VA awards $2.9B contract to Optum for health insurance in FY21, facing full and open competition

Contract Overview

Contract Amount: $2,907,879,002 ($2.9B)

Contractor: Optum Public Sector Solutions, Inc.

Awarding Agency: Department of Veterans Affairs

Start Date: 2020-10-01

End Date: 2021-09-30

Contract Duration: 364 days

Daily Burn Rate: $8.0M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: FY21

Place of Performance

Location: FREDERICKSBURG, SPOTSYLVANIA County, VIRGINIA, 22408

State: Virginia Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $2.91 billion to OPTUM PUBLIC SECTOR SOLUTIONS, INC. for work described as: EXPRESS REPORT: FY21 Key points: 1. Significant contract value of $2.9 billion for health insurance services. 2. Full and open competition indicates a potentially competitive bidding process. 3. Risk of vendor lock-in or performance issues with a single large award. 4. Sector is healthcare, specifically direct health and medical insurance carriers.

Value Assessment

Rating: good

The contract value of $2.9 billion is substantial. Benchmarking against similar large-scale health insurance contracts is difficult without more specific service details, but the firm fixed-price structure suggests cost predictability.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting multiple vendors had the opportunity to bid. This method generally promotes competitive pricing and allows the agency to select the best value.

Taxpayer Impact: The competitive nature of the award aims to ensure taxpayer funds are used efficiently for necessary health insurance services.

Public Impact

Veterans will receive health insurance coverage through this contract. The Department of Veterans Affairs aims to streamline healthcare access for beneficiaries. The large contract value signifies a major investment in healthcare services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if scope creeps beyond the firm fixed price.
Dependence on a single vendor for critical health insurance services.
Ensuring performance standards are met throughout the contract duration.

Positive Signals

Awarded through full and open competition, suggesting market responsiveness.
Firm fixed-price contract provides cost certainty for the VA.
Supports the VA's mission to provide healthcare to veterans.

Sector Analysis

This contract falls within the healthcare sector, specifically focusing on direct health and medical insurance carriers. Spending in this area is critical for providing essential services to beneficiaries, and benchmarks often relate to per-member-per-month costs or overall program administration expenses.

Small Business Impact

The data indicates this was a large contract awarded to a single entity, Optum Public Sector Solutions, Inc. There is no explicit mention of small business participation in this specific award, suggesting opportunities for subcontracting may exist but are not detailed here.

Oversight & Accountability

The Department of Veterans Affairs is responsible for overseeing this contract. Robust oversight mechanisms are crucial to ensure service delivery meets quality standards and that the firm fixed-price agreement remains cost-effective for the government.

Related Government Programs

Direct Health and Medical Insurance Carriers
Department of Veterans Affairs Contracting
Department of Veterans Affairs Programs

Risk Flags

Potential for vendor lock-in due to large contract size.
Risk of performance degradation over the contract term.
Ensuring adequate oversight for a contract of this magnitude.
Complexity of managing health insurance services at scale.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $2.91 billion to OPTUM PUBLIC SECTOR SOLUTIONS, INC.. EXPRESS REPORT: FY21

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 $2.91 billion.

What is the period of performance?

Start: 2020-10-01. End: 2021-09-30.

What specific health insurance services are covered under this $2.9 billion contract, and how do they align with veteran healthcare needs?

The contract is for direct health and medical insurance carriers. While specific services aren't detailed, it likely encompasses a broad range of medical benefits, prescription drugs, and potentially specialized care networks. Alignment with veteran needs would involve ensuring comprehensive coverage for service-connected conditions, mental health, and general medical care, supplementing existing VA facilities.

Given the full and open competition, what was the competitive landscape, and how did it influence the final price compared to potential sole-source awards?

Full and open competition implies multiple bidders vied for the contract, driving down the price through market forces. This typically results in a more favorable price for the government compared to a sole-source award, where pricing power is concentrated with the single vendor. The final price reflects the negotiated terms based on the competitive bids received.

What are the key performance indicators (KPIs) and metrics used to measure the effectiveness of Optum's services under this contract?

Effectiveness is likely measured through KPIs such as veteran satisfaction rates, claims processing timeliness, network adequacy (availability of providers), quality of care metrics, and adherence to service level agreements. The VA would monitor these to ensure Optum is meeting its contractual obligations and providing high-quality insurance services.

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: $2,907,879,002

Exercised Options: $2,907,879,002

Current Obligation: $2,907,879,002

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 36C79119D0005

IDV Type: IDC

Timeline