CMS awards $7.16M contract to McKinsey for procurement spend optimization, focusing on category management expansion

Contract Overview

Contract Amount: $7,155,256 ($7.2M)

Contractor: Mckinsey & Company, Inc. Washington D.C.

Awarding Agency: Department of Health and Human Services

Start Date: 2024-09-27

End Date: 2026-09-26

Contract Duration: 729 days

Daily Burn Rate: $9.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: PROJECT NUMBER IS 002010 PROCUREMENT SPEND OPTIMIZATION. PERIOD OF PERFORMANCE - BASE PERIOD: 09/27/2024 TO 09/26/2025. THE FUNDING IS FOR THE RE-PROCUREMENT OF CONTRACTOR SUPPORT SERVICES TO ASSIST CMS IN EXPANDING THE USE OF CATEGORY MANAGEMEN

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20036

State: District of Columbia Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $7.2 million to MCKINSEY & COMPANY, INC. WASHINGTON D.C. for work described as: PROJECT NUMBER IS 002010 PROCUREMENT SPEND OPTIMIZATION. PERIOD OF PERFORMANCE - BASE PERIOD: 09/27/2024 TO 09/26/2025. THE FUNDING IS FOR THE RE-PROCUREMENT OF CONTRACTOR SUPPORT SERVICES TO ASSIST CMS IN EXPANDING THE USE OF CATEGORY MANAGEMEN Key points: 1. Contract aims to enhance category management, a key strategy for optimizing federal procurement. 2. McKinsey & Company, a well-established consulting firm, is the selected contractor. 3. The contract is a delivery order under a larger indefinite-delivery/indefinite-quantity (IDIQ) vehicle, suggesting a pre-vetted relationship. 4. The period of performance spans one base year with potential for future extensions. 5. This award falls under administrative management and general management consulting services. 6. The fixed-price contract type suggests a defined scope and budget, potentially limiting cost overruns.

Value Assessment

Rating: good

The contract value of $7.16 million for a one-year period of performance for procurement optimization services appears reasonable, especially given the contractor's expertise. Benchmarking against similar large-scale consulting engagements for federal agencies suggests this is within expected ranges. The firm fixed-price structure provides cost certainty for the government, although it may limit flexibility if the scope evolves significantly.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. The presence of two bidders suggests a competitive process, though the specific details of the bidding and evaluation are not provided. Full and open competition generally leads to better price discovery and a wider range of innovative solutions.

Taxpayer Impact: Taxpayers benefit from a competitive process that aims to secure the best value for the government's investment in procurement optimization services.

Public Impact

The Centers for Medicare and Medicaid Services (CMS) will benefit from improved procurement processes and potential cost savings. The services delivered will focus on expanding the use of category management, a strategic approach to sourcing. The geographic impact is primarily within the District of Columbia, where the contractor is located, but the benefits will accrue to CMS operations nationwide. The contract supports administrative functions and does not directly imply significant workforce implications beyond the consulting team.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for scope creep if category management expansion is more complex than initially assessed.
Reliance on a single contractor for a critical optimization function could pose a risk if performance falters.
The effectiveness of category management implementation will depend heavily on internal CMS adoption and change management.

Positive Signals

Award to a reputable consulting firm with demonstrated experience in government consulting.
Firm fixed-price contract provides budget certainty.
Full and open competition suggests a robust selection process.
Focus on category management aligns with government-wide efficiency initiatives.

Sector Analysis

This contract falls within the Administrative Management and General Management Consulting Services sector (NAICS 541611). This sector is characterized by firms providing expertise in organizational efficiency, strategic planning, and operational improvements. Federal spending in this area often supports agency-wide initiatives to streamline operations, improve financial management, and enhance program delivery. Comparable spending benchmarks would involve other large consulting contracts awarded to major firms for similar strategic advisory services across various federal agencies.

Small Business Impact

The contract was awarded under full and open competition and does not indicate any specific small business set-aside. There is no explicit mention of subcontracting plans for small businesses. Therefore, the direct impact on the small business ecosystem from this specific award is likely minimal, though the prime contractor may engage small businesses as subcontractors if it aligns with their project needs.

Oversight & Accountability

Oversight for this contract will be managed by the Centers for Medicare and Medicaid Services (CMS). As a delivery order under an IDIQ, there are likely established oversight mechanisms within the parent contract. The firm fixed-price nature of the award provides a degree of accountability for the contractor to deliver within the agreed budget. Transparency will be facilitated through standard government contracting reporting mechanisms.

Related Government Programs

Federal Procurement Data System (FPDS)
Category Management Government-Wide Policy
CMS IT and Management Support Contracts
Administrative Management Consulting Services

Risk Flags

Potential for scope creep
Contractor performance risk
Dependency on internal agency adoption

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $7.2 million to MCKINSEY & COMPANY, INC. WASHINGTON D.C.. PROJECT NUMBER IS 002010 PROCUREMENT SPEND OPTIMIZATION. PERIOD OF PERFORMANCE - BASE PERIOD: 09/27/2024 TO 09/26/2025. THE FUNDING IS FOR THE RE-PROCUREMENT OF CONTRACTOR SUPPORT SERVICES TO ASSIST CMS IN EXPANDING THE USE OF CATEGORY MANAGEMEN

Who is the contractor on this award?

The obligated recipient is MCKINSEY & COMPANY, INC. WASHINGTON D.C..

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 $7.2 million.

What is the period of performance?

Start: 2024-09-27. End: 2026-09-26.

What is the track record of McKinsey & Company in delivering similar procurement optimization services to federal agencies?

McKinsey & Company has a significant track record of providing consulting services to federal agencies, including those focused on procurement, category management, and operational efficiency. They have been involved in numerous high-profile engagements across various departments and agencies, aiming to improve government operations and achieve cost savings. Their experience often includes developing strategic frameworks, implementing new processes, and advising on best practices. While specific details of past performance on similar contracts are not publicly detailed in this award notice, their general reputation and extensive work within the federal space suggest a strong capability to undertake this project. Further analysis would require reviewing past performance evaluations and specific project outcomes from their federal engagements.

How does the $7.16 million contract value compare to similar procurement optimization projects at CMS or other federal agencies?

The $7.16 million contract value for a one-year period of performance for procurement optimization services is within the expected range for large-scale consulting engagements at federal agencies like CMS. Such projects often involve strategic analysis, process redesign, and implementation support, requiring significant expertise and resources. Comparable contracts for similar services, especially those involving category management expansion or broader procurement reform, can range from several million to tens of millions of dollars annually, depending on the scope, duration, and complexity. Given McKinsey's profile and the strategic importance of category management, this value appears to be a reasonable investment for the potential benefits of improved efficiency and cost savings within CMS's vast procurement operations.

What are the primary risks associated with this contract, and what mitigation strategies are likely in place?

Primary risks include potential scope creep if the expansion of category management proves more complex than anticipated, leading to cost overruns or schedule delays, despite the firm fixed-price structure. Another risk is the contractor's ability to effectively drive change and achieve adoption of new category management strategies within CMS, which requires strong internal stakeholder buy-in. Performance risk also exists, where the quality of the consulting advice or implementation support may not meet expectations. Mitigation strategies likely include robust contract management by CMS, clear definition and monitoring of deliverables, regular progress reviews, and performance metrics. The firm fixed-price contract itself mitigates financial risk for the government, provided the scope is well-defined.

How effective is category management as a strategy for federal procurement optimization, and what is the expected impact of this contract?

Category management is a highly effective strategy for federal procurement optimization. It involves grouping similar goods and services into 'categories' and managing them strategically to leverage buying power, reduce duplication, and improve overall value. By focusing on specific categories, agencies can develop specialized sourcing strategies, negotiate better terms, and achieve significant cost savings and efficiencies. This contract's objective to expand the use of category management at CMS is expected to lead to more streamlined procurement processes, better contract consolidation, reduced Maverick spending, and improved data-driven decision-making. The ultimate impact should be more strategic sourcing and greater value for taxpayer dollars spent on goods and services.

What are the historical spending patterns for administrative management and general management consulting services at CMS?

Historical spending patterns for administrative management and general management consulting services at CMS, and across the federal government, show a consistent and significant investment in external expertise to support complex operations and strategic initiatives. Agencies like CMS frequently engage consultants for areas such as IT modernization, healthcare policy implementation, financial management improvements, and operational efficiency. While specific historical dollar amounts for CMS in this exact category are not provided in the data, the overall trend indicates a reliance on such services to augment internal capabilities and drive critical reforms. Spending in this area can fluctuate based on agency priorities, budget cycles, and the initiation of major transformation projects.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Management, Scientific, and Technical Consulting Services › Administrative Management and General Management Consulting 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: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1200 19TH ST NW STE 1000, WASHINGTON, DC, 20036

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

Financial Breakdown

Contract Ceiling: $15,135,422

Exercised Options: $7,155,256

Current Obligation: $7,155,256

Actual Outlays: $4,694,679

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 47QRAA22D00E3

IDV Type: FSS

Timeline