July 29, 2015 / 9:30 PM / 4 years ago

Leidos team wins $4.34 billion contract for U.S. military health records

WASHINGTON (Reuters) - The U.S. Defense Department on Wednesday awarded a team led by Leidos Holdings Inc a contract valued at up to $4.34 billion to build a new electronic health record system for 9.6 million current and retired military service members.

The Defense Healthcare Management System Modernization contract, included in the Pentagon’s daily digest of major contract awards, runs for 10 years, including several options to extend the contract.

The Pentagon’s chief arms buyer, Frank Kendall, said the contract was worth under $9 billion over the next 18 years, about $2 billion less than initially expected.

He said the decision followed two years of work aimed at ensuring that the new records system could be used by the U.S. military, the U.S. Veterans Administration and private health providers, while ensuring the security of the data.

Chris Miller, program executive officer for defense healthcare management systems, told reporters about 25 percent of the contract would cover training to ensure a smooth transition to the new system.

“We did a lot to make sure that there were no surprises here,” he said. “We’re going to comprehensively test the product to make sure it is ready to deploy.”

Leidos and Cerner Corp beat out a team made up of IBM Corp and Epic Systems, and another team that included Allscripts Healthcare Solutions Inc, Hewlett-Packard Co, and Computer Sciences Corp.

The system will replace 50 older records systems now in use at over 1,000 sites, Kendall said. He said the department hoped to fully implement the system by 2022, if not sooner.

He said the Pentagon had worked to avoid contract protests by following the rules it put in place for the competition, and documenting the selection process carefully. He said the competitors would also likely recognize that Leidos submitted a “clear best value solution.”

It has a two-year initial ordering period, with two three-year option periods, and a potential two-year award term, which, if awarded, would bring the total ordering period to 10 years.

Work will be performed at locations throughout the United States and overseas.

Reporting by Andrea Shalal; Editing by Steve Orlofsky and Lisa Shumaker

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