DoD's $23.5B TRICARE Managed Care Contract Awarded to Health Net Federal Services Faces Scrutiny
Contract Overview
Contract Amount: $23,493,318,778 ($23.5B)
Contractor: Health NET Federal Services, LLC
Awarding Agency: Department of Defense
Start Date: 2016-08-01
End Date: 2026-01-07
Contract Duration: 3,446 days
Daily Burn Rate: $6.8M/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 3
Pricing Type: COST PLUS FIXED FEE
Sector: Healthcare
Official Description: IGF::OT::IGF MANAGED CARE SUPPORT SERVICES IN SUPPORT OF THE TRICARE PROGRAM
Place of Performance
Location: RANCHO CORDOVA, SACRAMENTO County, CALIFORNIA, 95742
Plain-Language Summary
Department of Defense obligated $23.49 billion to HEALTH NET FEDERAL SERVICES, LLC for work described as: IGF::OT::IGF MANAGED CARE SUPPORT SERVICES IN SUPPORT OF THE TRICARE PROGRAM Key points: 1. Significant contract value of $23.5 billion over its potential duration. 2. Health Net Federal Services, LLC is the sole awardee, raising questions about competition. 3. The contract's Cost Plus Fixed Fee structure may incentivize cost increases. 4. This spending falls within the Healthcare sector, specifically direct health and medical insurance carriers.
Value Assessment
Rating: questionable
The Cost Plus Fixed Fee (CPFF) contract type, with a base value of $6.8 million and a potential ceiling of $23.5 billion, warrants scrutiny. CPFF contracts can lead to higher costs as the contractor is reimbursed for all allowable costs plus a fixed fee, potentially reducing the incentive for cost control.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
Despite the 'FULL AND OPEN COMPETITION' designation, the award to a single entity, Health Net Federal Services, LLC, suggests potential consolidation or a highly specialized market. The impact on price discovery is unclear without further details on the bidding process and the number of proposals received.
Taxpayer Impact: The substantial value of this contract means taxpayer funds are significantly allocated to managed care support. The CPFF structure necessitates close oversight to ensure cost efficiency and prevent overspending.
Public Impact
Affects millions of military personnel and their families enrolled in the TRICARE program. Ensures the provision of essential healthcare services to the uniformed services. Potential for increased healthcare costs for beneficiaries if not managed efficiently. Impacts the broader healthcare insurance and managed care industry.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Cost Plus Fixed Fee structure
- Sole awardee despite full and open competition
- Long contract duration (potential 10 years)
Positive Signals
- Supports critical TRICARE program operations
- Awarded to an established entity in the federal health space
Sector Analysis
This contract falls under the Healthcare sector, specifically within the NAICS code 524114 for Direct Health and Medical Insurance Carriers. Spending in this area is substantial, driven by government health programs like TRICARE, Medicare, and Medicaid, with significant competition among large insurance providers.
Small Business Impact
The data indicates that small businesses were not directly awarded this contract, as it went to Health Net Federal Services, LLC. Further analysis would be needed to determine if small businesses are involved as subcontractors, which is common in large federal contracts.
Oversight & Accountability
The Cost Plus Fixed Fee nature of this contract requires robust oversight from the Defense Health Agency to ensure cost containment and prevent potential overruns. Regular audits and performance reviews are crucial for accountability.
Related Government Programs
- Direct Health and Medical Insurance Carriers
- Department of Defense Contracting
- Defense Health Agency Programs
Risk Flags
- Potential for cost overruns due to CPFF structure
- Limited visibility into subcontractor utilization
- Risk of contractor performance issues impacting beneficiary care
- Long-term dependency on a single provider
Tags
direct-health-and-medical-insurance-carr, department-of-defense, ca, definitive-contract, billion-dollar
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $23.49 billion to HEALTH NET FEDERAL SERVICES, LLC. IGF::OT::IGF MANAGED CARE SUPPORT SERVICES IN SUPPORT OF THE TRICARE PROGRAM
Who is the contractor on this award?
The obligated recipient is HEALTH NET FEDERAL SERVICES, LLC.
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Health Agency).
What is the total obligated amount?
The obligated amount is $23.49 billion.
What is the period of performance?
Start: 2016-08-01. End: 2026-01-07.
What specific mechanisms are in place to ensure cost efficiency under the Cost Plus Fixed Fee structure for this large TRICARE contract?
The contract likely includes detailed cost accounting standards, allowable cost principles, and performance metrics that the Defense Health Agency monitors. Regular audits, reviews of contractor expenditures, and negotiation of the fixed fee based on performance objectives are critical. The agency must actively manage the contractor's performance and costs to mitigate the inherent risks of the CPFF structure.
How does the 'full and open competition' designation reconcile with a single awardee for this significant managed care contract?
While designated as 'full and open,' the single award suggests that only one offeror, Health Net Federal Services, LLC, met all the stringent requirements or submitted the most advantageous proposal. This could be due to specialized capabilities, past performance, or the complexity of the TRICARE program. The agency should provide transparency on the evaluation process to confirm fair competition.
What is the projected impact of this contract on the overall cost of healthcare delivery for TRICARE beneficiaries over its lifespan?
The impact on beneficiary costs is complex. While the contract aims to provide efficient managed care, the CPFF structure carries a risk of cost escalation. Effective oversight and negotiation by the Defense Health Agency are paramount to controlling overall program costs and ensuring that savings are passed on, rather than absorbed by increased contractor fees or expenses.
Industry Classification
NAICS: Finance and Insurance › Insurance Carriers › Direct Health and Medical Insurance Carriers
Product/Service Code: MEDICAL SERVICES › GENERAL HEALTH CARE SERVICES
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Solicitation ID: HT940215R0002
Offers Received: 3
Pricing Type: COST PLUS FIXED FEE (U)
Evaluated Preference: NONE
Contractor Details
Address: 4191 E COMMERCE WAY, SACRAMENTO, CA, 95834
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Limited Liability Corporation, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $25,814,375,621
Exercised Options: $24,042,351,601
Current Obligation: $23,493,318,778
Subaward Activity
Number of Subawards: 1
Total Subaward Amount: $418,230,242
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: NO
Timeline
Start Date: 2016-08-01
Current End Date: 2026-01-07
Potential End Date: 2026-12-31 00:00:00
Last Modified: 2026-01-07
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