HHS awards $122M contract for Medicare Part A claims processing system maintenance to Peraton Enterprise Solutions

Contract Overview

Contract Amount: $122,059,871 ($122.1M)

Contractor: Peraton Enterprise Solutions LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2022-02-01

End Date: 2027-01-31

Contract Duration: 1,825 days

Daily Burn Rate: $66.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 6

Pricing Type: TIME AND MATERIALS

Sector: IT

Official Description: FISCAL INTERMEDIARY SHARED SYSTEM MAINTAINER (FISS) THE CLAIM PROCESSING SYSTEM USED BY MEDICARE ADMINISTRATIVE CONTRACTORS (MACS) TO PROCESS MEDICARE PART A CLAIMS

Place of Performance

Location: WINDSOR MILL, BALTIMORE County, MARYLAND, 21244

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $122.1 million to PERATON ENTERPRISE SOLUTIONS LLC for work described as: FISCAL INTERMEDIARY SHARED SYSTEM MAINTAINER (FISS) THE CLAIM PROCESSING SYSTEM USED BY MEDICARE ADMINISTRATIVE CONTRACTORS (MACS) TO PROCESS MEDICARE PART A CLAIMS Key points: 1. Contract value of $122M over 5 years for critical Medicare claims processing. 2. Full and open competition suggests a potentially competitive bidding process. 3. Risk indicators include the use of Time and Materials pricing, which can lead to cost overruns. 4. Performance context is the maintenance of the Fiscal Intermediary Shared System (FISS). 5. Sector positioning is within IT services for government healthcare administration.

Value Assessment

Rating: fair

The contract value of $122 million over five years for maintaining a critical system like FISS appears reasonable given its scope. However, the use of Time and Materials (T&M) pricing is a potential concern, as it can incentivize longer project durations and higher costs compared to fixed-price contracts. Benchmarking against similar IT maintenance contracts for large-scale government systems would be necessary for a more definitive value assessment. The awarded amount is within the expected range for such specialized IT services.

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 bids. Six bidders participated in the competition, suggesting a healthy level of interest and a potentially competitive environment. This broad competition is generally favorable for price discovery and ensuring the government receives competitive offers.

Taxpayer Impact: The full and open competition with multiple bidders is beneficial for taxpayers as it increases the likelihood of securing services at a more competitive price, preventing potential overpayment.

Public Impact

Beneficiaries: Medicare beneficiaries who rely on timely and accurate processing of Part A claims. Services Delivered: Maintenance and support for the Fiscal Intermediary Shared System (FISS), ensuring its operational integrity. Geographic Impact: National impact, as FISS is used by Medicare Administrative Contractors (MACs) across the country. Workforce Implications: Supports IT professionals involved in maintaining and operating critical government healthcare infrastructure.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Time and Materials pricing structure can lead to cost uncertainty and potential overruns if not closely managed.
The long duration of the contract (5 years) increases the risk of technological obsolescence or the need for significant system upgrades.
Dependence on a single contractor for a critical system like FISS could pose a risk if performance issues arise.
The complexity of Medicare claims processing requires specialized knowledge, making contractor performance crucial.

Positive Signals

Awarded under full and open competition, indicating a robust selection process.
Multiple bidders (6) participated, suggesting a competitive landscape that could drive better performance and pricing.
The contractor, Peraton Enterprise Solutions LLC, likely possesses relevant experience in managing large-scale IT systems.
The contract duration allows for stability and continuity in maintaining a vital government system.

Sector Analysis

This contract falls within the Information Technology (IT) services sector, specifically focusing on government IT infrastructure and support for healthcare administration. The market for maintaining large-scale, mission-critical government IT systems is specialized, often dominated by a few large contractors with proven track records. Comparable spending benchmarks would involve analyzing other contracts for similar system maintenance and support within federal agencies, particularly those managing vast amounts of sensitive data and complex processing requirements.

Small Business Impact

This contract was awarded under full and open competition and does not appear to have specific small business set-aside provisions. While the prime contractor is Peraton Enterprise Solutions LLC, which is a large business, there may be opportunities for small businesses to participate as subcontractors. The extent of small business subcontracting will depend on Peraton's subcontracting plan and the specific needs for specialized IT support services.

Oversight & Accountability

Oversight for this contract will likely be managed by the Centers for Medicare and Medicaid Services (CMS), a division of HHS. CMS will be responsible for monitoring contractor performance, ensuring adherence to contract terms, and managing payments. Transparency is facilitated through contract award databases and reporting requirements. The Inspector General's office within HHS may conduct audits or investigations related to the contract's financial and performance aspects.

Related Government Programs

Medicare Administrative Contractor (MAC) IT Support
Federal Health IT Systems Maintenance
Claims Processing System Modernization
CMS IT Infrastructure Support
Healthcare Data Management Systems

Risk Flags

Time and Materials Pricing
Critical System Dependency
Long-Term Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $122.1 million to PERATON ENTERPRISE SOLUTIONS LLC. FISCAL INTERMEDIARY SHARED SYSTEM MAINTAINER (FISS) THE CLAIM PROCESSING SYSTEM USED BY MEDICARE ADMINISTRATIVE CONTRACTORS (MACS) TO PROCESS MEDICARE PART A CLAIMS

Who is the contractor on this award?

The obligated recipient is PERATON ENTERPRISE SOLUTIONS 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 $122.1 million.

What is the period of performance?

Start: 2022-02-01. End: 2027-01-31.

What is the track record of Peraton Enterprise Solutions LLC in managing similar large-scale government IT systems, particularly within the healthcare sector?

Peraton Enterprise Solutions LLC has a significant history of managing complex IT programs for government agencies, including defense and intelligence sectors. Their experience often involves large-scale system integration, cybersecurity, and mission-critical infrastructure support. While specific details on their track record with Medicare systems like FISS require deeper investigation into past performance reviews and contract histories, their general profile suggests they are equipped to handle the technical demands. However, a thorough review of past performance on contracts of similar size, scope, and criticality, especially within the healthcare domain, is essential to fully assess their suitability and mitigate potential risks associated with this specific award.

How does the awarded price of $122 million compare to the estimated value or market rates for similar IT maintenance contracts?

The awarded price of approximately $122 million over five years translates to an average annual cost of $24.4 million. Benchmarking this against similar contracts for maintaining large-scale, mission-critical government IT systems, particularly those involved in financial processing or healthcare administration, is crucial. Factors such as system complexity, user base, security requirements, and the scope of maintenance services (e.g., software updates, hardware support, help desk) significantly influence pricing. Without direct comparable contract data, it's challenging to definitively state if this price is high or low. However, given the critical nature of FISS for Medicare Part A claims processing, a substantial investment is expected. A detailed analysis comparing the labor rates, overhead, and profit margins to industry standards for comparable government IT services would provide a clearer picture of value for money.

What are the primary risks associated with the Time and Materials (T&M) pricing structure for this contract, and how are they being mitigated?

The primary risk with Time and Materials (T&M) contracts is the potential for cost overruns, as the contractor is reimbursed for actual labor hours and material costs incurred, plus a fixed fee or percentage. This structure can incentivize longer project durations and less efficient work if not rigorously managed. For this FISS maintenance contract, mitigation strategies would typically involve strong government oversight, including detailed monitoring of labor hours, material purchases, and regular progress reviews. Establishing clear ceilings or not-to-exceed clauses within the T&M structure, along with performance metrics and incentives, can also help control costs. The government contracting officer must actively manage the contract to ensure that work is performed efficiently and that costs remain within reasonable bounds relative to the services delivered.

How effective is the Fiscal Intermediary Shared System (FISS) in processing Medicare Part A claims, and what is the expected impact of this contract on its performance?

The Fiscal Intermediary Shared System (FISS) is a foundational system for Medicare Part A claims processing, managed by Medicare Administrative Contractors (MACs). Its effectiveness is critical for ensuring timely and accurate reimbursement to healthcare providers. This contract's primary goal is to maintain the operational integrity and functionality of FISS. Therefore, its expected impact is to ensure continued, reliable performance of the system, preventing disruptions in claims processing. Improvements in performance would likely stem from proactive maintenance, necessary system updates, and bug fixes implemented by Peraton. The contract's success will be measured by the system's uptime, processing accuracy, and the efficiency with which claims are handled, directly impacting provider payments and the overall administration of Medicare Part A.

What are the historical spending patterns for the FISS maintenance or similar Medicare claims processing systems over the past five years?

Analyzing historical spending for FISS maintenance or comparable Medicare claims processing systems over the past five years is crucial for context. While specific historical data for FISS maintenance alone isn't readily available in this summary, understanding the trend of IT spending within CMS for similar critical systems can provide insight. Generally, government IT systems require continuous investment for maintenance, upgrades, and security enhancements. Spending can fluctuate based on major system overhauls, technological advancements, or changes in regulatory requirements. If historical spending has been significantly lower or higher than the current $122 million award, it would warrant further investigation into the reasons, such as system age, complexity, or the scope of services provided under previous contracts. This contract's value should be assessed against these historical trends to identify any anomalies or consistent investment patterns.

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: 6

Pricing Type: TIME AND MATERIALS (Y)

Evaluated Preference: NONE

Contractor Details

Address: 15050 CONFERENCE CENTER DR, CHANTILLY, VA, 20151

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: $122,428,459

Exercised Options: $122,059,871

Current Obligation: $122,059,871

Actual Outlays: $95,755,287

Subaward Activity

Number of Subawards: 4

Total Subaward Amount: $13,138,252

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS35F146DA

IDV Type: FSS

Timeline