DOD plans $1.4B sole source extension for Leidos on health care record

The Pentagon is planning a $1.5 billion sole-source extension for Leidos to act as integrator on MHS Genesis, the Defense Department's electronic health record program, according to contracting documents released late last week.

Leidos won the 10-year contract to implement MHS Genesis in 2015. The original value of the contract was $4.3 billion, but that was later increased to about $5.5 billion to cover an expansion of the service to the Coast Guard and to support a common baseline for sharing with the Department of Veterans Affairs.

MHS Genesis is a system of systems that includes the Oracle Health electronic health record — which was operating as Cerner at the time of the original contract award, before its $34 billion acquisition by Oracle — along with the Henry Schein dental record and other systems that support billing, development and more. 

The Defense Health Agency signaled in the spring of 2023 that it might be ready to put the MHS Genesis sustainment contract out for competition. But in the sole source justification released on Oct. 18, DHA, on behalf of the Program Executive Office, Defense Healthcare Management Systems, stated that it wanted to wait until the MHS Genesis architecture is modernized and migrated to the cloud before looking to the open market for a new integrator — in part because of heightened security concerns.

"In February 2024, the Change Healthcare ransomware attack caused the government to review the state of its documentation amid new security and operational vulnerability concerns," the agency said in the sole source justification document.

The sole source extension is expected to be awarded by July 28, 2025, according to contracting documents. The extension includes additional work for Leidos, notably "the services associated with migrating to the cloud in addition to the services at a scale and complexity…which are required to support the MHS Genesis solution into the continuous support phase as a defense business system."

PEO-DHMS is proposing a 3-year extension at a dollar value of $1.13 billion and a nine-month transition option at $263.3 million. That means an open competition for MHS Genesis sustainment won't hit the market until 2028, at the earliest.

The sole source justification isn't binding. Any vendors who want to be considered for the work can make their case by the end of the month, however winning the business away from Leidos is going to be difficult, according to the terms set out in the contracting notice.

The MHS Genesis program was declared fully deployed in March 2024. The system went live at a few Pacific Northwest sites in 2017, with subsequent waves of deployment extending MHS Genesis to more than 3,600 DOD locations including 100% of DOD garrison facilities, covering a patient population of 9.6 million and 194,000 clinical users.

The sole source notice also indicates that MHS Genesis is currently in the midst of deployment to the National Security Agency.