JA DTP Medline- 36C77027D0001 Redacted.pdf

DEPARTMENT OF VETERANS AFFAIRS

Justification and Approval (J&A) For

Other Than Full and Open Competition (>SAT)

Acquisition Plan Action ID: 36C770-27-AP-0038

1. Contracting Activity: Department of Veterans Affairs, VISN 15, located at 3450 S 4th Street Trafficway, Leavenworth, KS, in support of the Consolidated Mail Outpatient Pharmacy (CMOP).

2. Nature and/or Description of the Action Being Approved:

The Department of Veterans Affairs (VA), Consolidated Mail Outpatient Pharmacy (CMOP), operates seven CMOP facilities across the United States. CMOP provides prescription fulfillment and mailing services for Veteran patients and fills approximately 84 percent of prescription orders for VA Medical Centers (VAMCs) and Community Based Outpatient Clinics (CBOCs) nationwide. CMOP also supports Indian Health Service (IHS) pharmacies and may support additional Federal partners under future interagency agreements.

At present, the CMOP network is operating at full production capacity. VAMCs also do not have the staff, space, or equipment needed to absorb a large increase in prescription volume. As a result, VA depends on CMOP to fill more than 500,000 Veteran prescriptions each day with an additional 44,000 supplemental medical and surgical supply prescriptions fulfilled per business day by the Direct-to-Patient (DTP) program. Demand continues to grow for the CMOP, requiring longer operating hours and weekend shifts.

Even with ongoing modernization efforts, CMOP does not have the capacity to absorb the approximately 44,000 daily prescriptions that are currently filled by the DTP contractor for medical-surgical and associated medical supplies.

Unlike standard pharmaceutical dispensing, these items require manual fulfillment processes and specialized equipment because of their size, weight, and handling requirements. The current DTP contract with the incumbent contractor, Medline Industries, expires on September 30, 2026. Without a bridge action, VA would face an immediate and unacceptable lapse in the fulfillment and delivery of medical-surgical and associated supplies to Veteran patients, with no alternative means available to absorb this workload within CMOP or elsewhere in the Government. Under the authority of FAR 6.103-2, VA intends to award a new bridge contract to Medline Industries for a six-month period from October 1, 2026, through March 31, 2027, with two (2) three-month extensions exercised at the discretion of the Government. This is not an extension of the current contract. Rather, it is a new bridge action needed to maintain uninterrupted service while VA completes a long-term competitive follow-on acquisition and transitions performance in an orderly manner.

The Integrated Product Team (IPT) continues to refine the requirements, finalize the acquisition strategy, obtain required reviews and approvals, and prepare for full and open competition. The urgent and compelling need for this bridge action did not result from a lack of advance planning by VA. Rather, it arose from developments that could not reasonably have been foreseen or avoided at the time the original acquisition schedule was established, as described below.

During IPT reviews, the team discovered a need to change the acquisition strategy for this procurement to better account for contract expenditures, increase program scope, validate IT infrastructure requirements, and explore the use of existing procurement vehicles such as Prime Vendor and Federal Supply Schedule. These changes resulted in a significant increase in the scope of the contract which is still in review at this time. Due to the significant scope change, the Government requires additional time to solicit a well-defined contract need, resulting in the need for this bridge action.

Collectively, these factors created an urgent and compelling need that could not be resolved through completion of a full and open competition before the current contract's expiration, while also impacting planning for a solicitation that promotes maximum competition for the long-term requirement. The Independent Government Estimate for the

3. Description of Supplies/Services Required to Meet the Agency's Needs:

In accordance with generally accepted contracting practice and court precedent requiring bridge contracts remain essentially unchanged from the existing structure, this contract will remain with the incumbent contractor. The requirement is for warehousing, distribution, and supply chain/logistics services — specifically the procurement, storage, picking, packing, and direct-to-patient shipment of medical-surgical and associated supplies. It is not a manufacturing requirement.

While the IPT has considered a review of the NAICS code for the long-term replacement contract, the Contracting Officer has decided to keep the NAICS code for this interim contract action the same as the prior contract which it is replacing. As this acquisition is intended to maintain the status quo while the competitive process is caried out for the long-term contract, the Contracting Officer will not change the NAICS code.

VA CMOP relies on the DTP contract to outsource 44,000 prescriptions to Medline Industries, for medical-surgical and associated supplies that are shipped directly to Veteran patients. This arrangement helps CMOP manage workload, allows CMOP to focus on prescription pharmaceuticals, supports a broad product line, reduces cancellations, and improves timely delivery to Veterans.

Medical-surgical and associated supply items are not compatible with CMOP's automated pharmaceutical production systems due to their size, bulk, and handling requirements. Processing these items at a CMOP facility would necessitate manual picking, packing, and handling, as well as specialized equipment to support high-volume fulfillment and shipping. Under the DTP program, the contractor is responsible for procuring the required supply items and packaging and shipping them directly to Veterans. The primary cost driver for this contract is the supply items themselves, rather than the service fees associated with packing and shipping. As such, this program is essential for maintaining efficient operations and ensuring the timely delivery of critical medical supplies to Veteran patients.

4. Statutory Authority Permitting Other than Full and Open Competition:

( ) (1) Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements per 41 USC §3304(a)(1) as implemented by FAR 6.103-1;

( X ) (2) Unusual and Compelling Urgency per 41 USC §3304(a)(2) as implemented by FAR 6.103-2;

( ) (3) Industrial Mobilization, Engineering, Developmental or Research Capability or Expert Services per 41 USC §3304(a)(3) as implemented by FAR 6.103-3;

( ) (4) International Agreement per 41 USC §3304(a)(4) as implemented by FAR 6.103-4;

( ) (5) Authorized or Required by Statute per 41 USC §3304(a)(5) as implemented by FAR 6.103-5;

( ) (6) National Security per 41 USC §3304(a)(6) as implemented by FAR 6.103-6;

( ) (7) Public Interest per 41 USC §3304(a)(7) as implemented by FAR 6.103-7;

This requirement supports a critical national CMOP function that must continue without interruption to avoid unacceptable risk to Veteran health and mission performance. As described above, an unforeseen increase in the scope and estimated value of the long-term competitive follow-on requirement

— was identified after Sources Sought closed in January 2026. This increase triggered a review of the current procurement need and strategy that could not have been anticipated at the outset of acquisition planning, and that cannot be completed before the current contract expires on September 30, 2026.

Without a bridge action, CMOP would experience an immediate lapse in the fulfillment and shipment of approximately 44,000 medical-surgical and associated supply prescriptions per business day. CMOP facilities are already at full capacity, and VA medical facilities do not have the space, staffing, or specialized equipment needed to absorb this workload. A lapse in this service would directly and immediately jeopardize the health and safety of Veteran patients who depend on the timely delivery of these supplies. This urgent and compelling need leaves insufficient time to conduct a full and open competition, evaluate proposals, and complete onboarding of a new contractor before the current contract expires.

Although the technical transition for a new contractor can reasonably be estimated at a minimum of 4 months, or approximately 120 days, from award to operational readiness, that estimate reflects only the post-award onboarding effort. It does not include the time needed to complete a full and open competition, obtain all required reviews and approvals for a high-value requirement, and carry out a deliberate, low-risk transition — time that is not available given the immediacy of the need. The total time needed for the competitive follow-on acquisition and transition is reasonably estimated at approximately 12 months, consistent with the anticipated follow-on contract award and start date of October 1, 202 , as reflected in the acquisition's established milestone schedule.

Given the compelling urgency of the need and the limited time remaining before contract expiration, Medline Industries — as the incumbent contractor already performing this requirement — is the source best able to begin performance immediately on October 1, 2026, without a gap in service. Medline Industries has a specific list of items that cannot be filled by any other existing VA or Federal Government contract.

Performance also depends on compliance with the VA Technical Reference Model (TRM) and the use of VA Office of Information and Technology (OI&T)-approved systems that can securely transmit protected health information, including patient and prescription data. This work requires full integration with VA-approved Health Level 7 (HL7) infrastructure and Application Program Interface (API), as well as extensive validation, cybersecurity authorization, and interoperability testing. Past onboarding experience for HL7-enabled vendors shows that these integration efforts are time-consuming and resource-intensive, and current OI&T review processes and cybersecurity requirements add additional complexity. This is the only secure way at present available to the VA for secure patient prescription and healthcare information to be transmitted to a non- Government entity to maintain HIPAA compliance. Given the urgency of the need, there is insufficient time for any source other than the incumbent to complete the mandatory HL7, TRM, cybersecurity, and operational onboarding process — a minimum of 120 days — without creating a lapse in service to Veteran patients.

5. Demonstration that the Contractor's Unique Qualifications or Nature of the Acquisition Requires the Use of the Authority Cited Above (applicability of authority):

Because of the urgent and compelling need to avoid a lapse in critical health care services, and the limited time remaining before contract expiration, VA does not have sufficient time to complete a full and open competition, or to onboard a new contractor, before the current contract ends. The incumbent already maintains the VA-approved technical and operational infrastructure in place to receive, process, fill, and ship prescriptions and related supplies directly to Veteran patients without interruption. That infrastructure includes VA TRM and VA OI&T-approved systems, secure transmission capability for patient and prescription data, validated HL7 interfaces, and the workforce, facilities, inventory, and fulfillment processes needed to operate at the required national scale.

The incumbent also has immediate operational capability that cannot be replicated within the available time. They are already meeting this requirement within established delivery standards, including fulfillment on average within 48 hours of order notification, and they maintain the logistics and distribution network needed to support approximately 44,000 prescriptions per business day for medical-surgical and associated supplies.

Although market research indicates that other firms may be able to compete for the long-term requirement in the future, given the immediacy of the need, a new contractor could not be onboarded in time to avoid a lapse in service, because any new source would require significant transition planning, facility and workforce stand-up, systems integration, testing, validation, cybersecurity approvals, and operational start-up before taking on workload. VA estimates that technical onboarding for a new contractor, from award to operational readiness, would require at least 4 months, or approximately 120 days, under the most favorable conditions — time that is not available before the current contract expires. That estimate covers only post-award onboarding activities such as systems integration, testing, validation, and cutover. It does not include the time required to complete a full and open competition, evaluate proposals, resolve protests if they occur, make award, and then transition performance in an orderly way.

Given the complexity, value, and national importance of this requirement, the overall timeline for the competitive follow-on acquisition and transition is reasonably estimated at approximately 12 months, with an anticipated award and start date of October 1, 2027.

That timeline includes requirements refinement, acquisition planning, internal reviews and approvals, solicitation issuance, proposal evaluation, award, potential protest resolution, and completion of the minimum 4-month technical onboarding period for the follow-on contractor, if the follow-on is awarded to a contractor other than the incumbent. A shorter bridge period would create a substantial risk of repeated bridge actions, added administrative burden, and possible disruption to prescription fulfillment and patient care. For these reasons, the urgency of the need and the incumbent's existing technical integration, validated processes, and immediate operational readiness support use of the cited authority for a 12-month bridge action.

6. Description of Efforts Made to ensure that offers are solicited from as many potential sources as possible (including whether a notice was or will be publicized as required by FAR Part 5 and, if not, which exception under FAR Part 5 applies):

During the work of the IPT, the team identified revised requirements that may increase future vendor participation, improve competition, and provide better value to VA. One important revision from the current PWS is restructuring the workload by geographic regions. A regional approach could reduce shipping costs and provide better continuity during emergencies, severe weather, and other disruptions.

VA is also considering updates to the long-term contract structure that may allow for new processes, new systems, and broader industry participation. Market research associated with the revised requirements and acquisition approach has required additional time and coordination because of evolving program needs and other unanticipated challenges.

Given the urgent and compelling nature of the need, VA published a notice of intent to award a sole source bridge contract in accordance with FAR 5.101 on August 4, 2026, in order to solicit interest from any source that believed it could meet the immediate requirement within the limited time available. No capabilities statements were received from industry in response to that notice, which VA considers reflective of the practical limitations facing any potential source given the compressed timeframe and the technical integration requirements described in Sections 4 and 5.

7. Determination by the CO that the Anticipated Cost to the Government will be Fair and Reasonable:

The estimated value of the proposed bridge action is based on current contract costs for the same services being provided by the incumbent contractor. Those prices were originally established through full and open competition in 2021 and were determined fair and reasonable. In accordance with FAR 15.404-1(b)(2)(ii), comparison of current pricing to historical pricing is a valid price analysis tool for “commercial products or commercial services including those of a type or when requiring minor modifications for commercial products.” Since this interim contract action will be a continuation of the same PWS and scope as the prior contract, comparison with the historical pricing, with a logical adjustment for inflation, is deemed a reasonable approach by the Contracting Officer.

The Government considers the proposed pricing for this bridge action to be fair and reasonable. The handling fee is a fully burdened rate consistent with program requirements.

The overall Consumer Price Index shows a change of April 2021 to current.

While the CPI index for shipping charges, the largest portion of the cost for this interim contract, is not readily available for review in that time period, shipping charges have outpaced the main CPI index Therefore, it would be prudent to believe any would be within the fair and reasonable range comparative to the historic pricing. Since the pricing offered the Contracting Officer considers it to be fair and reasonable.

8. Description of the Market Research Conducted and the Results, or a Statement of the Reasons Market Research Was Not Conducted:

Market research included a review of current DTP contract requirements, an assessment of incumbent contractor performance and operational capabilities, and an evaluation of commercially available sources that provide medical-surgical distribution, home delivery, enteral nutrition products, and related healthcare supply chain services. VA also considered sources identified during acquisition planning and vendor engagement, including Medline Industries, LP, McKesson Medical-Surgical, and Cardinal Health, as well as other firms offering enteral therapy or direct-to-home medical supply services.

Cardinal Health was evaluated for the long-term competed requirement but was not considered for the bridge action because VA does not have an existing contract with Cardinal Health to bridge, and Cardinal Health does not currently have access to the VA-approved HL7 interface required for performance. Obtaining that access requires more than 120 days, which exceeds the time available given the urgent and compelling need to avoid a lapse in service. No separate market outreach to large businesses was conducted for this action, given the urgency of the need and because this is a bridge to the original incumbent contractor rather than a new competitive acquisition; outreach to identify additional large-business sources, including for large-business participation, will occur as part of the long-term competitive follow-on acquisition. There are no other National VA or Federal Government Wide contract vehicles available that have the IT system authorization nor capabilities of servicing the current needs of the DTP program apart from the current vendor.

Market research showed that while commercial firms exist with capabilities relevant to parts of the requirement, the VA DTP requirement is more complex than a standard commercial home delivery model. Performance requires full integration with VA's TRM-approved systems and OI&T-authorized platforms. It also requires the secure exchange of protected health information and prescription data through HL7 interfaces that must work seamlessly with CMOP workflows and VA's electronic health record environment. In addition, a contractor must operate within VA-approved cybersecurity frameworks, maintain Authority to Operate (ATO) for interfacing systems, and support near real-time data exchange with minimal latency.

These are not turnkey commercial capabilities. A new contractor would have to design, build, test, and obtain approval for these integrations while also establishing nationwide distribution capabilities sufficient to support approximately 44,000 prescriptions per business day across a large and changing formulary of medical-surgical supply items for the program as a whole — none of which could be accomplished within the compressed timeframe created by the urgent and compelling need described above. That effort would also require the contractor to source, stock, and manage a broad catalog of supplies without the benefit of an established baseline inventory list, which increases both complexity and transition risk.

The Independent Government Cost Estimate (IGCE) for the long-term competitive follow-on as it now incorporates the supply portion of the requirement. The size, complexity, and criticality of the requirement also demand substantial acquisition planning, requirements refinement, governance review, and stakeholder coordination.

Based on market research and internal technical assessment, VA estimates that technical onboarding for a new contractor, from award to operational readiness, would require at least 4 months, or approximately 120 days, under optimal conditions. Full capability development, including systems integration, testing, inventory build-out, workforce scaling, and risk-mitigated cutover, would likely take longer than that minimum. When that onboarding period is combined with the time required to finalize the acquisition strategy, obtain all required reviews and approvals, conduct the competition, evaluate proposals, make award, and resolve any protest activity, the total time needed to transition safely to a new contractor aligns with an overall acquisition timeline of approximately 12 months, consistent with the anticipated October 1, 2027 award and start date.

Accordingly, market research supports the conclusion that broader competition may be achievable for the long-term requirement once revised requirements, acquisition strategy, and transition planning are completed, but the urgent and compelling need does not allow time for competition for the immediate bridge need. For the bridge period, the incumbent contractor is the source best positioned to begin performance without delay, primarily because of the post-award compliance and onboarding processes outlined above including possessing an integrated technical environment, validated interfaces, established inventory, trained workforce, and proven operational processes needed to continue performance without unacceptable risk to prescription fulfillment and patient care.

9. Any Other Facts Supporting the Use of Other than Full and Open Competition:

CMOP facilities are already operating at full production capacity, so returning the DTP workload to CMOP is not a viable option. VA medical facilities also do not have the staff, space, or specialized equipment necessary to absorb a high volume of enteral nutrition and medical-surgical supply fulfillment. VA remains dependent on CMOP to fill more than 500,000 Veteran prescriptions each day, and the DTP contractors support that mission by filling approximately 44,000 prescriptions a day that CMOP cannot absorb.

Given the urgent and compelling need to avoid a lapse in this critical service, Medline Industries is the vendor with the resources already in place to continue this specialized, Government-integrated DTP operation without disruption. Their current operations are aligned with the size, scope, and technical requirements of the effort, including validated HL7 interfaces, VA TRM/OI&T-approved systems, cybersecurity authorizations, and established fulfillment processes needed to support national-scale prescription and supply distribution. Given the compressed timeframe available, selecting any other source for the bridge period would put continuity of service at risk and create unacceptable risk to Veteran patients and the VA mission.

At a minimum, a new contractor would need a 4-month, approximately 120-day, technical onboarding period after award for system configuration, HL7 integration, VA OI&T review and approval, cybersecurity authorization, end-to-end testing, and operational cutover, followed by inventory build-out and workforce ramp-up — time that does not exist between now and the September 30, 2026 expiration of the current contract. That effort would come on top of the time needed to conduct and complete a full and open competition for the long-term requirement.

Given the importance of uninterrupted prescription and supply fulfillment, the size of the national workload, the urgent and compelling need created by the unforeseen increase in scope and value of the long-term requirement, and the time required to complete the competitive follow-on acquisition and transition, award of a new bridge contract to the incumbent contractor for the 12-month bridge period is the only viable near-term approach that avoids significant risk, service delays, and adverse impacts to patient care.

10. Listing of Sources that Expressed, in Writing, an Interest in the Acquisition:

No sources expressed interest in writing in response to the August 4, 2026, notice of intent to sole source.

11. A Statement of the Actions, if any, the Agency May Take to Remove or Overcome any Barriers to Competition before Making subsequent acquisitions for the supplies or services required:

The follow-on acquisition is expected to move toward a regional coverage model, with regional coverage aligned as evenly as practicable based on CMOP workload distribution.

This approach is intended to shorten delivery distances, reduce transportation costs, and build redundancy to help mitigate disruptions caused by severe weather, natural disasters, or other unforeseen events. By distributing fulfillment responsibility across multiple regions, VA expects to improve continuity of operations and create a more flexible operating model.

From a competition standpoint, this regional model should allow vendors to compete within specific regional coverage areas rather than requiring nationwide infrastructure from every offeror. Market research conducted with National CMOP administration indicates that multiple vendors currently have, or could reasonably establish, capability within the proposed regional coverage areas. These actions are intended to remove or reduce barriers to competition for future acquisitions of this requirement.

As to anticipated procurement schedule, the three-region approach is being incorporated into a full and open competitive procurement with an IGCE The overall acquisition schedule is expected to take approximately 12 months, with an anticipated award and start date of October 1, 2027, and includes refining the requirements and PWS, completing internal reviews and approvals, developing and issuing the solicitation, evaluating proposals, making award, resolving any protest activity, and completing a minimum 4-month, approximately 120-day, technical onboarding and transition period for the follow-on contractor or contractors. The 12-month bridge period, with a 6-month base and two 3-month options, is structured to provide the time needed to complete that competition and transition without disrupting services.