VA awards $505M to Optum for Direct Health and Medical Insurance Carriers in February 2024

Contract Overview

Contract Amount: $504,916,331 ($504.9M)

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: $18.0M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: R3 FY 24 2ND QTR FEB

Place of Performance

Location: ROCKVILLE, MONTGOMERY County, MARYLAND, 20850

State: Maryland Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $504.9 million to OPTUM PUBLIC SECTOR SOLUTIONS, INC. for work described as: EXPRESS REPORT: R3 FY 24 2ND QTR FEB Key points: 1. Significant contract value of $505M awarded to a single vendor. 2. Direct Health and Medical Insurance Carriers sector is critical for VA operations. 3. Potential risk associated with a large, single award for essential services. 4. Focus on IT and Healthcare sectors due to the nature of the contract.

Value Assessment

Rating: questionable

The contract value of $505M is substantial. Benchmarking against similar contracts for direct health and medical insurance carriers is difficult without more specific service details. The pricing structure (Firm Fixed Price) suggests a defined scope, but the overall value warrants scrutiny.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is positive for price discovery. However, the large award amount to a single entity may indicate limited specialized capabilities or a consolidation of services.

Taxpayer Impact: The full and open competition suggests efforts to achieve fair pricing, but the substantial award amount means taxpayers are funding a significant expenditure for these services.

Public Impact

Veterans will receive direct health and medical insurance services funded by this contract. The contract supports the Department of Veterans Affairs' mission to provide healthcare. Potential impact on the broader health insurance market if Optum is a major player.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Large contract value concentrated with one vendor.
Limited duration (28 days) for a substantial award.
No indication of small business participation.

Positive Signals

Awarded under full and open competition.
Firm Fixed Price contract type.

Sector Analysis

This contract falls within the Healthcare sector, specifically related to insurance carriers. The VA's spending in this area is crucial for veteran healthcare delivery. Benchmarks for similar large-scale insurance carrier contracts are highly variable based on scope and population served.

Small Business Impact

There is no indication of small business participation in this contract award. Further analysis would be needed to determine if opportunities were missed or if the nature of the services inherently excluded small businesses.

Oversight & Accountability

The Department of Veterans Affairs is responsible for oversight of this contract. The firm fixed price and full and open competition provide some accountability, but the short duration for such a large award raises questions about the oversight process.

Related Government Programs

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

Risk Flags

Large contract value awarded to a single entity.
Short contract duration (28 days) for a significant amount.
No small business participation indicated.
Lack of detailed service description.
Potential for follow-on contracts without full competition.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $504.9 million to OPTUM PUBLIC SECTOR SOLUTIONS, INC.. EXPRESS REPORT: R3 FY 24 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 $504.9 million.

What is the period of performance?

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

What specific services are included under 'Direct Health and Medical Insurance Carriers' for this $505M award, and how does this align with VA's core mission?

The specific services are not detailed in the provided data. However, 'Direct Health and Medical Insurance Carriers' typically refers to the administration and provision of health insurance plans and direct medical services. For the VA, this likely involves managing health benefits, processing claims, and potentially contracting with providers to ensure veterans receive necessary medical care, aligning with the VA's mission to provide comprehensive healthcare services.

Given the $505M award and a 28-day duration, what are the primary risks to the VA and taxpayers regarding service continuity and cost-effectiveness?

The primary risk is the potential for service disruption or a lack of sustained quality if this is a short-term bridge contract without a clear follow-on strategy. For taxpayers, the risk lies in potentially paying a premium for short-term solutions or facing inefficiencies if the vendor cannot fully ramp up or down within the limited timeframe. Ensuring continuity of care for veterans is paramount.

How does the 'full and open competition' for this large contract ensure optimal value and prevent vendor lock-in, especially if similar services are needed long-term?

Full and open competition theoretically allows multiple vendors to bid, driving down prices and fostering innovation. However, for a $505M award, it suggests either a highly specialized market or a consolidation of needs. The short duration raises concerns about whether this truly represents long-term value or a stop-gap measure, potentially leading to future sole-source or limited competition awards if the incumbent performs adequately.

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: $504,916,331

Exercised Options: $504,916,331

Current Obligation: $504,916,331

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 36C79119D0006

IDV Type: IDC

Timeline