Northrop Grumman's $119M ENCOUNTER DATA PROCESSING SYSTEM contract awarded by HHS for IT services
Contract Overview
Contract Amount: $119,152,798 ($119.2M)
Contractor: Northrop Grumman Systems Corporation
Awarding Agency: Department of Health and Human Services
Start Date: 2011-09-13
End Date: 2018-09-30
Contract Duration: 2,574 days
Daily Burn Rate: $46.3K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 4
Pricing Type: COST PLUS AWARD FEE
Sector: IT
Official Description: ENCOUNTER DATA PROCESSING SYSTEM
Place of Performance
Location: WINDSOR MILL, BALTIMORE County, MARYLAND, 21244
State: Maryland Government Spending
Plain-Language Summary
Department of Health and Human Services obligated $119.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: ENCOUNTER DATA PROCESSING SYSTEM Key points: 1. The contract's cost-plus-award-fee structure allows for performance-based incentives, potentially driving efficiency. 2. Full and open competition suggests a robust market for these services, likely leading to competitive pricing. 3. The contract duration of over 2500 days indicates a long-term need for these critical data processing services. 4. The significant dollar value points to the importance of the ENCOUNTER DATA PROCESSING SYSTEM for CMS operations. 5. The primary contractor, Northrop Grumman, is a large, established defense and aerospace company with extensive government contracting experience. 6. The contract was awarded as a delivery order, suggesting it was part of a larger indefinite-delivery/indefinite-quantity (IDIQ) vehicle.
Value Assessment
Rating: good
Benchmarking the value of this specific contract is challenging without direct comparisons of similar large-scale data processing systems. However, the cost-plus-award-fee (CPAF) pricing structure, while offering flexibility, can sometimes lead to higher costs if not managed tightly. The total award value of nearly $119 million over its period of performance suggests a substantial investment, and its effectiveness will depend on the system's ability to meet CMS's data processing needs efficiently and accurately. The number of offers received (4) indicates some level of competition, which is a positive sign for value.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit offers. Four offers were received, indicating a competitive environment for this type of IT service. The open competition is generally favorable for price discovery and ensuring the government receives competitive pricing for the services rendered.
Taxpayer Impact: Taxpayers benefit from full and open competition as it typically drives down costs through market forces, ensuring that federal dollars are used more efficiently.
Public Impact
The primary beneficiaries are the Centers for Medicare and Medicaid Services (CMS), which relies on this system for critical data processing. The services delivered are essential for the administration and oversight of healthcare programs. The geographic impact is national, given the scope of CMS operations across the United States. The contract supports a workforce involved in IT development, data management, and system maintenance.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Cost-plus-award-fee contracts require diligent oversight to ensure costs are reasonable and awards are justified.
- The long duration of the contract could present risks related to technological obsolescence if not managed proactively.
- Reliance on a single large contractor for such a critical system may pose a risk if performance falters.
Positive Signals
- Awarded under full and open competition, suggesting a healthy market and competitive pricing.
- The use of an award fee structure incentivizes contractor performance.
- Northrop Grumman's extensive experience in large-scale IT projects is a positive signal for successful execution.
Sector Analysis
The IT services sector is vast and highly competitive, with significant government spending allocated to system design, development, and maintenance. This contract falls within the computer systems design services sub-sector, which is crucial for agencies like CMS that manage massive amounts of sensitive data. Comparable spending benchmarks in this area are difficult to pinpoint without more specific details on system functionality, but large-scale data processing systems for federal agencies often represent multi-million dollar investments.
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 a large corporation, there may be opportunities for small businesses to participate as subcontractors, depending on Northrop Grumman's subcontracting plan. The absence of a direct set-aside means small businesses would need to compete for subcontracting roles.
Oversight & Accountability
Oversight for this contract would primarily reside with the contracting officers and program managers within the Centers for Medicare and Medicaid Services (CMS). The cost-plus-award-fee structure necessitates close monitoring of costs and performance to ensure the award fees are justified. 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 if any issues arise.
Related Government Programs
- Healthcare IT Systems
- Data Management Solutions
- Federal IT Modernization Programs
- CMS IT Contracts
- Large-Scale System Integration
Risk Flags
- Long contract duration may lead to technology obsolescence.
- Cost-plus-award-fee requires diligent oversight to manage costs and performance.
- Reliance on a single large contractor for a critical system.
Tags
it, health-it, data-processing, cost-plus-award-fee, full-and-open-competition, northrop-grumman, department-of-health-and-human-services, centers-for-medicare-and-medicaid-services, delivery-order, maryland, large-contract
Frequently Asked Questions
What is this federal contract paying for?
Department of Health and Human Services awarded $119.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. ENCOUNTER DATA PROCESSING SYSTEM
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 $119.2 million.
What is the period of performance?
Start: 2011-09-13. End: 2018-09-30.
What is the specific functionality and purpose of the ENCOUNTER DATA PROCESSING SYSTEM?
The ENCOUNTER DATA PROCESSING SYSTEM (EDPS) is a critical component of the Centers for Medicare and Medicaid Services (CMS) infrastructure. Its primary purpose is to process and manage encounter data submitted by Medicare Advantage and Prescription Drug Plans. This data includes information about services provided to beneficiaries, which is essential for calculating payments to health plans, monitoring plan performance, and ensuring program integrity. The system likely handles data validation, aggregation, and reporting, playing a vital role in the financial and operational management of Medicare's managed care programs. Without detailed system documentation, the exact technical specifications and data flows remain proprietary, but its function is central to CMS's mission.
How does the Cost Plus Award Fee (CPAF) structure compare to other contract types for similar IT services?
Cost Plus Award Fee (CPAF) contracts are a hybrid type where the contractor is reimbursed for allowable costs plus an award fee based on performance against defined criteria. This differs from Fixed Price contracts, where the price is set upfront, and Cost Plus Fixed Fee (CPFF) contracts, where the fee is fixed regardless of performance. CPAF is often used for complex, high-risk projects where performance is difficult to define precisely at the outset, such as large IT system development. It incentivizes the contractor to exceed minimum performance requirements to earn a higher fee. However, it requires robust government oversight to ensure costs are controlled and award fees are fairly assessed, potentially leading to higher overall costs than fixed-price contracts if performance targets are not challenging enough or if oversight is lax.
What is Northrop Grumman's track record with large-scale federal IT systems, particularly for health agencies?
Northrop Grumman has a significant track record in developing and managing large-scale IT systems for various federal agencies, including defense, intelligence, and civilian sectors. Their experience spans complex system integration, cybersecurity, data analytics, and mission-critical infrastructure. For health agencies like HHS and CMS, Northrop Grumman has been involved in projects related to health information exchange, data management, and IT modernization. While specific details of past performance on systems identical to the ENCOUNTER DATA PROCESSING SYSTEM are not publicly detailed, their broad experience with complex government IT programs suggests a capability to handle such contracts. Performance on previous contracts, including any past issues or successes, would be a key factor in assessing their suitability for ongoing or future work.
What are the potential risks associated with a long-duration contract (2574 days) for a data processing system?
Long-duration contracts for IT systems, like this 2574-day (approximately 7-year) contract, carry several inherent risks. Technological obsolescence is a primary concern; the IT landscape evolves rapidly, and a system designed and implemented years ago may struggle to keep pace with new technologies, security threats, or evolving user needs. Vendor lock-in can also be a risk, making it difficult and costly to switch providers or technologies if performance degrades or better solutions emerge. Furthermore, maintaining system relevance and performance over such an extended period requires continuous adaptation, robust change management, and proactive planning for upgrades and modernization, which can be challenging to manage effectively throughout the contract lifecycle.
How does the $119 million award value compare to typical spending for similar federal IT systems?
The $119 million award value for the ENCOUNTER DATA PROCESSING SYSTEM is substantial, reflecting the complexity and criticality of managing healthcare data for millions of beneficiaries. Federal IT systems, especially those supporting large agencies like HHS/CMS, often involve significant investments. For instance, major system modernizations, data warehouses, or large-scale application development projects can easily run into tens or hundreds of millions of dollars over their lifecycle. While direct comparisons are difficult without knowing the exact scope and specific functionalities, this award value is within the expected range for a mission-critical IT system supporting a federal health agency of CMS's size and operational scope. It indicates a significant, long-term investment in essential government IT infrastructure.
What are the implications of awarding a delivery order under a larger IDIQ contract for this service?
Awarding a delivery order under an Indefinite-Delivery/Indefinite-Quantity (IDIQ) contract means this specific task (the ENCOUNTER DATA PROCESSING SYSTEM) was one of potentially many services that could be ordered from a pre-competed contract vehicle. IDIQs are designed to provide agencies with flexibility and speed in acquiring services over a period. For this contract, it implies that the initial competition likely focused on the contractor's general capabilities and capacity to perform a range of IT services. The subsequent delivery order then defined the specific requirements, scope, and pricing for the EDPS. This approach can streamline procurement but also means the competition for this specific system might have been less direct than if it were procured as a standalone contract.
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: 4
Pricing Type: COST PLUS AWARD FEE (R)
Evaluated Preference: NONE
Contractor Details
Parent Company: Northrop Grumman Corporation (UEI: 967356127)
Address: 8110 GATEHOUSE RD, FALLS CHURCH, VA, 22042
Business Categories: Category Business, Not Designated a Small Business
Financial Breakdown
Contract Ceiling: $159,934,849
Exercised Options: $119,152,798
Current Obligation: $119,152,798
Subaward Activity
Number of Subawards: 32
Total Subaward Amount: $58,453,304
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: HHSM500200700014I
IDV Type: IDC
Timeline
Start Date: 2011-09-13
Current End Date: 2018-09-30
Potential End Date: 2019-06-30 00:00:00
Last Modified: 2019-05-14
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