HHS awards $60.4M IT contract to Northrop Grumman for computer systems design services

Contract Overview

Contract Amount: $60,397,990 ($60.4M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2014-07-31

End Date: 2019-02-28

Contract Duration: 1,673 days

Daily Burn Rate: $36.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS AWARD FEE

Sector: IT

Official Description: IGF::OT::IGF

Place of Performance

Location: WINDSOR MILL, BALTIMORE County, MARYLAND, 21244

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $60.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: IGF::OT::IGF Key points: 1. Contract value represents a significant investment in IT infrastructure. 2. Full and open competition suggests a potentially competitive bidding process. 3. Cost Plus Award Fee structure incentivizes performance but requires careful oversight. 4. The contract duration of over 4 years indicates a long-term need for these services. 5. Services are categorized under Computer Systems Design, a critical area for government operations. 6. The award was a Delivery Order under a larger contract vehicle.

Value Assessment

Rating: fair

The total award amount of $60.4 million for computer systems design services over approximately 4.5 years appears within a reasonable range for complex IT projects of this nature. However, without specific details on the scope of work and deliverables, a precise value-for-money assessment is challenging. The Cost Plus Award Fee (CPAF) pricing structure, while common for performance-based contracts, can lead to higher costs if not managed diligently, as the contractor is reimbursed for allowable costs plus a fee that is adjusted based on performance. Benchmarking against similar contracts for comparable services would provide a clearer picture of whether this represents competitive pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. With 4 bidders participating, this suggests a moderate level of competition for this requirement. While four bidders are more than a sole-source or limited competition scenario, the actual competitiveness can depend on the complexity of the requirement and the number of qualified vendors in the market. A higher number of bidders generally leads to better price discovery and potentially lower costs for the government.

Taxpayer Impact: Full and open competition with multiple bidders generally benefits taxpayers by fostering a more competitive environment, which can drive down prices and encourage innovation. This approach helps ensure that the government is obtaining services at a fair and reasonable cost.

Public Impact

Beneficiaries include the Centers for Medicare and Medicaid Services (CMS) and potentially healthcare providers and beneficiaries who rely on the underlying IT systems. Services delivered likely involve the design, development, integration, and maintenance of complex computer systems supporting healthcare administration. Geographic impact is primarily focused on the operations of CMS, likely supporting national-level healthcare programs. Workforce implications include the need for skilled IT professionals in computer systems design and related fields, both within the contractor's organization and potentially within CMS for oversight.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee (CPAF) contracts require robust oversight to ensure the 'award fee' component is justified by exceptional performance and not simply an increase in costs.
The 'Computer Systems Design Services' category is broad; specific performance metrics and deliverables are crucial for evaluating contractor success.
Reliance on a single large contractor for critical IT systems can introduce vendor lock-in risks if not managed proactively.

Positive Signals

Awarded under full and open competition, suggesting a structured procurement process that allowed multiple vendors to compete.
The contract is a Delivery Order, implying it was placed against an existing Indefinite Delivery/Indefinite Quantity (IDIQ) contract, which can streamline procurement for recurring needs.
The contractor, Northrop Grumman Systems Corporation, is a large, established entity with significant experience in government contracting, potentially indicating a lower risk of performance failure.

Sector Analysis

The contract falls within the Information Technology (IT) sector, specifically focusing on computer systems design services. This is a critical area for federal agencies, as modern government operations heavily rely on robust and efficient IT infrastructure. The market for these services is large and competitive, with numerous large and small businesses offering specialized expertise. This contract likely supports CMS's mission-critical IT systems, which are essential for managing healthcare programs. Comparable spending benchmarks for IT systems design and integration services for large federal agencies can range from tens to hundreds of millions of dollars, depending on the scope and complexity.

Small Business Impact

This contract was awarded under full and open competition and the data indicates the prime contractor is Northrop Grumman Systems Corporation, a large business. There is no explicit indication of a small business set-aside for the prime contract. However, large prime contractors are often required to subcontract a portion of the work to small businesses. The extent to which small businesses will benefit from subcontracting opportunities on this contract is not detailed in the provided data, but it is a common practice to ensure small business participation in federal contracting.

Oversight & Accountability

Oversight for this Cost Plus Award Fee (CPAF) contract would typically be managed by the Contracting Officer and the Contracting Officer's Representative (COR) at CMS. The CPAF structure necessitates detailed performance monitoring against established criteria to determine the award fee. Transparency is generally achieved through contract reporting requirements and the Federal Procurement Data System (FPDS). Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected related to the contract's execution.

Related Government Programs

Healthcare IT Modernization Programs
Federal Civilian IT Services
Centers for Medicare and Medicaid Services (CMS) IT Support
Computer Systems Design and Integration Contracts
Cost Plus Award Fee Contracts

Risk Flags

Potential for cost overruns due to CPAF structure if not managed tightly.
Scope creep risk in complex IT system design projects.
Dependency on a single large contractor for critical systems.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $60.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. IGF::OT::IGF

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 $60.4 million.

What is the period of performance?

Start: 2014-07-31. End: 2019-02-28.

What specific computer systems design services were provided under this contract?

The provided data categorizes the contract under 'Computer Systems Design Services' (NAICS 541512) but does not detail the specific services rendered. Typically, this category encompasses a wide range of activities including designing, developing, and integrating computer systems, as well as providing IT consulting services. For this contract with CMS, it could involve the architecture, development, testing, and deployment of new software systems, modification of existing systems, or the integration of disparate IT platforms to support healthcare administration, data management, or beneficiary services. A thorough review of the contract's Statement of Work (SOW) would be necessary to ascertain the precise nature and scope of the services performed.

How does the $60.4 million award compare to historical spending on similar IT services by CMS?

Comparing the $60.4 million award to historical spending requires access to detailed historical contract data for CMS. However, given that this is a Delivery Order under a larger contract vehicle, the $60.4 million represents a portion of a potentially larger overall contract ceiling. CMS is known to invest heavily in IT to manage its vast healthcare programs, and awards in the tens of millions for complex IT services are not uncommon. To provide a precise comparison, one would need to analyze CMS's spending trends for computer systems design and related IT services over the contract's performance period (July 2014 - February 2019) and benchmark it against other similar contracts awarded during that timeframe.

What are the key performance indicators (KPIs) used to determine the award fee for Northrop Grumman?

The provided data indicates a Cost Plus Award Fee (CPAF) contract type, which means a portion of the contractor's fee is contingent upon meeting or exceeding performance objectives. However, the specific Key Performance Indicators (KPIs) used to determine the award fee are not detailed in the summary data. Typically, for computer systems design services, KPIs might include metrics related to system uptime and availability, successful completion of development milestones, adherence to project schedules, quality of deliverables (e.g., bug rates, performance efficiency), user satisfaction, and effective cost management within budgeted parameters. The Contracting Officer's Representative (COR) would monitor these KPIs and assess performance against pre-defined criteria to determine the award fee.

What is the potential risk associated with the Cost Plus Award Fee (CPAF) contract structure for this IT service?

The primary risk associated with a CPAF contract structure, especially for complex IT services, is the potential for cost growth if not managed rigorously. While the 'award fee' is intended to incentivize superior performance, there's a risk that the government may pay a higher total cost compared to a fixed-price contract, even if performance is merely adequate. Effective oversight is crucial to ensure that the fee awarded truly reflects exceptional performance and that all costs incurred are allowable, reasonable, and allocable. Without strong performance metrics and diligent monitoring by the COR, the CPAF structure could lead to less cost certainty for the government and potentially higher overall expenditures.

How many other contracts of similar size and scope has Northrop Grumman Systems Corporation held with CMS or HHS?

Northrop Grumman Systems Corporation is a major defense and aerospace contractor with extensive experience across various U.S. federal agencies, including the Department of Health and Human Services (HHS) and its sub-agency, CMS. While the provided data only details this specific $60.4 million contract, a comprehensive analysis would reveal numerous other contracts held by Northrop Grumman with these agencies. These contracts likely span a range of services, including IT, logistics, and potentially healthcare-related technology solutions. To determine the exact number and scope of similar contracts, one would need to query federal procurement databases like FPDS or SAM.gov for Northrop Grumman's contract history with HHS and CMS.

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: $73,330,389

Exercised Options: $60,397,990

Current Obligation: $60,397,990

Subaward Activity

Number of Subawards: 66

Total Subaward Amount: $135,349,791

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HHSM500200700014I

IDV Type: IDC

Timeline