DoD awards $53.7M contract to Ortho-Clinical Diagnostics for diagnostic substance manufacturing

Contract Overview

Contract Amount: $53,728,155 ($53.7M)

Contractor: Ortho-Clinical Diagnostics Inc

Awarding Agency: Department of Defense

Start Date: 2021-03-31

End Date: 2023-09-29

Contract Duration: 912 days

Daily Burn Rate: $58.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: ORTHO CLINICAL DIAGNOSTICS INDUSTRIAL BASE EXPANSION

Place of Performance

Location: ROCHESTER, MONROE County, NEW YORK, 14626

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $53.7 million to ORTHO-CLINICAL DIAGNOSTICS INC for work described as: ORTHO CLINICAL DIAGNOSTICS INDUSTRIAL BASE EXPANSION Key points: 1. Contract awarded on a sole-source basis, raising questions about potential cost efficiencies. 2. The contract duration of 912 days suggests a significant, long-term need for these supplies. 3. Focus on 'In-Vitro Diagnostic Substance Manufacturing' highlights a critical niche within the healthcare sector. 4. The award to a single vendor limits opportunities for competitive pricing and innovation. 5. Geographic concentration in New York for Ortho-Clinical Diagnostics Inc. may impact supply chain resilience. 6. The firm fixed-price structure aims to control costs, but sole-source nature warrants scrutiny.

Value Assessment

Rating: fair

Benchmarking the value of this $53.7 million contract is challenging due to its sole-source nature and specific product focus. Without competitive bids, it's difficult to definitively assess if the pricing reflects optimal market value. However, the firm fixed-price contract type suggests an attempt to cap costs. Further analysis would require comparing the unit costs of these specific diagnostic substances to similar products from other manufacturers, if available, or to historical pricing for the same vendor.

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 cases of urgent need. The lack of competition means there were no other bidders to compare against, potentially leading to higher prices than if the contract had been openly competed. This limits the government's ability to leverage market forces for better pricing and terms.

Taxpayer Impact: Taxpayers may be paying a premium for these diagnostic substances due to the absence of competitive bidding. The government did not have the opportunity to solicit multiple offers, which could have driven down costs.

Public Impact

The Department of Defense benefits from a secured supply of critical in-vitro diagnostic substances. This contract ensures the availability of essential materials for military healthcare services and readiness. The primary beneficiary is the DoD's medical logistics and supply chain, ensuring operational continuity. The contract supports the manufacturing workforce within the specialized field of diagnostic substance production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings.
Lack of competition may reduce incentives for vendor innovation and efficiency.
Geographic concentration of the contractor in New York could pose supply chain risks.

Positive Signals

Firm fixed-price contract type provides cost certainty for the government.
Contract addresses a specific, critical need for diagnostic substances within the DoD.
Long-term contract duration (912 days) indicates a stable supply chain for essential materials.

Sector Analysis

The market for in-vitro diagnostic substances is a specialized segment within the broader healthcare and life sciences industry. This sector is characterized by high research and development costs, stringent regulatory requirements, and a need for specialized manufacturing capabilities. The global market for in-vitro diagnostics is substantial, driven by increasing healthcare needs and technological advancements. This contract represents a specific procurement within this sector, focusing on the manufacturing of raw materials or components essential for diagnostic test kits.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. The award to Ortho-Clinical Diagnostics Inc., a presumably larger entity, suggests that the primary focus was on securing the specialized manufacturing capability rather than promoting small business participation. This means that the direct economic benefits to the small business ecosystem from this specific contract are likely minimal.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices within the Department of Defense. Accountability measures are inherent in the contract terms, particularly the firm fixed-price structure which obligates the contractor to deliver specified goods at an agreed-upon price. Transparency is limited by the sole-source nature of the award, but contract award details are typically made public. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

DoD Medical Supplies Procurement
In-Vitro Diagnostic Manufacturing Contracts
Federal Healthcare Supply Chain Management
Defense Health Agency Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for inflated pricing
Supply chain concentration risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $53.7 million to ORTHO-CLINICAL DIAGNOSTICS INC. ORTHO CLINICAL DIAGNOSTICS INDUSTRIAL BASE EXPANSION

Who is the contractor on this award?

The obligated recipient is ORTHO-CLINICAL DIAGNOSTICS INC.

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 $53.7 million.

What is the period of performance?

Start: 2021-03-31. End: 2023-09-29.

What is the track record of Ortho-Clinical Diagnostics Inc. with federal contracts, particularly with the Department of Defense?

A review of federal procurement data indicates that Ortho-Clinical Diagnostics Inc. has received federal contracts, though the volume and nature may vary. Specific to the Department of Defense, understanding their past performance requires a deeper dive into contract databases to identify previous awards, their values, and any performance reviews or disputes. Without this detailed historical data, it's difficult to assess their established track record specifically within DoD. However, the award of a $53.7 million contract suggests a level of trust or capability recognized by the agency, even if the award was sole-source. Further investigation into past performance metrics and any reported issues would provide a more comprehensive picture of their reliability and effectiveness in fulfilling government requirements.

How does the pricing of this contract compare to similar procurements for in-vitro diagnostic substances?

Direct price comparison for this $53.7 million contract is challenging due to its sole-source nature and the specificity of 'In-Vitro Diagnostic Substance Manufacturing.' Without competitive bids, it's difficult to establish a market-driven price benchmark. To assess value, one would need to compare the unit costs of the specific substances procured under this contract against prices for comparable materials from other manufacturers, if available, or against historical pricing trends for Ortho-Clinical Diagnostics Inc. for similar items. The firm fixed-price structure offers cost certainty but doesn't inherently guarantee the best value without a competitive context. A thorough value assessment would require detailed product specifications and market research into alternative suppliers or substitute materials.

What are the primary risks associated with awarding a contract of this magnitude on a sole-source basis?

The primary risks associated with a sole-source award of this magnitude ($53.7 million) include potential overpayment due to the lack of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and a lack of market validation for the chosen solution. Taxpayers may bear a higher cost than if the contract had been competed. Furthermore, reliance on a single supplier can create supply chain vulnerabilities; if the contractor experiences production issues or financial instability, the DoD's supply of critical diagnostic substances could be jeopardized. The absence of competition also limits the government's leverage in negotiating terms and conditions, potentially leading to less favorable contract provisions.

How effective is the firm fixed-price contract type in managing costs for specialized manufacturing like diagnostic substances?

The firm fixed-price (FFP) contract type is generally effective in managing costs for specialized manufacturing by shifting cost-control responsibility to the contractor. Under an FFP agreement, the contractor agrees to a set price for the goods or services, regardless of their actual costs. This provides the government with cost certainty and protects against cost overruns. For specialized manufacturing like diagnostic substances, where technical specifications are well-defined, FFP can incentivize the contractor to manage their production efficiently to maximize profit. However, the effectiveness is somewhat diminished in a sole-source scenario, as the initial agreed-upon price might not reflect the best possible market value without competitive benchmarking. Despite this, FFP remains a preferred structure for cost control when the scope of work is clearly understood.

What are the implications of this contract for the broader industrial base in diagnostic substance manufacturing?

This contract, awarded to Ortho-Clinical Diagnostics Inc., directly supports and potentially expands that specific company's capacity within the industrial base for in-vitro diagnostic substances. As a sole-source award, it does not directly stimulate competition or encourage new entrants into this specialized market segment. However, it does signal a sustained demand from a major government entity (DoD) for these types of products, which can provide stability for the existing supplier. The long-term nature of the contract (912 days) suggests a commitment that could influence the contractor's investment in facilities or workforce. The broader implications depend on whether this procurement is part of a larger strategy to bolster the domestic industrial base for critical medical supplies.

Industry Classification

NAICS: Manufacturing › Pharmaceutical and Medicine Manufacturing › In-Vitro Diagnostic Substance 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: Ortho-Clinical Diagnostics, Inc

Address: 100 INDIGO CREEK DR, ROCHESTER, NY, 14626

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

Financial Breakdown

Contract Ceiling: $88,422,043

Exercised Options: $88,422,043

Current Obligation: $53,728,155

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline