VA awards $385.6M contract to Optum for health insurance carriers, highlighting a significant single delivery order

Contract Overview

Contract Amount: $385,628,152 ($385.6M)

Contractor: Optum Public Sector Solutions, Inc.

Awarding Agency: Department of Veterans Affairs

Start Date: 2024-02-01

End Date: 2024-02-29

Contract Duration: 28 days

Daily Burn Rate: $13.8M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: R2 FY24 2ND QTR FEB

Place of Performance

Location: ROCKVILLE, MONTGOMERY County, MARYLAND, 20850

State: Maryland Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $385.6 million to OPTUM PUBLIC SECTOR SOLUTIONS, INC. for work described as: EXPRESS REPORT: R2 FY24 2ND QTR FEB Key points: 1. The contract represents a substantial investment in health insurance carrier services for the VA. 2. Optum Public Sector Solutions, Inc. secured this large award, indicating a strong market position. 3. The fixed-price nature of the contract suggests a defined cost structure, potentially mitigating cost overrun risks. 4. This single delivery order within a short period (28 days) points to a specific, immediate need. 5. The award falls under NAICS code 524114, Direct Health and Medical Insurance Carriers. 6. The contract's value is significant within the context of federal health spending.

Value Assessment

Rating: good

This $385.6 million delivery order is a substantial award for health insurance carrier services. While direct comparisons to similar single delivery orders are difficult without more context on the specific services rendered, the firm fixed-price structure is generally favorable for cost control. Benchmarking the per-unit cost would require detailed service utilization data, but the overall value suggests a significant operational requirement for the VA.

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 likely had the opportunity to submit proposals. This competitive process is generally expected to yield better pricing and service options for the government. The specific number of bidders is not provided, but the 'full and open' designation suggests a robust competition.

Taxpayer Impact: A full and open competition process is beneficial for taxpayers as it encourages a wider range of providers to compete, potentially driving down costs and improving service quality through market forces.

Public Impact

Veterans will benefit from access to health insurance carrier services facilitated by this contract. The contract supports the delivery of essential health insurance and administrative services. The primary geographic impact is likely within the United States, serving VA facilities and beneficiaries. This contract supports jobs within the health insurance and administrative services sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The large dollar value of a single delivery order could indicate a concentrated reliance on one vendor for a critical function.
Without detailed service metrics, it's challenging to fully assess the efficiency and effectiveness of the awarded services.
The short duration of the delivery order (28 days) might suggest a temporary or urgent need, raising questions about long-term strategic planning if it's a recurring requirement.

Positive Signals

The award was made under full and open competition, suggesting a competitive marketplace and potentially fair pricing.
The firm fixed-price contract type provides cost certainty for the government, limiting the risk of cost overruns.
Optum Public Sector Solutions, Inc. is a known entity in the government contracting space, implying a level of established capability.

Sector Analysis

The health insurance and managed care sector is a critical component of the U.S. economy and federal spending. This contract falls within the broader healthcare services industry, specifically focusing on the administrative and carrier functions that support health benefits. Federal spending in this area is substantial, driven by programs like the VA, Medicare, and Medicaid, aiming to provide comprehensive healthcare coverage to eligible populations. Comparable spending benchmarks would typically involve analyzing other large-scale health insurance contracts awarded by federal agencies.

Small Business Impact

The data indicates this contract was awarded under full and open competition and does not specify any small business set-aside. Therefore, there is no direct indication of small business participation through a set-aside. However, the prime contractor, Optum Public Sector Solutions, Inc., may engage small businesses as subcontractors. Further analysis would be needed to determine subcontracting plans and their impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Veterans Affairs' contracting and program management offices. Accountability measures are inherent in the firm fixed-price contract structure, requiring the contractor to deliver specified services within the agreed-upon price. Transparency is facilitated by public contract databases, though detailed performance metrics and specific service delivery reports may not always be publicly available. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Department of Veterans Affairs Health Services
Federal Health Insurance Programs
Medical and Health Services Contracts
Government Health Benefits Administration

Risk Flags

Large single delivery order value
Short duration of delivery order
Potential for vendor lock-in

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $385.6 million to OPTUM PUBLIC SECTOR SOLUTIONS, INC.. EXPRESS REPORT: R2 FY24 2ND QTR FEB

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 $385.6 million.

What is the period of performance?

Start: 2024-02-01. End: 2024-02-29.

What specific health insurance carrier services are being procured under this $385.6 million delivery order?

The provided data identifies the North American Industry Classification System (NAICS) code as 524114, which corresponds to 'Direct Health and Medical Insurance Carriers.' This suggests the contract is for services related to the administration, management, or provision of health insurance plans and related benefits. Specific services could include claims processing, network management, eligibility verification, customer support, or the development and implementation of health insurance products for veterans. Without the full contract details or statement of work, the precise nature of these services remains general, but they are centered around the operational aspects of health insurance provision.

How does the value of this single delivery order compare to typical VA health insurance contracts?

The $385.6 million value for a single delivery order is substantial and indicates a significant procurement action. To provide a precise comparison, one would need to analyze historical VA contract data for similar services (NAICS 524114) and look at the average value of delivery orders or task orders issued under larger indefinite-delivery/indefinite-quantity (IDIQ) contracts. However, as a standalone delivery order, this amount suggests a large-scale requirement, potentially covering a broad scope of services or a significant number of beneficiaries for the period it covers. It is considerably larger than many routine operational contracts and points to a major initiative or a consolidation of services.

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

Optum Public Sector Solutions, Inc. is a known entity that has secured various contracts with federal agencies, including the Department of Veterans Affairs. Their track record typically involves providing health IT solutions, administrative services, and other healthcare-related support. A comprehensive review of their past performance with the VA would involve examining contract databases for previous awards, performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS), and any documented issues or successes. This specific $385.6 million award suggests a continued or expanded relationship, likely based on prior satisfactory performance or competitive positioning.

What are the potential risks associated with a single, large delivery order of this magnitude?

A single, large delivery order of this magnitude carries several potential risks. Firstly, there's a risk of vendor lock-in if the services are critical and difficult to transition to another provider. Secondly, if the scope of work is not perfectly defined, there's a risk of scope creep or disputes over deliverables, even with a firm fixed-price contract. Thirdly, a concentrated reliance on one vendor for a substantial amount could pose a risk if the vendor experiences financial instability, operational failures, or significant personnel changes. Finally, the short duration (28 days) for this large award might indicate an urgent, potentially unplanned need, which could imply underlying program risks or challenges in long-term planning.

How does the firm fixed-price contract type influence cost control and potential for overruns?

The firm fixed-price (FFP) contract type is generally considered the most advantageous for the government in terms of cost control and risk of overruns. Under an FFP contract, the contractor agrees to a set price for the specified goods or services, regardless of the actual costs incurred. This places the risk of cost overruns squarely on the contractor. For the VA, this means that the $385.6 million awarded amount is the ceiling, and they are not obligated to pay more if Optum's costs exceed this figure, assuming Optum meets all contractual requirements. This structure incentivizes the contractor to manage its costs efficiently to maximize profit.

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: 3237 AIRPORT RD, LA CROSSE, WI, 54603

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

Financial Breakdown

Contract Ceiling: $385,628,152

Exercised Options: $385,628,152

Current Obligation: $385,628,152

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 36C79119D0005

IDV Type: IDC

Timeline