VA spent over $44M on medical supplies in 5 months via Cardinal Health, highlighting a critical supply chain function

Contract Overview

Contract Amount: $44,253,034 ($44.3M)

Contractor: Cardinal Health 200, LLC

Awarding Agency: Department of Veterans Affairs

Start Date: 2017-10-01

End Date: 2018-02-28

Contract Duration: 150 days

Daily Burn Rate: $295.0K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: MEDICAL SURGICAL PRIME VENDOR EXPENDITURE REPORTS FOR THE MONTHS OCTOBER, NOVEMBER, DECEMBER 2017, AND JANUARY , FEBRUARY 2018

Place of Performance

Location: WAUKEGAN, LAKE County, ILLINOIS, 60085

State: Illinois Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $44.3 million to CARDINAL HEALTH 200, LLC for work described as: EXPRESS REPORT: MEDICAL SURGICAL PRIME VENDOR EXPENDITURE REPORTS FOR THE MONTHS OCTOBER, NOVEMBER, DECEMBER 2017, AND JANUARY , FEBRUARY 2018 Key points: 1. The contract represents a significant portion of the VA's medical supply expenditure, underscoring its importance to healthcare delivery. 2. Analysis of spending patterns over the 5-month period can reveal trends in demand for specific medical and surgical items. 3. The fixed-price contract structure provides cost certainty for the government, though it may limit flexibility for unforeseen needs. 4. Performance context is crucial to understand if the delivered supplies met the VA's quality and timeliness requirements. 5. The concentration of spending with a single vendor warrants scrutiny of market dynamics and potential single-source dependencies. 6. Geographic distribution of spending within Illinois (st) indicates the primary operational areas served by this contract. 7. The absence of small business set-aside flags suggests this contract was not specifically targeted for small business participation.

Value Assessment

Rating: good

The VA's expenditure of over $44 million in a five-month period for medical and surgical supplies through Cardinal Health indicates a substantial investment in healthcare infrastructure. Benchmarking this against similar prime vendor contracts for the Department of Defense or other large federal health agencies would provide a clearer picture of value for money. The firm fixed-price nature of the contract suggests a predictable cost structure for the government, which is generally favorable. However, a deeper dive into the specific items procured and their unit prices compared to market rates or other federal contracts would be necessary for a comprehensive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple vendors had the opportunity to bid. The specific number of bidders is not provided, but the fact that it was competed openly is a positive indicator for price discovery and potentially competitive pricing. Full and open competition generally leads to a wider range of solutions and better market responsiveness. The VA's approach here aligns with federal procurement regulations aimed at maximizing competition.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it drives down prices through market forces and encourages innovation among potential suppliers, ensuring the government receives the best possible value.

Public Impact

Veterans across the nation benefit from the consistent availability of necessary medical and surgical supplies facilitated by this contract. The contract ensures the delivery of a wide range of surgical instruments and medical supplies essential for patient care within VA facilities. Spending concentrated in Illinois (st) suggests that facilities and operations within this region are primary beneficiaries of this specific delivery order. The contract supports the healthcare workforce by ensuring they have the tools and supplies needed to perform their duties effectively.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of detailed competition metrics (number of bidders) limits the assessment of the degree of price pressure achieved.
The specific breakdown of medical supplies procured is not detailed, making it difficult to assess if the spending aligns with critical needs or potential overstocking.
The duration of the reporting period (5 months) is relatively short for a comprehensive trend analysis of medical supply demand.
No information is provided on contractor performance metrics, such as on-time delivery or product quality, which are crucial for assessing overall value.
The contract's focus on a specific vendor, even if competed, raises questions about supply chain resilience and potential dependencies.

Positive Signals

Awarded under full and open competition, indicating a robust bidding process.
Firm fixed-price contract provides cost certainty for the government.
The contract addresses a critical need for medical and surgical supplies, ensuring operational readiness for VA healthcare facilities.
The vendor, Cardinal Health, is a major player in the medical supply chain, suggesting established logistical capabilities.
The reporting period covers multiple months, allowing for some observation of expenditure patterns.

Sector Analysis

The medical surgical supply industry is a large and critical sector within the broader healthcare market, characterized by significant consolidation and complex supply chains. Prime vendors play a crucial role in aggregating demand and distributing a vast array of products to healthcare providers. Federal agencies like the VA represent substantial customers, and their procurement strategies significantly influence market dynamics. Spending benchmarks for similar federal contracts can vary widely based on the scope of supplies, contract type, and competition level, but expenditures in the tens of millions annually are common for large healthcare systems.

Small Business Impact

The provided data indicates that this contract was not awarded as a small business set-aside (sb: false). Consequently, there is no direct analysis of small business participation or subcontracting opportunities stemming from this specific award. Federal procurement goals typically encourage small business involvement, and the absence of a set-aside suggests this contract may have been awarded based on best value or lowest price technically acceptable criteria where small business participation was not a primary driver or was not sufficiently competitive.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Veterans Affairs' contracting officers and program managers. They are responsible for monitoring vendor performance, ensuring compliance with contract terms, and verifying that the supplies meet specifications. Transparency is facilitated through contract databases like FPDS, which provide basic award information. However, detailed performance reports, quality assurance checks, and Inspector General involvement would depend on specific VA policies and any identified issues or audits related to this contract's execution.

Related Government Programs

Department of Defense Medical Prime Vendor Contracts
Federal Supply Schedule (FSS) for Medical Supplies
VA Pharmaceutical Prime Vendor Contracts
General Services Administration (GSA) Schedules for Healthcare Products

Risk Flags

Potential for supply chain disruption due to single-vendor reliance.
Lack of detailed performance metrics in summary data.
Limited insight into specific unit pricing and market competitiveness.
Geographic concentration of spending may not reflect national distribution needs.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $44.3 million to CARDINAL HEALTH 200, LLC. EXPRESS REPORT: MEDICAL SURGICAL PRIME VENDOR EXPENDITURE REPORTS FOR THE MONTHS OCTOBER, NOVEMBER, DECEMBER 2017, AND JANUARY , FEBRUARY 2018

Who is the contractor on this award?

The obligated recipient is CARDINAL HEALTH 200, LLC.

Which agency awarded this contract?

Awarding agency: Department of Veterans Affairs (Department of Veterans Affairs).

What is the total obligated amount?

The obligated amount is $44.3 million.

What is the period of performance?

Start: 2017-10-01. End: 2018-02-28.

What is the historical spending trend for medical and surgical supplies by the VA, and how does this contract compare?

Historical spending data for the VA's medical and surgical supplies reveals a consistent and substantial investment in this category, often running into billions of dollars annually. This specific contract, with expenditures of over $44 million over a five-month period (October 2017 - February 2018), represents a significant portion of the VA's procurement for these items during that timeframe. To contextualize it further, one would need to compare this monthly average expenditure against the VA's total medical supply budget for fiscal years 2017 and 2018. Prime vendor contracts like this are a common mechanism for the VA to ensure a steady supply of necessary goods, and their aggregate spending often forms a large part of the overall medical supply budget. Analyzing year-over-year spending for similar prime vendor contracts would reveal trends in demand, pricing, and the VA's reliance on such large-scale agreements.

How does the unit cost of items procured under this contract compare to market rates or other federal contracts?

Determining the precise unit cost comparison is challenging without access to the detailed line-item data for the $44.25 million expenditure. The provided data summarizes total spending over five months, not individual product costs. However, the contract type, 'FIRM FIXED PRICE,' suggests that unit prices were established at the time of award. To perform a benchmark analysis, one would need to identify specific National Stock Numbers (NSNs) or product descriptions within the delivery orders and compare their prices against Federal Supply Schedule (FSS) pricing, other agency contracts, or commercial market data from the same period. Given Cardinal Health's position as a major distributor, their pricing is often competitive, but variations can occur based on volume, specific product configurations, and the competitive environment during the original bid process. A lack of detailed itemized data prevents a definitive unit cost assessment.

What are the key performance indicators (KPIs) used to evaluate Cardinal Health's performance under this contract?

The provided data summary does not explicitly list the Key Performance Indicators (KPIs) used to evaluate Cardinal Health's performance. However, for a contract of this nature (medical surgical prime vendor), typical KPIs would likely include metrics related to delivery timeliness (e.g., percentage of orders delivered on time), order accuracy (e.g., percentage of orders filled correctly), product quality (e.g., adherence to specifications, absence of defects), responsiveness to urgent requests, and potentially inventory management if applicable. The Department of Veterans Affairs would have a Contracting Officer's Representative (COR) or similar role responsible for monitoring these aspects. Without access to performance reports or contractually defined SLAs, a direct assessment of Cardinal Health's performance against these potential KPIs is not possible from the given information.

What is the risk associated with relying on a single vendor like Cardinal Health for such a large volume of medical supplies?

Relying on a single vendor, even one as established as Cardinal Health, for a substantial volume of critical medical supplies introduces several risks. Supply chain disruptions, whether due to natural disasters, geopolitical events, manufacturing issues, or labor disputes affecting the vendor, could lead to shortages impacting patient care. There's also a potential risk of price increases in future contract renewals if competition is limited or if the vendor gains significant market leverage. Furthermore, a lack of alternative suppliers might reduce the incentive for the incumbent vendor to innovate or offer the most competitive pricing over the long term. While full and open competition at the time of award mitigates some of these risks, ongoing monitoring and contingency planning are essential for supply chain resilience.

How does the $44M expenditure align with the VA's overall strategy for medical supply chain management?

This $44 million expenditure represents a significant component of the VA's strategy to ensure a reliable and efficient supply of medical and surgical necessities for its healthcare facilities. Prime vendor contracts are a cornerstone of the VA's approach, allowing for centralized procurement and distribution, which can lead to economies of scale and streamlined logistics. The use of full and open competition aims to secure competitive pricing and access to a broad range of products. The VA's strategy likely emphasizes ensuring product availability, maintaining quality standards, and managing costs effectively. This contract, awarded through a competitive process, aligns with these objectives by leveraging a major distributor to meet a substantial portion of the demand, thereby supporting the operational readiness of VA medical centers.

Industry Classification

NAICS: Manufacturing › Medical Equipment and Supplies Manufacturing › Surgical and Medical Instrument Manufacturing

Product/Service Code: MEDICAL/DENTAL/VETERINARY EQPT/SUPP

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Cardinal Health, Inc. (UEI: 097537435)

Address: 3651 BIRCHWOOD DR, WAUKEGAN, IL, 60085

Business Categories: Category Business, Limited Liability Corporation, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $44,253,034

Exercised Options: $44,253,034

Current Obligation: $44,253,034

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA11916D0005

IDV Type: IDC

Timeline