DoD's $255M health IT contract to Leidos shows fair competition but raises value concerns
Contract Overview
Contract Amount: $255,292,517 ($255.3M)
Contractor: Leidos, Inc.
Awarding Agency: Department of Defense
Start Date: 2015-04-30
End Date: 2018-10-31
Contract Duration: 1,280 days
Daily Burn Rate: $199.4K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 2
Pricing Type: FIRM FIXED PRICE
Sector: IT
Official Description: IGF::OT::IGF THIS CONTRACT PROVIDES OVERALL MAINTENANCE AND SUSTAINMENT OF THE COMPOSITE HEALTH CARE SYSTEM AND ARMED FORCES HEALTH LONGITUDINAL TECHNOLOGY APPLICATION SYNCHRONIZED BASELINES.
Place of Performance
Location: FALLS CHURCH, FAIRFAX County, VIRGINIA, 22041
State: Virginia Government Spending
Plain-Language Summary
Department of Defense obligated $255.3 million to LEIDOS, INC. for work described as: IGF::OT::IGF THIS CONTRACT PROVIDES OVERALL MAINTENANCE AND SUSTAINMENT OF THE COMPOSITE HEALTH CARE SYSTEM AND ARMED FORCES HEALTH LONGITUDINAL TECHNOLOGY APPLICATION SYNCHRONIZED BASELINES. Key points: 1. Contract awarded through full and open competition, indicating a broad search for qualified vendors. 2. The contract's duration and value suggest a significant, long-term commitment to IT sustainment. 3. Fixed-price contract type aims to control costs, but performance monitoring is crucial for value. 4. The award to a large, established contractor like Leidos may limit opportunities for smaller, innovative firms. 5. Sustainment focus implies a need for reliable, ongoing IT support rather than new development. 6. The contract's value is substantial, necessitating careful oversight to ensure taxpayer funds are well-spent.
Value Assessment
Rating: fair
Benchmarking the value of this $255 million contract is challenging without specific performance metrics and detailed cost breakdowns. However, the firm-fixed-price structure suggests an attempt to cap costs. Comparing it to similar large-scale IT sustainment contracts within the DoD or other federal agencies would be necessary for a more precise value assessment. The absence of readily available per-unit cost data makes direct pricing comparisons difficult, but the overall expenditure warrants scrutiny for efficiency.
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. The fact that it was competed suggests a deliberate effort to solicit proposals from a wide range of vendors, potentially leading to more competitive pricing. The number of bidders is not specified, but full and open competition generally implies multiple interested parties, which is a positive sign for price discovery.
Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it increases the likelihood of receiving competitive pricing and encourages a wider pool of contractors to vie for government work.
Public Impact
Benefits military personnel and their families by ensuring the continuity and reliability of critical healthcare IT systems. Delivers essential maintenance and sustainment services for the Composite Health Care System and the Armed Forces Health Longitudinal Technology Application. Impacts healthcare delivery across various military treatment facilities globally where these systems are deployed. Supports a workforce involved in the operation and maintenance of these sophisticated health IT platforms.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Potential for cost overruns if sustainment requirements are not precisely managed.
- Risk of vendor lock-in if transition to a new system or vendor is complex and costly.
- Dependence on a single contractor for critical health IT infrastructure could pose operational risks.
- Ensuring continuous innovation and system upgrades within a fixed-price sustainment model can be challenging.
Positive Signals
- Awarded through full and open competition, suggesting a robust selection process.
- Firm-fixed-price contract type provides cost certainty for the government.
- Leidos, Inc. is an established contractor with significant experience in large-scale IT programs.
- The contract focuses on essential maintenance and sustainment, critical for operational continuity.
Sector Analysis
This contract falls within the Engineering Services sector, specifically related to IT infrastructure and healthcare systems. The federal IT market is vast, with significant spending on sustainment and maintenance of existing systems. Comparable spending benchmarks would involve looking at other large-scale IT support contracts within the Department of Defense or other federal health agencies, which often run into hundreds of millions of dollars over their lifecycle. The market for such services is competitive, with a mix of large prime contractors and specialized subcontractors.
Small Business Impact
While this contract was awarded through full and open competition and does not explicitly mention small business set-asides, large prime contractors like Leidos are often required to subcontract portions of their work to small businesses. The extent to which small businesses will participate as subcontractors is a key consideration for assessing the impact on the small business ecosystem. Without specific subcontracting plans or goals, it's difficult to quantify the direct benefit to small businesses from this particular award.
Oversight & Accountability
Oversight for this contract would typically be managed by the Defense Health Agency (DHA) contracting officers and program managers. Accountability measures would be embedded in the contract's performance work statement (PWS), with defined deliverables and quality standards. Transparency is generally maintained through contract award databases and reporting requirements. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract's execution.
Related Government Programs
- Composite Health Care System (CHCS)
- Armed Forces Health Longitudinal Technology Application (AHLTA)
- Defense Health Information Management System (DHIMS)
- Military Health System (MHS) IT Services
- Federal Health IT Contracts
Risk Flags
- Potential for cost creep if scope is not well-defined.
- Risk of vendor lock-in for critical health IT infrastructure.
- Ensuring continuous innovation within a sustainment contract.
- Dependence on contractor performance for critical healthcare operations.
Tags
it, defense, health-it, engineering-services, definitive-contract, firm-fixed-price, full-and-open-competition, large-contract, sustainment, dod, defense-health-agency, virginia
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $255.3 million to LEIDOS, INC.. IGF::OT::IGF THIS CONTRACT PROVIDES OVERALL MAINTENANCE AND SUSTAINMENT OF THE COMPOSITE HEALTH CARE SYSTEM AND ARMED FORCES HEALTH LONGITUDINAL TECHNOLOGY APPLICATION SYNCHRONIZED BASELINES.
Who is the contractor on this award?
The obligated recipient is LEIDOS, INC..
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Health Agency).
What is the total obligated amount?
The obligated amount is $255.3 million.
What is the period of performance?
Start: 2015-04-30. End: 2018-10-31.
What is Leidos, Inc.'s track record with large federal IT sustainment contracts, particularly within the DoD?
Leidos, Inc. has a substantial track record of managing large-scale IT programs for the federal government, including significant contracts within the Department of Defense. They are known for their expertise in systems integration, sustainment, and modernization across various domains. For instance, Leidos has held major contracts related to enterprise IT services, cybersecurity, and data management for military branches and intelligence agencies. Their experience in handling complex, mission-critical systems like those in healthcare IT suggests a capacity to manage the demands of the Composite Health Care System and AHLTA. However, like any large contractor, their history may include both successes and challenges, necessitating a review of past performance evaluations and any reported issues on similar contracts to fully assess their suitability and reliability for this specific award.
How does the $255 million contract value compare to similar IT sustainment contracts for healthcare systems within the federal government?
The $255 million value over approximately three years (April 2015 - October 2018) places this contract within the range of significant federal IT sustainment agreements. Large-scale healthcare IT systems, especially those supporting extensive user bases like the military, require substantial ongoing investment for maintenance, upgrades, and operational support. Contracts for similar systems, such as Electronic Health Records (EHR) or enterprise IT infrastructure within agencies like the Veterans Affairs (VA) or other DoD components, often reach similar or even higher figures over their lifecycles. The key comparison points would be the scope of services (maintenance, sustainment, modernization), the number of users supported, and the criticality of the systems. Without granular data on comparable contracts, it's difficult to definitively state if $255 million represents over or under-spending, but it aligns with the expected investment for maintaining complex, mission-critical health IT infrastructure.
What are the primary risks associated with a firm-fixed-price contract for IT sustainment, and how are they mitigated?
The primary risk of a firm-fixed-price (FFP) contract for IT sustainment is that the contractor may cut corners on quality or service to maximize profit if the scope is not perfectly defined or if unforeseen technical challenges arise. This can lead to system degradation or unmet performance standards. Conversely, the government bears the risk if the scope of work expands significantly beyond initial estimates, as change orders can become costly. Mitigation strategies include a meticulously detailed Performance Work Statement (PWS) that clearly defines all required services, deliverables, and performance metrics. Robust government oversight, including regular performance reviews, quality assurance checks, and acceptance testing, is crucial. Incentive clauses or award fees tied to performance can also encourage the contractor to maintain high standards. For sustainment, ensuring adequate funding for necessary upgrades and addressing scope creep proactively are key government responsibilities.
How effective is the 'full and open competition' approach in ensuring competitive pricing for large IT contracts like this one?
Full and open competition is generally considered the most effective method for ensuring competitive pricing for large IT contracts. By allowing all responsible sources to submit proposals, the government maximizes the pool of potential bidders, thereby increasing the likelihood of receiving multiple, competitive offers. This competitive pressure incentivizes bidders to offer their best pricing and technical solutions to win the contract. The process typically involves a detailed Request for Proposal (RFP) that outlines specific requirements, allowing bidders to accurately estimate costs. While it requires more upfront effort from both the government and the bidders, the potential for cost savings and access to a wider range of innovative solutions often outweighs these initial investments. The success of this approach hinges on clear requirements and a fair evaluation process.
What are the potential long-term implications for the Military Health System if the sustainment of CHCS and AHLTA is managed by a single large contractor?
The long-term implications of relying on a single large contractor like Leidos for the sustainment of critical systems like CHCS and AHLTA involve both potential benefits and risks. On the positive side, a single contractor can offer streamlined management, consistent service delivery, and potentially economies of scale. This can lead to greater operational stability and a unified approach to system maintenance. However, the risks include potential vendor lock-in, where transitioning to a different contractor or system in the future could be prohibitively expensive and complex. There's also a risk of reduced innovation if the contractor focuses solely on maintaining the status quo rather than proactively proposing system enhancements. Furthermore, over-reliance on one entity could reduce the government's leverage in future negotiations and potentially lead to complacency if competition is not actively fostered through future re-competitions or performance-based incentives.
What is the typical industry benchmark for IT sustainment costs as a percentage of the total system lifecycle cost?
IT sustainment costs typically represent a significant portion of a system's total lifecycle cost, often ranging from 50% to 80% over a 10-15 year period. This includes expenses for hardware maintenance, software updates and patches, technical support, system administration, security monitoring, and personnel. For complex, mission-critical systems like those within the Military Health System, the sustainment percentage can be on the higher end due to the need for high availability, robust security, and continuous operational readiness. Factors influencing this percentage include the system's complexity, the rate of technological obsolescence, the criticality of the system's function, and the chosen support model (e.g., vendor-provided vs. in-house). The $255 million contract, covering roughly 3.5 years of sustainment, suggests an annual expenditure of approximately $73 million, which needs to be evaluated against the total estimated lifecycle cost of CHCS and AHLTA.
Industry Classification
NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services
Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Solicitation ID: HT001113R0045
Offers Received: 2
Pricing Type: FIRM FIXED PRICE (J)
Evaluated Preference: NONE
Contractor Details
Parent Company: Leidos Holdings, Inc.
Address: 11951 FREEDOM DR, RESTON, VA, 20190
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $301,684,097
Exercised Options: $258,878,777
Current Obligation: $255,292,517
Contract Characteristics
Commercial Item: COMMERCIAL ITEM
Cost or Pricing Data: NO
Timeline
Start Date: 2015-04-30
Current End Date: 2018-10-31
Potential End Date: 2019-08-31 00:00:00
Last Modified: 2022-03-08
More Contracts from Leidos, Inc.
- Science Operation and Maintenance Support for the United States Antarctic Program — $3.1B (National Science Foundation)
- Provide Funding for Clin 302 for Pre-Flight and In-Flight Services. Contract Number Dtfawa-05-C-00031, Lockheed Martin. POP 01/16/08-03/31/08 — $1.9B (Department of Transportation)
- THE Facilities Development and Operations Contract(fdoc) Specifies Technical, Managerial, and Adminstrative Work Needed to Ensure the Availablitity, Integrity, and Reliability of Missionoperations Facilites Supporting National Aeronautics and Space Administration (nasa) Human Space Flight (HSF) Programs Requiring Mission Operations Support. the Objective of This Contract IS to Consolidate Efforts Across the Facilities Covered Under Fodoc in Order to Maximize Synergy for Hardware and Software Development, Modification, Sustaining. Maintenance, Reconfiguration, and Operations for the Purpose of Reducing Cost Without Compromising Facility Functionality and Performance. Nasa Will Collaborate With the Contractor on Developing Procedural and Technical Innovations That Improve Quality, Ensure Customer Satisfaction and Reduce Cost. Mission Operations Facilities Currently Support the Space Shuttle Programand the International Space Station Progra, Including International Partner and Commmercial Visiting Vehicles. Mission Operations Facilities Supporting the Cnstellation Program(cxp) ARE Continuously Under Development in Concert With CXP Formulation and Implementation. Fdoc Applies to the Facilities of These Three Programs, and ANY Other HSF Program Requiring Mission Operations Facility Support. in Addition, Future Mission Operations Facilities and Capabilities ARE Within the Technical Scope of This SOW, and Fdoc Worlk Associated With These Facilities Will BE Enabled Through Idiq — $1.3B (National Aeronautics and Space Administration)
- National Airspace System (NAS) Implementation Support Contract (nisc). Provides Engineering and Technical Support Services to FAA Organizations Responsible for NAS Transformation, Integration and Implementation in the Areas of Implementation and Integration Planning, Transition Planning, Engineering Support, Environmental Support, Automation Support and Other Engineering and Technical Disciplines AS Required. TAS::69 8107::TAS — $1.1B (Department of Transportation)
- Itssc Task Order for Systems — $1.1B (Social Security Administration)
Other Department of Defense Contracts
- Federal Contract — $51.3B (Humana Government Business Inc)
- Lrip LOT 12 Advance Acquisition Contract — $35.1B (Lockheed Martin Corporation)
- SSN 802 and 803 Long Lead Time Material — $34.7B (Electric Boat Corporation)
- 200204!008532!1700!AF600 !naval AIR Systems Command !N0001902C3002 !A!N! !N! !20011026!20120430!008016958!008016958!834951691!n!lockheed Martin Corporation !lockheed Blvd !fort Worth !tx!76108!27000!439!48!fort Worth !tarrant !texas !+000026000000!n!n!018981928201!ac15!rdte/Aircraft-Eng/Manuf Develop !a1a!airframes and Spares !2ama!jast/Jsf !336411!E! !3! ! ! ! ! !99990909!B! ! !A! !a!n!r!2!002!n!1a!a!n!z! ! !N!C!N! ! ! !a!a!a!a!000!a!c!n! ! ! !Y! !N00019!0001! — $34.2B (Lockheed Martin Corporation)
- KC-X Modernization Program — $32.0B (THE Boeing Company)