More than $24 billion in Department of Health and Human Services contracts are set to expire by the end of the year, according to a Govini analysis. Those funds could be redirected to help drive President Trump's health care agenda.
An anticipated wave of expiring contracts at the Department of Health and Human Services could free up billions for reprogramming -- money that could help drive the implementation of the Trump administration's health care agenda.
More than $24 billion in HHS contracts are set to expire by the end of the year, according to an analysis by contracting intelligence firm Govini. While most of the exposure centers on contracts for pharmaceuticals and services, IT spending also accounts for a big chunk of this money. Tech contractors are especially vulnerable. IT contracts expiring by the close of 2017 total $6.7 billion, up from $4.2 billion in 2016.
"HHS is well positioned relative to other agencies to help implement the Trump agenda right away, based on reprogramming opportunities," said Govini Analyst Matt Hummer. "President Trump is trying to execute on priorities in his first 100 days, despite not having a budget, using whatever tools that are there to reorient agencies. Expiring contracts is a way to do that."
The details of Trump's health care policy remain sketchy. Rep. Tom Price (R-Ga.), Trump's choice to lead HHS, hasn't yet been confirmed by the Senate. One big plank of the Trump health care plan was the repeal of the Affordable Care Act, but that may take longer than expected.
In a Feb. 5 interview with Fox News, which aired during the Super Bowl pregame show, Trump said the repeal could "take till sometime into next year," and that he hoped to have "at least the rudiments" of a replacement figured out by the end of 2017.
Wholesale changes to the ACA could lead to the government pulling the plug on billions in IT software and services contracts related to the technological implementation of the law.
"Any move to repeal and replace is going to impact health IT systems, data systems, all those systems built around this specific mandate to buy insurance off of government-run exchanges," Hummer said.
But even in the absence of repeal, there is $2.1 billion in expiring contracts on the main vehicle used to acquire IT and services to support the ACA. The Centers for Medicare and Medicaid Services' Enterprise System Development contract dates back to 2007, long before the passage of the health care act. Govini found that CSRA has $552.8 million in expiring ESD orders, Quality Software Services has $445.1 million and CGI Federal has $268.8 million.
There are 16 primes on the ESD vehicle. Much of the ACA work will flow to ESD's replacement, the $25 billion Strategic Partners Acquisition Readiness Contract, dubbed SPARC. But there are more than 80 vendors on SPARC, opening up incumbents to more competition.
If the ACA is modified or replaced, "all these systems and data architecture designed around the law over the last eight years would have to change as well," Hummer said. If the system is repealed and not replaced, that contract money could be reprogrammed for other uses.
On the other hand, the money might not be spent at all. HHS is "under no obligation to spend against the ceiling value of these contracts," Hummer said. "That’s why people in industry are really worried."
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