HHS awards $1.03B for IT support, with Serco Inc. as prime contractor

Contract Overview

Contract Amount: $1,032,865,951 ($1.0B)

Contractor: Serco Inc

Awarding Agency: Department of Health and Human Services

Start Date: 2018-07-01

End Date: 2023-06-30

Contract Duration: 1,825 days

Daily Burn Rate: $566.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: ELIGIBILITY SUPPORT

Place of Performance

Location: ROGERS, BENTON County, ARKANSAS, 72756

State: Arkansas Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $1.03 billion to SERCO INC for work described as: ELIGIBILITY SUPPORT Key points: 1. Contract value represents a significant investment in IT infrastructure and support. 2. The firm fixed-price contract type suggests a focus on predictable costs. 3. A single award indicates a specific need or a highly competitive selection process. 4. The contract duration of five years allows for long-term planning and execution. 5. The broad IT services category suggests a wide range of potential support activities. 6. The contract's geographic scope is focused on Arkansas, potentially indicating a regional service delivery model.

Value Assessment

Rating: good

The total contract value of over $1 billion over five years is substantial. Benchmarking this against similar large-scale IT support contracts is challenging without more specific service details. However, the firm fixed-price structure generally aims for cost efficiency. The obligated amount of $565.95 million suggests a significant portion of the total value has been committed, indicating active work. Further analysis would require comparing the per-unit costs of specific services rendered against market rates.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting that multiple vendors had the opportunity to bid. This process is designed to foster a competitive environment, potentially leading to better pricing and service offerings for the government. The fact that it resulted in a single award might imply that one bidder, Serco Inc., demonstrated the most advantageous combination of technical capability, past performance, and price.

Taxpayer Impact: Full and open competition generally benefits taxpayers by driving down costs and encouraging innovation among potential bidders, leading to a more efficient use of public funds.

Public Impact

Beneficiaries include the Centers for Medicare and Medicaid Services (CMS) and potentially other HHS agencies requiring IT support. Services delivered likely encompass a broad range of computer systems design and related services. The geographic impact is primarily focused on Arkansas, suggesting a concentration of operations or personnel in that state. Workforce implications may include job creation or utilization of skilled IT professionals within Serco Inc. and its potential subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in due to the long contract duration and specialized nature of IT support.
Risk of cost overruns if the firm fixed-price model does not adequately account for unforeseen technical challenges or scope creep.
Dependence on a single contractor for critical IT infrastructure could pose a risk if performance falters.

Positive Signals

The use of full and open competition suggests a robust selection process that likely favored a capable and cost-effective provider.
The firm fixed-price contract type provides cost certainty for the government, reducing the risk of unexpected expenses.
The five-year duration allows for stability and continuity in essential IT support services.

Sector Analysis

This contract falls within the broader IT services sector, specifically focusing on computer systems design and related services. This sector is characterized by rapid technological advancements and a high demand for skilled labor. The federal government is a major consumer of IT services, with significant spending allocated to maintaining and modernizing its digital infrastructure. Comparable spending benchmarks would typically involve analyzing other large-scale IT support contracts awarded by HHS or other federal agencies for similar services.

Small Business Impact

The data indicates that small business participation was not a specific set-aside for this contract (ss: false, sb: false). This suggests that the primary competition was likely among larger firms capable of handling the scale and complexity of the requirement. There is no explicit information on subcontracting plans for small businesses, which would typically be detailed in the contract's statement of work or performance requirements. The absence of a small business focus may mean limited direct opportunities for small businesses as prime contractors on this specific award, though they could potentially participate as subcontractors.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Health and Human Services (HHS) and its contracting officers, particularly within the Centers for Medicare and Medicaid Services (CMS). Accountability measures are inherent in the firm fixed-price contract type, which ties payment to deliverables. Transparency is facilitated through federal contract databases where such awards are reported. Inspector General jurisdiction would apply if any fraud, waste, or abuse related to the contract is suspected.

Related Government Programs

HHS IT Modernization Initiatives
CMS Health IT Services
Federal Civilian IT Procurement
Government IT Infrastructure Support
Computer Systems Design Services Contracts

Risk Flags

Potential for vendor lock-in
Risk of technological obsolescence over contract duration
Dependence on single contractor for critical IT functions

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $1.03 billion to SERCO INC. ELIGIBILITY SUPPORT

Who is the contractor on this award?

The obligated recipient is SERCO INC.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Centers for Medicare and Medicaid Services).

What is the total obligated amount?

The obligated amount is $1.03 billion.

What is the period of performance?

Start: 2018-07-01. End: 2023-06-30.

What is Serco Inc.'s track record with federal IT contracts, particularly with HHS?

Serco Inc. has a significant history of performing federal contracts across various agencies, including the Department of Defense, Department of Homeland Security, and Health and Human Services. Their portfolio often includes IT services, mission support, and operational support. For HHS, Serco has previously been awarded contracts related to health IT, administrative support, and program management. A detailed review of their past performance ratings on similar HHS contracts would be necessary to fully assess their suitability and reliability for this specific $1.03 billion award. Analyzing past performance metrics, such as on-time delivery, quality of service, and adherence to budget, would provide crucial insights into their capabilities and potential risks.

How does the $1.03 billion contract value compare to other large federal IT support contracts?

A contract valued at over $1 billion over five years for IT support is substantial and places it among the larger federal IT procurements. To benchmark effectively, one would need to compare it against contracts for similar services (e.g., systems integration, IT operations and maintenance, cybersecurity support) awarded by agencies like the Department of Defense, NASA, or the General Services Administration. The average value of large federal IT contracts can vary significantly by fiscal year and agency priorities. However, a $1B+ contract typically signifies a critical, long-term need for comprehensive IT services, often involving complex infrastructure management or large-scale system development and deployment.

What are the primary risks associated with a five-year firm fixed-price IT support contract of this magnitude?

The primary risks associated with a five-year firm fixed-price IT support contract of this magnitude include potential scope creep, where the requirements expand beyond the initial agreement, leading to cost pressures if not managed strictly. Technological obsolescence is another risk; IT evolves rapidly, and a five-year contract might see the technology underpinning the services become outdated. Vendor lock-in is also a concern, as the government becomes heavily reliant on Serco Inc. for critical functions. Furthermore, if the initial pricing was overly aggressive to win the bid, Serco Inc. might face profitability challenges, potentially impacting service quality or leading to requests for contract modifications. Ensuring robust contract management and clear performance metrics is crucial to mitigate these risks.

How effective is full and open competition in ensuring value for money in large federal IT contracts?

Full and open competition is generally considered the most effective method for ensuring value for money in large federal IT contracts. By allowing all responsible sources to submit bids, it maximizes the pool of potential offerors, thereby increasing the likelihood of receiving competitive pricing and innovative solutions. This competitive pressure incentivizes contractors to offer their best value proposition. When multiple bidders compete, the government can compare proposals based on technical merit, past performance, and price, selecting the offer that provides the optimal balance. While it requires more upfront effort in solicitation and evaluation, the long-term benefits in terms of cost savings and quality of service typically outweigh the initial investment.

What are the historical spending patterns for computer systems design services within HHS?

Historical spending patterns for computer systems design services within HHS reveal a consistent and significant investment in IT infrastructure and support. Over the years, HHS has allocated substantial funds to procure services related to designing, developing, implementing, and maintaining its complex IT systems, which are critical for managing programs like Medicare and Medicaid. Spending in this category often fluctuates based on agency modernization initiatives, new technological requirements, and the lifecycle of existing systems. Analyzing past HHS budgets and contract awards for 'Computer Systems Design Services' (NAICS code 541512) would show trends in contract values, types of services procured, and the prime contractors frequently utilized, providing context for the current $1.03 billion award.

What is the significance of the contract being awarded as a Delivery Order (DO) under an existing contract vehicle?

The data indicates this award is a 'Delivery Order' (aw: DELIVERY ORDER). This signifies that the $1.03 billion contract is not a standalone, new award but rather a specific order placed against a previously established indefinite-delivery, indefinite-quantity (IDIQ) contract or a similar type of multiple-award contract vehicle. This approach is common for large government procurements, allowing agencies to procure services or items as needed over a period. The significance is that the foundational contract terms, including competition, pricing structure, and basic requirements, were likely established earlier, possibly through a broader competition. This specific DO then defines the scope, quantity, and delivery schedule for this particular task.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Computer Systems Design Services

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1818 LIBRARY ST STE 1000, RESTON, VA, 20190

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

Financial Breakdown

Contract Ceiling: $1,047,660,824

Exercised Options: $1,047,626,347

Current Obligation: $1,032,865,951

Actual Outlays: $428,992,616

Subaward Activity

Number of Subawards: 384

Total Subaward Amount: $346,214,309

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS00Q09BGD0049

IDV Type: GWAC

Timeline