Walk through a federal courthouse, a military base cafeteria, or a VA hospital, and you’ll see the janitor pushing the cart, the cook behind the line, the IT tech rebooting a server, the construction worker building a new wing. They are not federal employees, but contract workers. There are roughly 5 million of them, and they outnumber federal employees more than 2 to 1.
Roughly half of the ~$800B federal contract spend annually is on these services contractors (1). A good chunk of that goes to “fringe” dollars, or mandatory benefits from health to disability to retirement. That ranges from $5.55 per hour or $11,500 per year for a janitor to $21.68 per hour or $45,000 per year for an electrician. Unfortunately for the contractor business, administering these benefits is a nightmare: hourly fringe dollar accruals collide with monthly insurance billing cycles, audits by the Department of Labor are a when, not if, run against manual spreadsheets and “hour banking” systems, and failure to comply means back-pay and even debarment from bidding on future contracts. Against the backdrop of double digit increases in health insurance premiums, contractors are left covering the gap, while workers still have insufficient benefits that don’t fit their needs.
Enter CVRD Health founded by Alexa Baggio and Stephanie Craghead, repeat entrepreneurs and veterans in the benefits and government contractor space. They are building the highway every fringe dollar moves on, customized to the worker’s needs while simplifying the contractor’s administration in a compliant manner. We are thrilled to lead their $5M Seed round and join the board, alongside good friends Distributed Ventures and Waterline Ventures.
The CVRD Way
Underneath CVRD is a simple idea: fringe benefits are an infrastructure problem solvable by technology and AI, not an HR problem stop-gapped by more human labor. The platform combines a compliance rules engine, an audit-ready ledger, and a payments rail underneath an extensible benefits wallet. A contractor pays one invoice, not cobbling together multiple vendors and tools. CVRD tracks every fringe dollar in real time and routes it to each worker’s specific benefits. For the first time, contractors get real-time visibility and control. When the audit arrives, every benefit election and dollar earned is already documented, reconciled, and ready to be defended.
On that reliable data and infra, CVRD applies AI and a dedicated member advocate to help each worker customize benefits to their needs. One of its first customers, Aptive Resources, cut average premiums by 52% and reduced employer contributions by 30% in year one, saving more than half a million dollars while giving its workforce real, location-specific health plan options for the first time.
Starting with health insurance and select ancillary benefits, the team is already rapidly expanding to 401k, dental and vision, life, disability, etc. Oftentimes a government contractor also has a related commercial business, why not service both? And did we mention there is a complex universe of state by state equivalent to federal contractors? We were inspired by the ambition of vision and speed of execution of Alexa during our very first call. A lifelong benefits operator and repeat founder, Alexa built her first company, an on-site tradeshow benefits business, to $1M in EBITDA before COVID forced it to close. After selling that business to a government-contractor operator, she saw firsthand how complex and underserved contractor benefits are. Alexa then founded CVRD in February 2025, and the investors who had backed her before lined up to back her again. She also convinced Stephanie to join as co-founder, a 25-year veteran in government benefits who is a rare operator whose name moves brokers and contractors in this market.
If you’re a government contractor or broker looking for scalable, seamless benefits infrastructure, or an AI-first builder looking to join a fast moving, mission-driven team, please reach out.
- According to GAO, FY2025 federal contract spend was $793B. Service workers fall under 2 major acts, the Davis-Bacon Related Acts covering construction workers, and the Service Contract Act covering the rest. Extrapolating from the 2023 estimate of $217B for the former, and FY2014-2019 average of $120B for the latter, we arrive at the ~50% spend estimate.