Publicly Released: January 21, 2021
Objective
The objective of this audit was to determine whether the DoD paid fair and reasonable prices for laboratory equipment and medical supplies, including personal protective equipment (PPE), procured in response to the coronavirus disease–2019 (COVID‑19) pandemic.
Background
COVID‑19 is an infectious disease caused by a newly discovered coronavirus. The World Health Organization Director‑General declared COVID‑19 a pandemic on March 11, 2020. As a result of the surge in demand in response to the pandemic, laboratory equipment and medical supplies were in short supply, and the World Health Organization and the Centers for Disease Control and Prevention (CDC) both warned of severe and mounting disruption to the global supply of PPE due to the COVID‑19 pandemic. According to the World Health Organization, these shortages left doctors, nurses, and other frontline workers ill-equipped to care for COVID‑19 patients due to limited access to supplies, such as gloves, medical masks, respirators, goggles, face shields, gowns, aprons, hand sanitizer, and thermometers. Therefore, we selected particular items for review so we could determine whether the DoD obtained these items at fair and reasonable prices.
The focus of our review was on four items we categorized as laboratory equipment and medical supplies, and four items we categorized as PPE. For laboratory equipment and medical supplies, we focused on reagents, viral transport tubes, thermometers, and hand sanitizer; for PPE we focused on nitrile gloves, gowns, coveralls, and N95 masks. These items accounted for 861 contract actions, valued at $27.8 million, as of May 1, 2020.
According to the Federal Acquisition Regulation (FAR), at a minimum, contracting officers must use price analysis to determine whether prices are fair and reasonable when acquiring commercial items, which are items available for sale to the general public. All the items we reviewed were considered commercial items. Furthermore, according to the FAR, in acquisitions that do not require certified cost or pricing data, contracting officers are required to use all data available for determining a fair and reasonable price. Finally, contracting officers are required to document the main elements of negotiated agreements in their contract files.
Finding
The DoD paid fair and reasonable prices on 19 of 23 contracts, valued at $4.1 million, for the eight items reviewed. In addition, contracting personnel evaluated price reasonableness and determined that prices for all 23 contracts were fair and reasonable in accordance with DoD and FAR guidance. However, using commercially available and historical pricing, we identified items on four contracts for which the DoD did not pay fair and reasonable prices. This occurred because the COVID‑19 pandemic caused an increase in demand for medical supplies that were not always available for purchase at the time contracting personnel made their determinations. Specifically, the DoD paid:
• $13.75 per mask for N95 masks, while the price published by the manufacturer for the same
model was between $1.02 and $1.31 per mask.
• $4 per ounce for 8-ounce bottles of hand sanitizer ($32 per bottle) and $6 per ounce for 4-
ounce bottles of hand sanitizer ($24 per bottle), while comparable prices for other contracts
we reviewed were between $0.49 and $0.70 per ounce of hand sanitizer.
• $20 per viral transport tube, while comparable prices for other contracts we reviewed were “
between $0.88 and $3.68 per tube.
• $8.99 per isolation gown, while comparable prices for other contracts we reviewed were
between $0.88 and $2.80 per gown.
The DoD did not pay fair and reasonable prices for viral transport tubes and isolation gowns because there was an urgent need for these items and lower-priced options were not available due to the impact of the COVID‑19 pandemic on supply availability. We referred the contracts related to N95 masks and hand sanitizer to the Defense Criminal Investigative Service for possible investigation and consequently cannot discuss in detail our oversight of these purchases.
While the DoD paid between $466,935 and $530,263 more than the manufacturer’s list prices or other comparable prices on the four contracts, contracting personnel had to purchase these urgently needed items, the availability of which was drastically impacted by supply shortages. Though the DoD was not able to spend these funds on other equipment and supplies, contracting personnel were able to procure the items to combat the pandemic and ensure the health and safety of service members, their families, and other frontline health care workers.
Recommendations
Given the impact of the COVID‑19 pandemic on commercially available supplies, contracting personnel took necessary actions to procure the urgently needed items, even though the DoD did not pay fair and reasonable prices for some items. Therefore, we did not make any recommendations.
This report is the result of Proj. No. D2020‐D000AX‐0110.00.