HHS awards $2.64B contact center contract to Maximus Federal Services, Inc. for 4 years

Contract Overview

Contract Amount: $2,641,443,092 ($2.6B)

Contractor: Maximus Federal Services, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2022-08-31

End Date: 2026-09-10

Contract Duration: 1,471 days

Daily Burn Rate: $1.8M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 9

Pricing Type: COST PLUS AWARD FEE

Sector: Other

Official Description: CONTACT CENTER OPERATIONS

Place of Performance

Location: MCLEAN, FAIRFAX County, VIRGINIA, 22102

State: Virginia Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $2.64 billion to MAXIMUS FEDERAL SERVICES, INC. for work described as: CONTACT CENTER OPERATIONS Key points: 1. Contract value of $2.64 billion over 4 years suggests significant operational scale. 2. Full and open competition indicates a potentially competitive bidding process. 3. Cost Plus Award Fee contract type allows for performance-based incentives. 4. The contract's duration of 1471 days (approx. 4 years) points to long-term service needs. 5. The North American Industry Classification System (NAICS) code 561422 signifies a focus on telemarketing and contact center services. 6. The contract is managed by the Centers for Medicare and Medicaid Services (CMS), a major health agency. 7. The award to Maximus Federal Services, Inc. represents a substantial commitment to a single provider for critical operations.

Value Assessment

Rating: good

The total contract value of $2.64 billion over approximately four years averages to roughly $660 million annually. Benchmarking this against similar large-scale federal contact center operations is challenging without more specific service delivery metrics. However, the Cost Plus Award Fee structure suggests that pricing is tied to performance, which can be a mechanism for achieving value for money if performance targets are met and incentivized appropriately. The absence of a specific price per unit makes direct value assessment difficult, but the overall scale implies a need for efficient operations to manage costs effectively.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit a bid. The data shows 9 bids were received, suggesting a healthy level of interest and competition for this significant contract. A competitive process like this generally leads to better price discovery and potentially more favorable terms for the government compared to sole-source or limited competition awards. The number of bidders provides a good indication that the market was engaged.

Taxpayer Impact: A competitive award process helps ensure that taxpayer dollars are used efficiently by driving down costs and encouraging innovation among bidders. The government likely secured a more competitive price due to the multiple offers received.

Public Impact

Beneficiaries include citizens interacting with Medicare and Medicaid services, seeking information or assistance. Services delivered encompass telemarketing, customer support, and potentially other contact center functions for health programs. Geographic impact is national, as CMS serves beneficiaries across the United States. Workforce implications include job creation within Maximus Federal Services, Inc. and potentially its subcontractors, particularly in areas where contact centers are located.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for over-reliance on a single large contractor for critical citizen services.
Performance variability in Cost Plus Award Fee contracts can sometimes lead to unexpected cost overruns if not managed tightly.
Ensuring consistent quality of service across all interactions and channels is a perpetual challenge for large contact centers.

Positive Signals

The use of full and open competition suggests a robust market assessment and potential for competitive pricing.
The Cost Plus Award Fee structure incentivizes strong performance, which can lead to improved service delivery.
The contract's significant value indicates a commitment to providing essential services to a large beneficiary population.

Sector Analysis

The federal contact center and telemarketing services sector is a significant component of government IT and administrative support spending. This contract falls within the broader IT services and administrative support categories. The market for these services is competitive, with numerous large and small businesses capable of providing scaled operations. Benchmarking this contract's value against the total federal spending on contact center operations would require a comprehensive analysis of similar contracts across various agencies, but $2.64 billion represents a substantial investment in this capability.

Small Business Impact

The data indicates that small business participation was not a primary set-aside component for this contract (ss: false, sb: false). While Maximus Federal Services, Inc. is the prime contractor, there may be opportunities for small businesses to participate as subcontractors. The extent of small business subcontracting will depend on Maximus's own subcontracting plan and the specific requirements of the contract. Without explicit set-aside goals or reporting on subcontracting, the direct impact on the small business ecosystem is unclear but likely indirect.

Oversight & Accountability

Oversight for this contract would primarily reside with the Centers for Medicare and Medicaid Services (CMS) contracting officers and program managers. The Cost Plus Award Fee structure necessitates close monitoring of performance metrics to determine award fees. Transparency is typically managed through contract reporting requirements and potentially through public contract databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse related to the contract is suspected or identified.

Related Government Programs

Federal Contact Center Services
CMS IT Services
Health Information Technology Support
Customer Relationship Management (CRM) Services
Telecommunications Services

Risk Flags

Performance Risk: Ensuring consistent high-quality service delivery over a 4-year period.
Cost Control Risk: Managing costs effectively within a CPAF structure to avoid overruns.
Vendor Stability Risk: Ensuring the long-term financial and operational viability of the prime contractor.
Transition Risk: Potential disruption during contract transitions if performance issues arise or at contract end.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $2.64 billion to MAXIMUS FEDERAL SERVICES, INC.. CONTACT CENTER OPERATIONS

Who is the contractor on this award?

The obligated recipient is MAXIMUS FEDERAL SERVICES, 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 $2.64 billion.

What is the period of performance?

Start: 2022-08-31. End: 2026-09-10.

What is the historical spending pattern for contact center operations at CMS or similar agencies?

Analyzing historical spending requires access to detailed budget and contract data over multiple fiscal years. For CMS, contact center operations are critical for managing beneficiary inquiries related to Medicare and Medicaid. Past spending would likely show a consistent need for these services, potentially with fluctuations based on policy changes, enrollment periods, or system updates. Comparing this $2.64 billion award to previous contract values for similar services would reveal trends in cost and scope. Without specific historical data, it's difficult to ascertain if this award represents an increase, decrease, or stable level of investment in contact center capabilities. However, the scale of this award suggests a sustained and significant requirement.

How does the Cost Plus Award Fee (CPAF) structure typically impact contractor performance and cost control?

The Cost Plus Award Fee (CPAF) contract type allows the government to reimburse the contractor for allowable costs plus a fixed fee that is subject to an award amount based on performance. This structure is designed to incentivize contractors to exceed basic performance requirements by offering additional fee opportunities for exceptional service. For taxpayers, CPAF can be beneficial if the performance incentives are well-defined and effectively monitored, leading to higher quality services. However, it also requires robust government oversight to ensure that costs remain reasonable and that award fees are justified by demonstrable performance improvements. If not managed carefully, CPAF can sometimes lead to higher overall costs than fixed-price contracts, as the government shares in the cost risk and rewards performance.

What are the key performance indicators (KPIs) likely used to evaluate Maximus Federal Services under this contract?

For a contract center operation of this magnitude, key performance indicators (KPIs) would likely focus on efficiency, effectiveness, and customer satisfaction. Common KPIs include average handle time (AHT), first call resolution (FCR) rate, customer satisfaction scores (CSAT), net promoter score (NPS), abandonment rate, and adherence to schedule. For a CPAF contract, these KPIs would be directly tied to the award fee structure, meaning Maximus would need to meet or exceed specific targets for these metrics to earn their full award fee. The government would establish baseline targets and potentially stretch goals for each KPI, with performance measured against these benchmarks.

What is the typical profit margin for federal contact center operations, and how does this contract compare?

Profit margins in federal contracting can vary significantly based on contract type, competition, and the specific services provided. For IT and administrative support services like contact centers, profit margins might typically range from 5% to 15% for the base fee, with potential for additional profit through award fees in a CPAF structure. Without knowing the breakdown of the fixed fee and the potential award fee pool for this $2.64 billion contract, it's impossible to definitively compare its profit margin to industry averages. However, the competitive nature of the award suggests that the government sought to secure services at a reasonable cost, implying that profit margins are likely within a competitive range.

What are the risks associated with a single, large contract for essential citizen services like contact center operations?

A significant risk associated with a single, large contract for essential services is vendor lock-in and the potential for service disruption if the contractor fails to perform or faces financial instability. If Maximus Federal Services were to experience significant operational issues, it could directly impact millions of citizens relying on Medicare and Medicaid services for information and support. Another risk is reduced agility; a large, long-term contract might be less adaptable to rapidly changing technological landscapes or policy shifts compared to smaller, more modular contracts. The government must maintain strong oversight and contingency planning to mitigate these risks.

Industry Classification

NAICS: Administrative and Support and Waste Management and Remediation Services › Business Support Services › Telemarketing Bureaus and Other Contact Centers

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: RFP75FCMC21R0013

Offers Received: 9

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 1600 TYSONS BLVD STE 300, MCLEAN, VA, 22102

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

Financial Breakdown

Contract Ceiling: $6,436,264,456

Exercised Options: $2,793,630,348

Current Obligation: $2,641,443,092

Actual Outlays: $2,296,312,770

Subaward Activity

Number of Subawards: 8

Total Subaward Amount: $189,209,472

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline