JA_Cardinal_Health_Final_Redacted.pdf

DEFENSE LOGISTICS AGENCY

(DLA) CONTRACTING SERVICES OFFICE

8000 Jefferson Davis Highway Richmond, VA 23297-5441

JUSTIFICATION AND APPROVAL FOR OTHER

THAN FULL AND OPEN COMPETITION

1. IDENTIFICATION OF THE AGENCY AND CONTRACTING ACTIVITY.

Requiring Activity:

Defense Logistics Agency (DLA) Troop Support 700 Robbins Avenue Philadelphia, PA 19111

Contracting Activity:

DLA Contracting Services Office Richmond (DCSO-R) 8000 Jefferson Davis Highway Richmond, VA 23297-5000

2. NATURE AND/OR DESCRIPTION OF THE ACTION BEING APPROVED.

The action being approved is the use of other than full and open competition to award a contract for continued use of Cardinal Health’s SupplyLine classification system through a license agreement. The license agreement will enable the Government’s continued use of Cardinal Health’s SupplyLine medical and surgical product classification system for readiness m anagement and other logistics functions performed by Defense Medical Logistics Standard Support-Wholesale (DMLSS-W), which supports DMLSS-Retail (DMLSS-R) applications and systems used by U.S. Army, U.S. Air Force, U.S. Navy, and U.S. Marine Corps logisticians. The license agreement will cover use of Cardinal Health’s classification system by both DLA and the Department of Veterans Affairs (DVA). The award of a fixed price contract is anticipated.

3. A DESCRIPTION OF THE SUPPLIES OR SERVICES REQUIRED TO MEET

THE AGENCY’S NEEDS/ESTIMATED DOLLAR AMOUNT.

DLA has a requirement to establish a license agreement for DLA’s and DVA’s use of Cardinal Health’s SuppyLine medical and surgical classification system, which provides determinations of functional equivalences for medical and surgical products. Cardinal Health is the only known source that produces a classification system that is capable of fully integrating with existing DLA Troop Support databases and other medical databases that currently support various military service and DVA logistics and planning activities.

The proposed contract will be for five (5) years, with a 12-month base period and four

(4) unilateral 12-month option periods. The period of performance will be:

September 26, 2016 – September 25, 2017 for the base period, September 26, 2017 – September 25, 2018 for option period one, Justification and Approval Cardinal Health

September 26, 2018 – September 25, 2019 for option period two, September 26, 2019 – September 25, 2020 for option period three, and September 26, 2020 – September 25, 2021 for option period four.

The Government requires a license agreement for DLA Troop Support; a license a greement for DVA; and access to the data for other users in the Departments of Defense (DoD) and DVA medical communities, as well as other federal agencies and departments.

The estimated costs, based on various scenarios, are:

MINIMUM

(3,000

Classifications/ Yr)

MAXIMUM

(36,000

Classifications/Yr

Most Likely:

DLA (DOD)

w/DVA Participation

Base Year Option Year 1 Option Year 2 Option Year 3 Option Year 4 Total

4. IDENTIFICATION OF STATUTORY AUTHORITY PERMITTING OTHER

THAN FULL AND OPEN COMPETITION:

The statutory authority permitting other than full and open competition is 10 U.S.C.

2304(c)(1), as implemented by FAR 6.302-1(a)(2)(iii)(A), “only one responsible source and no other supplies or services will satisfy agency requirements.” FAR 6.302-1(a)(2)(iii)(A) provides that, “For DoD, NASA, and the Coast Guard, services may be deemed to be available only from the original source in the case of follow-on contracts for the continued provision of highly specialized services when it is likely that award to any other source would result in (A) Substantial duplication of cost to the Government that is not expected to be recovered through competition”. Cardinal Health has the only classification system on the market that provides both classification and identification of functionally equivalent medical and surgical products. The Cardinal Health SupplyLine system is available only from the single original source in the case of this follow-on contract action. Other sources for this highly specialized classification system have not been found.

5. DEMONSTRATION THAT THE PROPOSED CONTRACTOR’S UNIQUE

QUALIFICATIONS OR THE NATURE OF ACQUISITION REQUIRES USE OF

CITED AUTHORITY:

The DMLSS requirement for unique classification and identification of functionally equivalent medical and surgical products is provided under the current contract with Cardinal Health, which is due to expire on 25 September 2016. A follow-on contract is needed for uninterrupted use of this classification system. To meet the Government’s requirement to identify functionally equivalent health care products and achieve necessary cost savings opportunities through data aggregation and evaluation, use of Cardinal Health’s SupplyLine system is essential. No other classification system is compatible with the Cardinal Health SupplyLine data feed used in the DMLSS data standardization and synchronization processes.

Only Cardinal Health’s SupplyLine continued data feeds will integrate seamlessly with the existing algorithms and software code developed and owned by DLA. Failure to procure follow-on use of the classification system and identify functionally equivalent medical and surgical product data will adversely impact DLA’s medical supply chain spend analyses and sourcing processes designed to achieve the greatest cost savings mandated by DoD’s Better Buying Power initiative. Furthermore, failure to procure use of Cardinal Health’s SupplyLine classification system has the potential to negatively impact DMLSS application procedures specifically coded to integrate this data feed to satisfy and fulfill functional requirements for acquisition and logistics users in the field, resulting in mission failure.

It is likely that award to any other source will result in substantial duplication of cost that is not expected to be recovered through competition. Use of any other medical and surgical classification system will require a significant investment in developer resources to redesign all the impacted DMLSS applications that use Cardinal Health’s SupplyLine system, as well as a substantial recruitment and staffing effort for clinicians to continually evaluate products for classification as they enter the commercial marketplace. An alternative source will prove cost-prohibitive and will not provide the functional equivalencies the acquisition and logistics field users need for sourcing and purchasing decisions. DLA and the DMLSS program offices do not have money budgeted to recode all government application program code to accommodate a new and different data feed with the required data elements, even if one could be found.

6. DESCRIPTION OF EFFORTS MADE TO ENSURE THAT OFFERS ARE

SOLICITED FROM AS MANY POTENTIAL SOURCES AS IS PRACTICABLE:

The requirement was synopsized in FedBizOpps as a Request for Information (RFI) on June 17, 2016 and closed on June 22, 2016. The RFI was posted to ensure that as many potential sources as possible for the classification and identification of functionally equivalent medical and surgical products will be given the opportunity to submit offers. As a result, no additional potential sources responded. Only one vendor, Cardinal Health, is capable of fulfilling all aspects of the Government’s requirement, based on market research and procurement history.

7. DETERMINATION BY THE CONTRACTING OFFICER THAT THE

ANTICIPATED COST TO THE GOVERNMENT WILL BE FAIR AND

REASONABLE:

I hereby determine the anticipated cost to the government will be fair and reasonable, based on:

a comparison of the proposed price with historical vendor pricing;

pricing for other medical/surgical data used by DLA in the DMLSS suite of applications;

8. DESCRIPTION OF THE MARKET RESEARCH CONDUCTED AND THE

RESULTS:

The following lists the results of additional market research conducted:

POTENTIAL SOURCES IDENTIFIED: COMMENTS:

Incumbent: Cardinal Health SupplyLine Fulfills government requirements U.S. Food and Drug Administration Product Classification

Safety and effectiveness perspective. Does not satisfy government requirements.

European Commission Director General of Health and Consumer MEDICAL DEVICES (MEDDEV) Guidance Document

Safety and effectiveness perspective. Does not satisfy government requirements.

United Nations Standard Products and Services Code (UNSPSC)

Classification schema only. Does not classify or identify functional equivalents. Does not satisfy government requirements.

U.S. National Institute of Health, Unified Medical Language System® (UMLS®)

Over 100 schema. Does not classify or identify functional equivalents. Does not satisfy government requirements.

Centers for Medicare and Medicaid Services (CMS) Healthcare Common Procedure Coding System(HCPCS)

General procedure, product and service coding, no brand names. Does not classify or identify functional equivalents. Does not satisfy government requirements.

Centers for Medicare and Medicaid Services (CMS) International Classification Diseases, Ninth Revision, Clinical Modification (ICD-9-

CM)

Diagnosis and procedure classification. Does not classify or identify functional equivalent products. Does not satisfy government requirements.

Systemized Nomenclature of Medicine

(SNOMED)

Medical terms, codes, diseases, procedure and substance schema. Does not classify or identify functional equivalents. Does not satisfy government requirements.

IMS Government Solutions, IMS Hospital Supply Index™

Sales, not product index. Does not classify or identify functional equivalents. Does not satisfy government requirements.

Cardinal Health is the only known source for this Government requirement for a medical and surgical classification system that can determine functional equivalents for medical and surgical products. Although DLA cannot identify any other sources with a demonstrated capability necessary to fulfill its requirements at this time, DLA will conduct new market research to promote full and open competition for future procurements.

9. ANY OTHER FACTS SUPPORTING THE USE OF OTHER THAN

FULL AND OPEN COMPETITION:

The DMLSS program has conducted independent market research. None of the potential sources identified has the capability to satisfy government requirements. DLA has been employing Cardinal Health’s SupplyLine classifications and functional equivalents in its medical applications since 1993. Historical market research and procurement records show only one responsive offeror can satisfy Government requirements. In addition to cost savings, the benefits of use of Cardinal Health’s SupplyLine system include faster service, reduced waste and excess, improved inventory controls, and improved utilization management and outcome analysis.

10. LISTING OF THE VENDOR SOURCES, IF ANY, WHICH EXPRESSED

IN WRITING AN INTEREST IN THE ACQUISITION:

To date the only offeror who is expected to express an interest in the acquisition effort is Cardinal Health.

11. A STATEMENT OF ACTIONS, IF ANY, THE AGENCY MAY TAKE TO

REMOVE OR OVERCOME ANY BARRIERS TO COMPETITION BEFORE

ANY SUBSEQUENT ACQUISITION FOR SUPPLIES OR SERVICES:

DLA continues to exercise competition as often as possible and is required to conduct ongoing reviews to keep abreast of new technology, both within industry and the Government.

Furthermore, DLA utilizes a variety of vendors, manufacturers, and contracts to fulfill its requirements and will continue the practice of surveying the market to ensure future full and open competition. Requirements will continue to be posted on FedBizOpps to ensure fair opportunity is given and no other providers are available.