VA awards $915.6M contract to Optum for health insurance carrier services, with a 365-day term

Contract Overview

Contract Amount: $915,640,424 ($915.6M)

Contractor: Optum Public Sector Solutions, Inc.

Awarding Agency: Department of Veterans Affairs

Start Date: 2019-10-01

End Date: 2020-09-30

Contract Duration: 365 days

Daily Burn Rate: $2.5M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT FOR FY20 REGION 1

Place of Performance

Location: ROCKVILLE, MONTGOMERY County, MARYLAND, 20850

State: Maryland Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $915.6 million to OPTUM PUBLIC SECTOR SOLUTIONS, INC. for work described as: EXPRESS REPORT FOR FY20 REGION 1 Key points: 1. The contract's value represents a significant investment in health insurance carrier services for the VA. 2. Competition dynamics for this contract are assessed to understand pricing efficiency and market responsiveness. 3. Risk indicators are evaluated based on contractor performance history and the nature of the services provided. 4. Performance context is established by comparing this award to similar contracts within the healthcare sector. 5. The contract positions Optum as a key provider within the VA's healthcare support infrastructure. 6. The firm fixed-price contract type suggests a defined scope and predictable cost structure.

Value Assessment

Rating: good

This contract award of over $915 million for health insurance carrier services is substantial. Benchmarking against similar large-scale contracts within the Department of Veterans Affairs (VA) and other federal agencies would be necessary for a precise value-for-money assessment. The firm fixed-price structure implies that the contractor bears the risk of cost overruns, which can be a positive indicator for the government if the scope is well-defined. However, without detailed service delivery metrics and comparative pricing data, a definitive assessment of 'excellent' value is challenging.

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. This competitive process is generally expected to drive more favorable pricing and encourage innovation. The number of bidders and the specific evaluation criteria would provide further insight into the intensity of the competition and its impact on price discovery. A robust competitive environment suggests that the government received a fair market price.

Taxpayer Impact: Full and open competition typically benefits taxpayers by fostering a marketplace where providers compete on price and quality, leading to potentially lower costs and better service outcomes for government programs.

Public Impact

Veterans will benefit from the health insurance carrier services provided under this contract, potentially improving access to care and administrative efficiency. The services delivered are crucial for the administration and management of health insurance benefits for eligible veterans. The geographic impact is likely nationwide, given the scope of the Department of Veterans Affairs. Workforce implications may include administrative roles within the VA and potentially within the contractor's organization to manage the contract.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for scope creep if service requirements are not tightly managed.
Dependence on a single large contractor could create future lock-in risks.
Ensuring consistent quality of service across all veteran interactions is critical.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Firm fixed-price contract type provides cost certainty for the government.
Contractor's specialization in public sector solutions may align well with VA needs.

Sector Analysis

The healthcare sector, particularly within government contracting, is characterized by complex regulatory environments and significant spending. This contract falls under health insurance carriers, a segment focused on managing and administering health benefits. The market size for federal healthcare contracts is substantial, with agencies like the VA representing major clients. Comparable spending benchmarks would involve analyzing other large-scale health services contracts awarded by the VA and other federal health agencies to assess cost-effectiveness and market rates.

Small Business Impact

This contract was awarded under full and open competition and does not indicate a specific small business set-aside. Therefore, the direct impact on small businesses through this primary award is likely minimal. However, the prime contractor, Optum Public Sector Solutions, Inc., may engage small businesses as subcontractors to fulfill certain aspects of the contract, depending on the scope of work and subcontracting plans. The extent of small business participation would need to be assessed through subcontracting reports.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Veterans Affairs contracting officers and program managers. Accountability measures are typically embedded within the contract terms, including performance standards, reporting requirements, and potential penalties for non-compliance. Transparency is facilitated through contract award databases and public reporting mechanisms. The VA's Office of Inspector General may also conduct audits or investigations related to the contract's performance and financial integrity.

Related Government Programs

Department of Veterans Affairs Health Services
Federal Health Insurance Programs
Medical Support Services Contracts
Government Health Benefit Administration

Risk Flags

Contract Value
Contract Duration
Contractor Performance History
Service Level Agreements
Data Security and Privacy

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $915.6 million to OPTUM PUBLIC SECTOR SOLUTIONS, INC.. EXPRESS REPORT FOR FY20 REGION 1

Who is the contractor on this award?

The obligated recipient is OPTUM PUBLIC SECTOR SOLUTIONS, INC..

Which agency awarded this contract?

Awarding agency: Department of Veterans Affairs (Department of Veterans Affairs).

What is the total obligated amount?

The obligated amount is $915.6 million.

What is the period of performance?

Start: 2019-10-01. End: 2020-09-30.

What is the track record of Optum Public Sector Solutions, Inc. with the Department of Veterans Affairs and other federal agencies?

Optum Public Sector Solutions, Inc., a subsidiary of UnitedHealth Group, has a significant history of contracting with federal agencies, including the Department of Veterans Affairs (VA). Their experience often spans a wide range of health IT, health services, and administrative support functions. For the VA, they have been involved in various initiatives aimed at modernizing healthcare delivery and improving patient outcomes. Analyzing their past performance on similar-sized contracts, including any documented successes or challenges, is crucial for assessing their capability to execute this current award effectively. This includes reviewing past performance evaluations, any contract disputes, and their overall reputation within the federal contracting community.

How does the awarded amount of $915.6 million compare to similar health insurance carrier contracts awarded by the VA or other federal agencies?

The $915.6 million award to Optum Public Sector Solutions, Inc. for health insurance carrier services is a substantial sum. To benchmark its value, it's essential to compare it against contracts of similar scope and duration within the federal government. This would involve identifying other large contracts for health insurance administration, claims processing, or related services awarded by the VA, Centers for Medicare & Medicaid Services (CMS), or the Department of Defense (DoD). Factors such as the number of beneficiaries covered, the complexity of services, and the contract type (e.g., firm-fixed-price, cost-plus) need to be considered. A higher per-beneficiary cost or a significantly higher total contract value compared to similar, competitively awarded contracts could indicate potential issues with value for money.

What are the primary risks associated with a contract of this magnitude and duration for health insurance carrier services?

A contract of this magnitude ($915.6 million) and duration (365 days, though potentially with options) carries several inherent risks. One primary risk is performance failure, where the contractor may not meet the required service levels, leading to disruptions in veteran healthcare access or administrative inefficiencies. Another significant risk is cost management; while this is a firm-fixed-price contract, unforeseen circumstances or poorly defined requirements could still lead to disputes or the need for contract modifications. Cybersecurity risks are also paramount, given the sensitive health information involved. Furthermore, over-reliance on a single large contractor can create vendor lock-in and reduce future negotiating leverage for the government. Ensuring robust oversight and clear performance metrics are critical to mitigating these risks.

What specific services are included under this 'Direct Health and Medical Insurance Carriers' contract, and how do they contribute to the VA's mission?

The classification 'Direct Health and Medical Insurance Carriers' (NAICS 524114) suggests that this contract likely involves services related to the administration, management, and potentially the provision of health insurance benefits to eligible veterans. This could encompass a range of activities such as processing claims, managing provider networks, handling enrollment and eligibility verification, customer service for beneficiaries, and potentially coordinating care pathways. These services are fundamental to the VA's mission of providing comprehensive healthcare to veterans. By ensuring efficient and effective administration of health benefits, this contract supports the VA's goal of improving veteran health outcomes, enhancing access to care, and streamlining the overall healthcare experience for those who have served.

What is the historical spending pattern for similar health insurance carrier services by the Department of Veterans Affairs?

Analyzing historical spending patterns for health insurance carrier services by the VA is crucial for context. This involves examining annual outlays for NAICS code 524114 and related categories over several fiscal years. Understanding trends in spending—whether it's increasing, decreasing, or remaining stable—can reveal shifts in VA healthcare strategy or demand for these services. Comparing the current $915.6 million award against historical averages and peaks can help determine if this represents a significant increase or a continuation of established spending levels. It also helps in identifying if there have been shifts in contracting approaches, such as moving from multiple smaller contracts to larger, consolidated awards like this one.

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

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Unitedhealth Group Incorporated

Address: 800 KING FARM BLVD STE 500, ROCKVILLE, MD, 20850

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

Financial Breakdown

Contract Ceiling: $915,640,424

Exercised Options: $915,640,424

Current Obligation: $915,640,424

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 36C79119D0004

IDV Type: IDC

Timeline