36C10G18D0084-002.pdf

Justification for Other than Full and Open Competition

1. Contracting Activity: Department of Veterans Affairs (VA) Office of Acquisition Operations (OAO) Strategic Acquisition Center (SAC) 10300 Spotsylvania Avenue Fredericksburg, VA 22408

2. Description of the Action: The proposed action is to award a sole source firm-fixed-priced Indefinite Delivery Indefinite Quantity (IDIQ) to Cardinal Health P.R. 220, LLC.

This action is to provide the Department of Veteran Affairs (VA) Strategic Acquisition Center (SAC) a short term solution to continue, pending remediation of disaster conditions associated with Hurricane Maria, urgently needed distribution services for the Medical Surgical Prime Vendor Next Generation (MSPV-NG) of medical and surgical products specific to the VA Medical Facility/Caribbean Healthcare System Puerto Rico, Geographic Area 21, including: VA Medical Center, San Juan, PR; VA Outpatient Clinic Mayaguez, PR; and Outpatient Clinic, Ponce, PR ((Veterans Integrated Service Network (VISN 8 Puerto Rico only)). The Period of Performance for this award will be 20 April 2018 through 19 April 2019. Medical Surgical Prime Vendor is a national mandatory program that provides a customized distribution system to meet or exceed facility requirements by providing an efficient, cost-effective, just-in-time distribution catalog ordering process. This type of prime vendor program is a standard commercial practice and enables facilities to reduce inventory holding cost and streamline delivery and distribution tasks within the facility. The program supports VA’s need to have a single centralized distribution contractor, so as to benefit from economies of scale and to facilitate immediate action to respond to product recalls and like events that may impact patient safety. The estimated value of the proposed contracting action is not to exceed $10,293,720.00.

The action proposed will provide medical/surgical stock to the distribution centers and warehouses and shipment of those items to VA Medical Centers in Puerto Rico. A previous sole source bridge IDIQ for the requirement was awarded on 17 April 2017 to Cardinal Health P.R. 220, Inc. following performance issues with American Medical Depot (AMD) who was competitively selected as the MSPV awardee for Puerto Rico in 2016. A second bridge effort is required in order to continue prime vendor services in PR without any disruption in service to our Veterans in the aftermath of Hurricane Maria.

The Government has conducted continuing market research and analysis to identify sources capable of providing these services within Puerto Rico at full performance level within the required time. An immediate solution must be in place no later than April 19, 2018, so that medical services and supplies can be delivered while the Government’s efforts to fully compete the requirement, postponed as a result of local disaster conditions, are reinitiated and completed. The medical care and surgical support of 73,000 enrolled veterans in Puerto Rico depend on this service to be continued uninterrupted. The failure on the part of the Government to have a contract in place no later than April 19, 2018 would result in grave physical and medical risk to Veteran patients.

3. Description of the Supplies or Services: VA SAC, in partnership with the Veterans Health Administration (VHA), are tasked to deliver timely medical and surgical products to our Nation’s Veterans through the MSPV-NG Program. These items include all required, medical, surgical, dental, cleaning, rescue and safety, and laboratory consumable supplies used by VA medical facilities. These medical/surgical supplies are currently provided via Cardinal Health P.R. 220 as MSPV-NG prime contractor distributor under terms established with suppliers under various Federal Supply Schedules, VA National and local contracts, Blanket Purchase Agreements, Basic Ordering Agreements and Distribution and Pricing Agreements. Cardinal Health P.R.

220 will be required to provide the following product categories (Produce Service Codes) at established Government prices from a pre-negotiated formulary catalog developed by SAC:

4240 (Safety and Rescue Equipment;

6505 (Drugs, Biologicals);

6509 (Drugs and Biologicals, Veterinary use);

6510 (Surgical Dressing Materials);

6515 (Medical & Surgical Instruments, Equipment and Supplies);

6520 (Dental Equipment, instruments, Supplies);

6525 (Imaging Equipment and Supplies);

6530 (Hospital Equipment);

6532 (Hospital and Surgical Clothing and Related Special Purpose

Medical/Surgical Supplies);

6540 (Ophthalmic Instruments, Equipment and Supplies);

6545 (Replenishable Field Medical Sets, Kits, and Equipment);

6550 (In Vitro diagnostic Substances, Reagents, Test Kits and Sets);

6630 (Chemical Analysis Instruments and Equipment);

6640 (Laboratory Equipment and Supplies);

6650 (Optical Instruments, Test Equipment, Components and Accessories);

6670 (Scales and Balances);

7910 (Floor Polishers and Vacuum Cleaning Equipment);

7920 (Brooms, Brushes, Mops and Sponges);

7930 (Cleaning and Polishing Compounds and Preparations);

8305 (Textile Fabrics);

8520 (Toilet Soap, Shaving Preparations and Dentifrices).

The VHA manages the United States’ largest integrated healthcare system. The VHA consists of over 1,700 sites of care, serving 8.76 million Veterans each year. These sites include 18 VISNs with approximately 150 Medical Centers, 820 outpatient clinics, and various other facilities to include Community Living Centers, Vet Centers and multiple Domiciliary. Together these health care facilities and the more than 53,000 independent licensed health care professionals, provide comprehensive care to about

9.3 million enrolled Veterans. The Medical care and surgical support of more than 73,000 enrolled Veterans in Puerto Rico depend on this requirement.

The SAC and VHA have an urgent requirement not only to obtain continued delivery of these medical/surgical products and services in Puerto Rico, but to assure that delivery continues at the current high performance levels and degree of reliability. Currently, successful performance of critical MSPV-NG functions within Puerto Rico is at extremely high risk due to disaster conditions formally declared by the Federal Emergency Management Agency (FEMA) on September 17, 2017 in connection with Hurricane Maria. Due to the devastating losses associated with these conditions, the majority of PR has been cut off from the world and massive recovery efforts continue today.

The period of performance will commence on 20 April 2018 and extend for 12 months .

This period of performance allows sufficient time for the VA to continue essential services while re-initiating efforts – ongoing at the time Hurricane Maria hit - to compete its requirement for a long term MSPV solution, once local conditions allow. The estimated maximum price of the new Cardinal Health P.R. 220, LLC. IDIQ for Puerto Rico is $10,293,720.00.

4. Statutory Authority: The statutory authority permitting other than full and open competition is in accordance with 41 U.S.C. 3304(a)(2) and FAR 6.302.2(a)(1), Unusual and Compelling Urgency

5. Rationale Supporting the Use of the Authority Cited Above: Due to disaster conditions associated with Hurricane Maria, employees and highways are unable to support transportation and communications necessary to assure all interested vendors (many from outside the country) can support or participate in any competitive pre-solicitation efforts; and performance risks associated with any transition of the contract to a new provider are unacceptably high. Cardinal Health P.R. 220, LLC. is currently providing these critical MSPV services to VHA facilities in VISN 8 (Puerto Rico only) at acceptable service levels, but the contract will expire on April 19, 2018. Any delay or disruption in supply of service could create a medically unsafe issue within multiple facilities, because medical surgical supplies are critical to patient care. VHA medical centers and related facilities cannot operate without a reliable stream of the correct supplies, provided to fill short-fuse orders in a timely manner. Cardinal Health P.R. 220, LLC. has the necessary supply chain, warehouse and employee resources currently in place, and since the events of Hurricane Maria has deployed these resources effectively to provide the reliable, uninterrupted service that meets the government's system-wide requirements.

At the time Hurricane Maria hit, the Government was close to releasing a competitive solicitation for the requirement to be awarded. However, extensive and persisting hurricane related damage to PR’s communication, power, and transportation infrastructure has significantly impaired the Government’s ability to engage in even the most rudimentary efforts during the ensuing months. Onsite Government personnel were fully occupied in recovery efforts and lacked sufficient time to engage in efforts needed to meaningfully compete the contract (i.e., performance of site tours, on-site preproposal conferences and evaluation of proposals). Moreover, although some progress has been made toward recovery efforts in the intervening months, there has been continuing instability in the infrastructure necessary to support performance of a new contractor. For example, catastrophic damage to roads has resulted in long lead times being necessary to travel even a short distance. To meet short turnaround times for fulfillment of medical supply orders, the contractor therefore needs a warehouse within very close proximity of VA facilities. Moreover, that warehouse must be of sufficient size to accommodate a 60 day supply of approximately 300 different items, and should be climate and humidity controlled to prevent damage to medical items in PR’s tropical climate. Cardinal, the incumbent, has suitable warehouse space available.

Further, even if a competitive contract could be awarded immediately, such an award would result in unacceptable delays in providing distribution services of critical medical products to VA. It is estimated that a new contract/vendor would take more than six months to build the complete required 60 day inventory of almost 300 recurrent items.

For any required items where a vendor is not resident in Puerto Rico, the contractor would be required to ship them in to the island. Local piers that would need to be used for this purpose are currently being overseen by FEMA, which prioritizes all shipments and which has the power to hold release of supplies from the port indefinitely. It is also anticipated that any new contractor would be delayed in putting the necessary logistics and IT systems in place based on continuing deficiencies in the power and communications grids – even today, electrical power facilities are still only about 80 percent restored, and these are still subject to frequent outages. The risks in requiring an untried new contractor - without Cardinal’s hands-on experience, knowledge of local conditions and existing relationships – to negotiate these obstacles are unacceptably high given the importance of the health care mission to be supported.

Reports in the press also indicate significant migration of individuals out of Puerto Rico since the Hurricane, which in turn calls into question the adequacy of the local labor pool from which a new contractor could staff the contract. Critical to successful performance of this requirement is a fully-functional workforce that can provide VHA Medical Centers in Puerto Rico with effective on-site support. This workforce consists of full time customer service representatives who assist with ordering processes;

identify mandatory usage data items to achieve contractual fill rates; review reports;

provide problem resolution of Core/Non-Core backorders; update pricing and federal contract information; research and coordinate substitute products; perform web-based ordering; and continue systems training. Hiring, interviewing and selecting a staff of employees to perform these functions would take weeks if not months even in a stable labor market; added to which an estimated 220 days is needed to train customer service representatives in these required functions. Mistakes by untrained employees during a transition to a new provider could create patient safety issues if mistakes are made in filling supply orders, or the necessary supplies are not received when needed.

Accordingly, in order to assure provide uninterrupted medical/surgical products and services in the unstable market and business conditions now prevailing in Puerto Rico, a sole source IDIQ contract will be awarded to the incumbent MSPV service provider, Cardinal Health P.R. 220, LLC. The proposed MSPV distribution bridge will provide uninterrupted services to PR until recovery efforts are further along and conditions can better support full competition of the Government’s MSPV requirement, without putting essential Veteran health care missions at risk.

For the expressed reasons herein, the government's needs are best served by a short term urgent and compelling contract with Cardinal Health P.R. 220, LLC. to support the MPSV program. Cardinal Health P.R. 220, LLC. is the only contractor capable of fulfilling the government’s short-term urgent requirements without unacceptable disruption to operations and significant potential risks to patient care and patient safety.

This contract will ensure continuous delivery of medical and surgical supplies to participating medical facilities.

6. Efforts to Obtain Competition: Market research for this requirement supports that Cardinal Health P.R. 220, LLC, as VA’s incumbent MSPV provider, is the only source who could continue to provide service and supplies at the necessary levels of fidelity, without any disruption. The damage from the hurricane in combination with the influx of relief supplies to the island has put a premium on warehouse space and other infrastructure a new contractor would need to take over performance; dislocation of residents due to hurricane damage has potential to disrupt of the available workforce;

and loss of transportation/communication infrastructure make it impracticable if not impossible to convene at this time the necessary preproposal activities required for a competitive solicitation. In addition, given the degraded local infrastructure conditions now prevailing, it would be impossible for a new contractor to complete the necessary ramp up to full contract performance levels - 120 days is needed to complete workforce training, and 6 months is needed to build the required store of local inventories needed to support successful performance. Under these circumstances, competition of this requirement and transition to a new contractor places the Veteran population at unacceptable risk since the VA is the only functioning medical resource for many of our patients during this emergency. No additional resources can start up and timely meet the Government’s requirement when the current contract expires (April 19, 2018). Due to the anticipated performance period being limited and the post-hurricane logistical situation being so complex, meaningful competition at fair and reasonable prices cannot be anticipated. In accordance with FAR 5.301, 6.302-1 and 6.302-2, this action will be synopsized upon award on the Federal Business Opportunities (FBO) website and the justification will be made publically available.

7. Actions to Increase Competition: A competitive solicitation for this requirement was ready for publication immediately prior to Hurricane Maria making landfall in Puerto Rico. The devastation caused by the hurricane precluded further efforts to timely complete the solicitation process in time for a 20 April 2018 award; and local conditions continue in a debilitated state that preclude VA from risking any transition in service at this time. No barrier to future competition is anticipated once the island recovers from the hurricane damage. Currently, however, it is in the Agency’s best interest to proceed with the proposed sole source acquisition strategy for a 12-month period, moving forward during that time with a competitive solicitation utilizing the full and open competition supported in the 2016 market research. This will create conditions more conducive to fair competition and by all companies interested in the procurement.

8. Determination of Fair and Reasonable Price: The Contracting Officer will conduct all analysis and negotiation necessary to assure all pricing under any awarded contract will be fair and reasonable. The Contracting Officer will ensure the distribution fees are considered reasonable and are in line with the fees charged in the previous contract.

Additionally, price discounts will be sought when negotiating the final contract prior to award. This IDIQ to Cardinal Health P.R. 220, LLC. will represent the best value to the Government and result in the lowest overall cost alternative to meet the Government’s immediate needs while minimizing risk and ensuring continued delivery of medical/surgical products.

9. Market Research: Market research for this requirement, which included consultation with onsite VA personnel with direct and current knowledge of local conditions and contract requirements, concluded that Cardinal Health P.R. 220, LLC is the only source who can currently continue to provide supplies without any disruption. Due to continuing disaster conditions in the state of PR after the hurricanes in September of 2017, it is impossible for this requirement to be competitively solicited at this time. The emergency needs of our Veterans and the inability of a potential competitor to construct a realistic proposal for this requirement compel the SAC to seek another short term bridge with the incumbent. There are no other sources that can immediately meet the requirements for the MSPV medical/surgical supplies in such a short period of time. The conditions of the logistics network and workforce on the island were verified by onsite VA personnel with knowledge of VA’s requirements. Performance is required by April 20, 2018 and no other source is capable of providing these services by that date due to the need to have inventory and a distribution system in place. Veterans Affairs has a compelling need to have consistent uninterrupted medical and surgical supplies that can meet the government’s system-wide requirements; principally to ensure uninterrupted medical surgical supplies without compromising direct patient care to VHA medical centers.

10. Any other Facts Supporting this Justification: Strategic Acquisition Center is currently establishing single award competed IDIQs that will populate the MSPV-NG catalog for VHAA and the medical centers to order from. Cardinal Health P.R. 220, LLC. will be providing distribution of these competed medical products to VA hospitals and medical centers in PR. The Government proposes awarding for a period of 12 months to allow for conducting additional market research to determine if any new potential businesses are capable of fulfilling this requirement and to execute a satisfactory acquisition strategy.

Approved: 20 March 2018

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