VA awards $24.7M contract for pharmaceutical preparations to McKesson Corporation, highlighting a single delivery order

Contract Overview

Contract Amount: $24,671,062 ($24.7M)

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: $850.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT:

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $24.7 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: Key points: 1. The contract represents a significant award for pharmaceutical preparations, underscoring the VA's need for consistent supply. 2. Competition dynamics for this specific delivery order were not detailed, but the overall contract was fully competed. 3. Risk indicators are moderate, given the nature of pharmaceutical supply chains and the established contractor. 4. Performance context suggests a focus on timely delivery of essential medications to support veteran healthcare. 5. The sector positioning is within the broader healthcare and pharmaceutical manufacturing industry, a critical area for federal agencies.

Value Assessment

Rating: good

The award value of $24.7 million for a single delivery order over 29 days appears substantial. Benchmarking against similar pharmaceutical supply contracts would be necessary for a precise value-for-money assessment. However, McKesson is a major distributor, suggesting potential economies of scale. The firm fixed-price contract type 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 multiple vendors had the opportunity to bid. The data does not specify the number of bidders for this particular delivery order, but the initial contract solicitation likely attracted significant interest. Full and open competition generally fosters a more competitive pricing environment.

Taxpayer Impact: Taxpayers benefit from the potential for competitive pricing achieved through a fully competed contract, ensuring that the VA receives the best possible value for pharmaceutical preparations.

Public Impact

Veterans across the nation will benefit from the reliable supply of pharmaceutical preparations facilitated by this contract. Essential medications and pharmaceutical supplies will be delivered to VA healthcare facilities. The geographic impact is nationwide, supporting the VA's extensive network of medical centers and clinics. Workforce implications include ensuring that healthcare professionals have the necessary supplies to treat patients effectively.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price fluctuations in subsequent delivery orders if not managed through competitive processes.
Dependence on a single large contractor could pose supply chain risks if not diversified.
Ensuring equitable distribution of pharmaceuticals across all VA facilities requires robust logistical oversight.

Positive Signals

Award to a well-established and experienced pharmaceutical distributor like McKesson.
The use of a firm fixed-price contract provides cost predictability.
The contract was awarded under full and open competition, suggesting a competitive bidding process.

Sector Analysis

The pharmaceutical preparation manufacturing sector is a critical component of the healthcare industry, involving the production and distribution of a wide range of medications. Federal agencies, particularly the Department of Veterans Affairs, are significant purchasers of these goods to meet the healthcare needs of beneficiaries. Spending in this sector is influenced by factors such as drug development, regulatory requirements, and the demand for both generic and specialized pharmaceuticals. Comparable spending benchmarks would involve analyzing other large-scale pharmaceutical contracts awarded by federal health agencies.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. As a large award to a major corporation, the primary subcontracting opportunities for small businesses would likely be in logistics, distribution, or specialized support services, rather than direct pharmaceutical manufacturing. Further analysis of the contractor's subcontracting plan would be needed to assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Veterans Affairs contracting officers and program managers. Accountability measures are embedded in the firm fixed-price contract terms, requiring delivery of specified pharmaceutical preparations. Transparency is generally maintained through contract databases, although specific performance metrics and detailed spending breakdowns may not always be publicly available. The VA's Office of Inspector General would have jurisdiction to investigate any potential fraud, waste, or abuse related to this award.

Related Government Programs

VA Pharmaceutical Prime Vendor Program
DoD Medical Materiel
Federal Supply Schedule (FSS) for Pharmaceuticals

Risk Flags

Potential for supply chain disruption
Price volatility in pharmaceutical markets
Over-reliance on a single large contractor

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $24.7 million to MCKESSON CORPORATION. EXPRESS REPORT:

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 $24.7 million.

What is the period of performance?

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

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

McKesson Corporation has a long-standing relationship with the Department of Veterans Affairs, serving as a key supplier for pharmaceutical products. They are a major player in the pharmaceutical distribution market and have held numerous contracts with federal agencies, including the VA, over many years. Their track record typically involves large-scale distribution and supply chain management. While specific performance details for every contract are not always public, their continued awards suggest a generally satisfactory performance history in meeting the VA's needs for a wide array of medications and medical supplies. However, like any large contractor, there may have been instances of performance issues or disputes that would be documented in contract performance reports or agency oversight records.

How does the $24.7 million award compare to historical VA spending on pharmaceutical preparations?

The $24.7 million awarded for this specific delivery order represents a significant, albeit potentially short-term, expenditure. To contextualize this, one would need to examine the VA's total annual spending on pharmaceutical preparations over several fiscal years. The VA is one of the largest purchasers of pharmaceuticals in the United States, with annual spending often in the billions of dollars. This single award, covering a 29-day period, is likely a component of a larger, ongoing strategy to ensure pharmaceutical availability. Comparing it to the average value of previous delivery orders or the total value of prime vendor contracts would provide a clearer picture of its relative scale within the VA's overall pharmaceutical procurement landscape.

What are the primary risks associated with this contract and the contractor?

The primary risks associated with this contract revolve around supply chain reliability and potential price volatility. As a large distributor, McKesson's ability to consistently deliver a wide range of pharmaceuticals is crucial. Disruptions in their global or domestic supply chains, whether due to manufacturing issues, transportation problems, or unforeseen events like pandemics, could impact the VA's ability to provide care. Another risk is price escalation; while this is a firm fixed-price order, future contracts or adjustments could see price increases, especially for specialized or newly developed drugs. Furthermore, over-reliance on a single large contractor, even one as established as McKesson, can create vulnerabilities. Ensuring robust inventory management and contingency planning by both the VA and McKesson is essential to mitigate these risks.

How effective is the VA's procurement process for ensuring value in pharmaceutical purchases?

The VA's procurement process for pharmaceuticals is generally considered robust, aiming to ensure value through various mechanisms. The use of full and open competition for major contracts, like the one awarded to McKesson, is a key strategy to drive competitive pricing. The VA also leverages large-scale programs, such as Prime Vendor contracts, to achieve economies of scale and streamline distribution. Furthermore, the VA utilizes formulary management and evidence-based practices to guide purchasing decisions, prioritizing cost-effective medications where clinically appropriate. Oversight by contracting officers and the VA's Office of Inspector General helps to ensure compliance and identify potential inefficiencies or improprieties. However, the complexity of the pharmaceutical market, including drug pricing regulations and the introduction of new therapies, presents ongoing challenges in consistently achieving optimal value.

What is the typical duration and value of similar pharmaceutical preparation contracts awarded by the VA?

Pharmaceutical preparation contracts awarded by the VA, particularly those involving major distributors like McKesson, often have multi-year base periods with option years, allowing for extended periods of performance. The total contract values can range from tens of millions to billions of dollars over their entire potential duration. Delivery orders, such as the one detailed here, represent specific taskings within these larger contract vehicles. The value of individual delivery orders can vary significantly based on demand, specific product needs, and the time period covered. A $24.7 million delivery order over 29 days is substantial, suggesting a significant immediate need or a large batch order for a critical set of pharmaceuticals. It is indicative of the scale at which the VA procures essential medical supplies.

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: $24,671,062

Exercised Options: $24,671,062

Current Obligation: $24,671,062

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline