Four vendors lose appeals in $50M DOD health record follow-on

In a contract modification issued in December 2015, the Defense Department added data-hosting services to its $4.3 billion electronic health record contract. DOD awarded Cerner, the health IT vendor on the winning team led by Leidos, a $50.7 million sole-source add-on to provide data hosting, despite objections from IBM, Computer Sciences Corp, Amazon and General Dynamics.

According to documents approved by Pentagon Contracting Officer Matthew Hudson, data from the new system must be hosted in Cerner's data centers "to enable the full functionality" of the Defense Healthcare Management Systems Modernization EHR.

The original solicitation urged competitors to propose tools and applications to expand on DOD's basic requirements. Although details on some of the unique aspects of the winning Leidos solution are redacted in the documents, the overall thrust suggests that clinical and business predictive analytics and machine learning are included and can only be delivered via Cerner's proprietary data system.

Cerner's data includes anonymized information from health systems that use the company's EHR and from analytical models based on 15 years of research and development. According to contracting documents, establishing a separate hosting environment for DOD data would inhibit the ability of the DHMSM solution to incorporate Cerner's historical data. Pentagon officials argued that the separate "forked" environment created by segregating DOD data would add costs to the overall procurement.

It would also be bad for Cerner's business. DOD noted that "allowing a third party to host or have access to the Cerner proprietary data could adversely impact Cerner's financial viability and competitive market advantage."

Some hosting vendors did not see it that way. According to the documents, CSC, IBM, Amazon and General Dynamics all objected to the sole-source award of hosting duties to Cerner.

The protests are notable because IBM, CSC and General Dynamics participated in the original competition for the DHMSM contract and did not protest the award to Leidos.

IBM led an offering that included leading EHR firm Epic. CSC was part of a team that included HP and EHR firm Allscripts. General Dynamics was part of an open-source bid to use a commercial version of the VistA EHR developed by the Department of Veterans Affairs. That bid included PricewaterhouseCoopers.

Contracting officials did not dispute that the vendors in question could handle the hosting job on a technical basis. However, Cerner "has asserted to the government that it does not allow for connection to [its] managed services by any other commercial entity and that it does not resell these services through any other source."

According to contracting documents, those restrictions even made it impossible for DOD's health data to be hosted in a DOD data center.

Although it's not clear what is contained in each of the four objections, at least one of the vendors believes the Pentagon has the power to tell Cerner to share its data and modeling techniques with a hosting company. However, the contracting documents note that such rights were not part of the solicitation and award, and Cerner has no intention of negotiating them away.

One bid sought to replace Cerner's analytical modules with offerings from another vendor. However, Pentagon officials said such a solution would result in duplicative costs and "considerable inefficiency."

The estimated $50.7 million in hosting costs under the add-on are included in the overall $4.3 billion DHMSM ceiling.