HHS awards $354M for OWS Kitting to McKesson Medical-Surgical, impacting surgical instrument manufacturing

Contract Overview

Contract Amount: $353,900,696 ($353.9M)

Contractor: Mckesson Medical-Surgical Government Solutions LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2020-08-30

End Date: 2021-08-27

Contract Duration: 362 days

Daily Burn Rate: $977.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: OWS KITTING

Place of Performance

Location: ATLANTA, DEKALB County, GEORGIA, 30341

State: Georgia Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $353.9 million to MCKESSON MEDICAL-SURGICAL GOVERNMENT SOLUTIONS LLC for work described as: OWS KITTING Key points: 1. Significant contract value of $354M for essential medical supplies. 2. Sole awardee McKesson Medical-Surgical highlights potential lack of broad competition. 3. Risk of price escalation due to single-source award and fixed-price structure. 4. Sector focus on Surgical and Medical Instrument Manufacturing, critical for public health. 5. Contract duration of 362 days suggests a focused, short-term need.

Value Assessment

Rating: questionable

The contract's $354M value is substantial. Without competitive bidding, it's difficult to assess if this price represents fair market value compared to similar large-scale medical supply procurements.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This limits price discovery and potentially leads to higher costs for taxpayers as there was no market pressure to offer the best price.

Taxpayer Impact: The lack of competition for a large contract raises concerns about the efficient use of taxpayer funds.

Public Impact

Ensures supply chain resilience for critical medical equipment during emergencies. Supports the operational readiness of the Strategic National Stockpile. Potential for increased costs impacts overall federal healthcare spending.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competition and price negotiation.
Fixed-price contract may not reflect true market value without competition.
Contract duration is relatively short, suggesting a specific, time-bound need.

Positive Signals

Addresses critical need for medical supplies.
Supports national preparedness initiatives.

Sector Analysis

This contract falls within the Surgical and Medical Instrument Manufacturing sector, a vital area for healthcare infrastructure. Benchmarks for similar large-scale, sole-source procurements in this sector are scarce, making direct comparison difficult.

Small Business Impact

The contract data does not indicate any specific provisions or set-asides for small businesses. The sole-source nature of this large award likely means it was not accessible to small business competitors.

Oversight & Accountability

The award was made by the Department of Health and Human Services, specifically the Office of Assistant Secretary for Preparedness and Response, suggesting oversight related to national health emergencies. Further review of the justification for the sole-source award is needed.

Related Government Programs

Surgical and Medical Instrument Manufacturing
Department of Health and Human Services Contracting
Office of Assistant Secretary for Preparedness and Response Programs

Risk Flags

Lack of competition may lead to inflated pricing.
Sole-source award limits transparency in price discovery.
Potential for reduced value for taxpayer money.
Dependence on a single vendor for critical supplies.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $353.9 million to MCKESSON MEDICAL-SURGICAL GOVERNMENT SOLUTIONS LLC. OWS KITTING

Who is the contractor on this award?

The obligated recipient is MCKESSON MEDICAL-SURGICAL GOVERNMENT SOLUTIONS LLC.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Office of Assistant Secretary for Preparedness and Response).

What is the total obligated amount?

The obligated amount is $353.9 million.

What is the period of performance?

Start: 2020-08-30. End: 2021-08-27.

What was the specific justification for awarding this contract on a sole-source basis, and were alternative competitive strategies considered?

The justification for a sole-source award typically involves circumstances where only one responsible source can provide the required supplies or services. For this $354M OWS Kitting contract, the specific rationale from HHS is crucial. Without competition, it's difficult to ascertain if urgency, unique capabilities, or other factors precluded a competitive process, potentially impacting the best value achieved for taxpayer funds.

How does the $354M contract price compare to industry benchmarks for similar kitting services, especially considering the lack of competitive bidding?

Assessing the $354M price against industry benchmarks is challenging without competitive data. Sole-source contracts often carry a risk of being priced higher than competitively awarded ones. A thorough analysis would require comparing the scope, quantity, and specific items included in the 'OWS Kitting' against publicly available data for similar large-scale medical supply procurements, if any exist.

What mechanisms are in place to ensure the effectiveness and timely delivery of the kitted supplies under this contract, given its sole-source nature?

Effectiveness and timely delivery are typically managed through contract performance clauses, milestones, and quality assurance surveillance plans. For a sole-source award, robust oversight from HHS is critical to ensure McKesson meets all contractual obligations. Regular performance reviews and clear communication channels are essential to mitigate risks associated with the absence of competitive pressure on performance.

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: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Mckesson Corporation

Address: 9954 MAYLAND DR STE 5176, HENRICO, VA, 23233

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

Financial Breakdown

Contract Ceiling: $633,211,819

Exercised Options: $371,300,696

Current Obligation: $353,900,696

Actual Outlays: $353,900,159

Subaward Activity

Number of Subawards: 4

Total Subaward Amount: $64,777,205

Contract Characteristics

Commercial Item: PRODUCTS OR SERVICES PURSUANT TO FAR 12.102(F)

Cost or Pricing Data: NO

Timeline