HHS awarded $602M for childhood vaccines, with GSK as the sole contractor under full and open competition

Contract Overview

Contract Amount: $602,049,945 ($602.0M)

Contractor: Glaxosmithkline, LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2014-04-01

End Date: 2015-03-31

Contract Duration: 364 days

Daily Burn Rate: $1.7M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: VACCINE FOR CHILDREN (VFC) 2014

Place of Performance

Location: DURHAM, DURHAM County, NORTH CAROLINA, 27709

State: North Carolina Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $602.0 million to GLAXOSMITHKLINE, LLC for work described as: VACCINE FOR CHILDREN (VFC) 2014 Key points: 1. The contract value represents a significant investment in public health, specifically for childhood immunization programs. 2. While GSK was the sole awardee, the 'full and open competition' indicates a broad solicitation process. 3. The fixed-price contract type suggests predictable costs for the government, mitigating budget overruns. 4. The duration of one year allows for flexibility in adapting to evolving public health needs and vaccine availability. 5. The contract's focus on pharmaceutical preparation manufacturing highlights the critical role of the private sector in vaccine supply chains. 6. The absence of small business set-asides suggests the scale and specialized nature of this procurement.

Value Assessment

Rating: good

The contract value of $602 million for a one-year supply of childhood vaccines appears to be within a reasonable range for large-scale pharmaceutical procurements. Benchmarking against similar large-volume vaccine contracts would provide a more precise value-for-money assessment. The fixed-price nature of the award helps control costs, but the absence of detailed cost breakdowns makes a granular price assessment challenging. The sole awardee, GSK, is a major pharmaceutical manufacturer with established capabilities in this area.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' meaning all responsible sources were permitted to submit offers. Despite this broad solicitation, GlaxoSmithKline, LLC was the sole awardee. This could indicate that while multiple entities were eligible to bid, only GSK possessed the specific capabilities, product offerings, or met the stringent requirements necessary for this particular vaccine procurement. The competitive process, even with a single awardee, should have driven pricing to a market-competitive level.

Taxpayer Impact: A full and open competition process, even resulting in a single awardee, suggests that taxpayer funds were sought through a structured and transparent bidding process, aiming for the best value available in the market.

Public Impact

Children across the United States benefit from access to essential vaccines, contributing to herd immunity and disease prevention. The Centers for Disease Control and Prevention (CDC) receives a critical supply of vaccines to administer through the Vaccines for Children (VFC) program. The geographic impact is nationwide, ensuring vaccine availability across all states and territories. The contract supports jobs within the pharmaceutical manufacturing sector, particularly at GlaxoSmithKline's facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for over-reliance on a single supplier for a critical public health commodity.
Lack of transparency on specific vaccine types and quantities procured within the total award amount.
Limited visibility into the cost breakdown per vaccine unit, making detailed price analysis difficult.

Positive Signals

Award to a reputable, large-scale pharmaceutical manufacturer with a proven track record in vaccine production.
Use of a firm-fixed-price contract type provides cost certainty for the government.
The 'full and open competition' process, even with one awardee, suggests a structured procurement approach.

Sector Analysis

The pharmaceutical manufacturing sector is a critical component of the healthcare industry, characterized by high R&D costs, stringent regulatory oversight, and significant market concentration among a few large players. This contract falls within the 'Pharmaceutical Preparation Manufacturing' subsector. The global vaccine market is substantial, driven by public health initiatives and the need to combat infectious diseases. Government procurements like this represent a significant portion of demand for vaccine manufacturers.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Given the scale of the procurement and the specialized nature of vaccine manufacturing, it is common for such contracts to be awarded to large, established pharmaceutical companies. There is no explicit information on subcontracting plans for small businesses, but it is unlikely to be a primary focus for this type of high-value, specialized product procurement.

Oversight & Accountability

Oversight for this contract would primarily reside with the Centers for Disease Control and Prevention (CDC) within the Department of Health and Human Services (HHS). The contract is a definitive contract, implying a formal agreement with defined terms and conditions. Accountability measures would be embedded in the contract's performance clauses and delivery schedules. Transparency is facilitated by the public nature of federal contract awards, though specific details on vaccine types and pricing may be proprietary.

Related Government Programs

Vaccines for Children Program
HHS Strategic National Stockpile
CDC Immunization Services
Public Health Emergency Preparedness

Risk Flags

Sole awardee despite full and open competition may warrant further investigation into market dynamics.
Lack of detailed cost breakdown limits granular value assessment.
Potential for supply chain disruption if reliance on a single manufacturer is high.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $602.0 million to GLAXOSMITHKLINE, LLC. VACCINE FOR CHILDREN (VFC) 2014

Who is the contractor on this award?

The obligated recipient is GLAXOSMITHKLINE, LLC.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Centers for Disease Control and Prevention).

What is the total obligated amount?

The obligated amount is $602.0 million.

What is the period of performance?

Start: 2014-04-01. End: 2015-03-31.

What specific vaccines were procured under this contract, and what was the rationale for selecting GSK as the sole awardee despite full and open competition?

The provided data does not specify the exact types or quantities of vaccines procured under this $602 million contract for the Vaccines for Children (VFC) program. The rationale for GlaxoSmithKline, LLC being the sole awardee, despite the 'full and open competition' solicitation, likely stems from their established market position, specific vaccine portfolio relevant to the VFC program's needs at the time, and their ability to meet the stringent technical, quality, and volume requirements. Other bidders may not have offered the required vaccines, or their proposals may not have been deemed as advantageous in terms of price, delivery, or technical merit by the contracting agency, the Centers for Disease Control and Prevention (CDC).

How does the $602 million award for one year compare to historical spending on childhood vaccines by the CDC?

To assess how the $602 million award compares to historical spending, one would need to analyze CDC's procurement data for childhood vaccines over previous years. For instance, if the CDC typically spent between $500 million and $700 million annually on similar vaccine procurements, this award would be considered within the expected range. Conversely, if historical spending was significantly lower or higher, it might indicate a shift in vaccine needs, pricing trends, or program scope. Without access to that historical data, it's difficult to definitively benchmark this specific award's magnitude against past expenditures. However, $602 million represents a substantial commitment to ensuring vaccine availability for children.

What are the key performance indicators (KPIs) and risk mitigation strategies associated with this contract?

Key performance indicators for this contract would likely include timely delivery of vaccines, adherence to quality and storage standards (e.g., cold chain maintenance), and meeting specified quantities. Risk mitigation strategies would involve the firm-fixed-price contract type, which caps the government's financial exposure. The CDC would also likely have clauses for product recalls, contingency plans for supply chain disruptions, and potentially require performance bonds. Given GSK's established role, the primary risks might revolve around potential manufacturing issues, unexpected demand surges, or the emergence of new public health threats requiring different vaccine formulations, which would necessitate contract modifications or new procurements.

What is GlaxoSmithKline's track record with the federal government, particularly in vaccine supply?

GlaxoSmithKline (GSK) is a major global pharmaceutical company with a long-standing history of supplying vaccines to governments worldwide, including the U.S. federal government. They are a significant player in the pediatric vaccine market, producing several vaccines routinely recommended for children. Their track record with the federal government would typically involve numerous contracts over the years for various pharmaceutical products and vaccines, administered through agencies like HHS/CDC and the Department of Defense. While specific contract performance details are often proprietary, GSK's continued role as a major supplier suggests a generally reliable performance history in meeting government requirements for vaccine supply and quality.

What are the implications of a sole-source awardee emerging from a full and open competition for price discovery and market competition?

When a 'full and open competition' results in a sole awardee, it can have mixed implications for price discovery and market competition. On one hand, the initial competitive solicitation process theoretically drives prices down as multiple bidders vie for the contract. The government benefits from the market's best offer at that stage. However, the subsequent lack of ongoing competition for that specific contract period means the government is reliant on the single awardee. This can limit further price negotiation leverage until the contract expires or requires significant modification. It may also signal that the market for this specific product or service is highly concentrated, with few capable suppliers, potentially indicating higher inherent market prices.

What is the typical profit margin for pharmaceutical companies on government vaccine contracts of this scale?

Determining the precise profit margin for pharmaceutical companies on government vaccine contracts is challenging, as this information is typically considered proprietary and is not publicly disclosed in contract award details. Profit margins are influenced by numerous factors, including the specific vaccine, the complexity of manufacturing, R&D recoupment, market competition, contract terms (like fixed-price vs. cost-plus), and the overall volume of the order. While government contracts aim for fair and reasonable pricing, pharmaceutical companies operate in a market where significant investment in research and development necessitates profitable ventures. Industry-standard profit margins can vary widely, but for large-scale, established product procurements like this, margins are generally expected to be within a range that allows for continued investment and shareholder returns, often falling within the typical ranges seen in the broader pharmaceutical sector.

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

Solicitation ID: 2014N15784

Offers Received: 5

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Glaxosmithkline PLC (UEI: 238980408)

Address: 5 MOORE DR, RESEARCH TRIANGLE PARK, NC, 27709

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Limited Liability Corporation, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $688,405,900

Exercised Options: $688,405,900

Current Obligation: $602,049,945

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Timeline