DoD awards Moderna $1.79B for COVID-19 mRNA Vaccines, a sole-source definitive contract

Contract Overview

Contract Amount: $1,788,399,999 ($1.8B)

Contractor: Moderna US, Inc.

Awarding Agency: Department of Defense

Start Date: 2022-07-28

End Date: 2023-03-31

Contract Duration: 246 days

Daily Burn Rate: $7.3M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: COVID-19 MRNA VACCINES

Place of Performance

Location: CAMBRIDGE, MIDDLESEX County, MASSACHUSETTS, 02139

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $1.79 billion to MODERNA US, INC. for work described as: COVID-19 MRNA VACCINES Key points: 1. Contract value represents a significant investment in vaccine procurement. 2. Sole-source award raises questions about price discovery and potential cost savings. 3. Contract duration of 246 days suggests a focused, short-term supply need. 4. Firm Fixed Price contract type offers cost certainty for the government. 5. The award falls within the Pharmaceutical Preparation Manufacturing sector. 6. This contract is a key component of the government's pandemic response strategy.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific application to COVID-19 vaccines. Without competitive bids, it's difficult to definitively assess if the $1.79 billion represents optimal value for money. However, given the urgency and critical nature of vaccine supply during a pandemic, the price may reflect market conditions and the contractor's unique capabilities. Further analysis would require comparing pricing to other government vaccine procurements or commercial sales, if available and comparable.

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 responsible source is available or when there is a compelling justification for not seeking full and open competition. The lack of competition means that the government did not benefit from the price reductions and innovation that can arise from a competitive bidding process.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without multiple bids, there is less assurance that the price reflects the lowest possible cost for the required vaccines.

Public Impact

The primary beneficiaries are the U.S. military personnel and potentially their families, ensuring their health and readiness. The service delivered is the supply of critical COVID-19 mRNA vaccines. The geographic impact is national, supporting public health initiatives across the United States. Workforce implications are minimal for this specific contract, as it focuses on product supply rather than direct service provision.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Lack of transparency in the sole-source justification could obscure potential alternatives.
Dependence on a single supplier for critical medical supplies poses a supply chain risk.

Positive Signals

Firm Fixed Price contract provides budget certainty and protects against cost overruns.
Awarding to Moderna leverages existing expertise and established production capabilities for mRNA vaccines.
Ensures timely access to a critical medical countermeasure for national security and public health.

Sector Analysis

The pharmaceutical preparation manufacturing sector is a vital part of the healthcare industry, focused on the production of drugs and vaccines. This contract falls within the broader biopharmaceutical market, which is characterized by high R&D costs, stringent regulatory requirements, and significant government investment. Comparable spending benchmarks in this sector would typically involve large-scale procurements of vaccines or therapeutics by government agencies for public health or military readiness purposes.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there information suggesting significant subcontracting opportunities for small businesses. The award is made directly to Moderna US, Inc., a large pharmaceutical company. Therefore, the direct impact on the small business ecosystem is likely minimal, although the broader availability of vaccines could indirectly support small businesses by enabling economic activity.

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 contract terms, particularly the Firm Fixed Price structure, which obligates Moderna to deliver the specified quantity and quality of vaccines. Transparency is limited due to the sole-source nature of the award, but contract details are typically reported in federal procurement databases. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

COVID-19 Vaccine Procurement
Department of Defense Medical Supplies
Pharmaceutical Manufacturing Contracts
Biopharmaceutical Research and Development
Public Health Emergency Response

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 Defense awarded $1.79 billion to MODERNA US, INC.. COVID-19 MRNA VACCINES

Who is the contractor on this award?

The obligated recipient is MODERNA US, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $1.79 billion.

What is the period of performance?

Start: 2022-07-28. End: 2023-03-31.

What is Moderna US, Inc.'s track record with the Department of Defense prior to this award?

Prior to this $1.79 billion award for COVID-19 mRNA vaccines, Moderna US, Inc. had a limited direct contracting history with the Department of Defense. While Moderna is a prominent player in the pharmaceutical industry, particularly known for its mRNA vaccine technology, its primary government contracts were often associated with health agencies like the Department of Health and Human Services (HHS) for COVID-19 vaccine development and procurement. The Department of Defense's engagement with Moderna for such a large-scale vaccine supply contract suggests a strategic decision to leverage the company's established capabilities for military health and readiness, potentially building upon broader federal pandemic response efforts.

How does the $1.79 billion contract value compare to other government vaccine procurements?

The $1.79 billion contract value for COVID-19 mRNA vaccines is substantial, reflecting the scale and critical nature of pandemic preparedness. Comparing it to other government vaccine procurements requires context. For instance, large influenza vaccine contracts or procurements for other critical countermeasures might reach hundreds of millions of dollars. However, the unique circumstances of the COVID-19 pandemic, including the rapid development, mass production, and widespread distribution needs, likely drove this contract's value higher than typical annual vaccine procurements. Without specific data on comparable sole-source awards for novel vaccines during public health emergencies, a precise benchmark is difficult, but the figure indicates a significant national investment.

What are the primary risks associated with a sole-source award for critical medical supplies?

The primary risks associated with a sole-source award for critical medical supplies like COVID-19 vaccines include a lack of price competition, which can lead to higher costs for the government and taxpayers. There's also a reduced incentive for the sole-source provider to innovate or offer the most cost-effective solutions, as they face no direct competitive pressure. Furthermore, sole-source awards can create dependency on a single supplier, posing supply chain vulnerabilities if that supplier experiences production issues, quality control problems, or faces geopolitical challenges. Transparency is also reduced, making it harder to scrutinize the justification for not competing the award.

How effective is the Firm Fixed Price contract type in managing costs for vaccine procurement?

The Firm Fixed Price (FFP) contract type is generally considered effective for managing costs in procurement scenarios where the scope of work is well-defined and risks are manageable. For vaccine procurement, an FFP contract provides the government with cost certainty, as the price is fixed regardless of the contractor's actual costs. This protects the government from cost overruns. It also incentivizes the contractor to control costs efficiently to maximize profit. However, for highly complex or R&D-intensive procurements where uncertainties are high, FFP might not be suitable. In this case, for the supply of established mRNA vaccines, FFP is a suitable choice for budget predictability.

What are the historical spending patterns for pharmaceutical preparation manufacturing by the Department of Defense?

Historical spending patterns for pharmaceutical preparation manufacturing by the Department of Defense typically fluctuate based on national health priorities, military readiness requirements, and emerging threats. While the DoD procures pharmaceuticals for its personnel and beneficiaries, its spending in this category is generally lower than that of civilian health agencies like HHS or the VA. Major spikes in spending, such as the $1.79 billion awarded to Moderna, are often driven by specific public health emergencies or strategic initiatives like pandemic preparedness. Historically, the DoD's pharmaceutical spending would focus on vaccines for deployed forces, endemic disease prevention, and readiness-related medical countermeasures, often through competitive contracts.

What is the significance of the contract's duration (246 days) in the context of vaccine supply?

The contract duration of 246 days (approximately 8 months) for the supply of COVID-19 mRNA vaccines suggests a focused, medium-term procurement effort rather than a long-term, ongoing supply agreement. This timeframe likely aligns with specific delivery schedules, seasonal needs, or immediate public health objectives related to the pandemic response. It indicates that the Department of Defense was seeking to secure a defined quantity of vaccines within a relatively short period. This duration is shorter than typical multi-year sustainment contracts but longer than immediate, short-notice emergency procurements, suggesting a planned acquisition phase.

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: W58P0522R0007

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Modernatx Inc.

Address: 200 TECHNOLOGY SQ, CAMBRIDGE, MA, 02139

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

Financial Breakdown

Contract Ceiling: $7,837,399,999

Exercised Options: $1,788,399,999

Current Obligation: $1,788,399,999

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline