VA Pharmacy Prime Vendor Contract Exceeds $30M in FY16, McKesson Corporation Awarded

Contract Overview

Contract Amount: $30,675,496 ($30.7M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2016-09-01

End Date: 2016-09-30

Contract Duration: 29 days

Daily Burn Rate: $1.1M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: COPY OF EXPRESS REPORT: PHARMACY PRIME VENDOR NCO 10 FY 2016 SEP 1, 2016 TO SEP 30, 2016 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 $30.7 million to MCKESSON CORPORATION for work described as: COPY OF EXPRESS REPORT: PHARMACY PRIME VENDOR NCO 10 FY 2016 SEP 1, 2016 TO SEP 30, 2016 CONTRACT VA797P-12-D-0001 Key points: 1. The contract, valued at over $30.6 million, covers pharmaceutical preparations for the VA. 2. McKesson Corporation is the sole awardee, raising questions about competition. 3. The contract's fixed-price nature provides some cost certainty. 4. This spending falls within the Pharmaceutical Preparation Manufacturing sector.

Value Assessment

Rating: fair

The contract's value of $30.6 million for a one-month period appears high, suggesting potential for overpricing or a very large scope of services. Benchmarking against similar large-scale pharmaceutical prime vendor contracts would be necessary for a definitive assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which theoretically allows for the best pricing. However, the data indicates a single awardee (McKesson Corporation), suggesting that either only one vendor submitted a competitive bid or the award process favored a specific entity.

Taxpayer Impact: Taxpayer funds are utilized for this contract. While competition is intended to ensure value, the high dollar amount necessitates scrutiny to confirm efficiency and prevent overpayment.

Public Impact

Ensures a steady supply of essential pharmaceuticals for veterans. Supports the operational needs of the VA healthcare system. Potential for cost savings through competitive bidding, though actual savings are unclear. Impacts the pharmaceutical supply chain and distribution networks.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

High contract value for a short duration.
Single awardee despite full and open competition.
Lack of detailed performance metrics in provided data.

Positive Signals

Contract awarded under full and open competition.
Firm fixed price contract provides cost predictability.
Supports critical healthcare needs for veterans.

Sector Analysis

This contract falls under Pharmaceutical Preparation Manufacturing, a critical sector for healthcare delivery. Spending benchmarks for similar prime vendor contracts are typically in the tens to hundreds of millions annually, making this $30.6M for one month substantial but potentially in line with large-scale operations.

Small Business Impact

The provided data does not indicate any specific set-asides for small businesses. Large prime vendor contracts like this often involve complex supply chains where subcontracting opportunities may exist, but direct small business participation in the prime award is not evident.

Oversight & Accountability

The Department of Veterans Affairs is responsible for oversight. The 'Express Report' suggests a level of reporting, but further details on performance monitoring, audits, and accountability mechanisms would be needed to fully assess oversight effectiveness.

Related Government Programs

Pharmaceutical Preparation Manufacturing
Department of Veterans Affairs Contracting
Department of Veterans Affairs Programs

Risk Flags

High monthly expenditure.
Sole awardee despite full and open competition.
Potential for price inflation in pharmaceutical markets.
Limited transparency on specific performance metrics.
Dependence on a single large vendor.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $30.7 million to MCKESSON CORPORATION. COPY OF EXPRESS REPORT: PHARMACY PRIME VENDOR NCO 10 FY 2016 SEP 1, 2016 TO SEP 30, 2016 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 $30.7 million.

What is the period of performance?

Start: 2016-09-01. End: 2016-09-30.

What was the specific scope of pharmaceutical products and services covered by this $30.6 million delivery order to ensure the value proposition?

The scope likely included a broad range of pharmaceuticals, potentially including generics, brand-name drugs, and specialty medications, along with associated logistical services like warehousing, distribution, and inventory management. The high value suggests a comprehensive prime vendor agreement covering a significant portion of the VA's pharmaceutical needs for the region during that month.

Given the full and open competition, why was McKesson Corporation the sole awardee, and what was the competitive landscape like?

While awarded under full and open competition, the sole award to McKesson Corporation could stem from various factors. Competitors may have been disqualified on technical grounds, or McKesson may have submitted the most advantageous offer based on price and other evaluation criteria. Understanding the number of proposals received and the specific evaluation factors is crucial to assessing the true level of competition.

How does the $30.6 million expenditure for a single month compare to historical spending patterns for this pharmacy prime vendor service?

Comparing this single month's expenditure to historical data is essential. If this represents a typical monthly spend, it indicates a consistent, high-volume requirement. However, if it's an anomaly, it warrants investigation into potential surge demand, contract modifications, or changes in service scope that could impact long-term cost-effectiveness and budget planning.

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: $30,675,496

Exercised Options: $30,675,496

Current Obligation: $30,675,496

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline