DoD's $26.6M contract for healthcare IT transformation awarded to Frontier Technology Inc. raises value questions

Contract Overview

Contract Amount: $26,652,905 ($26.7M)

Contractor: Frontier Technology Inc

Awarding Agency: Department of Defense

Start Date: 2020-09-27

End Date: 2022-05-01

Contract Duration: 581 days

Daily Burn Rate: $45.9K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Healthcare

Official Description: PHASE III SMALL BUSINESS INNOVATION RESEARCH EFFORT TO SUPPORT ORGANIZATIONAL TRANSFORMATION FOR THE PROGRAM EXECUTIVE OFFICE - DEFENSE HEALTHCARE MANAGEMENT SYSTEMS AND ITS SUBORDINATE PROGRAMS.

Place of Performance

Location: BEAVERCREEK TOWNSHIP, GREENE County, OHIO, 45431

State: Ohio Government Spending

Plain-Language Summary

Department of Defense obligated $26.7 million to FRONTIER TECHNOLOGY INC for work described as: PHASE III SMALL BUSINESS INNOVATION RESEARCH EFFORT TO SUPPORT ORGANIZATIONAL TRANSFORMATION FOR THE PROGRAM EXECUTIVE OFFICE - DEFENSE HEALTHCARE MANAGEMENT SYSTEMS AND ITS SUBORDINATE PROGRAMS. Key points: 1. The contract's value-for-money is questionable given the lack of competitive bidding and the cost-plus incentive fee structure. 2. Competition dynamics were limited, with the award being 'not available for competition,' potentially leading to higher costs. 3. Risk indicators include the cost-plus contract type, which can incentivize spending, and the absence of a clear per-unit cost benchmark. 4. Performance context is limited as this is a Phase III SBIR effort, suggesting a continuation of prior research rather than a new, fully defined service. 5. Sector positioning is within Defense Healthcare IT, a critical but complex area requiring specialized management consulting services.

Value Assessment

Rating: questionable

The contract's value is difficult to assess without competitive benchmarks. Awarded as a sole-source, 'not available for competition' action, it lacks the price discovery inherent in open bidding. The Cost Plus Incentive Fee (CPIF) structure, while common in R&D, can lead to cost overruns if not tightly managed. The raw dollar amount of $26.6 million over 581 days (approximately $46,000 per day) is substantial for management consulting, but its true value depends heavily on the specific deliverables and outcomes achieved, which are not detailed here.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under a 'not available for competition' basis, indicating that it was not openly competed. This typically occurs when a specific technology or service is uniquely available from a single source, often stemming from prior Small Business Innovation Research (SBIR) phases. The lack of competition means there were no other bidders to drive down prices or offer alternative solutions, potentially impacting the cost-effectiveness for the government.

Taxpayer Impact: For taxpayers, a sole-source award means they are not benefiting from the potential cost savings that competitive bidding can generate. The government may have paid a premium compared to what a competitive process might have yielded.

Public Impact

The primary beneficiaries are the Department of Defense's Program Executive Office for Defense Healthcare Management Systems (PEO DHMS) and its subordinate programs, which receive organizational transformation support. The services delivered focus on improving healthcare IT systems and processes within the military health system. The geographic impact is likely nationwide, supporting military healthcare facilities and personnel across various locations. Workforce implications may include changes to IT roles and responsibilities within the Defense Health Agency and related entities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to suboptimal pricing.
Cost-plus contract type can incentivize higher spending without guaranteed efficiency.
Limited transparency on specific performance metrics and outcomes achieved.
Phase III SBIR awards can sometimes lack the rigorous definition of requirements seen in fully competed contracts.

Positive Signals

Continuation of a prior SBIR effort suggests a potentially mature solution or technology.
Focus on Defense Healthcare IT addresses a critical national security and personnel welfare need.
Award to a small business (implied by SBIR) can support innovation and growth in the sector.

Sector Analysis

This contract falls within the broader IT services and management consulting sector, specifically targeting the niche of defense healthcare information technology. The market for such specialized services is significant, driven by ongoing modernization efforts within government healthcare systems. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of defense healthcare IT transformation, but large-scale IT modernization projects within the federal government often run into the tens or hundreds of millions of dollars.

Small Business Impact

Although the contract is a Phase III SBIR effort, which often involves small businesses, the data indicates the contractor is Frontier Technology Inc. The contract was not competed, so there's no direct small business set-aside analysis. However, the SBIR program itself is designed to foster small business innovation. Subcontracting implications are not specified, but if Frontier Technology Inc. is a small business, they may be required to subcontract a portion of the work to other small businesses.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Health Agency and the Department of Defense's contracting and program management offices. Accountability measures would be tied to the Cost Plus Incentive Fee (CPIF) structure, performance metrics outlined in the contract, and regular reporting requirements. Transparency is moderate; while the award is public, detailed performance data and cost breakdowns may be less accessible due to the nature of defense contracts.

Related Government Programs

Defense Health Information System (DHIS)
Military Health System (MHS)
TRICARE Management Activity
Federal Health IT Initiatives
Small Business Innovation Research (SBIR) Program

Risk Flags

Sole-source award
Cost-plus contract type
Lack of clear performance metrics in summary data
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $26.7 million to FRONTIER TECHNOLOGY INC. PHASE III SMALL BUSINESS INNOVATION RESEARCH EFFORT TO SUPPORT ORGANIZATIONAL TRANSFORMATION FOR THE PROGRAM EXECUTIVE OFFICE - DEFENSE HEALTHCARE MANAGEMENT SYSTEMS AND ITS SUBORDINATE PROGRAMS.

Who is the contractor on this award?

The obligated recipient is FRONTIER TECHNOLOGY INC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Health Agency).

What is the total obligated amount?

The obligated amount is $26.7 million.

What is the period of performance?

Start: 2020-09-27. End: 2022-05-01.

What specific organizational transformation challenges is this contract intended to address within PEO DHMS?

This contract, a Phase III SBIR effort, is designed to support organizational transformation for the Program Executive Office - Defense Healthcare Management Systems (PEO DHMS) and its subordinate programs. While the specific challenges are not detailed in the provided data, PEO DHMS is responsible for modernizing the Military Health System's IT capabilities. This typically involves addressing issues related to data integration, interoperability between legacy and new systems, cybersecurity, user experience for healthcare providers and patients, and the overall efficiency and effectiveness of healthcare delivery through technology. The transformation likely aims to streamline processes, improve data analytics for better decision-making, and enhance the security and reliability of critical healthcare information.

How does the Cost Plus Incentive Fee (CPIF) structure typically function in contracts like this, and what are its implications for cost control?

A Cost Plus Incentive Fee (CPIF) contract is a type of cost-reimbursement contract where the government and the contractor agree on a target cost, a target profit, and a fee formula. The final profit (or fee) is adjusted based on whether the final costs are above or below the target cost, according to a predetermined sharing ratio. For example, if the final cost is lower than the target, both parties share in the savings, increasing the contractor's profit. Conversely, if costs exceed the target, the contractor's profit is reduced, and in some cases, they may absorb a portion of the overrun. This structure aims to incentivize the contractor to control costs while pursuing the project's objectives. However, it requires robust government oversight to ensure the target costs are realistic and that the contractor is genuinely motivated to achieve efficiencies rather than simply incurring costs.

What is the significance of this being a Phase III SBIR effort, and how does it differ from other contract types?

A Phase III SBIR (Small Business Innovation Research) effort signifies the culmination of a multi-phase research and development program initiated under the SBIR initiative. Phase I typically involves feasibility studies, and Phase II focuses on R&D and prototype development. Phase III is where the technology or innovation developed in earlier phases is transitioned into commercial or government applications. Unlike typical R&D contracts, Phase III often involves larger sums and aims for practical implementation. It differs from standard service contracts in that it builds upon prior, government-funded innovation, potentially reducing initial research risk but also sometimes leading to sole-source awards because the government has already invested in the specific technology's development path.

Given the 'not available for competition' status, what are the potential risks to the government regarding pricing and vendor lock-in?

The 'not available for competition' designation, often associated with sole-source awards, presents several risks. Primarily, the government loses the benefit of competitive bidding, which typically drives down prices and encourages innovation among multiple vendors. Without competition, the contractor may have less incentive to offer the most cost-effective solution. This can lead to higher prices than might be achieved in an open market. Furthermore, it can create a vendor lock-in situation, where the government becomes dependent on a single provider for a specific technology or service, making it difficult and costly to switch vendors in the future. This necessitates strong negotiation skills and rigorous oversight from the government contracting officers to ensure fair pricing and adequate performance.

How does this contract's spending compare to other IT modernization efforts within the Department of Defense or federal healthcare sector?

The $26.6 million awarded to Frontier Technology Inc. for organizational transformation within PEO DHMS is a significant sum, but it must be viewed in the context of large-scale federal IT modernization projects. The Department of Defense, in particular, undertakes massive IT initiatives, such as the Joint Enterprise Defense Infrastructure (JEDI) cloud computing project (though canceled) or the ongoing development of the Defense Enclave Services (DES) and Enterprise IT-as-a-Service (EITaaS) programs, which involve billions of dollars. Within the healthcare sector, agencies like the Veterans Affairs (VA) have also invested heavily in IT modernization, with projects often running into hundreds of millions or billions. Therefore, while substantial, this $26.6 million contract appears to be a focused effort within a larger ecosystem of defense healthcare IT spending, likely representing a specific phase or component of a broader modernization strategy.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Management, Scientific, and Technical Consulting Services › Other Management Consulting Services

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 4141 COLONEL GLENN HWY STE 140, BEAVERCREEK, OH, 45431

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $27,799,546

Exercised Options: $27,725,968

Current Obligation: $26,652,905

Actual Outlays: $4,799

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HT003819G0002

IDV Type: BOA

Timeline