Pentagon pays Leidos $318 million to hand over the military's health record
The Pentagon's October 13 digest gave Leidos a $317.9 million sole-source bridge to keep MHS Genesis, the U.S. military's electronic health record, running through January 2028 while the Defense Health Agency signs the system's actual owners to direct contracts. DHA's own language shrinks the work toward that end date.
Vincent Jiang · 3 min read
The Pentagon's October 13 awards digest handed Leidos+2.83% — Leidos, up 2.83 percent today (NYSE: LDOS), the software and IT-services contractor whose clients include the Defense Department, a $317.9 million contract for MHS Genesis, the electronic health record the U.S. military runs on 12. It is sole-source: the Defense Health Agency (DHA) picked one company, without a competition 2. The money, from fiscal 2026 operations and maintenance funds, pays for system reintegration, software licensing and hosting through the end of January 2028 12.
One trade headline booked it as revenue: "Leidos Books $318M DHA MHS GENESIS Bridge Contract" 3. The award's own language points the other way. DHA says the contract will "gradually reduce in scope until the end date," and exists to move work to other service providers and to establish direct relationships with the system's technology owners 1.
DHA will buy directly from Oracle Health and four other vendors
Leidos has run Genesis as lead systems integrator, the prime contractor that assembles other companies' products into one working system, since 2015 under a $4.3 billion Pentagon contract 45. The record itself was built by Cerner, the original software maker; Oracle Cerner+2.08% — Oracle Cerner, up 2.08 percent today supplies the baseline system today 45. In June, DHA laid out its plan to drop the middleman role and contract directly with the technology owners, targeting summer 2027 for completion 14.
Those owners, with tickers as identifiers: Oracle Health (ORCL), Philips North America+1.96% — Philips North America, up 1.96 percent today (PHG), American Well+1.52% — American Well, up 1.52 percent today (AMWL), Henry Schein+1.44% — Henry Schein, up 1.44 percent today (HSIC) and Solventum Health Information Systems+0.69% — Solventum Health Information Systems, up 0.69 percent today (SOLV) 14.
The bridge is under 2% of a year's revenue, and the exit is the story
The ceiling equals about 7% of Leidos' latest-quarter revenue of $4.56 billion, and under 2% of the $17.6 billion booked over the past four quarters 6. GuruFocus puts the stock at 11.16 times trailing earnings against an 18.27 times five-year median, on a $15.02 billion market cap 2. The discount predates the award, which suggests the market began repricing the government-integrator model before this bridge appeared in print.
The entire bridge is worth about 7% of one Leidos quarter
Data
| Quarterly revenue | |
|---|---|
| Q3 '23 | $3.92B |
| Q4 '23 | $3.98B |
| Q1 '24 | $3.98B |
| Q2 '24 | $4.13B |
| Q3 '24 | $4.19B |
| Q4 '24 | $4.37B |
| Q1 '25 | $4.25B |
| Q2 '25 | $4.25B |
| Q3 '25 | $4.47B |
| Q4 '25 | $4.21B |
| Q1 '26 | $4.4B |
| Q2 '26 | $4.56B |
Leidos argues the in-sourcing has limits
Chief executive Tom Bell told investors the administration wants to in-source systems integration and buy commercial technology directly, adding: "We see that trend continuing across many agencies" 4. He also said it is "difficult to see that they can in-source it all and have the manpower necessary to do the whole work" 4. Leidos kept a foothold on July 31, when DHA picked it among 12 companies, from 29 offers, for a five-year, $300 million product-deployment contract spanning the agency's health IT, Genesis included 47.
The first direct award is the tell
Watch the Pentagon digest for DHA's first direct award to one of the five owners, against the summer 2027 target 1. The bridge runs out at the end of January 2028 1. The Pentagon is paying Leidos $317.9 million to make itself unnecessary, on a schedule DHA published.
Deepdive
AI-generated from this story and its cited sources. Not investment advice.
