Contracting officers are key to national contracts savings

By Shaun Eagan DLA Troop Support Public Affairs

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Joanmarie Grace watched in amazement as pharmaceutical drug manufacturers went back and forth underbidding one another for 10 straight hours. The winning bidder would be awarded a contract to sell a specific drug to government customers, and she was the moderator.

Grace is a Defense Logistics Agency Troop Support Medical supply chain contracting officer who uses pricing tools, such as the reverse auction, to procure drugs for customers across four federal agencies.

“For that particular one, I was really excited because I figured out that I’d have to work more than 200 years at my current salary to match the savings that we got,” Grace said.

Grace works within Medical’s National Contracts program. Through the program, Grace and the other contracting officers consolidate all of the requirements from select federal agencies and bulk order specific generic pharmaceutical drugs at lower costs.

The National Contracts program is a cost reduction initiative between the Department of Defense, Veterans Affairs, Indian Health Services and the Federal Bureau of Prisons that operates within Defense Health Agency guidelines.

Jason Wray, the National Contracts chief, says contracting officers like Grace are vital to the program’s success.

Their ability to build relationships, handle the solicitation process, work with industry and federal agency partners and manage contracting plans is what allows the program to provide pharmaceutical drugs to those who need it, at the best price.


GOVERNMENT COLLABORATION  

Grace and the other contracting officers are responsible for managing the drug contracts while they are in the program.

The process is lengthy and requires strong organization and communication with her counterparts at other agencies, customers and manufacturers.

The team that manages the National Contracts program meets monthly with DHA and the other agencies.

This is the starting point for the 195-day process.

At the meeting, DHA assigns pharmaceutical drugs on an as-needed basis to the agencies for entry into the National Contracts programs.

From a list of about 300 of the most purchased drugs between the agencies, whichever agency purchased the most takes the lead on that drug for all the involved agencies.

“If the DOD uses it more, it’s assigned to us,” Wray said. “Once it’s assigned to me, DHA will give me the entire [amount purchased] that we’ve had the past year. I’ll take that, combine the [amount purchased] from the VA, BOP and IHS all together, and then assign it to one of the contracting officers.”

As of November, there are about 60 drugs assigned to Medical.

Before drugs can enter the National Contracts program, market research needs to make sure the drug will be beneficial to the government with low pricing options. This requires close coordination and communication with the manufacturers and customers.

“The whole purpose is that we’re not going to waste the government’s money and time when it’s something that we know is just not the right time for,” Grace said. “So that’s what your market research is. It’s to see who are the players, who’s out there, can I get buy-in, can they produce it, do we have the right dimensions, bottle size, etcetera.”

The research shows if contract details and drug requirements satisfy the agencies’ customers and determines if there will be manufacturer competition that would result in low bidding on the contracts.

It may also show that a requested quantity is not how the pharmaceuticals are manufactured.

“Sometimes you may want 50 counts in a bottle and [manufacturers] really only do 30, 60 or 90,” Grace said. “These are the things you need ironed out before you get started. Sometimes, it’s really just to get industry input.”

For example, Grace was working a follow-on contract for a drug that came in 90-count bottles, but some customers requested both 90- and 100-count bottles.

“We told them that we’d go out and ask because generally you don’t ask for both of [those size dimensions] that close,” Grace said. “There is a major difference for a 90 count for a drug. This particular drug you may take three times a day, which the bottle can be shipped right out from the mail. With the 100-count bottles, you’re not going to do that. It’ll probably be poured into a machine and dispensed either at a hospital or a pharmacy where they’ll fill different sized bottles.”

Graces uses the information to find out which manufacturers, if any, can handle both specifications, and how much competition would there be for a new contract.

“It’ll be my job to go to Jason once I compiled all the information and say, ‘This is what I’m finding out. Do we still want to pursue 90s and 100s because it’ll take this one player out because they can’t provide both?’”

If the market research shows that the change would be beneficial to the government, they would change the specifications. If not, Grace and Wray decide a way forward.

“We’ll go back to the customer and say, ‘we have one vendor who does 90s and 100s but one vendor can only do 90s. Can we go with the 90s as opposed to both?’” Wray said.

Once the market research justifies the drug entering the National Contracts program, Grace posts the solicitation and works with Medical’s Customer Pharmacy Operations Center pharmacists to verify the manufacturers who applied for the contract meet all of the federal and agency requirements.

 

IMPACT TO THE BOTTOM LINE

Once the contracting officer awards the contract, the ordering system informs customers that the drug is on a national contract and reflects a new price to save money.

“If everything goes the way it’s supposed to, it’ll be the best priced,” Grace said. “It could be available on Federal Supply Schedule for $1 a pill, but, National Contracts could have it at $.04 a pill.”

Contracts come with one-year deals and give the contracting officer the option rights for another year, not to exceed five years. The locked price protects Medical customers from price increases and plays an important role in allowing customers, such as medical treatment facilities, to reduce their budgets on generic pharmaceuticals, said Wray.

Altogether, the contracting officers helped save customers $19.7 million in October and $254 million in fiscal 2018 through the National Contracts program.

The program saved DLA and its partner agencies $851.5 million since its inception in 2013.

Some of the largest customers that benefit from the program are military service members and their dependents, the Tricare Mail Order Pharmacy, the VA’s Consolidated Mail Outpatient Pharmacy and VA hospitals across the country.

 

RELATIONSHIPS MATTER

Grace’s job is still not finished even after she awards the contract.

“Joan is assigned roughly a dozen contracts that are already awarded and administers their yearly option renewals along with any other issues that may arise during the life of the contract,” Wray said. “In addition, Joan is also in the process of awarding four or five new contract awards.”

Because the contracts she administers are in different phases of the National Contract program, Grace develops various relationships with the manufacturers.

There are times she will engage a manufacturer as a potential business partner, and she may engage that same manufacturer for a drug on its third year option facing a distribution problem. The way she fosters these relationships helps her do her job.

“We have to make sure everything is fair and transparent,” Grace said. “We need to make sure everyone is treated equal. Once the award goes out, you now have to treat it like a business partnership.

“You may say, ‘hey, Jane Doe, what’s going on with this, or is there something you can do with that?’ Then the next day it’s, ‘Ms. Doe, send us your best proposal.’ I mean, it’s just a way we need to do business.”

Grace also has to make sure both the customer and manufacturer stick to their end of the contract.

If manufacturers aren’t delivering products as they promised or customers aren’t purchasing the drugs that are on national contracts when they should be, the contracting officers work with their Medical partners, such as the CPOC, to assist.

Occasionally, there are times when the relationship between the contracting officer and manufacturer keeps the business partnerships going.

If a drug is actively under contract and suddenly costs less on the Federal Supply Schedule, which is a General Service Administration long-term government wide contract, it wouldn’t be cost-effective for the government to continue the contract. Grace may tell the manufacturer that she does not plan to extend the option due to the drug being cheaper than the current agreement and begin working with the manufacturer in hopes of getting a better price.

“We’re basically renegotiating at the option-time and it may or may not work,” Grace said.

There may also be contingency operations that raise requirement numbers that weren’t agreed upon in the contract. In this situation, the contracting officer works with the manufacturer to see if the relationship she has created with the manufacturer can influence them in providing more to the government.

“Our job is to mitigate as much risk as possible for the government and still have a fair deal for both parties,” Wray said.

The contracting officers’ ability to foster relationships and create partnerships with the other agencies, customers and industry plays a large role in the program’s success.

Grace says it’s important for a contracting officer to “stay loose” because things can happen at any moment that has a serious impact on money and companies.

She suggests that for success in National Contracts, contracting officers need to have good time management, organizational skills and be motivated.

“I try to never lose sight of how important it is for [our customers] to be able to count on receiving the pharmaceutical medical supplies we are able to supply on our National Contracts,” Grace said. “I am extremely proud of the work this team accomplishes and I do get quite a sense of pride and satisfaction knowing we are making a difference.”