Northrop Grumman's $33M Medicare Beneficiary Database contract awarded non-competitively raises value questions

Contract Overview

Contract Amount: $33,142,367 ($33.1M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2006-09-15

End Date: 2008-08-31

Contract Duration: 716 days

Daily Burn Rate: $46.3K/day

Competition Type: NON-COMPETITIVE DELIVERY ORDER

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: MEDICARE BENEFICIARY DATABASE SUITE OF SYSTEMS (MBDSS)

Plain-Language Summary

Department of Health and Human Services obligated $33.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: MEDICARE BENEFICIARY DATABASE SUITE OF SYSTEMS (MBDSS) Key points: 1. The contract's non-competitive award suggests potential for higher costs and reduced innovation. 2. Limited competition may have hindered price discovery, impacting overall value for money. 3. The Cost Plus Fixed Fee (CPFF) contract type can incentivize cost overruns. 4. Performance duration of 716 days for a $33M award warrants scrutiny of efficiency. 5. The contract's focus on a critical database highlights potential risks if performance falters. 6. This award represents a small fraction of overall CMS IT spending, but its nature is notable.

Value Assessment

Rating: questionable

Benchmarking the value of this specific contract is challenging due to its non-competitive nature and the lack of detailed cost breakdowns. However, a $33 million award for a 716-day duration, especially under a CPFF structure, suggests a potentially high per-diem cost. Without comparable competitively awarded contracts for similar database systems, it's difficult to definitively assess if the government received optimal value. The absence of competitive pressure inherently limits the ability to ensure the most cost-effective solution was secured.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as a Non-Competitive Delivery Order, indicating that it was not subjected to a full and open competition. The specific justification for this sole-source award is not detailed in the provided data. Typically, sole-source awards are made when only one responsible source can provide the required supplies or services. The lack of multiple bidders means there was no direct price competition, which can lead to higher prices than might be achieved in a competitive environment.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. The government did not benefit from the price reductions and innovative solutions that often arise from a competitive procurement process.

Public Impact

Medicare beneficiaries benefit indirectly through the maintenance and potential improvement of the Medicare Beneficiary Database. The contract supports the operational integrity of critical healthcare data management systems for CMS. The geographic impact is national, as the Medicare Beneficiary Database serves beneficiaries across the United States. Workforce implications include the employment of IT professionals and support staff by Northrop Grumman for this project.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Non-competitive award limits price discovery and potentially increases costs for taxpayers.
Cost Plus Fixed Fee (CPFF) contract type can incentivize cost escalation if not managed tightly.
Lack of transparency regarding the justification for sole-source award.
Limited performance data provided to assess efficiency and effectiveness over the contract duration.
Potential for vendor lock-in due to the specialized nature of database systems.

Positive Signals

Contract supports a critical function for CMS, ensuring data integrity for Medicare beneficiaries.
Northrop Grumman is a large, established defense and technology contractor with significant experience.
The contract duration is defined, providing a clear timeframe for service delivery.
Fixed fee component in CPFF provides some level of cost certainty compared to pure cost-plus contracts.

Sector Analysis

The Information Technology sector, specifically within government IT services, is characterized by significant spending on system development, maintenance, and modernization. Contracts like this, focused on large-scale databases crucial for program administration, are common within agencies like CMS. The market includes a mix of large prime contractors and specialized subcontractors. Benchmarks for similar large-scale database management contracts within federal agencies often range from tens to hundreds of millions of dollars, depending on scope and complexity.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications for small businesses stemming from a small business set-aside. The prime contractor, Northrop Grumman, is a large corporation, and any subcontracting would likely be determined by their internal procurement strategies rather than specific set-aside requirements for this particular award.

Oversight & Accountability

Oversight for this contract would fall under the Centers for Medicare and Medicaid Services (CMS) contracting officers and program managers. As a delivery order under a larger contract vehicle (implied by 'NON-COMPETITIVE DELIVERY ORDER'), oversight might be integrated into the broader management of that vehicle. Transparency is limited by the non-competitive nature and the lack of detailed public reporting on performance metrics. The Department of Health and Human Services Office of Inspector General (HHS-OIG) would have jurisdiction for audits and investigations if concerns regarding fraud, waste, or abuse arise.

Related Government Programs

Medicare Beneficiary Database
CMS IT Modernization Efforts
Healthcare Data Management Systems
Federal IT Services Contracts
Northrop Grumman Government Contracts

Risk Flags

Non-competitive award
Cost Plus Fixed Fee contract type
Lack of detailed justification for sole-source
Potential for reduced price discovery

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $33.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. MEDICARE BENEFICIARY DATABASE SUITE OF SYSTEMS (MBDSS)

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORPORATION.

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 $33.1 million.

What is the period of performance?

Start: 2006-09-15. End: 2008-08-31.

What was the specific justification for awarding this contract non-competitively to Northrop Grumman?

The provided data indicates the contract was a 'NON-COMPETITIVE DELIVERY ORDER' (ct: NON-COMPETITIVE DELIVERY ORDER). While the specific justification is not detailed, common reasons for non-competitive awards include situations where only one source is capable of meeting the requirement, an urgent need exists that precludes competition, or a previous contract needs to be extended under specific circumstances. Without further documentation from the agency (e.g., a Justification for Other Than Full and Open Competition - JOFOC), the precise rationale remains unknown. This lack of transparency is a key concern for assessing value and accountability.

How does the Cost Plus Fixed Fee (CPFF) contract type potentially impact the cost-effectiveness of this $33 million award?

The Cost Plus Fixed Fee (CPFF) contract type involves the contractor being reimbursed for all allowable costs plus a fixed amount of profit. While the 'fixed fee' provides some cost certainty regarding the contractor's profit margin, the 'cost-plus' aspect means the government bears the risk of cost overruns. If Northrop Grumman incurs higher-than-expected costs in developing or maintaining the Medicare Beneficiary Database Suite of Systems (MBDSS), the government is obligated to cover those costs. This structure can incentivize contractors to be less vigilant about cost control compared to fixed-price contracts, potentially leading to higher overall expenditures than anticipated or achieved through competitive bidding.

What are the potential risks associated with a non-competitive award for a critical system like the Medicare Beneficiary Database?

Awarding a critical system like the Medicare Beneficiary Database Suite of Systems (MBDSS) non-competitively carries several risks. Firstly, the absence of competition limits the government's ability to negotiate the best possible price, potentially leading to overpayment. Secondly, it reduces the incentive for the contractor to innovate or optimize performance, as there is no competitive pressure to do so. Thirdly, it can create vendor lock-in, making it difficult and costly to switch providers in the future. Finally, a lack of competition can sometimes mask underlying issues with the requirement definition or the contractor's capability, as these are not rigorously tested through a competitive evaluation process.

Can the performance duration of 716 days for this $33 million contract be considered efficient?

The duration of 716 days (approximately 23.5 months) for a $33 million contract requires context to assess efficiency. If this contract covers a comprehensive development lifecycle, including extensive testing, integration, and deployment phases for a complex database suite, the duration might be reasonable. However, if it primarily involves maintenance or incremental updates, the duration could indicate potential inefficiencies or scope creep. Without knowing the specific tasks and deliverables, it's difficult to benchmark this duration definitively. A higher average daily spend ($33,142,367 / 716 days ≈ $46,288 per day) suggests a significant investment, making efficient execution crucial.

What is the historical spending context for the Medicare Beneficiary Database Suite of Systems (MBDSS)?

The provided data reflects a specific award of $33,142,367 with a start date of 2006-09-15 and an end date of 2008-08-31. This represents a single contract action. To understand the historical spending context for the MBDSS, one would need to examine cumulative spending over multiple years, including all prior and subsequent contracts awarded for this system or its predecessors. Analyzing trends in contract values, award types (competitive vs. non-competitive), and contractor performance over time would provide a more comprehensive view of the government's investment and the system's lifecycle costs.

Competition & Pricing

Extent Competed: NON-COMPETITIVE DELIVERY ORDER

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Titan II Inc. (UEI: 016435559)

Address: 12011 SUNSET HILLS RD, RESTON, VA, 11

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $33,566,173

Exercised Options: $33,142,367

Current Obligation: $33,142,367

Parent Contract

Parent Award PIID: 500020040

IDV Type: IDC

Timeline