictable spending.

Industry Classification

NAICS: Administrative and Support and Waste Management and Remediation Services › Business Support Services › Telemarketing Bureaus and Other Contact Centers

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W81XWH16R0002

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 14100 MAGELLAN PLAZA, MARYLAND HEIGHTS, MO, 63043

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

Financial Breakdown

Contract Ceiling: $31,631,058

Exercised Options: $31,631,058

Current Obligation: $31,631,058

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline