Northrop Grumman awarded $45.6M for HITECH business operations support, a significant investment in healthcare IT infrastructure

Contract Overview

Contract Amount: $45,624,865 ($45.6M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2010-09-14

End Date: 2015-09-13

Contract Duration: 1,825 days

Daily Burn Rate: $25.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 8

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: ARRA::YES::ARRA TAS::75 0510::TAS RECOVERY- HITECH BUSINESS OPERATIONS SUPPORT CONTRACTOR

Place of Performance

Location: WINDSOR MILL, BALTIMORE County, MARYLAND, 21244

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $45.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: ARRA::YES::ARRA TAS::75 0510::TAS RECOVERY- HITECH BUSINESS OPERATIONS SUPPORT CONTRACTOR Key points: 1. The contract's value suggests a substantial need for specialized IT support within the Centers for Medicare and Medicaid Services (CMS). 2. Full and open competition indicates a broad market search, potentially leading to competitive pricing. 3. The duration of the contract (5 years) implies a long-term strategic need for these services. 4. The Cost Plus Fixed Fee (CPFF) contract type requires careful monitoring to ensure cost control. 5. This award falls within the broader context of the HITECH Act's push for health IT modernization. 6. The geographic location in Maryland aligns with a concentration of federal IT contracting activity.

Value Assessment

Rating: good

The contract value of $45.6 million over five years for IT business operations support appears reasonable given the scope and duration. Benchmarking against similar large-scale IT support contracts for federal agencies suggests this falls within expected ranges for complex systems integration and maintenance. The CPFF structure, while allowing flexibility, necessitates robust oversight to manage costs effectively and ensure value for money is achieved.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple bidders had the opportunity to compete. The presence of 8 bidders (no=8) indicates a healthy level of interest and competition for this type of federal IT support. This broad competition is generally favorable for price discovery and ensures the government can select from a wide range of qualified contractors.

Taxpayer Impact: A competitive bidding process helps ensure that taxpayer dollars are used efficiently by driving down costs and encouraging innovation among contractors.

Public Impact

Beneficiaries include the Centers for Medicare and Medicaid Services (CMS) and potentially healthcare providers and patients through improved IT systems. Services delivered encompass computer systems design and related support crucial for the HITECH Act's objectives. The primary geographic impact is within Maryland, a hub for federal IT contracting. Workforce implications include the creation of specialized IT jobs within Northrop Grumman and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee (CPFF) contracts can lead to cost overruns if not managed diligently.
The long duration of the contract may reduce flexibility to adapt to rapidly changing technology needs.
Reliance on a single large contractor for critical IT operations could pose a risk if performance falters.

Positive Signals

Awarded under full and open competition, suggesting a robust selection process.
Northrop Grumman is a large, established defense and aerospace contractor with significant IT capabilities.
The contract supports the implementation of the HITECH Act, a significant national initiative for health IT.

Sector Analysis

This contract falls within the Computer Systems Design Services sector, a critical component of the broader IT industry. The federal government is a major consumer of these services, particularly for managing complex legacy systems and implementing new technological initiatives like those mandated by the HITECH Act. Spending in this area is driven by the need for modernization, cybersecurity, and data management across various agencies. Comparable spending benchmarks for large-scale IT support contracts often run into tens or hundreds of millions of dollars annually.

Small Business Impact

This contract was not set aside for small businesses, and there is no explicit indication of small business subcontracting requirements in the provided data. As a large prime contract awarded to a major corporation, the primary focus is on the prime contractor's capabilities. However, large prime contractors often utilize small businesses for specialized support or components, which could indirectly benefit the small business ecosystem. Further analysis would be needed to determine the extent of small business participation.

Oversight & Accountability

Oversight for this contract would typically be managed by the Centers for Medicare and Medicaid Services (CMS) contracting officers and program managers. The CPFF structure necessitates rigorous financial oversight to track costs and ensure they align with the fixed fee and contract objectives. Transparency is generally maintained through contract reporting mechanisms, and the Department of Health and Human Services (HHS) Office of Inspector General (OIG) would have jurisdiction for audits and investigations into potential fraud, waste, or abuse.

Related Government Programs

HITECH Act Programs
Centers for Medicare and Medicaid Services IT Modernization
Federal Health IT Initiatives
Health Information Exchange Support
Electronic Health Records (EHR) Implementation Support

Risk Flags

Cost Overruns Risk (CPFF)
Technological Obsolescence
Performance Monitoring Challenges

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $45.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. ARRA::YES::ARRA TAS::75 0510::TAS RECOVERY- HITECH BUSINESS OPERATIONS SUPPORT CONTRACTOR

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 $45.6 million.

What is the period of performance?

Start: 2010-09-14. End: 2015-09-13.

What is Northrop Grumman's track record with similar large-scale federal IT contracts, particularly within the healthcare sector?

Northrop Grumman Systems Corporation has a long history of performing complex IT services for various federal agencies, including the Department of Defense and NASA. While specific details on their healthcare IT contract performance are not provided here, their extensive experience in systems integration, cybersecurity, and large program management suggests a strong capability. They have been involved in significant government IT modernization efforts. However, like any large contractor, past performance reviews and any documented issues or successes on similar contracts would be crucial for a complete assessment. Their ability to manage Cost Plus Fixed Fee (CPFF) contracts effectively, ensuring cost containment and adherence to scope, is a key factor.

How does the $45.6 million contract value compare to historical federal spending on HITECH Act related business operations support?

The $45.6 million awarded to Northrop Grumman represents a significant, but not unprecedented, investment within the context of the HITECH Act's broader goals. The HITECH Act, enacted in 2009, allocated substantial funding towards promoting the adoption and meaningful use of health information technology. Federal spending related to HITECH has encompassed various initiatives, including grants, incentives, and IT infrastructure support contracts. While this specific contract focuses on business operations support, it aligns with the overall objective of building robust IT capabilities within agencies like CMS. Historical data shows billions of dollars were invested across numerous contracts to achieve HITECH's objectives, making this award a notable component of that larger federal effort.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract of this magnitude and duration?

The primary risks with a CPFF contract of this scale ($45.6M over 5 years) revolve around cost control and potential scope creep. While the fixed fee provides the contractor with a defined profit margin, the 'cost plus' component means the government bears the risk of actual costs incurred. If costs escalate beyond initial projections due to inefficiencies, unforeseen technical challenges, or poor management, the total expenditure can significantly exceed expectations. For the government, ensuring robust oversight, detailed cost tracking, and clear performance metrics is paramount to mitigate these risks. The long duration also introduces the risk of technological obsolescence or shifts in program requirements, which may not be adequately captured by the initial fixed fee, potentially leading to costly contract modifications.

How effective has the Centers for Medicare and Medicaid Services (CMS) been in leveraging IT contracts to achieve the goals of the HITECH Act?

CMS has played a pivotal role in implementing the HITECH Act, primarily through its incentive programs for the adoption of Electronic Health Records (EHRs) and its efforts to improve health information exchange. IT contracts, like the one awarded to Northrop Grumman, are essential for CMS to manage its complex operational infrastructure, develop new systems, and support data analysis. The agency has seen progress in EHR adoption rates among providers, a key HITECH objective. However, challenges remain in areas such as interoperability between different health IT systems and ensuring the security and privacy of patient data. The effectiveness is often measured by the agency's ability to adapt to evolving technological landscapes and regulatory requirements while ensuring the reliability and efficiency of its own IT systems.

What is the typical market rate or benchmark for Computer Systems Design Services for federal agencies of CMS's size and complexity?

Benchmarking the market rate for Computer Systems Design Services for an agency like CMS is complex due to the varied nature of services and contract types. However, for large-scale, mission-critical IT support contracts, annual values can range from tens to hundreds of millions of dollars. Factors influencing rates include the specific services (e.g., system design, integration, maintenance, cybersecurity), the complexity of the systems involved, security clearance requirements, and the contract vehicle used. Given that CMS manages vast amounts of sensitive healthcare data and operates critical national programs, the pricing for specialized support is generally at the higher end of the spectrum. The $45.6 million over five years ($9.12M annually) for Northrop Grumman appears to be within a reasonable range for such a significant undertaking, especially considering the competitive award process.

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 › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 8

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 8110 GATEHOUSE RD, FALLS CHURCH, VA, 22042

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $85,737,475

Exercised Options: $45,624,865

Current Obligation: $45,624,865

Subaward Activity

Number of Subawards: 37

Total Subaward Amount: $16,564,650

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Parent Contract

Parent Award PIID: HHSM500200700014I

IDV Type: IDC

Timeline