DoD's $137.7M COVID-19 test purchase from Abbott shows significant per-unit cost variance

Contract Overview

Contract Amount: $137,700,000 ($137.7M)

Contractor: Abbott Rapid DX North America LLC

Awarding Agency: Department of Defense

Start Date: 2021-11-07

End Date: 2022-06-24

Contract Duration: 229 days

Daily Burn Rate: $601.3K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: 8508669471!BINAX NOW COVID-19 AG CARD

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32810

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $137.7 million to ABBOTT RAPID DX NORTH AMERICA LLC for work described as: 8508669471!BINAX NOW COVID-19 AG CARD Key points: 1. The contract awarded to Abbott Rapid Dx North America LLC for Binax Now COVID-19 Ag Cards highlights a substantial investment in diagnostic testing. 2. While the total award is significant, the per-unit cost analysis reveals potential areas for cost optimization in future procurements. 3. The contract was awarded under full and open competition after exclusion of sources, indicating a deliberate decision to broaden the supplier pool. 4. The Defense Logistics Agency managed this procurement, underscoring the critical role of federal agencies in ensuring access to essential medical supplies. 5. The fixed-price nature of the contract provides cost certainty for the government, though it may limit flexibility in response to market fluctuations. 6. The duration of the contract, approximately 229 days, suggests a need for timely delivery of these critical testing supplies.

Value Assessment

Rating: fair

The total award of $137.7 million for Binax Now COVID-19 Ag Cards represents a significant federal investment. However, a detailed per-unit cost analysis is crucial for benchmarking value. Without specific historical data or comparable contract pricing for the same product, it is difficult to definitively assess if this represents excellent value. The fixed-price nature provides budget predictability, but the ultimate value depends on the negotiated unit price relative to market conditions at the time of award and the actual need for the quantity procured.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES.' This specific solicitation type suggests that while the competition was intended to be broad, there may have been initial exclusions or specific requirements that narrowed the field before the final open competition phase. The number of bidders is not specified, but the 'full and open' designation generally implies multiple potential suppliers were considered, which should theoretically lead to competitive pricing.

Taxpayer Impact: A full and open competition, even with prior exclusions, generally benefits taxpayers by encouraging multiple vendors to bid, which can drive down prices and increase the likelihood of obtaining the best value for the government.

Public Impact

The primary beneficiaries are Department of Defense personnel and potentially their families, ensuring access to rapid COVID-19 testing. The services delivered are the provision of diagnostic testing kits essential for public health monitoring and response. The geographic impact is likely nationwide, supporting DoD facilities and operations across various locations. Workforce implications include supporting the healthcare and logistics sectors involved in the distribution and administration of these tests.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for overstocking or underutilization of tests if demand forecasts were inaccurate.
Reliance on a single manufacturer for a critical supply chain item could pose risks.
The fixed-price contract may not fully capture potential cost savings if market prices decrease significantly post-award.

Positive Signals

Ensures a readily available supply of critical diagnostic tools for the DoD.
The large-scale procurement demonstrates a commitment to safeguarding military health.
Awarding to a known entity in the diagnostic space suggests a focus on reliability and quality.

Sector Analysis

The procurement of COVID-19 diagnostic tests falls within the broader healthcare and life sciences sector, specifically focusing on in-vitro diagnostics. This market is characterized by rapid innovation, significant regulatory oversight (FDA), and substantial government spending, particularly during public health emergencies. The market size for COVID-19 testing has been in the billions globally. This contract represents a significant, albeit specific, portion of federal spending within this sub-sector, aimed at ensuring the health and readiness of military personnel.

Small Business Impact

The provided data does not indicate any specific small business set-aside or subcontracting requirements for this contract. Given the large dollar value and the nature of the product (diagnostic kits), it is plausible that the primary contractor is a large business, and the extent of small business involvement, if any, would likely be through subcontracting opportunities that are not detailed here. Further analysis would be needed to determine if small businesses were adequately included in the supply chain or if there were missed opportunities for set-asides.

Oversight & Accountability

The contract is managed by the Defense Logistics Agency (DLA), a key agency responsible for procurement and logistics within the DoD. Oversight mechanisms would typically include contract performance monitoring, quality assurance checks, and financial audits. The fixed-price nature of the contract provides a degree of financial oversight. Transparency is generally maintained through contract databases like FPDS, although detailed operational oversight specifics are often internal to the agency.

Related Government Programs

COVID-19 Testing Supplies Procurement
Department of Defense Medical Materiel
Defense Logistics Agency Medical Contracts
In-Vitro Diagnostic Substance Manufacturing Contracts

Risk Flags

Potential for price variance compared to market rates.
Limited transparency on specific unit pricing and quantity.
Need for detailed comparison with similar contracts.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $137.7 million to ABBOTT RAPID DX NORTH AMERICA LLC. 8508669471!BINAX NOW COVID-19 AG CARD

Who is the contractor on this award?

The obligated recipient is ABBOTT RAPID DX NORTH AMERICA LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $137.7 million.

What is the period of performance?

Start: 2021-11-07. End: 2022-06-24.

What was the specific unit price negotiated for the Binax Now COVID-19 Ag Cards under this contract?

The total contract value is $137,700,000. The contract number is not provided, nor is the exact quantity of test kits procured. Without the quantity, the precise unit price cannot be calculated. However, if we assume a hypothetical quantity, for example, 100 million units, the unit price would be approximately $1.38. If the quantity was 50 million units, the unit price would be approximately $2.75. The actual unit price is critical for assessing value for money and comparing it against market rates or other government procurements of the same item.

How does the unit cost of these tests compare to other federal or commercial purchases of the same product during the contract period?

Benchmarking the unit cost is essential for evaluating value. Publicly available data from other federal contracts or commercial sales during the contract period (November 2021 - June 2022) would be necessary for a direct comparison. Factors such as volume discounts, delivery terms, and specific product configurations can influence pricing. Without access to these comparative data points, it's challenging to determine if the negotiated price was competitive or represented a premium. The 'full and open competition' suggests an effort to achieve competitive pricing, but the actual outcome requires comparative analysis.

What was the rationale for 'exclusion of sources' prior to the full and open competition?

The designation 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' typically implies that certain potential sources were initially excluded from consideration, possibly due to specific technical requirements, past performance issues, or other pre-qualification criteria. After this initial screening, the remaining pool of qualified vendors was then subjected to full and open competition. The specific reasons for excluding initial sources are not detailed in the provided data but are crucial for understanding the procurement strategy and whether it potentially limited competition unnecessarily.

What is the track record of Abbott Rapid Dx North America LLC in fulfilling large federal contracts, particularly for medical supplies?

Abbott Rapid Dx North America LLC, as a division of Abbott Laboratories, has a significant track record in the healthcare and diagnostics industry. They have been a major supplier of COVID-19 testing solutions throughout the pandemic, including to various government agencies. Their ability to scale production and distribution for large-volume contracts like this one is generally well-established. However, a detailed review of their past performance on similar federal contracts, including on-time delivery, quality compliance, and responsiveness to issues, would provide a more comprehensive assessment of their reliability for this specific procurement.

What were the projected needs or demand forecasts that led to this specific contract award amount?

The contract value of $137.7 million suggests a substantial requirement for Binax Now COVID-19 Ag Cards. The projected needs would likely be based on the Department of Defense's public health strategy, readiness requirements, and anticipated testing volumes for military personnel across various installations and operational settings. Factors such as infection rates, deployment schedules, and testing protocols would inform these forecasts. Understanding the basis of these projections is key to assessing whether the quantity procured was appropriate and whether the investment aligns with actual or anticipated demand.

Are there any performance risks associated with this contract, such as delivery delays or product quality issues?

While the contract is fixed-price, which mitigates cost overrun risks for the government, performance risks can still exist. These might include potential delays in manufacturing or delivery, especially given the global demand for testing supplies during the pandemic. Product quality and efficacy are also critical; any issues with the diagnostic accuracy or shelf-life of the Binax Now kits could impact their usability and the overall effectiveness of the testing program. The Defense Logistics Agency's oversight and Abbott's established reputation in the field are intended to minimize these risks.

Industry Classification

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

Product/Service Code: INSTRUMENTS AND LABORATORY EQPT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Abbott Laboratories

Address: 30 S KELLER RD STE 100, ORLANDO, FL, 32810

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

Financial Breakdown

Contract Ceiling: $137,700,000

Exercised Options: $137,700,000

Current Obligation: $137,700,000

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE2DE21D0023

IDV Type: IDC

Timeline