Northrop Grumman awarded $115M for IT services by HHS, spanning over 7 years

Contract Overview

Contract Amount: $115,183,389 ($115.2M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2012-09-28

End Date: 2019-09-27

Contract Duration: 2,555 days

Daily Burn Rate: $45.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS AWARD FEE

Sector: IT

Official Description: ESD TASK ORDER AWARD

Place of Performance

Location: MC LEAN, FAIRFAX County, VIRGINIA, 22102

State: Virginia Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $115.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: ESD TASK ORDER AWARD Key points: 1. Value for money appears fair given the extended duration and cost-plus award fee structure. 2. Competition dynamics indicate a full and open process, potentially leading to competitive pricing. 3. Risk indicators include the cost-plus award fee structure, which can incentivize cost growth. 4. Performance context is tied to computer systems design services for CMS. 5. Sector positioning is within the IT services domain for a major health agency.

Value Assessment

Rating: fair

The contract's total value of $115.2 million over 2555 days (approximately 7 years) suggests an average annual value of around $15.3 million. Without specific performance metrics or detailed cost breakdowns, a precise value-for-money assessment is challenging. However, the Cost Plus Award Fee (CPAF) structure implies that contractor performance directly influences the final profit, which can be a positive incentive for quality delivery. Benchmarking against similar large-scale IT service contracts for federal health agencies would provide a clearer picture of whether this pricing is competitive.

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 offers. The presence of 3 bidders suggests a reasonable level of competition for this significant IT services requirement. A competitive bidding process generally helps in achieving fair market prices and encourages contractors to offer their best value propositions.

Taxpayer Impact: A full and open competition is beneficial for taxpayers as it increases the likelihood of securing services at a competitive price, preventing potential overpayment that could arise from limited or sole-source awards.

Public Impact

Beneficiaries include the Centers for Medicare and Medicaid Services (CMS) and, indirectly, the healthcare system users. Services delivered are computer systems design and related services, crucial for the operational efficiency of CMS. Geographic impact is primarily within the federal government's IT infrastructure, supporting national healthcare programs. Workforce implications may involve specialized IT professionals employed by Northrop Grumman and potentially subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus award fee contracts can lead to cost overruns if not managed diligently.
The long duration of the contract increases the risk of scope creep or evolving technological needs.
Reliance on a single large contractor for critical IT systems can pose a risk if performance falters.

Positive Signals

Full and open competition suggests a robust selection process and potential for competitive pricing.
The award to a large, established contractor like Northrop Grumman may indicate a perceived capability to handle complex IT requirements.
The CPAF structure, if well-defined with clear award criteria, can incentivize high performance and quality.

Sector Analysis

This contract falls within the broader IT services sector, a critical component of federal government operations. The market for government IT services is substantial, with agencies increasingly relying on contractors for system design, development, integration, and maintenance. Comparable spending benchmarks for similar large-scale IT support contracts within federal health agencies can range from tens to hundreds of millions of dollars, depending on the scope and duration.

Small Business Impact

The data indicates this contract was not set aside for small businesses, and there is no explicit mention of subcontracting goals for small businesses. This suggests that the primary award went to a large business. While large contracts can sometimes include subcontracting opportunities for small businesses, the absence of specific set-aside provisions means direct participation by small businesses in the prime contract is unlikely. Further analysis of subcontracting plans would be needed to assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the program management office within the Centers for Medicare and Medicaid Services (CMS). The Cost Plus Award Fee structure necessitates detailed performance monitoring and evaluation to determine award amounts. Transparency is generally facilitated through contract award databases, but specific performance reports and audits are often internal. The Inspector General for the Department of Health and Human Services would have jurisdiction for oversight related to fraud, waste, and abuse.

Related Government Programs

HHS IT Modernization Initiatives
CMS Health IT Services
Federal Civilian IT Procurement
Large-Scale Systems Integration Contracts

Risk Flags

Long contract duration may lead to technological obsolescence.
Cost-plus award fee structure requires careful performance monitoring to control costs.
Potential for scope creep over the 7-year period.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $115.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. ESD TASK ORDER AWARD

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 $115.2 million.

What is the period of performance?

Start: 2012-09-28. End: 2019-09-27.

What is Northrop Grumman's track record with similar large-scale IT service contracts for federal health agencies?

Northrop Grumman has a significant history of performing large, complex IT service contracts for various U.S. federal agencies, including defense and civilian sectors. For health-related agencies like HHS and CMS, their experience often involves managing critical infrastructure, developing and maintaining large databases, and providing systems integration services. While specific performance details for this particular $115 million contract are not publicly detailed in terms of success metrics, their general profile suggests a capacity for handling such requirements. However, like any large contractor, past performance reviews and any documented issues on other contracts would be crucial for a comprehensive assessment. A review of past performance evaluations and any contract disputes or terminations would be necessary to fully gauge their reliability in this domain.

How does the $115 million total award compare to other IT service contracts awarded by CMS in recent years?

The $115 million total award for this 7-year contract represents a significant, but not unprecedented, investment by CMS in IT services. CMS manages vast and complex IT systems supporting Medicare and Medicaid, often requiring substantial funding. Annual IT spending by CMS can easily reach into the hundreds of millions or even billions of dollars across various contracts. This particular award, averaging roughly $15.3 million per year, falls within the mid-to-large range for a single, long-term IT support contract. Comparing it to other contracts for similar services (e.g., system design, development, maintenance) awarded over similar durations would reveal if the pricing structure and total value are in line with market rates and agency historical spending patterns for comparable scope and complexity.

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

The primary risks associated with a CPAF contract of this magnitude ($115 million over 7 years) revolve around cost control and performance incentivization. CPAF contracts allow the contractor to recover all allowable costs plus a fee that is composed of a base fee and an award amount, determined by the government's evaluation of performance against stated criteria. The risk for the government is that contractors may have less incentive to control costs aggressively compared to fixed-price contracts, as costs are reimbursed. Furthermore, the 'award' portion of the fee, while intended to incentivize performance, can be subjective and lead to disputes if performance evaluations are not clearly defined and consistently applied. The long duration also increases the risk of scope creep and the potential for the contract to become misaligned with evolving technological needs or agency priorities, potentially leading to inefficiencies or the need for costly modifications.

What does the 'Computer Systems Design Services' (NAICS 541512) classification imply about the services rendered under this contract?

The NAICS code 541512, 'Computer Systems Design Services,' indicates that the core services procured under this contract involve designing and developing integrated computer systems. This typically includes activities such as analyzing user needs, designing system architecture, developing software and hardware solutions, systems integration, and providing project management for these efforts. It implies that the contractor is responsible for the conceptualization and planning of IT systems, ensuring that various components (hardware, software, networks) work together effectively to meet specific business or operational requirements. This is distinct from services like IT support (help desk), data processing, or computer facilities management, focusing instead on the creation and implementation of new or significantly improved systems.

How does the fact that this was a 'Delivery Order' under a larger contract structure affect its analysis?

The term 'Delivery Order' (or 'Task Order' as indicated in the data 'd') suggests that this award is a specific order placed against a previously established indefinite-delivery, indefinite-quantity (IDIQ) contract or a similar multiple-award contract vehicle. This means the underlying contract vehicle itself likely underwent a competitive process, and this specific order represents a defined scope of work with a set value and period of performance. Analyzing this as a delivery order means we are looking at a specific task within a broader framework. The initial competition for the IDIQ vehicle is crucial for understanding the overall competitive landscape. This specific order's value ($115M) and duration (7 years) are significant, indicating a substantial task within that framework. The analysis should consider both the competition for the IDIQ and the specific terms of this delivery order.

What are the potential implications of awarding a 7-year contract for computer systems design in the rapidly evolving IT sector?

Awarding a 7-year contract for computer systems design in the fast-paced IT sector presents both opportunities and risks. The long duration allows for deep integration and understanding of the systems by the contractor, potentially leading to efficiencies and stability. It also provides a predictable revenue stream for the contractor, encouraging investment in specialized resources. However, the primary risk is technological obsolescence. The IT landscape can change dramatically in 7 years, with new technologies, methodologies, and security threats emerging. A contract structured rigidly might not adapt well, leading to the government paying for outdated solutions or requiring costly modifications. Effective contract management, including robust change control processes and flexibility for incorporating new technologies, is critical to mitigate this risk and ensure the systems remain relevant and effective throughout the contract's life.

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: 3

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: $117,969,155

Exercised Options: $115,183,389

Current Obligation: $115,183,389

Subaward Activity

Number of Subawards: 103

Total Subaward Amount: $153,430,167

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HHSM500200700014I

IDV Type: IDC

Timeline