HHS awards $61.2M for OTC COVID-19 tests to Azure Medical, Inc. under a non-competed contract

Contract Overview

Contract Amount: $61,236,000 ($61.2M)

Contractor: Azure Medical, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2023-09-20

End Date: 2025-03-19

Contract Duration: 546 days

Daily Burn Rate: $112.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: OVER THE COUNTER (OTC) COVID-19 TESTS

Place of Performance

Location: PLAIN CITY, UNION County, OHIO, 43064

State: Ohio Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $61.2 million to AZURE MEDICAL, INC. for work described as: OVER THE COUNTER (OTC) COVID-19 TESTS Key points: 1. The contract value represents a significant investment in readily available diagnostic tools. 2. The sole-source nature of this award warrants scrutiny regarding potential price inflation and lack of market pressure. 3. Performance risk appears moderate given the product type, but supply chain and delivery timelines are key indicators. 4. This award positions Azure Medical as a key supplier for essential public health supplies. 5. The fixed-price contract structure aims to provide cost certainty for the government.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without comparable sole-source awards for similar quantities and types of OTC COVID-19 tests. The fixed-price nature provides some cost control, but the lack of competition means there's no direct market comparison to assess if the pricing is optimal. The total award amount of $61.2 million for a 546-day period suggests a substantial per-unit cost, which should be evaluated against production costs and market availability.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor can provide the required goods or services, or in urgent situations. The lack of competition limits the government's ability to leverage market forces to secure the best possible price and terms.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Without a competitive process, there is less assurance that the price reflects the lowest achievable cost for these essential medical supplies.

Public Impact

The primary beneficiaries are the public, who gain access to over-the-counter COVID-19 tests. The contract ensures the supply of diagnostic tools crucial for public health monitoring and individual health management. The geographic impact is national, aiming to ensure availability across the United States. Workforce implications are primarily within Azure Medical, Inc. and its supply chain, potentially supporting manufacturing and distribution jobs.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source awards can reduce transparency in pricing and procurement.
Dependence on a single supplier could create supply chain vulnerabilities.
The specific performance metrics and quality control measures need close monitoring.

Positive Signals

Ensures a consistent supply of critical public health resources.
Fixed-price contract provides budget predictability.
Azure Medical, Inc. is positioned to meet a specific government need.

Sector Analysis

The market for diagnostic tests, particularly for infectious diseases like COVID-19, is a significant segment within the broader healthcare and biotechnology sector. This contract falls under In-Vitro Diagnostic Substance Manufacturing. The demand for such tests has fluctuated but remains important for public health infrastructure. Comparable spending benchmarks would typically involve analyzing other large-scale government procurements of similar diagnostic kits, though sole-source awards make direct comparisons difficult.

Small Business Impact

This contract does not appear to involve a small business set-aside. There is no explicit information regarding subcontracting plans with small businesses. The focus is on a direct award to Azure Medical, Inc., which may limit opportunities for small businesses to participate in the supply chain for these specific tests unless they are direct suppliers to Azure Medical.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Health and Human Services (HHS), specifically the Office of Assistant Secretary for Preparedness and Response (ASPR). Accountability measures would be defined by the contract terms, including delivery schedules and quality standards. Transparency is limited due to the sole-source nature, but contract details should be publicly available through federal procurement databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

COVID-19 Testing Supplies
Public Health Preparedness
Diagnostic Medical Devices
Medical Supplies Procurement

Risk Flags

Sole-source award lacks competitive justification.
Potential for inflated pricing due to lack of competition.
Supply chain risk associated with single-source provider.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $61.2 million to AZURE MEDICAL, INC.. OVER THE COUNTER (OTC) COVID-19 TESTS

Who is the contractor on this award?

The obligated recipient is AZURE MEDICAL, INC..

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 $61.2 million.

What is the period of performance?

Start: 2023-09-20. End: 2025-03-19.

What is Azure Medical, Inc.'s track record with government contracts, particularly for medical supplies?

Information regarding Azure Medical, Inc.'s specific track record with government contracts, especially for medical supplies, is not detailed in the provided data. A comprehensive review would require accessing federal procurement databases (like SAM.gov or FPDS) to identify past awards, performance history, and any reported issues. Understanding their experience with similar large-scale procurements, their capacity to meet demand, and their past performance ratings would be crucial for assessing risk and value. Without this historical data, it's difficult to fully evaluate their reliability as a sole-source provider for these critical OTC COVID-19 tests.

How does the per-unit cost of these OTC COVID-19 tests compare to market rates or other government purchases?

The provided data does not include the per-unit cost or the total quantity of tests, making a direct comparison impossible. The total contract value is $61.2 million over 546 days. To benchmark the per-unit cost, one would need to know the number of tests procured. This information is essential for comparing against market prices for similar OTC COVID-19 tests or against prices paid by other government agencies or entities. Given the sole-source nature, it is plausible that the per-unit cost might be higher than if the contract had been competitively bid, as there is less pressure to offer the lowest possible price.

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

The primary risks associated with this sole-source award include potential overpayment due to the lack of competitive pricing pressure, reduced transparency in the procurement process, and increased dependence on a single supplier. This dependence can create vulnerabilities in the supply chain, potentially leading to shortages if Azure Medical, Inc. faces production or logistical challenges. Furthermore, without competition, there is less incentive for the contractor to innovate or offer cost-saving efficiencies. The government also loses the opportunity to discover and engage with potentially more capable or cost-effective alternative suppliers.

How effective is the fixed-price contract structure in managing costs for this specific procurement?

The Firm Fixed Price (FFP) contract structure is generally effective in providing cost certainty for the government, as the price is set and not subject to adjustment based on the contractor's cost experience. For this procurement of OTC COVID-19 tests, an FFP contract helps the Department of Health and Human Services (HHS) manage its budget by establishing a clear ceiling for the expenditure. However, the effectiveness in managing overall value is diminished by the sole-source nature of the award. While the price is fixed, it may not necessarily be the lowest achievable price. The government bears the risk of the contractor realizing a higher profit margin if their costs are lower than anticipated.

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

The provided data snippet focuses on a single contract award and does not offer historical spending patterns for OTC COVID-19 tests by HHS. To analyze historical spending, one would need to examine procurement data over previous years, identifying all contracts related to COVID-19 testing supplies, their values, award types (competed vs. sole-source), and the contractors involved. Understanding past spending trends, including fluctuations in demand, pricing evolution, and the prevalence of sole-source awards versus competitive ones, would provide crucial context for evaluating the current $61.2 million award and its justification.

Industry Classification

NAICS: Manufacturing › Pharmaceutical and Medicine Manufacturing › In-Vitro Diagnostic Substance Manufacturing

Product/Service Code: INSTRUMENTS AND LABORATORY EQPT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: 75A50223C00037

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 8628 INDUSTRIAL PKWY, PLAIN CITY, OH, 43064

Business Categories: Asian Pacific American Owned Business, Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Minority Owned Business, Self-Certified Small Disadvantaged Business, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $61,236,000

Exercised Options: $61,236,000

Current Obligation: $61,236,000

Actual Outlays: $61,236,000

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline