VA's Pharmacy Prime Vendor contract for NCO 10 saw $25.58M in spending over 29 days in FY15

Contract Overview

Contract Amount: $25,580,356 ($25.6M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2015-09-01

End Date: 2015-09-30

Contract Duration: 29 days

Daily Burn Rate: $882.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: PHARMACY PRIME VENDOR NCO 10 FY 2015 SEP 1, 2015 TO SEP 30, 2015 CONTRACT VA797P-12-D-0001

Place of Performance

Location: SAN FRANCISCO, SAN FRANCISCO County, CALIFORNIA, 94104

State: California Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $25.6 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: PHARMACY PRIME VENDOR NCO 10 FY 2015 SEP 1, 2015 TO SEP 30, 2015 CONTRACT VA797P-12-D-0001 Key points: 1. The contract represents a significant portion of the VA's pharmaceutical spending for the region. 2. McKesson Corporation was the sole awardee, highlighting potential concentration in pharmaceutical supply. 3. The short duration of the delivery order (29 days) suggests it was part of a larger, ongoing program. 4. The contract was awarded under full and open competition, indicating a broad market solicitation. 5. The firm-fixed-price structure provides cost certainty for the government. 6. The spending level is substantial, requiring careful monitoring for efficiency and necessity.

Value Assessment

Rating: good

This delivery order for $25.58 million over 29 days represents a high volume of pharmaceutical procurement. Benchmarking against similar VA Pharmacy Prime Vendor contracts would be necessary for a precise value assessment. However, the firm-fixed-price nature of the contract provides a degree of cost control. The spending per day is approximately $882,000, which, while substantial, is expected for a prime vendor supporting a large region like NCO 10.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting that multiple vendors had the opportunity to bid. With 5 bidders identified, this indicates a reasonably competitive environment for this pharmaceutical prime vendor service. The level of competition is generally positive for price discovery and ensuring the government receives competitive pricing.

Taxpayer Impact: The full and open competition process is beneficial for taxpayers as it encourages multiple vendors to offer their best pricing, potentially leading to cost savings for the government.

Public Impact

Veterans in the NCO 10 region benefit from timely access to necessary pharmaceuticals. The contract ensures the availability of a wide range of medications through a prime vendor system. The contract supports the operational efficiency of VA healthcare facilities within the specified geographic area. The pharmaceutical supply chain is supported, indirectly impacting healthcare providers and potentially pharmaceutical manufacturing jobs.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in if competition is not consistently robust for future prime vendor contracts.
Reliance on a single prime vendor for a large region could pose supply chain risks in case of disruptions.
The high dollar value necessitates ongoing scrutiny to ensure cost-effectiveness and prevent potential overspending.

Positive Signals

Awarded through full and open competition, indicating a structured procurement process.
Firm-fixed-price contract provides budget certainty for the VA.
The existence of a prime vendor program streamlines pharmaceutical procurement for the VA.

Sector Analysis

The pharmaceutical manufacturing sector (NAICS 325412) is a critical component of the healthcare industry, involving the production of drugs and medicines. Federal spending in this area, particularly through agencies like the VA, is substantial. Prime vendor contracts are a common mechanism for large government agencies to ensure a steady and efficient supply of pharmaceuticals, often covering a broad range of products. This contract fits within the broader category of healthcare supply chain management and pharmaceutical distribution.

Small Business Impact

Information regarding small business set-asides or subcontracting plans was not explicitly provided for this specific delivery order. However, prime vendor contracts of this nature often involve complex supply chains where opportunities for small businesses may exist in areas such as logistics, distribution, or specialized pharmaceutical services, though the primary awardee is a large corporation.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Veterans Affairs' procurement and program management offices. The firm-fixed-price nature provides a degree of financial oversight. Transparency is generally maintained through contract award databases, though detailed operational performance metrics may not always be publicly available. Inspector General involvement would be triggered by allegations of fraud, waste, or abuse.

Related Government Programs

VA Federal Supply Schedule (FSS) contracts
Department of Defense (DoD) pharmaceutical contracts
Other agency prime vendor agreements

Risk Flags

High dollar value for a short period
Sole awardee for a critical service
Potential supply chain concentration risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $25.6 million to MCKESSON CORPORATION. EXPRESS REPORT: PHARMACY PRIME VENDOR NCO 10 FY 2015 SEP 1, 2015 TO SEP 30, 2015 CONTRACT VA797P-12-D-0001

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 $25.6 million.

What is the period of performance?

Start: 2015-09-01. End: 2015-09-30.

What is the typical duration and spending pattern for VA Pharmacy Prime Vendor contracts?

The provided data reflects a single delivery order with a duration of 29 days and a value of $25.58 million. This short duration suggests it was a specific call against a larger indefinite-delivery/indefinite-quantity (IDIQ) contract, likely a prime vendor agreement. Typical VA Pharmacy Prime Vendor contracts, especially those establishing a prime vendor relationship for a region, are often longer-term agreements (multiple years) with significant annual spending. The spending pattern within these longer contracts can vary based on seasonal demands, formulary changes, and specific healthcare needs of the veteran population served by that region. The $25.58 million for 29 days indicates a very high daily expenditure rate, suggesting this was a critical period or a large replenishment order.

How does McKesson Corporation's performance on this contract compare to its overall track record with the VA?

Assessing McKesson Corporation's performance on this specific 29-day delivery order requires access to detailed performance metrics, which are not publicly available in this report. McKesson is a major pharmaceutical distributor and has a long history of contracting with government agencies, including the VA, for pharmaceutical supply. Their overall track record with the VA is extensive, encompassing numerous contracts over many years. Generally, large, established companies like McKesson are expected to meet performance standards related to delivery timeliness, product availability, and quality. Any significant performance issues on this or other contracts would typically be reflected in past performance evaluations used in future source selections, or could lead to contract disputes or corrective actions.

What are the key risks associated with relying on a single prime vendor for pharmaceutical supply in a large region like NCO 10?

Relying on a single prime vendor, such as McKesson in this case, for pharmaceutical supply in a large region like VA's NCO 10 presents several key risks. Firstly, there's a supply chain disruption risk; if the vendor experiences issues (e.g., logistical problems, manufacturing shortages, natural disasters affecting distribution centers), it could lead to widespread medication unavailability for veterans. Secondly, reduced competition in future contract renewals could potentially lead to higher prices over time if the government becomes overly dependent on one supplier. Thirdly, a lack of alternative sources could limit the VA's flexibility in adopting new pharmaceutical products or responding to rapidly changing healthcare needs. Robust contingency planning and strong contract management by the VA are crucial to mitigate these risks.

How does the firm-fixed-price contract type influence cost control and potential for overspending?

A firm-fixed-price (FFP) contract type is generally considered advantageous for cost control by the government. Under an FFP agreement, the contractor (McKesson Corporation) is obligated to complete the work and deliver the pharmaceuticals for a predetermined price, regardless of their actual costs. This shifts the risk of cost overruns to the contractor. For the VA, this means greater budget certainty and predictability. It minimizes the risk of overspending due to unforeseen increases in the contractor's operational costs. However, it's important to note that the initial price must be set competitively and reasonably. If the FFP is set too high due to inadequate market research or weak competition, the government could still end up paying more than necessary, albeit at a fixed rate.

What is the historical spending trend for pharmaceutical prime vendor contracts within the VA?

Historical spending on pharmaceutical prime vendor contracts within the VA has generally been substantial and has trended upwards over the years, reflecting increasing healthcare demands and pharmaceutical costs. The VA relies heavily on these contracts to manage its vast pharmaceutical supply chain efficiently across its numerous medical centers and clinics nationwide. While specific figures for every year and region vary, the overall budget allocated to pharmaceuticals and related services by the VA represents a significant portion of its healthcare expenditures. Factors influencing this trend include an aging veteran population, advancements in medical treatments requiring new medications, and inflation in drug prices. The data provided, showing $25.58 million in a single 29-day period for one region, aligns with the high-volume nature of VA pharmaceutical procurement.

Industry Classification

NAICS: Manufacturing › Pharmaceutical and Medicine Manufacturing › Pharmaceutical Preparation Manufacturing

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 5

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: ONE POST ST, SAN FRANCISCO, CA, 94104

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

Financial Breakdown

Contract Ceiling: $25,580,356

Exercised Options: $25,580,356

Current Obligation: $25,580,356

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline