HCG_JA.pdf

JUSTIFICATION AND APPROVAL

FOR OTHER THAN FULL AND OPEN COMPETITION

U.S. Office of Personnel Management

Procurement Services Division (PSD)

DOCUMENT TYPE: Justification and Approval (J&A) — Sole Source FAR AUTHORITY: FAR 6.302-1 — Only One Responsible Source ACQUISITION METHOD: Sole Source — Other Than Full and Open Competition CONTRACT TYPE: Firm Fixed Price (FFP)

BASE PERIOD VALUE: $300,000

TOTAL ESTIMATED VALUE (Base + 2 Option Years):

$927,270

1. Contracting Activity

U.S. Office of Personnel Management (OPM), Procurement Services Division (PSD), 1900 E Street NW, Washington, DC 20415.

2. Description of Supplies or Services and Estimated Value

OPM's Healthcare and Insurance, Office of Health Systems Analytics (HSA) requires access to external healthcare claims benchmark data and the proprietary software grouper necessary to analyze that data in a methodologically consistent manner. Specifically, OPM requires:

(a) MedInsight Data Products License — A de-identified, longitudinal closed commercial claims dataset covering approximately 80 million commercial lives across approximately 100 contributors, with medical and pharmacy claims, enrollment records, provider identifiers, and fully adjudicated financial fields. Data history is available from 2017 forward with monthly refreshes covering all 50 states. This product will serve as OPM's external benchmark for comparing Federal Employees Health Benefits (FEHB) utilization, reimbursement, provider activity, and care patterns against broader commercial healthcare experience, supporting fraud, waste, and abuse (FW&A) review, provider analysis, and program integrity oversight of existing programs.

(b) Application of Health Cost Guidelines (HCGs) — Milliman's proprietary Health Cost Guideline grouper software applied to OPM's approximately 8,000,000 FEHB lives. HCGs organize FEHB claim lines into standardized service categories and utilization measures using the same proprietary methodology that underlies the MedInsight benchmark data. This alignment is essential to ensure that OPM's FEHB claims can be categorized and counted using the identical framework reflected in the benchmark, enabling valid cost, utilization, and FW&A comparisons.

Delivery of the MedInsight Data Products will be via Secure File Transfer Protocol (SFTP) or another mutually agreed-upon secure method. HCG grouper software will be delivered as a software package. Data delivery will commence following contract award and include 12 monthly refreshes over the contract year.

CLIN 0001 — Base Year MedInsight Data Products License: $200,000 CLIN 0002 — Base Year Application of HCGs to ~8M FEHB Lives: $100,000 Base Year Total: $300,000 Option Year 1 Total (3% adj.): $309,000 Option Year 2 Total (3% adj.): $318,270 Total Estimated Contract Value: $927,270

3. Applicable Statutory Authority

This acquisition is justified under 10 U.S.C. 3204(a)(1) and FAR 6.302-1 — Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements. This authority applies when the supplies or services required by the agency are available from only one responsible source and no other type of supplies or services will satisfy agency requirements.

The HCG grouper methodology is proprietary to Milliman, Inc., and exclusively available through its subsidiary Milliman Solutions, LLC. No other entity produces the Health Cost Guidelines or a grouper built on the HCG methodology. The use of any alternative grouper would require additional mapping, validation, and equivalency analysis that would undermine the analytic integrity of OPM's benchmark comparisons — a direct function of the proprietary methodology alignment between the HCG software and the MedInsight benchmark data.

4. Demonstration That Only One Source Can Satisfy the Requirement

4a. Technical Uniqueness of the HCG Grouper OPM's program office provided the following technical justification for requiring the HCG Grouper specifically:

"Milliman's HCG Grouper is distinguished from general-purpose industry grouping tools by its use of the proprietary Health Cost Guidelines methodology underlying the Milliman benchmark data OPM intends to use. The HCG Grouper provides this direct alignment, allowing OPM to categorize claims and count utilization using the framework associated with those benchmarks. An alternative grouper would require demonstrated equivalence or additional mapping and validation to establish comparable results, introducing potential analytical inconsistencies into OPM's cost, utilization, and fraud, waste, and abuse reviews."

The HCG grouper is not available from any other commercial source. The term "HCG" refers specifically to Milliman's Health Cost Guidelines — a proprietary claims classification and benchmarking methodology that Milliman has developed over decades. There is no equivalent product in the commercial market that produces HCG-format output or uses HCG methodology. Comparable groupers from other vendors (e.g., 3M APR-DRGs, Optum Episode Groupers) use different classification frameworks that are not aligned with Milliman's benchmark data structure, requiring substantial additional validation work to produce comparable outputs.

4b. Technical Uniqueness of the MedInsight Data Products The MedInsight benchmark dataset is the product of Milliman's proprietary claims ingestion, normalization, and analytics infrastructure built over 70+ years of actuarial practice. The dataset's construction, contributor composition, and analytic methodology are specific to Milliman. Because OPM is acquiring the HCG grouper for the express purpose of applying it to FEHB claims to produce benchmarks aligned with MedInsight outputs, the two products are functionally and methodologically interdependent. Substituting a different benchmark data product would eliminate the methodological alignment that the HCG grouper provides.

4c. Contracting Entity Milliman operates two distinct contracting entities. The products described in this J&A — MedInsight Data Products and the HCG Grouper — are available exclusively through Milliman Solutions, LLC, not Milliman LLC or Milliman, Inc. This distinction is confirmed in Milliman's proposal dated September 10, 2026.

4d. Market Research Findings OPM's program office (HSA) conducted market research to identify whether the HCG Grouper or equivalent products are available on the GSA Multiple Award Schedule (MAS) or through other agencies' existing contract vehicles. Research included:

(i) Review of current GSA MAS contracts held by Milliman (GS-00F-096CA and GS-23F-030CA) — confirmed that neither the HCG Grouper nor the MedInsight Data Products license are listed as awarded schedule items at current pricing, and thus cannot be ordered via MAS;

(ii) Review of existing interagency agreements, including Department of Veterans Affairs (VA) contracts with Milliman — determined that scope limitations preclude OPM from ordering under existing VA agreements;

(iii) Assessment of commercial alternative benchmark data products (Merative/MarketScan, Optum, Inovalon, FAIR Health, Cotiviti) — confirmed that none produce HCG-format output or support methodologically consistent benchmark comparison against MedInsight data without significant additional validation effort that would delay OPM's FW&A program.

5. Actions to Foster Competition in the Future

OPM will take the following actions to promote competition for future procurements of similar services:

(a) OPM will conduct a full market survey at the beginning of Option Year 1 and again prior to Option Year 2 to determine whether alternative providers have entered the market with methodologically equivalent products.

(b) OPM will coordinate with program office stakeholders to determine whether future analytical requirements could be satisfied by a competitively available data product or an alternative grouper methodology, with appropriate transition lead time.

(c) OPM will monitor GSA MAS additions to determine whether Milliman or competitors list relevant data products as awarded schedule items.

(d) Should OPM determine a follow-on requirement is needed beyond Option Year 2, OPM will publish a sources sought notice on SAM.gov not less than 12 months prior to contract expiration.

6. Market Research

Market research was conducted by OPM's Healthcare and Insurance, Health Systems Analytics office beginning [FILL IN: Start Date] and concluded September 5, 2026. Research included:

(a) Review of GSA Multiple Award Schedule contracts for Milliman (GS-00F-096CA and GS-23F-030CA) — HCG Grouper and MedInsight Data Products confirmed not available as awarded schedule items;

(b) Review of FPDS-NG for prior federal awards for HCG Grouper or MedInsight licensing — no relevant prior awards identified for OPM; VA contracts confirmed but scope does not support inter-agency ordering for OPM's use case;

(c) Review of commercial market alternatives — identified Merative (MarketScan), Optum, Inovalon, FAIR Health, and Cotiviti as alternative benchmark data sources; none produce HCG-compatible output for consistent benchmark analysis;

(d) [FILL IN: SAM.gov Sources Sought notice information, or rationale for not posting per FAR 5.202.]

Market research supports the determination that only Milliman Solutions, LLC can satisfy OPM's requirement as described in Section 4.

7. Determination of Fair and Reasonable Price

7a. Proposed Pricing CLIN 0001 — MedInsight Data Products License (Base Year):

$200,000

CLIN 0002 — HCG Application to ~8M FEHB Lives (Base Year):

$100,000

Base Year Total: $300,000 Option Year 1 (3% escalation): $309,000 Option Year 2 (3% escalation): $318,270

TOTAL ESTIMATED CONTRACT VALUE: $927,270

7b. Basis for Price Reasonableness Price reasonableness is supported by the following:

(i) The proposed base year price of $300,000 is significantly below OPM's Independent Government Cost Estimate (IGCE) of approximately $500,000, providing a direct comparison favorable to the government;

(ii) The MedInsight Data Products license at $200,000 reflects a commercial data license for an 80-million-life dataset with monthly refreshes — consistent with the scale and scope of similar large commercial claims datasets used in federal health analytics;

(iii) The HCG application fee of $100,000 is a one-time grouper application to OPM's approximately 8,000,000 FEHB lives — representing approximately $0.0125 per covered life, which is commercially reasonable for a proprietary clinical grouper application;

(iv) The 3% annual option year escalation is at or below the Bureau of Labor Statistics CPI for medical care services and is commercially reasonable for a multi-year data licensing arrangement.

8. Description of Market Research

See Section 6. Market research was conducted beginning [FILL IN: Start Date] and concluded September 5, 2026 by OPM's Health Systems Analytics office. Research results, including the market research memorandum prepared by the program office, are incorporated into the contract file.

9. Any Other Facts Supporting the Use of Other Than Full and Open Competition

The health care data analytics mission of OPM's Healthcare and Insurance office requires a stable, longitudinal external benchmark to support ongoing FW&A detection and provider review activities. Interrupting data access or switching to a methodologically inconsistent benchmark mid-program would compromise the validity of trend analyses and provider comparisons already initiated, potentially undermining OPM's ability to detect improper payments and support program integrity functions.

The two option years are included to provide continuity of access to the full MedInsight data history and to allow OPM to accumulate multi-year trend data necessary for longitudinal FW&A analysis. Limiting the contract to a single base year would undermine OPM's analytical program and create unnecessary re-procurement burden for a sole source product where no market change is anticipated in the near term.

Additionally, the proposal's permitted use restrictions are noted: Milliman Solutions, LLC limits OPM's use of the data products to internal FEHB-related FW&A analytics, provider review, and program integrity oversight of existing programs. OPM's use case is consistent with these restrictions. The data and outputs may not serve as the sole basis for any enforcement, legal, or final FW&A determination — a restriction that aligns with OPM's own intended use of the data for analytical prioritization, not as a stand-alone evidentiary basis.

10. Statement of Actions to Be Taken to Remove or Overcome Barriers to Competition

(a) OPM will conduct a competition readiness assessment prior to the end of Option Year 1 to determine whether an open competition is feasible for a follow-on contract.

(b) OPM will publish a sources sought notice on SAM.gov [FILL IN: within 30 days of award OR state that the notice was posted on DATE with notice number XXXXXX] to inform potential offerors of OPM's requirement and invite capability statements.

(c) OPM will engage with Milliman Solutions, LLC at least 12 months prior to contract expiration to understand whether data rights, APIs, or export formats may enable OPM to transition to a competitive environment for future data needs.

11. Technical and Requirements Personnel Certification

I certify that the supporting data under my cognizance that are included in the justification are accurate and complete to the best of my knowledge and belief.

_____________________________________ Date: _______________

Elena Dubas

Program Manager, Health Systems Analytics

Healthcare and Insurance, U.S. Office of Personnel Management

12. Contracting Officer Certification and Approval

I certify that this justification is accurate and complete to the best of my knowledge and belief. I further certify that this justification supports an award that does not exceed the amount necessary to meet the legitimate needs of

OPM.

_____________________________________ Date: _______________

Matthew J. Manning

Contracting Officer, Procurement Services Division

U.S. Office of Personnel Management

13. Competition Advocate Approval

_____________________________________ Date: _______________

Tunissha Marshall

Competition Advocate

U.S. Office of Personnel Management