HHS awards $237M for OTC COVID-19 tests from Osang LLC, a non-competed definitive contract

Contract Overview

Contract Amount: $237,000,000 ($237.0M)

Contractor: Osang LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2022-12-07

End Date: 2023-04-07

Contract Duration: 121 days

Daily Burn Rate: $2.0M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: THE PURPOSE OF THIS CONTRACT IS TO PROCURE OVER THE COUNTER (OTC) COVID-19 TESTS.

Place of Performance

Location: PASADENA, LOS ANGELES County, CALIFORNIA, 91101

State: California Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $237.0 million to OSANG LLC for work described as: THE PURPOSE OF THIS CONTRACT IS TO PROCURE OVER THE COUNTER (OTC) COVID-19 TESTS. Key points: 1. Contract awarded to a single supplier, raising questions about price competitiveness. 2. The contract's fixed-price nature aims to control costs, but without competition, true value is hard to ascertain. 3. A short performance period (121 days) suggests an urgent need or a bridge to a larger procurement. 4. The awardee's industry is Pharmaceutical Preparation Manufacturing, aligning with the product type. 5. The contract's value is significant, representing a substantial investment in public health preparedness. 6. Lack of competition indicates potential risks related to contractor performance and future pricing.

Value Assessment

Rating: questionable

The contract value of $237 million for OTC COVID-19 tests is substantial. However, as a sole-source award, it is difficult to benchmark against competitive pricing. Without competitive bids, it's challenging to determine if the government secured the best possible value for the taxpayer. The fixed-price structure provides cost certainty for the government, but the absence of competition means there was no market pressure to drive down the price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor was solicited. The justification for this approach is not provided in the data. Typically, sole-source awards occur when there is a unique capability or an urgent need that cannot be met through competition. The lack of multiple bidders means there was no opportunity for price discovery through a competitive bidding process.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as there is no competitive pressure to offer the lowest possible cost. This limits the government's ability to leverage market forces for cost savings.

Public Impact

The primary beneficiaries are the public, who will receive access to over-the-counter COVID-19 tests. The services delivered include the procurement and likely distribution of essential diagnostic tools. The geographic impact is likely nationwide, aiming to support public health efforts across the United States. Workforce implications are minimal for this specific procurement, focusing on manufacturing and supply chain rather than direct service provision.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may result in inflated prices and reduced value for taxpayer funds.
Sole-source awards can set a precedent for future procurements, potentially limiting competition.
The short duration might indicate a reactive procurement rather than strategic planning.
Transparency is limited due to the non-competitive nature of the award.

Positive Signals

The contract addresses a critical public health need for accessible COVID-19 testing.
A fixed-price contract provides cost certainty for the government.
The awardee operates within the relevant industry (Pharmaceutical Preparation Manufacturing).
The contract aims to ensure the availability of essential medical supplies.

Sector Analysis

The procurement of over-the-counter (OTC) COVID-19 tests falls within the broader pharmaceutical and medical supply sector. This sector is characterized by significant research and development, complex manufacturing processes, and stringent regulatory requirements. The market size for diagnostic tests, particularly in response to public health emergencies, can be substantial. This contract represents a direct government investment to bolster the supply chain for essential health products, complementing private market availability.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false) and there is no information on subcontracting plans (sb: false). Therefore, this award does not appear to directly benefit the small business ecosystem through set-asides. The large value of the contract might also suggest that it is less likely to be broken down into smaller portions suitable for small business participation, unless specifically mandated.

Oversight & Accountability

Oversight for this contract would typically fall under 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. The Inspector General's office within HHS would have jurisdiction to investigate any potential fraud, waste, or abuse related to this award.

Related Government Programs

COVID-19 Testing Procurement
Public Health Emergency Supplies
Over-the-Counter Diagnostic Devices
Pharmaceutical Manufacturing Contracts
Department of Health and Human Services Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for price inflation
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $237.0 million to OSANG LLC. THE PURPOSE OF THIS CONTRACT IS TO PROCURE OVER THE COUNTER (OTC) COVID-19 TESTS.

Who is the contractor on this award?

The obligated recipient is OSANG 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 $237.0 million.

What is the period of performance?

Start: 2022-12-07. End: 2023-04-07.

What is the track record of Osang LLC in supplying government contracts, particularly for health-related products?

Information regarding Osang LLC's specific track record with government contracts, especially for health-related products, is not detailed in the provided data. The award is a definitive contract, suggesting it's a direct agreement. Further investigation would be needed to ascertain their past performance, delivery history, and any previous government engagements. Understanding their experience with similar large-scale procurements and their compliance with federal regulations would be crucial for assessing reliability and performance risk.

How does the unit cost of these OTC COVID-19 tests compare to similar government or commercial procurements?

The provided data does not include the per-unit cost of the OTC COVID-19 tests, making a direct comparison impossible. The total award amount is $237 million, and the number of units procured is not specified. Without this information, it is difficult to benchmark the value for money. Given the sole-source nature of the award, there is a heightened need to scrutinize the implied unit cost once it becomes available, comparing it against market rates and other government purchases of similar diagnostic tools.

What are the specific risks associated with awarding a contract of this magnitude on a sole-source basis?

The primary risk associated with a sole-source award of this magnitude is the potential for overpayment due to the lack of competitive bidding. Without competing offers, the government may not be securing the lowest possible price. Other risks include potential quality issues if the sole provider lacks robust quality control, and a lack of flexibility if the contract needs to be modified or expanded. Furthermore, it can stifle innovation and discourage other capable vendors from entering the market for future procurements.

What is the intended distribution strategy for these OTC COVID-19 tests, and who are the primary end-users?

The data indicates the purpose is to procure OTC COVID-19 tests, implying they are intended for widespread public use. The specific distribution strategy is not detailed, but typically such procurements by HHS aim to increase accessibility through pharmacies, community health centers, or direct distribution programs. The primary end-users would be the general public seeking to test for COVID-19 symptoms or exposure. The goal is to provide readily available testing options outside of clinical settings.

What is the historical spending pattern for OTC COVID-19 tests by the Department of Health and Human Services?

The provided data focuses on a single contract award and does not offer historical spending patterns for OTC COVID-19 tests by HHS. To understand historical spending, one would need to analyze procurement databases for previous contracts related to diagnostic testing, particularly during the COVID-19 pandemic. This would involve looking at the volume, value, and types of tests procured over time, as well as the methods of competition used in those prior awards.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 215 N MARENGO AVE FL 3, PASADENA, CA, 91101

Business Categories: Category Business, Foreign Owned, Limited Liability Corporation, Not Designated a Small Business, Partnership or Limited Liability Partnership, Self-Certified Small Disadvantaged Business, Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $237,000,000

Exercised Options: $237,000,000

Current Obligation: $237,000,000

Actual Outlays: $237,000,000

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline