HealthCare.gov – A billion dollar deal for Accenture?

I recently wrote a blog regarding the risks Accenture faces with its new contract to fix Healthcare.com. The blog was picked up by Jerry Markon at The Washington Post and was expanded on in a recent front page story. The blog outlines a number of risks Accenture faces to turn around the site including:

• An unrealistic schedule that is out of their control
• Estimates that were provided to them, not by them
• The availability of knowledgeable talent that fully understands the current HHS system

If Accenture fails to deliver, that failure obviously comes with the heaps of negative publicity that surround a failed Healthcare.com site.

These guys at Accenture are smart cookies and would not be taking such a big risk if there was not a compelling reward. To understand the potential reward, let’s take a hypothetical look into the strategy room of Accenture and consider the following possibilities:

• Health and Human Services (HHS) has outlined that this contract is for maintenance on the backend portion of the website. This will cost approximately $90M, and the follow-on maintenance contract will be considered for a proper/competitive bidding process in 2014. Following the transition from CGI to Accenture, it is unlikely HHS will have an appetite to change maintenance providers again for at least a few years. Assuming that ObamaCare will continue to morph and flex over the next few legislative years, Accenture can look forward to 3-4 more years of $75M to $100M in HHS maintenance contracts.
• In 2013, HHS contracted for $1.8B of computer design services. Accenture’s total penetration into the HHS IT world was virtually non-existent in 2013. Making the assumption that Accenture developed a level of expertise in HHS systems with conservative penetration of 10% into the annual $1.8 billion up for grabs would conservatively net Accenture $500M dollars over the next 4 years.
• Some back of the envelope math from Accenture’s earnings statement would suggest that Accenture currently generates approximately $1.5B in revenue from Health and Human Services in the Americas. Accenture should be able to leverage its new found position and knowledge base to increase its win rate in state and private health care opportunities. Let’s make a conservative assumption that the improved win rate results in a 5% increase in revenue in years 3 and 4 which would roughly be $300M dollars.

When you add it all up the total is over ONE BILLION dollars in revenue over the next 4 years.

So HHS take note,  when you sit down at the negotiating table with Accenture, keep in mind this deal is likely worth $1B dollars to Accenture, and get a rate card and incentives that are commensurate with this level of potential opportunity. If you need some help with the negotiations, please feel free to reach out to UpperEdge as we will make sure you get the best deal.