Confidential
Decision Brief
Prepared May 1, 2026

RFP · 2026-014

Managed Services prepared for Mercy Community Health

Financial decision support for a multi-site community health managed services bid, prepared for analyst review prior to RFP submission.

Term

5 Years

TCV

$7.43M

Sites

5

NPV

$1.86M

Decision BID

Structurally profitable with strong margin coverage and rapid payback.

Bid recommendation

A structurally profitable contract with strong margin coverage and rapid payback.

NPV of $1.86M against a five-year term with healthy double-digit net margin from year two onward. No critical deal-killer flags detected. Rapid payback (8 months) reflects implementation fee structure rather than margin compression.

Decision

BID

Net Present Value

$1.86M

Above $0 threshold

Annualized IRR

> 200%

Fast payback

Discounted Payback

0.7yrs

Within 3-yr limit

Total Contract Value

$7.43M

5-year horizon

Facility: Community Health
Coverage: 24/7 Full
Sites: 5
Bed Equivalent: 150
Complexity: Medium

Steady-State MRR: $100,000
WACC: 12.6%
Hurdle Rate: 18.0%
Tax Rate: 5.5%
Floor Price MRR: $56,493

Analyst Commentary

The engagement profile is structurally favorable. Direct labour at three FTE produces a 33% labour ratio against MRR — within the band typical for community-health managed services and providing meaningful headroom against wage inflation. The hardware refresh cycle absorbs into operating cash within a single quarter.

The implementation fee accelerates payback to under nine months, producing a high reported IRR. This is a feature of deal structure, not unusually high steady-state returns. Net margin in the final year stabilizes at 40.7%, with 43.5% of negotiating room before NPV turns negative. Bear stress preserves $1.40M; catastrophic stress holds at $0.99M.

Range of Outcomes

Scenario Analysis

Bear

$-0.16M

−112%

Base

$1.35M

Reference

Bull

$2.15M

+59%

Stress

$-1.78M

−232%

Driver Sensitivity

Tornado Analysis

Top drivers by NPV impact at ±10% perturbation. Red = adverse move.

Negotiation Cushion

Break-Even Analysis

Driver values at which NPV crosses zero. Cushion shows distance from current.

Driver	Current	Break-Even	Cushion	Status
MRR	$100,000	$68,353	−32%	Comfortable
Wage Rate	$65/hr	$112/hr	+72%	Comfortable
FTE Count	3.5	6.05	+73%	Comfortable
Hardware BOM	$100,000	— OOR	—	N/A
MACD %	20%	— OOR	—	N/A

✓

All deal-killer flags clear

No unilateral scope expansion, uncapped SLA, MFN pricing, or cyber liability triggers detected. Subcontractor and BAA terms within typical bounds.

8 / 8 flags
cleared

NPV Composition

Value Bridge

From discounted revenue to net present value

Cash Flow Trajectory

Annual Net Cash

Year-over-year contract economics

Annual Statement

Profit & Loss

Line Item	Y1	Y2	Y3	Y4	Y5
Total Revenue	$1,142,250	$1,503,900	$1,548,396	$1,594,227	$1,641,433
Operating Expenses	($762,293)	($825,100)	($849,313)	($874,252)	($899,940)
Capital Expenditure	($100,000)	—	—	($100,000)	—
SLA Risk Reserve	($70,000)	($74,000)	($74,000)	($74,000)	($74,000)
Net Cash Flow	$209,957	$604,800	$625,083	$545,975	$667,493
Net Margin	18.4%	40.2%	40.4%	34.2%	40.7%

Pairwise Sensitivity

Multi-Variable Trade-Offs

Each grid shows NPV at combinations of two variables, holding all others constant. Center cell is base case. Red cells indicate negative NPV.

Pair 1: MRR × FTE

Revenue versus labour scale

Pair 2: MRR × Wage

Revenue versus unit labour cost

Pair 3: Term × MRR

Contract length versus price (independent — does not assume price-term elasticity)

Analyst Commentary

Add interpretation of the trade-off grids in Inputs cell B131. This block highlights specific cells the CFO should pay attention to. Sample format: 'The Term×MRR grid shows the deal survives even at -2 years and -20% MRR ($165K NPV). A 1-year shorter term at +10% MRR is roughly NPV-equivalent to base — useful trade-off if the client pushes for shorter term.'

How to read these tables: Each row varies the row-axis variable shown on the left; each column varies the column-axis variable shown above. Center cell is the base scenario. Walk left/right to see effect of one variable; walk diagonally to see combined effects. Red cells indicate where the deal turns NPV-negative — these define the "break boundary" of the deal.