IBM-Epic Team to Vie for $11 Billion Pentagon IT System

International Business Machines Corp. (IBM), the world’s biggest computer services provider, and Epic Systems Corp. will team up to compete for an $11 billion project to manage U.S. troops’ electronic health records.

IBM announced its plans to bid today, even before the Defense Department formally starts the competition for the information-technology system. Rival bids may come from Accenture Plc (ACN) and Northrop Grumman Corp. (NOC)

The winner gets one of the biggest opportunities in federal information technology, where new projects are under scrutiny after the flawed rollout of the Obamacare website. A better Pentagon system is needed so troops’ health records can be shared quickly with the Department of Veterans Affairs, which is struggling to reduce backlogs in disability claims.

“I hope people expect results, because this is where we show up,” Andy Maner, managing partner for IBM’s U.S. federal division, said in a phone interview. “We don’t bid on everything, but when we do, we want to change the world.”

The Pentagon’s solicitation for the contract, possibly with a 10-year duration, may be posted as early as next month, Maner said. IBM, based in Armonk, New York, already has more than 100 employees working to develop a proposal, he said.

“This has been a thing we’ve had circled for more than three years,” Maner said.

Website Fixes

The contract may attract bids from companies such as Dublin-based Accenture and Falls Church, Virginia-based Northrop, according to Brian Friel, a Bloomberg Industries analyst.

The U.S. government this year turned to Accenture for help fixing healthcare.gov, the enrollment website for the federal health-care overhaul. The company succeeds Montreal-based CGI Group Inc. (GIB/A), criticized for the website’s early troubles.

Other competitors for the Pentagon program might include Palo Alto, California-based Hewlett-Packard Co. (HPQ) and Reston, Virginia-based Leidos Holdings Inc. (LDOS), Friel said.

Northrop built the original system, which is now being maintained by Leidos, he said.

The planned system, which will replace the older one, will track U.S. forces’ health records no matter where they receive care, whether on base, on a ship, in a military hospital or close to combat. It will handle the health records of 9.7 million beneficiaries, including active-duty military, retirees and their dependents.

Epic’s Software

“Service members, their families and health-care providers who care for them deserve the best health care our country can provide,” Carl Dvorak, president of Verona, Wisconsin-based Epic, said in a statement. “They would benefit from an integrated system that leverages best practices from other large and successful health-care organizations.”

Epic’s enterprise software is widely used in the health-care industry, including by Johns Hopkins Medicine, Kaiser Permanente and the Cleveland Clinic.

IBM and Epic have worked together on other health-care projects, including for Kaiser.

IBM was the 51st biggest federal contractor in the fiscal year that ended Sept. 30, receiving $1.2 billion in prime, or direct, awards, according to data compiled by Bloomberg. The company ranked 45th in 2012, when it had $1.5 billion in U.S. contracts.

The IBM-Epic collaboration will be led by Keith Salzman, a former Army hospital chief medical information officer who is now IBM’s chief medical information officer, and use technology from its Watson supercomputer, best known for beating human contestants on the “Jeopardy!” TV game show.

Claims Backlog

The Pentagon and the Department of Veterans Affairs have been pressured by lawmakers, White House officials and veterans to help fix the VA’s backlog in processing disability claims. The military has contributed to that bottleneck, some lawmakers and the Veterans of Foreign Wars have said.

The Pentagon announced in May 2013 that it would build its own electronic health-records system. Defense Secretary Chuck Hagel promised to work with the VA to develop a “seamless system.”

The military’s plan raised concerns among lawmakers and veterans’ organizations that had pushed the two agencies to build a single system for current and former troops’ health records.

To contact the reporter on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net

To contact the editors responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net Steve Geimann

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