Maximus announces feds have backed off $6.6B contract rebid

Correction: This story has been updated to correct an error in the original version, which incorrectly stated that the contract, not the rebidding process, had been canceled.

Tysons-based Maximus, a government contractor specializing in administrative support for Medicare and Medicaid, announced Tuesday that the U.S. Department of Health and Human Services has canceled efforts to rebid the company’s $6.6 billion contract to operate a customer service call center for the Centers for Medicare and Medicaid.

The contract, awarded by the Biden administration to Maximus in 2022 with a one-year base period, included nine one-year option periods until 2031 and covered staffing of the Contact Center Operations call center for CMS programs like 1-800 MEDICARE and the health insurance marketplace.

However, in December 2023, U.S. Department of Health and Human Services Secretary Xavier Becerra and Centers for Medicare & Medicaid Services Administrator Chiquita Brooks-LaSure announced they would send the contract out for rebidding in an apparent response to walkouts by call center workers. The Communications Workers of America union, which had been trying to unionize Maximus’ call center workers, praised the move. U.S. Rep. Rosa DeLauro, D-Connecticut, who had criticized Maximus in 2019 for paying call center workers at low levels for federal grade workers, also expressed happiness that the contract was being re-competed.

On Nov. 1, Maximus announced it had filed a lawsuit in the U.S. Court of Federal Claims, alleging that the CMS has illegally added a “labor harmony” agreement into the rebidding process for the $6.6 billion contract started in the spring, which the company calls “baseless and unlawful” in a news release.

“Despite providing high-quality customer service, exceeding every performance metric and delivering uninterrupted service even during two hurricanes, CMS is taking the unnecessary step of rebidding the contract only two years into the nine-year term with a requirement for a labor harmony agreement,” the company said in its Nov. 1 statement. “This unprecedented move is illegal and improper pursuant to established law, regulation and procurement policy, and may jeopardize future seamless service to the 75 million Americans with Medicare and accessing health insurance through the federal marketplace all while increasing cost to taxpayers.”

The U.S. Health and Human Services’ decision to cancel the rebidding process is a win for the Tysons company.

Maximus has been the prime contractor for the 1-800 MEDICARE and health insurance marketplace contact centers since 2018 and has supported CMS contact centers for more than a decade, starting as a subcontractor to Reston-based General Dynamics. The company, which employed nearly 40,000 people as of 2023, operates 84 contact centers in 28 states and employs more than 20,000 contact center agents. It handles more than 100 million contacts per year, according to a CMS news release. Maximus reported $5.3 billion in revenue for fiscal 2024, up from $4.9 billion from the previous year.

“Maximus employees have consistently demonstrated their ability to successfully manage this critical program providing essential support to more than 75 million eligible Americans who rely on Medicare and the Federal Marketplace. We appreciate the opportunity to continue supporting HHS and CMS in their vital missions and look forward to delivering innovative, high-quality and reliable solutions that benefit the American public,” Maximus President and CEO Bruce Caswell said in a statement Tuesday.

At 4:30 p.m. Tuesday, just after Maximus’ announcement, its stock dropped from $74.99 a share to $66.80, but rebounded to $72.90 a share at closing.

The U.S. Department of Health and Human Services did not respond immediately to a request for comment Tuesday.