DoD's $59.7M COVID-19 test kit industrial base expansion contract awarded to Cepheid

Contract Overview

Contract Amount: $59,686,916 ($59.7M)

Contractor: Cepheid

Awarding Agency: Department of Defense

Start Date: 2021-09-30

End Date: 2022-09-30

Contract Duration: 365 days

Daily Burn Rate: $163.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: R&D

Official Description: COVID-19 DHHS INDUSTRIAL BASE EXPANSION FOR TEST KITS.

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $59.7 million to CEPHEID for work described as: COVID-19 DHHS INDUSTRIAL BASE EXPANSION FOR TEST KITS. Key points: 1. Contract aimed to bolster domestic manufacturing capacity for critical COVID-19 testing supplies. 2. Sole-source award raises questions about price reasonableness and potential for better value through competition. 3. Performance period of one year suggests a focused effort on immediate industrial base needs. 4. The contract's R&D classification indicates a focus on process or product improvement, not just procurement. 5. Geographic focus on California for this industrial expansion effort. 6. No small business set-aside was applied, potentially limiting opportunities for smaller firms in this expansion.

Value Assessment

Rating: questionable

The contract value of $59.7 million for a one-year period for industrial base expansion is substantial. Without competitive bidding, it is difficult to benchmark the value for money. The sole-source nature of the award necessitates a thorough review of Cepheid's pricing to ensure it aligns with market rates for similar industrial expansion or R&D efforts. The lack of competition may have led to a higher price than could have been achieved through a more open process.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Cepheid, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. While sole-source awards can be justified in specific circumstances, such as urgent needs or unique capabilities, they limit price discovery and may not yield the best possible pricing for the government.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as the government does not benefit from the price reductions typically driven by competition among multiple bidders.

Public Impact

The primary beneficiaries are the domestic industrial base for COVID-19 test kits, aiming for increased production capacity. Services delivered include the expansion and strengthening of manufacturing capabilities for critical testing supplies. The geographic impact is focused on California, where the industrial base expansion is likely to occur. Workforce implications could include job creation in manufacturing and related technical fields within California.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits transparency and potential for cost savings through competition.
Lack of small business participation may exclude innovative smaller firms from contributing to industrial base expansion.
R&D classification for industrial base expansion could obscure the true nature of the procurement if it's primarily for production scaling.

Positive Signals

Addresses a critical need for domestic production of COVID-19 testing supplies, enhancing national health security.
Supports a specific, high-demand area (test kits) crucial for pandemic response.
Awarded to a known entity (Cepheid) which may possess specialized knowledge or existing infrastructure.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on physical, engineering, and life sciences. The award aims to expand the industrial base for COVID-19 test kits, a critical component of the healthcare and biotechnology market. The market for diagnostic testing and related manufacturing is substantial, with significant government investment during the pandemic to ensure supply chain resilience. Comparable spending benchmarks would typically involve R&D grants for manufacturing process improvements or capital investments in production facilities.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. This means that opportunities for small businesses to participate in this industrial base expansion were likely limited, potentially missing out on their agility and innovation in manufacturing or related services.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting oversight mechanisms. Given it's a definitive contract, standard reporting and performance monitoring would apply. Transparency is limited due to the sole-source nature. The Inspector General's office could investigate the justification for the sole-source award and the reasonableness of the price if concerns arise.

Related Government Programs

COVID-19 Testing Supply Chain Initiatives
Biotechnology Industrial Base Support
Medical Device Manufacturing R&D
Department of Defense Advanced Manufacturing Programs

Risk Flags

Sole-source award may limit price competition.
Lack of small business participation noted.
R&D classification for industrial base expansion could be broad.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $59.7 million to CEPHEID. COVID-19 DHHS INDUSTRIAL BASE EXPANSION FOR TEST KITS.

Who is the contractor on this award?

The obligated recipient is CEPHEID.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $59.7 million.

What is the period of performance?

Start: 2021-09-30. End: 2022-09-30.

What is Cepheid's track record with government contracts, particularly in R&D and manufacturing expansion?

Cepheid has a history of government contracts, often related to diagnostic testing solutions. Their track record with the Department of Defense and other federal agencies would need to be reviewed to assess their performance on previous R&D and manufacturing-related awards. Specific details on past contract values, performance ratings, and any issues encountered would provide context for this current $59.7 million award. Understanding their experience in scaling production and managing industrial base expansion projects is crucial for evaluating the risk and potential success of this contract.

How does the $59.7 million value compare to similar industrial base expansion or R&D contracts for diagnostic test kits?

Benchmarking the $59.7 million value requires comparing it to similar contracts for industrial base expansion or R&D in the diagnostic test kit sector. Without access to a comprehensive database of comparable sole-source or competitively awarded contracts, a precise comparison is difficult. However, the amount suggests a significant investment, potentially covering substantial capital expenditures, technology development, or workforce training. If competitive awards for similar objectives exist, their values would offer a critical point of comparison to assess if this sole-source award represents fair market value.

What specific risks are associated with a sole-source award for industrial base expansion in a critical area like COVID-19 test kits?

The primary risk of a sole-source award is the potential for inflated pricing due to the lack of competitive pressure. This means taxpayers might be paying more than necessary. Another risk is the missed opportunity to leverage the innovation and efficiency of multiple potential suppliers. Furthermore, if Cepheid faces unforeseen challenges in execution, the government has limited alternative options without re-initiating a lengthy procurement process. Ensuring robust oversight and clear performance metrics becomes even more critical in sole-source situations.

How effective is the R&D classification in capturing the scope of 'industrial base expansion for test kits'?

Classifying this contract under 'Research and Development in the Physical, Engineering, and Life Sciences' (NAICS 541715) for 'industrial base expansion' might be a broad interpretation. While R&D could be involved in optimizing manufacturing processes or developing new testing technologies, the core objective appears to be scaling production capacity. If the primary focus is on increasing output of existing test kits, the 'industrial base expansion' aspect might lean more towards capital investment and manufacturing scale-up rather than pure R&D. A clearer classification might better reflect the contract's true purpose and allow for more accurate spending analysis.

What are the historical spending patterns for COVID-19 related industrial base expansion by the Department of Defense?

Historical spending patterns for COVID-19 related industrial base expansion by the DoD would reveal the scale and frequency of such investments. Analyzing previous awards, including their values, durations, and awarded contractors, would indicate the government's strategy in bolstering domestic manufacturing for pandemic response. This $59.7 million contract should be viewed within that broader context to understand if it represents a typical investment or an outlier in terms of size or scope for this specific objective.

What is the justification provided for awarding this contract to Cepheid on a sole-source basis?

The justification for a sole-source award typically rests on specific criteria outlined in federal acquisition regulations, such as the existence of only one responsible source capable of providing the required supplies or services, or urgent and compelling circumstances that preclude full and open competition. For this contract, the justification would likely detail Cepheid's unique capabilities, proprietary technology, or existing infrastructure essential for rapidly expanding the industrial base for test kits during the COVID-19 pandemic. Without this specific justification, it's challenging to fully assess the necessity of the sole-source approach.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology)

Product/Service Code: RESEARCH AND DEVELOPMENT › N – Health R&D Services

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

Parent Company: Danaher Corporation

Address: 904 CARIBBEAN DR, SUNNYVALE, CA, 94089

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $59,686,916

Exercised Options: $59,686,916

Current Obligation: $59,686,916

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline