HHS awards $787M contract for IT services to Accenture, with 2 years remaining

Contract Overview

Contract Amount: $787,236,926 ($787.2M)

Contractor: Accenture Federal Services LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2021-07-11

End Date: 2027-01-10

Contract Duration: 2,009 days

Daily Burn Rate: $391.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: IT

Official Description: FEDERALLY FACILITATED EXCHANGE (FFE)

Place of Performance

Location: ARLINGTON, ARLINGTON County, VIRGINIA, 22203

State: Virginia Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $787.2 million to ACCENTURE FEDERAL SERVICES LLC for work described as: FEDERALLY FACILITATED EXCHANGE (FFE) Key points: 1. Contract value appears high for the services rendered, warranting further scrutiny of cost-effectiveness. 2. Full and open competition was utilized, suggesting a potentially competitive bidding process. 3. The contract's duration and cost structure present moderate financial risk. 4. This contract supports critical IT infrastructure for Medicare and Medicaid services. 5. Accenture Federal Services has a significant presence in the federal IT services market. 6. The contract's performance period extends into 2027, indicating long-term IT support needs.

Value Assessment

Rating: fair

The total contract value of $787 million over its life is substantial. Benchmarking against similar IT system design and integration contracts awarded by HHS or other agencies is crucial. Without specific performance metrics or detailed cost breakdowns, it's difficult to definitively assess value for money. However, the Cost Plus Award Fee (CPAF) structure can sometimes lead to higher costs if not tightly managed, as contractor incentives are tied to performance outcomes which may not always align with cost efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. This typically fosters a competitive environment, which can lead to better pricing and innovation. The data shows 2 bids were received, which is a relatively low number for a contract of this magnitude and suggests that the competitive landscape might have been limited, potentially impacting price discovery.

Taxpayer Impact: A competitive bidding process, even with a limited number of bidders, is generally favorable for taxpayers as it encourages multiple companies to offer their best pricing and solutions to win the contract.

Public Impact

Beneficiaries include millions of individuals relying on Medicare and Medicaid services. Services delivered are critical for the operational integrity of health insurance programs. The geographic impact is nationwide, supporting federal health IT infrastructure. Workforce implications include IT professionals employed by the contractor and potentially government oversight personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited number of bids received (2) for a large contract could indicate potential barriers to entry or a concentrated market.
Cost Plus Award Fee (CPAF) contract type can sometimes lead to cost overruns if performance incentives are not carefully structured and monitored.
The contract duration extending to 2027 means significant taxpayer funds are committed over a long period, requiring ongoing oversight.
Lack of specific details on performance metrics makes it hard to assess if the award fee structure is driving optimal value.
The contract's significant dollar value ($787M) inherently carries financial risk if not managed effectively.

Positive Signals

Awarded under full and open competition, which generally promotes a fair and competitive marketplace.
The contractor, Accenture Federal Services, is a well-established entity with significant experience in federal IT.
The contract supports essential functions for major federal health programs (Medicare/Medicaid).
The contract has a defined end date (Jan 2027), providing a clear timeframe for services.
The contract is a Delivery Order, suggesting it's part of a larger framework agreement which might offer some efficiencies.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically focusing on computer systems design services. The federal IT services market is vast, with agencies consistently investing in modernizing systems, cybersecurity, and data management. Contracts like this are crucial for maintaining and upgrading the complex technological infrastructure that supports government operations, particularly in sensitive areas like healthcare. Comparable spending benchmarks would involve looking at other large-scale IT system development and integration contracts within HHS and other civilian agencies.

Small Business Impact

The data indicates that small business participation (ss: false, sb: false) was not a specific set-aside requirement for this contract. This suggests that the primary focus was on full and open competition to secure the best technical solution and price. There is no explicit information on subcontracting plans for small businesses. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem is likely minimal, though large prime contractors often engage small businesses for specialized support.

Oversight & Accountability

Oversight for this contract would primarily reside with the Centers for Medicare and Medicaid Services (CMS) within HHS. As a Cost Plus Award Fee (CPAF) contract, robust oversight is critical to ensure that performance objectives are met and that award fees are justified. The contract's duration and significant value necessitate continuous monitoring of contractor performance, costs, and adherence to contract terms. Transparency would be enhanced through regular reporting requirements and potentially through public contract data portals, though specific performance details might be sensitive. The Inspector General for HHS would have jurisdiction to investigate any potential fraud, waste, or abuse.

Related Government Programs

Healthcare IT Modernization Programs
Federal Health Exchange Platforms
Medicare Modernization Act Initiatives
Medicaid Information Technology Architecture (MITA)
CMS Enterprise Systems Development

Risk Flags

Limited Competition
High Contract Value
Cost Plus Award Fee Structure
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $787.2 million to ACCENTURE FEDERAL SERVICES LLC. FEDERALLY FACILITATED EXCHANGE (FFE)

Who is the contractor on this award?

The obligated recipient is ACCENTURE FEDERAL SERVICES LLC.

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 $787.2 million.

What is the period of performance?

Start: 2021-07-11. End: 2027-01-10.

What is Accenture Federal Services' track record with similar large-scale IT contracts within HHS or other federal health agencies?

Accenture Federal Services has a substantial history of performing large IT contracts for various federal agencies, including HHS. They are a major player in the federal IT services market, often handling complex system integrations, modernization efforts, and IT support. Their track record typically includes managing significant budgets and delivering services across diverse domains. For HHS, Accenture has been involved in projects related to health information technology, data analytics, and program support. While specific performance details for past contracts are often proprietary or buried in performance reports, their continued success in winning large federal contracts suggests a generally positive performance history. However, like any large contractor, they may have faced challenges or criticisms on specific projects, which would require a deeper dive into contract performance databases and agency evaluations.

How does the $787 million total contract value compare to similar IT system design and integration contracts awarded by HHS or other agencies in the last five years?

The $787 million total contract value is significant and falls within the upper range for large-scale IT system design, development, and integration contracts within the federal government. Agencies like the Department of Defense, Veterans Affairs, and other components of HHS frequently award contracts in the hundreds of millions, and sometimes billions, for similar services. For instance, contracts supporting electronic health records (EHR) modernization, large data analytics platforms, or core IT infrastructure upgrades often reach these figures. The number of bids received (2) for this specific contract, however, is on the lower side for such a substantial award, which might suggest that the market for this particular niche or scope of work is more concentrated, or that the barriers to entry were high. Benchmarking requires comparing not just the total dollar value but also the contract duration, scope of work, and the specific IT services provided.

What are the primary risks associated with the Cost Plus Award Fee (CPAF) contract type for this specific engagement?

The primary risks associated with a Cost Plus Award Fee (CPAF) contract type for this engagement revolve around cost control and the potential for scope creep. In a CPAF structure, the contractor is reimbursed for allowable costs plus a fee that is composed of a fixed base fee and an award amount determined by the government based on performance. The risk is that the government may not have sufficiently defined performance metrics or may be overly generous in awarding fees, leading to higher-than-expected costs. Contractors may also have incentives to incur costs to achieve higher award fees, potentially leading to less focus on cost efficiency. Effective oversight is crucial to mitigate these risks, ensuring that performance standards are clear, measurable, and tied to genuine value, and that award fees are only granted when exceptional performance is demonstrated. Without stringent oversight, CPAF contracts can become more expensive than fixed-price alternatives.

What is the historical spending pattern for computer systems design services (NAICS 541512) by the Centers for Medicare and Medicaid Services (CMS)?

The Centers for Medicare and Medicaid Services (CMS) consistently spends significant amounts on computer systems design services, as indicated by NAICS code 541512. This category encompasses a wide range of IT support, including system design, development, integration, and maintenance, which are critical for managing the complex operations of Medicare and Medicaid. Historical spending data would likely show a steady or increasing trend over the years, reflecting the ongoing need to modernize legacy systems, implement new healthcare initiatives (like the Affordable Care Act provisions), enhance data security, and improve user interfaces for beneficiaries and providers. The total spending in this category by CMS often runs into hundreds of millions or even billions of dollars annually, distributed across numerous contracts of varying sizes and durations, awarded to a mix of large and small businesses.

Given the contract's duration (ending Jan 2027) and value, what are the potential long-term implications for IT infrastructure modernization at CMS?

The contract's duration extending to January 2027 and its substantial value suggest a strategic commitment by CMS to leverage Accenture Federal Services for critical IT infrastructure modernization. This implies that the services procured are intended to address long-standing needs or implement significant upgrades that require sustained effort. The long-term implications could be positive, leading to more robust, secure, and efficient IT systems that better support CMS's mission of administering Medicare and Medicaid. However, it also carries risks. A long-term reliance on a single vendor for core infrastructure could lead to vendor lock-in, potentially stifling future innovation or making transitions to new technologies more difficult and costly. Furthermore, the success of modernization hinges on effective contract management, clear performance metrics, and adaptability to evolving technological landscapes and policy requirements over the contract's lifespan.

How does the number of bidders (2) impact the government's ability to ensure competitive pricing for this $787 million contract?

A low number of bidders, such as the two received for this $787 million contract, generally raises concerns about the level of competition and its impact on pricing. Ideally, a 'full and open' competition would attract a larger pool of qualified bidders, fostering a more robust price discovery process where companies vie to offer the most competitive terms. With only two bidders, the government has less leverage to negotiate favorable pricing, as the bidders may perceive less risk of losing the contract to a competitor. This situation can sometimes lead to higher prices than might be achieved in a more crowded marketplace. While the government still negotiates, the absence of broader competition means the potential for significant cost savings through competitive pressure is diminished. It also raises questions about why more potential bidders did not participate, which could be due to the contract's complexity, specific requirements, or market dynamics.

Industry Classification

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

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › IT AND TELECOM - APLLICATIONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Novetta Solutions, LLC

Address: 800 NORTH GLEBE RD #300, ARLINGTON, VA, 22203

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

Financial Breakdown

Contract Ceiling: $798,071,716

Exercised Options: $797,202,725

Current Obligation: $787,236,926

Actual Outlays: $590,737,099

Subaward Activity

Number of Subawards: 199

Total Subaward Amount: $162,351,203

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HHSM500201600003I

IDV Type: IDC

Timeline