HHS awarded E3HEALTH SOLUTIONS $217M for medical labs, a sole-source contract with a 242-day duration

Contract Overview

Contract Amount: $217,287,460 ($217.3M)

Contractor: E3health Solutions, LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2021-10-01

End Date: 2022-05-31

Contract Duration: 242 days

Daily Burn Rate: $897.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Healthcare

Official Description: INCREASE COMMUNITY ACCESS TO TESTING (ICATT)

Place of Performance

Location: MANSFIELD, TARRANT County, TEXAS, 76063

State: Texas Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $217.3 million to E3HEALTH SOLUTIONS, LLC for work described as: INCREASE COMMUNITY ACCESS TO TESTING (ICATT) Key points: 1. The contract's value of $217M for a 242-day period suggests a high per-diem cost, warranting scrutiny of efficiency. 2. As a sole-source award, the lack of competition may have led to suboptimal pricing and reduced incentive for cost savings. 3. The fixed-price incentive contract type introduces performance risk, where cost overruns could be borne by the government. 4. The contract's focus on medical laboratories aligns with critical public health needs, particularly in the context of testing access. 5. The relatively short duration of 242 days indicates a specific, time-bound requirement rather than a long-term service agreement.

Value Assessment

Rating: questionable

The contract value of $217,287,460 for a 242-day period equates to approximately $897,882 per day. This daily burn rate is exceptionally high for medical laboratory services, especially when considering the contract was not competed. Without comparative data from similar sole-source awards or a detailed breakdown of services rendered, it is difficult to definitively assess value for money. However, the lack of competition and the high daily expenditure raise concerns about potential overpricing and inefficient resource allocation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning E3HEALTH SOLUTIONS, LLC was the only vendor considered. The justification for a sole-source award is not provided in the data, but typically it implies that only one responsible source is capable of meeting the government's needs. The absence of competition means there was no opportunity for other qualified vendors to bid, potentially limiting price discovery and the government's ability to secure the most cost-effective solution.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive bidding. Without a competitive process, there is less pressure on the contractor to offer the lowest possible price.

Public Impact

The contract aims to increase community access to testing, directly benefiting the public by providing essential diagnostic services. Services delivered likely include a range of medical laboratory tests crucial for public health monitoring and individual health management. The contract is based in Texas (TX), suggesting a primary geographic impact within that state, though the reach of testing access could be broader. The contract supports the healthcare workforce by engaging medical laboratory professionals and technicians.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

High daily expenditure raises concerns about cost efficiency and potential overpayment.
Sole-source award limits competitive pressure, potentially leading to higher prices.
Fixed-price incentive contract type carries risk of cost overruns for the government.
Lack of transparency regarding the sole-source justification hinders full assessment.

Positive Signals

Addresses critical public health need for increased testing access.
Contract awarded to a specific entity (E3HEALTH SOLUTIONS, LLC) for specialized services.
Fixed-price incentive contract structure can incentivize performance if managed well.

Sector Analysis

The healthcare sector, particularly the segment focused on diagnostic and laboratory services, is a critical component of public health infrastructure. This contract falls under the Medical Laboratories (NAICS 621511) industry. The market for medical laboratory services is substantial, driven by increasing demand for diagnostics, preventative care, and disease management. Government contracts in this area often support public health initiatives, emergency preparedness, and healthcare access programs. Benchmarking this contract's value is challenging without more specific service details, but its significant value suggests a large-scale or high-complexity operation.

Small Business Impact

This contract was not set aside for small businesses, nor does it indicate any specific subcontracting requirements for small businesses. The award to E3HEALTH SOLUTIONS, LLC, a single entity, does not provide direct opportunities for small business participation through set-asides. The impact on the small business ecosystem is likely minimal unless E3HEALTH SOLUTIONS, LLC engages small businesses as subcontractors, which is not specified.

Oversight & Accountability

Oversight mechanisms for this contract would typically involve the Department of Health and Human Services (HHS), specifically the Office of Assistant Secretary for Preparedness and Response (ASPR). As a definitive contract, it is subject to standard federal procurement regulations and oversight. Transparency is limited due to the sole-source nature of the award. Accountability measures would be tied to the performance requirements outlined in the fixed-price incentive contract. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Public Health Surveillance
Diagnostic Testing Services
Emergency Preparedness and Response
Healthcare Services Contracts
Medical Laboratory Services

Risk Flags

Sole-source award lacks competition
High daily expenditure rate
Potential for cost overruns under FPI contract
Limited transparency on justification for sole-source

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $217.3 million to E3HEALTH SOLUTIONS, LLC. INCREASE COMMUNITY ACCESS TO TESTING (ICATT)

Who is the contractor on this award?

The obligated recipient is E3HEALTH SOLUTIONS, LLC.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Office of Assistant Secretary for Preparedness and Response).

What is the total obligated amount?

The obligated amount is $217.3 million.

What is the period of performance?

Start: 2021-10-01. End: 2022-05-31.

What specific services does E3HEALTH SOLUTIONS, LLC provide under this contract, and how do they justify the high daily cost?

The provided data indicates the contract is for 'Medical Laboratories' (NAICS 621511) and falls under the 'INCREASE COMMUNITY ACCESS TO TESTING (ICATT)' initiative. While the specific services are not detailed, they likely encompass a broad range of diagnostic testing, potentially including COVID-19 testing given the contract's timeframe (2021-2022) and the ICATT program's focus. The high daily cost of approximately $897,882 suggests either a very high volume of complex tests, specialized equipment and personnel, rapid turnaround requirements, or a combination thereof. Without a detailed statement of work or service-level agreements, it is difficult to precisely justify this expenditure. However, the urgency and scale of public health testing needs during the relevant period may have necessitated such significant investment.

Why was this contract awarded on a sole-source basis, and what was the justification?

The data explicitly states this contract was 'NOT COMPETED' and is a 'SOLE SOURCE' award. Federal procurement regulations allow for sole-source awards under specific circumstances, such as when only one responsible source is available, or in cases of urgent and compelling need where competition is not feasible. The specific justification for this award to E3HEALTH SOLUTIONS, LLC is not provided in the data. Typically, such justifications would be documented by the agency (HHS/ASPR) and might relate to unique capabilities, proprietary technology, or an immediate, critical need that could not be met through a competitive process within the required timeframe. The lack of competition inherently limits transparency and price discovery.

How does the $217M contract value compare to historical spending on similar medical laboratory services by HHS or other agencies?

Comparing the $217M contract value requires context regarding the specific services and duration. For the 242-day period, the daily expenditure is exceptionally high. Historical spending on medical laboratory services varies widely based on scope. For instance, large-scale public health initiatives or pandemic response efforts can command significant funding. However, without knowing the exact volume, types of tests, and geographic reach intended by this contract, direct historical comparisons are difficult. Generally, sole-source contracts of this magnitude warrant close examination to ensure they represent fair and reasonable pricing compared to what might be achieved through competition or against established benchmarks for similar, albeit potentially smaller or differently scoped, laboratory service contracts.

What are the potential risks associated with a fixed-price incentive (FPI) contract of this size and duration?

A Fixed-Price Incentive (FPI) contract, especially one valued at $217M over 242 days, carries significant risks for the government. The FPI structure aims to share cost savings and overruns between the government and the contractor based on performance targets. Key risks include: 1) Cost Overruns: If the contractor exceeds the target cost, the government's share of the overrun could be substantial, increasing the final price beyond initial estimates. 2) Price Ceiling: While there's a ceiling price, the incentive structure can still lead to a higher final cost than a firm-fixed-price contract if targets are met or exceeded. 3) Performance Measurement: Accurately defining and measuring performance metrics to trigger incentives can be complex and contentious. 4) Contractor Motivation: If incentives are poorly structured, they might not adequately motivate the contractor to achieve the most cost-effective outcomes. Given the sole-source nature, the government has less leverage to negotiate favorable incentive clauses.

What is the track record of E3HEALTH SOLUTIONS, LLC in performing large federal contracts, particularly in healthcare or laboratory services?

Information regarding the specific track record of E3HEALTH SOLUTIONS, LLC in performing large federal contracts, especially within the healthcare or laboratory services sector, is not detailed in the provided data snippet. To assess their capability and past performance, one would typically need to consult federal procurement databases (like SAM.gov or FPDS) for contract history, performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS), and any publicly available information on their operational capacity and experience. Given this is a sole-source award of significant value ($217M), it implies the agency believed E3HEALTH SOLUTIONS, LLC possessed unique qualifications or capabilities. However, a thorough assessment would require independent verification of their performance history on similar contracts.

How does the 'INCREASE COMMUNITY ACCESS TO TESTING (ICATT)' program's overall spending compare to this single contract award?

The provided data focuses solely on the $217M contract awarded to E3HEALTH SOLUTIONS, LLC. It does not offer information on the total budget or spending for the 'INCREASE COMMUNITY ACCESS TO TESTING (ICATT)' program. Therefore, it is impossible to determine how this single contract award compares to the program's overall expenditure. To make such a comparison, one would need data on all contracts awarded under the ICATT initiative, their respective values, and the program's total allocated funding. This contract represents a significant portion of the funding, given its size, but its proportion within the entire program remains unknown without broader program data.

Industry Classification

NAICS: Health Care and Social Assistance › Medical and Diagnostic Laboratories › Medical Laboratories

Product/Service Code: MEDICAL SERVICES › LABORATORY TESTING SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Address: 602 STRADA CIR, MANSFIELD, TX, 76063

Business Categories: Category Business, Limited Liability Corporation, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business, Woman Owned Business

Financial Breakdown

Contract Ceiling: $217,287,460

Exercised Options: $217,287,460

Current Obligation: $217,287,460

Actual Outlays: $216,956,446

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline