VA awards $35.9M contract for drugs and druggists' sundries to McKesson Corporation

Contract Overview

Contract Amount: $35,909,521 ($35.9M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2010-03-01

End Date: 2010-03-31

Contract Duration: 30 days

Daily Burn Rate: $1.2M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 8

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: TAS::36 0160::TAS

Place of Performance

Location: MURFREESBORO, RUTHERFORD County, TENNESSEE, 37129

State: Tennessee Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $35.9 million to MCKESSON CORPORATION for work described as: TAS::36 0160::TAS Key points: 1. Contract awarded under full and open competition, suggesting a competitive bidding process. 2. The contract value of $35.9 million over 30 days indicates a significant volume of pharmaceutical and medical supply procurement. 3. Awarded to McKesson Corporation, a major player in the pharmaceutical distribution market. 4. The fixed-price contract type aims to control costs by establishing a set price for goods. 5. The contract duration of 30 days suggests a need for rapid or short-term supply fulfillment. 6. The North American Industry Classification System (NAICS) code 424210 points to wholesale distribution of drugs and druggists' sundries.

Value Assessment

Rating: good

The contract value of $35.9 million for a 30-day period represents a substantial procurement. Without specific unit pricing or comparison data for the exact sundries and drugs procured, a precise value-for-money assessment is challenging. However, the award to a major distributor like McKesson under full and open competition suggests a competitive pricing environment. The firm fixed-price nature of the contract provides cost certainty for the government.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The presence of 8 bidders (no) suggests a healthy level of competition for this procurement. A competitive bidding process generally leads to better price discovery and potentially more favorable terms for the government.

Taxpayer Impact: Full and open competition ensures that taxpayer dollars are used efficiently by driving down prices through market forces. The multiple bids received indicate that the government likely secured a competitive price for the drugs and sundries.

Public Impact

Beneficiaries include veterans receiving medical care through the Department of Veterans Affairs. Services delivered include the provision of essential drugs and druggists' sundries for medical use. Geographic impact is likely nationwide, supporting VA medical facilities across the country. Workforce implications may include logistics and supply chain personnel involved in the distribution and management of these supplies.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price fluctuations in the pharmaceutical market impacting long-term value.
Dependence on a single large contractor for critical medical supplies.
Ensuring timely delivery and availability of a wide range of sundries and drugs.

Positive Signals

Awarded through full and open competition, indicating a competitive market.
Firm fixed-price contract provides cost predictability.
Procurement of essential medical supplies ensures continuity of care for veterans.

Sector Analysis

The pharmaceutical and medical supply distribution sector is a critical component of the healthcare industry. This contract falls under wholesale trade, specifically NAICS code 424210. The market is characterized by large, established distributors like McKesson, Cardinal Health, and AmerisourceBergen, who manage complex supply chains. Government agencies, particularly the VA, are significant purchasers in this sector, often leveraging large-scale contracts to ensure access to necessary medical supplies.

Small Business Impact

This contract does not appear to have a small business set-aside. Given the nature of pharmaceutical distribution and the scale of this award, it is unlikely that small businesses would be primary awardees for such a large contract. However, McKesson Corporation, as a prime contractor, may engage small businesses for subcontracting opportunities related to logistics, transportation, or specialized services, though this is not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Veterans Affairs' procurement and contracting offices. Accountability measures are embedded in the firm fixed-price contract terms, requiring delivery of specified goods at the agreed-upon price. Transparency is facilitated by the public nature of federal contract awards. The VA Office of Inspector General (OIG) would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Department of Defense Medical Materiel
General Services Administration Federal Supply Schedule (FSS) for Medical Equipment and Supplies
National Institutes of Health (NIH) Research Supplies
TRICARE Pharmacy Program

Risk Flags

Potential for price increases in pharmaceutical market
Supply chain vulnerability
Ensuring product quality and compliance

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $35.9 million to MCKESSON CORPORATION. TAS::36 0160::TAS

Who is the contractor on this award?

The obligated recipient is MCKESSON CORPORATION.

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 $35.9 million.

What is the period of performance?

Start: 2010-03-01. End: 2010-03-31.

What is McKesson Corporation's track record with the Department of Veterans Affairs for similar contracts?

McKesson Corporation has a long-standing relationship with the Department of Veterans Affairs (VA) as a major supplier of pharmaceuticals and medical supplies. They are frequently awarded contracts through competitive bidding processes for various medical materiel needs. Historical data indicates McKesson has consistently been a significant provider to the VA, fulfilling numerous contracts for drugs, sundries, and related services. While specific performance metrics for this particular 30-day contract are not detailed, McKesson's general performance with the VA is often characterized by its ability to manage large-scale distribution and meet demand, though like any large contractor, they may have faced occasional performance-related inquiries or reviews over their extensive history with the agency.

How does the per-unit cost of drugs and sundries under this contract compare to market rates or other federal contracts?

Determining the precise per-unit cost comparison for this $35.9 million contract is challenging without access to the specific itemized list of drugs and druggists' sundries procured and their respective quantities. The contract is a firm fixed-price award, meaning prices were set at the time of award. McKesson, as a major distributor, operates on established pricing structures that are often competitive due to their scale. Federal agencies, including the VA, often negotiate pricing through large-volume purchasing and competitive solicitations, which typically aim to align with or beat market rates. However, the pharmaceutical market is complex, with significant price variations based on drug type, manufacturer, and volume. A direct, item-by-item comparison would require detailed product-level data from this contract and comparable contracts or market analyses.

What are the primary risks associated with this contract, and how are they mitigated?

Primary risks for this contract include potential supply chain disruptions (e.g., manufacturing issues, transportation delays), price volatility in the pharmaceutical market, and ensuring the quality and efficacy of the procured items. Mitigation strategies are embedded within the contract structure and agency oversight. The firm fixed-price nature mitigates cost overrun risks for the VA. McKesson, as a large, established distributor, has robust supply chain management systems designed to minimize disruptions. The VA likely has quality assurance protocols and relies on manufacturer guarantees for drug efficacy. Furthermore, the competitive nature of the award process encourages contractors to offer reliable products and services to secure the contract and maintain a good performance record for future opportunities.

How effective is the firm fixed-price contract type in ensuring value for money for the VA in this context?

The firm fixed-price (FFP) contract type is generally effective in ensuring value for money for the VA in the context of procuring drugs and druggists' sundries, especially for well-defined products. FFP shifts the risk of cost overruns to the contractor (McKesson Corporation), providing the VA with cost certainty. This means the VA knows the total expenditure upfront, simplifying budgeting and financial management. For standardized items like many drugs and common sundries, where specifications are clear and market prices are relatively stable or predictable, FFP is highly suitable. It incentivizes the contractor to manage their costs efficiently to maintain profitability. However, for highly variable or R&D-intensive procurements, FFP might be less appropriate, but for routine supply needs, it's a strong mechanism for cost control and value realization.

What are the historical spending patterns for drugs and druggists' sundries by the Department of Veterans Affairs?

The Department of Veterans Affairs (VA) consistently spends significant amounts on pharmaceuticals and medical supplies annually, often in the billions of dollars. This spending is driven by the large veteran population and the comprehensive healthcare services the VA provides. Historical data shows a trend of large-scale, competitive procurements for these essential items, often awarded to major distributors like McKesson, Cardinal Health, and AmerisourceBergen. Spending patterns are influenced by factors such as healthcare policy changes, the introduction of new drugs, an aging veteran population, and public health emergencies. The VA utilizes various contracting vehicles, including FSS, large IDIQ contracts, and individual competitive awards like the one detailed, to meet its diverse and substantial needs for medical materiel.

Industry Classification

NAICS: Wholesale Trade › Drugs and Druggists' Sundries Merchant Wholesalers › Drugs and Druggists' Sundries Merchant Wholesalers

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Offers Received: 8

Pricing Type: FIRM FIXED PRICE (J)

Contractor Details

Address: 1 POST ST, SAN FRANCISCO, CA, 90

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $35,909,521

Exercised Options: $35,909,521

Current Obligation: $35,909,521

Parent Contract

Parent Award PIID: V797P1020

IDV Type: IDC

Timeline