DoD awards $70.4M for nitrile glove production, raising questions about competition and value

Contract Overview

Contract Amount: $70,430,937 ($70.4M)

Contractor: Renco Corporation

Awarding Agency: Department of Defense

Start Date: 2020-07-14

End Date: 2023-02-27

Contract Duration: 958 days

Daily Burn Rate: $73.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: COVID-19 DHHS: CAPACITY EXPANSION FOR NITRILE BEUTADINE RUBBER (NBR) GLOVES PRODUCTION AND PACKAGING

Place of Performance

Location: COLEBROOK, COOS County, NEW HAMPSHIRE, 03576

State: New Hampshire Government Spending

Plain-Language Summary

Department of Defense obligated $70.4 million to RENCO CORPORATION for work described as: COVID-19 DHHS: CAPACITY EXPANSION FOR NITRILE BEUTADINE RUBBER (NBR) GLOVES PRODUCTION AND PACKAGING Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of the contract (958 days) suggests a long-term need for these supplies. 3. The award was made by the Department of the Air Force, indicating a defense-related need. 4. The contract's value is substantial, requiring careful scrutiny of its economic justification. 5. Focus on domestic production capacity for critical medical supplies highlights supply chain resilience efforts.

Value Assessment

Rating: questionable

The contract value of $70.4 million for nitrile glove production and packaging appears high, especially given the sole-source award. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The lack of transparency in the pricing structure makes it challenging to assess whether the government is receiving fair value for its investment. Further analysis would be needed to compare the per-unit cost of gloves under this contract to industry averages.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor can provide the required goods or services, or in urgent situations. The lack of competition means that the government did not benefit from the price reductions and innovation that can arise from a competitive bidding process. This raises concerns about whether the most cost-effective solution was secured.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. The sole-source nature limits the government's ability to negotiate the best possible price, potentially leading to less efficient use of public funds.

Public Impact

The primary beneficiaries are the Department of Defense and potentially other government agencies requiring nitrile gloves for operational or medical purposes. The contract supports the domestic production and packaging of nitrile butadiene rubber (NBR) gloves, enhancing supply chain security. The geographic impact is primarily within New Hampshire, where the contractor is located, potentially creating or sustaining local jobs. The contract contributes to the national stockpile and readiness of critical medical supplies.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value assessment.
Lack of detailed justification for sole-source procurement raises transparency concerns.
High contract value warrants rigorous oversight to ensure efficient use of funds.

Positive Signals

Addresses critical need for domestic production of essential medical supplies.
Supports supply chain resilience for defense and national security.
Contract awarded to a single entity, potentially simplifying management and delivery.

Sector Analysis

The nitrile glove market is a significant segment within the broader surgical appliance and supplies manufacturing industry. This contract falls under the 'Surgical Appliance and Supplies Manufacturing' NAICS code (339113). The COVID-19 pandemic highlighted vulnerabilities in global supply chains for personal protective equipment (PPE), including nitrile gloves, leading to increased government focus on domestic production capabilities. Comparable spending benchmarks are difficult to establish without competitive data, but the scale of this award suggests a substantial commitment to securing a reliable domestic source.

Small Business Impact

The contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses. This means that opportunities for small business participation in fulfilling this large contract are likely limited. The focus on a single, presumably larger, contractor may not directly benefit the small business ecosystem within the surgical supply manufacturing sector.

Oversight & Accountability

Oversight mechanisms for this contract would typically involve the Department of Defense's contracting officers and potentially the Defense Contract Management Agency (DCMA). Accountability measures would be tied to contract performance clauses and delivery schedules. Transparency is limited due to the sole-source nature of the award, making public scrutiny of the justification and pricing more challenging. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

COVID-19 Relief Spending
Department of Defense Medical Supplies
Personal Protective Equipment Procurement
Domestic Manufacturing Initiatives

Risk Flags

Sole-source award lacks competitive justification.
Potential for overpayment due to lack of competition.
Limited transparency in procurement process.
Contract duration is lengthy, requiring sustained oversight.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $70.4 million to RENCO CORPORATION. COVID-19 DHHS: CAPACITY EXPANSION FOR NITRILE BEUTADINE RUBBER (NBR) GLOVES PRODUCTION AND PACKAGING

Who is the contractor on this award?

The obligated recipient is RENCO CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $70.4 million.

What is the period of performance?

Start: 2020-07-14. End: 2023-02-27.

What is the specific justification provided by the Department of the Air Force for awarding this contract on a sole-source basis?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source contracts are justified under circumstances such as urgency, unique capabilities of a single source, or when only one responsible source is available. For a contract valued at over $70 million, a detailed justification document (e.g., a Justification and Approval, J&A) would normally be required and made publicly available through sources like the Federal Business Opportunities (now SAM.gov) portal. Without this document, it is impossible to assess the validity of the sole-source determination and whether competitive alternatives were truly exhausted.

How does the per-unit cost of nitrile gloves under this contract compare to market rates or similar government contracts?

The provided data does not include the per-unit cost of nitrile gloves or any specific pricing details beyond the total contract value. Therefore, a direct comparison to market rates or similar government contracts is not possible. To perform such an analysis, one would need access to the contract's line item details, including quantities and unit prices, and then benchmark these against publicly available pricing data for NBR gloves from other federal contracts (e.g., through GSA schedules or other competitive awards) or commercial market research reports. The absence of this information, coupled with the sole-source nature, makes value assessment difficult.

What are the potential risks associated with a sole-source award of this magnitude for critical supplies?

A sole-source award of this magnitude carries several risks. Firstly, the lack of competition can lead to inflated prices, meaning taxpayers may overpay for the gloves. Secondly, it reduces the incentive for the contractor to innovate or improve efficiency, as there is no competitive pressure. Thirdly, it can create a dependency on a single supplier, which could be problematic if that supplier faces production issues, quality control problems, or financial instability. Finally, it raises concerns about transparency and fairness in government procurement, potentially undermining public trust.

What is the track record of RENCO CORPORATION in fulfilling large government contracts, particularly in the defense or medical supply sectors?

The provided data only identifies RENCO CORPORATION as the contractor and the contract details. It does not offer information on the company's past performance, track record, or experience with similar government contracts. To assess RENCO's track record, one would need to consult resources like the Federal Awardee Performance and Integrity Information System (FAPIIS), past performance reviews within contract files, or news archives. Without this information, it's difficult to gauge their capability and reliability in executing a contract of this size and importance.

How does this contract align with broader federal strategies for enhancing domestic manufacturing and supply chain resilience, especially post-COVID-19?

This contract appears to directly align with federal strategies aimed at bolstering domestic manufacturing capabilities and strengthening supply chains for critical goods, particularly in the wake of the COVID-19 pandemic. The emphasis on nitrile glove production and packaging within the U.S. addresses the vulnerability exposed by global supply chain disruptions. By investing in domestic capacity, the government seeks to reduce reliance on foreign sources, ensure a stable supply during future emergencies, and potentially stimulate domestic economic activity. The scale of the award suggests a significant commitment to these strategic goals.

Industry Classification

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

Address: 1 BEAVER DAM RD STE 6, MANCHESTER, MA, 01944

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $70,430,937

Exercised Options: $70,430,937

Current Obligation: $70,430,937

Actual Outlays: $10,260,000

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline