DoD awards $335.6M to GlaxoSmithKline for vaccine adjuvant, raising questions about competition and value

Contract Overview

Contract Amount: $335,592,191 ($335.6M)

Contractor: Glaxosmithkline, LLC

Awarding Agency: Department of Defense

Start Date: 2020-07-30

End Date: 2022-12-30

Contract Duration: 883 days

Daily Burn Rate: $380.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: GLAXOSMITHKLINE ADJUVANT AS03

Place of Performance

Location: DURHAM, DURHAM County, NORTH CAROLINA, 27709

State: North Carolina Government Spending

Plain-Language Summary

Department of Defense obligated $335.6 million to GLAXOSMITHKLINE, LLC for work described as: GLAXOSMITHKLINE ADJUVANT AS03 Key points: 1. The contract's value of $335.6 million represents a significant investment in pharmaceutical preparation manufacturing. 2. Awarded on a sole-source basis, the lack of competition limits price discovery and potentially inflates costs. 3. The duration of 883 days suggests a substantial, long-term need for the specified product. 4. The contract's classification as 'NOT COMPETED' is a key risk indicator for potential overspending. 5. The firm fixed-price structure provides some cost certainty but does not mitigate the risks of a non-competitive award. 6. The absence of small business set-aside flags indicates this large contract did not prioritize small business participation.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific nature of the product (adjuvant AS03). Without competitive bids, it's difficult to ascertain if $335.6 million represents a fair market price. The contract's value is substantial, and the lack of comparative pricing from other potential suppliers makes a definitive value-for-money assessment difficult. Further analysis would require understanding the unique properties and market availability of this specific adjuvant.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a 'NOT COMPETED' procedure, indicating that GlaxoSmithKline, LLC was the only source considered. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. The lack of competition means that the government did not benefit from the price reductions and innovation that can arise from a bidding war among potential suppliers.

Taxpayer Impact: Taxpayers may have paid a premium for this product due to the absence of competitive pressure. The government missed an opportunity to secure the best possible price and terms through open competition.

Public Impact

The primary beneficiaries are likely military personnel and potentially other government entities requiring vaccine support. The contract delivers a critical component (adjuvant AS03) for vaccine formulations, enhancing their efficacy. The geographic impact is primarily linked to the Department of Defense's supply chain and distribution networks. Workforce implications are concentrated within GlaxoSmithKline's pharmaceutical manufacturing facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and may lead to higher costs for taxpayers.
Lack of competition raises concerns about whether the government obtained the best value.
The substantial dollar amount warrants close scrutiny of the necessity and pricing.
Absence of small business participation in a contract of this size is notable.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
The award is for a specific, potentially critical, pharmaceutical component.
The contract duration suggests a sustained need, implying strategic importance.

Sector Analysis

This contract falls within the Pharmaceutical Preparation Manufacturing sector, a critical component of the broader healthcare and defense industries. The market for vaccine adjuvants is specialized, often dominated by a few key players due to intellectual property and manufacturing complexities. Spending in this area is driven by public health needs, military readiness, and biosecurity concerns. Comparable spending benchmarks would typically involve other large-scale pharmaceutical procurements for critical medical supplies.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for them mentioned in the provided data. Given the large dollar value and specialized nature of pharmaceutical manufacturing, it's common for such contracts to go to large, established corporations. The absence of small business involvement means that opportunities for smaller enterprises within this specific procurement are limited, potentially concentrating the economic benefits with the prime contractor.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and financial management offices. Accountability measures are inherent in the firm fixed-price structure, which obligates the contractor to deliver the specified product at the agreed-upon price. Transparency is limited by the sole-source nature of the award; details regarding the justification for not competing and the pricing negotiations are not publicly available. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Pharmaceutical Procurements
Vaccine and Adjuvant Research and Development
Biosecurity and Public Health Initiatives
Medical Countermeasure Stockpiling

Risk Flags

Sole-source award
Lack of competition
Potential for overpricing
Limited transparency in procurement justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $335.6 million to GLAXOSMITHKLINE, LLC. GLAXOSMITHKLINE ADJUVANT AS03

Who is the contractor on this award?

The obligated recipient is GLAXOSMITHKLINE, LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $335.6 million.

What is the period of performance?

Start: 2020-07-30. End: 2022-12-30.

What is the specific function and importance of Adjuvant AS03 in vaccine formulations?

Adjuvant AS03 is an oil-in-water emulsion designed to enhance the immune response to vaccine antigens. It is particularly known for its use in pandemic influenza vaccines, such as those developed during the H1N1 pandemic. By boosting the body's reaction to the vaccine, adjuvants like AS03 can allow for lower doses of antigen to be used, potentially extending vaccine supply during a shortage, or increasing the effectiveness of vaccines in certain populations, such as the elderly. Its specific role in this DoD contract likely relates to ensuring the efficacy and availability of vaccines critical for military readiness or public health preparedness.

What are the typical profit margins for pharmaceutical preparation manufacturing contracts of this scale?

Profit margins in pharmaceutical manufacturing can vary significantly based on factors like product complexity, R&D investment, regulatory hurdles, and market competition. For large-scale government contracts, especially those involving specialized products like vaccine adjuvants, profit margins are often negotiated as part of the firm fixed-price agreement. While specific industry averages are hard to pinpoint without more context on AS03's development costs and market exclusivity, typical government contract profit margins can range from 5% to 15%. However, in sole-source situations, the government has less leverage to negotiate lower margins, potentially leading to higher profits for the contractor if the initial price is not tightly benchmarked.

What are the risks associated with sole-source pharmaceutical contracts for the government?

Sole-source pharmaceutical contracts present several risks for the government. The most significant is the lack of price competition, which can lead to inflated costs compared to what might be achieved in an open market. This reduces the overall value for money. Additionally, without competition, there's less incentive for the sole-source provider to innovate or improve efficiency. There's also a risk of vendor lock-in, making it difficult and costly to switch suppliers in the future. Furthermore, the justification for a sole-source award must be robust to ensure that the government isn't foregoing potentially better options or that the selection wasn't influenced by factors other than best value.

How does the duration of 883 days impact the overall value and risk of this contract?

A contract duration of 883 days (approximately 2.4 years) indicates a long-term commitment by the Department of Defense for GlaxoSmithKline's Adjuvant AS03. This extended period suggests a strategic need for the product, potentially for ongoing vaccination programs, stockpiling, or research and development purposes. From a value perspective, a longer duration can sometimes allow for economies of scale in production, potentially lowering per-unit costs if production is continuous. However, it also increases the risk exposure to market changes, technological obsolescence, or shifts in government priorities over the contract's life. The firm fixed-price nature mitigates some cost uncertainty, but the government remains committed to purchasing the product for the duration.

What are the potential implications of awarding this contract to GlaxoSmithKline, LLC, given their track record?

GlaxoSmithKline (GSK) is a major global pharmaceutical company with extensive experience in vaccine development and manufacturing, including the production of adjuvants. Their track record includes significant contributions to public health and defense-related medical needs. For the DoD, awarding this contract to GSK likely signifies confidence in their ability to reliably produce a high-quality, specialized product like Adjuvant AS03. However, their status as a large, established corporation also means they are a frequent recipient of large government contracts, which, in the context of a sole-source award, reinforces the concern about limited competition and potentially higher costs compared to smaller or emerging suppliers who might offer competitive pricing.

Are there alternative adjuvants or suppliers that the DoD considered or could consider in the future?

The provided data indicates this contract was sole-sourced, meaning alternatives were likely not formally considered through a competitive process for this specific award. However, the pharmaceutical industry does have other adjuvants and suppliers. For instance, aluminum salts (alum) are common and less expensive adjuvants used in many vaccines. Other companies also develop proprietary adjuvant technologies. The DoD's decision to sole-source AS03 suggests either a unique requirement that only GSK could meet, or a failure to adequately explore competitive options. In the future, the DoD could mitigate sole-source risks by conducting market research to identify alternative suppliers and adjuvants, and by structuring future solicitations to encourage competition.

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

Solicitation ID: W15QKN20R0141

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Glaxosmithkline PLC

Address: 5 MOORE DR RESEARCH TRIANGLE PK, DURHAM, NC, 27709

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

Financial Breakdown

Contract Ceiling: $335,592,191

Exercised Options: $335,592,191

Current Obligation: $335,592,191

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline