The Assistant Secretary for Administration Awarded and Managed Five Sole Source Contracts
Summary
An audit report, Report No. A-05-21-00014, dated January 2022, from the Office of Inspector General of the Department of Health and Human Services. The report states that the Assistant Secretary for Administration awarded and managed five sole source COVID-19 testing contracts, totaling $1.8 billion, in accordance with Federal regulations and contract requirements. It states that as of October 2021, over $1.2 billion had been paid to the contractors, and that the audit reviewed 18 invoices totaling $217 million and found no issues. The report contains no recommendations.
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“The Assistant Secretary for Administration Awarded and Managed Five Sole Source Contracts.”
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Department of Health and Human Services
OFFICE OF
INSPECTOR GENERAL
THE ASSISTANT SECRETARY FOR
ADMINISTRATION AWARDED AND
MANAGED FIVE SOLE SOURCE
CONTRACTS FOR COVID-19
TESTING IN ACCORDANCE WITH
FEDERAL AND CONTRACT
REQUIREMENTS
Inquiries about this report may be addressed to the Office of Public Affairs at
Public.Affairs@oig.hhs.gov.
Amy J. Frontz
Deputy Inspector General
for Audit Services
January 2022
A-05-21-00014
Office of Inspector General
https://oig.hhs.gov
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as amended, is
to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as the
health and welfare of beneficiaries served by those programs. This statutory mission is carried out
through a nationwide network of audits, investigations, and inspections conducted by the following
operating components:
Office of Audit Services
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting audits with
its own audit resources or by overseeing audit work done by others. Audits examine the performance of
HHS programs and/or its grantees and contractors in carrying out their respective responsibilities and are
intended to provide independent assessments of HHS programs and operations. These audits help reduce
waste, abuse, and mismanagement and promote economy and efficiency throughout HHS.
Office of Evaluation and Inspections
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide HHS, Congress,
and the public with timely, useful, and reliable information on significant issues. These evaluations focus
on preventing fraud, waste, or abuse and promoting economy, efficiency, and effectiveness of
departmental programs. To promote impact, OEI reports also present practical recommendations for
improving program operations.
Office of Investigations
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations of fraud and
misconduct related to HHS programs, operations, and beneficiaries. With investigators working in all 50
States and the District of Columbia, OI utilizes its resources by actively coordinating with the Department
of Justice and other Federal, State, and local law enforcement authorities. The investigative efforts of OI
often lead to criminal convictions, administrative sanctions, and/or civil monetary penalties.
Office of Counsel to the Inspector General
The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, rendering
advice and opinions on HHS programs and operations and providing all legal support for OIG’s internal
operations. OCIG represents OIG in all civil and administrative fraud and abuse cases involving HHS
programs, including False Claims Act, program exclusion, and civil monetary penalty cases. In
connection with these cases, OCIG also negotiates and monitors corporate integrity agreements. OCIG
renders advisory opinions, issues compliance program guidance, publishes fraud alerts, and provides
other guidance to the health care industry concerning the anti-kickback statute and other OIG enforcement
authorities.
Notices
THIS REPORT IS AVAILABLE TO THE PUBLIC
at https://oig.hhs.gov
Section 8M of the Inspector General Act, 5 U.S.C. App., requires
that OIG post its publicly available reports on the OIG website.
OFFICE OF AUDIT SERVICES FINDINGS AND OPINIONS
The designation of financial or management practices as
questionable, a recommendation for the disallowance of costs
incurred or claimed, and any other conclusions and
recommendations in this report represent the findings and
opinions of OAS. Authorized officials of the HHS operating
divisions will make final determination on these matters.
Report in Brief
Date: January 2022
Report No. A-05-21-00014
Why OIG Did This Audit
HHS is one of the largest contracting The Assistant Secretary for Administration Awarded
agencies in the Federal Government. and Managed Five Sole Source Contracts for
In fiscal year 2020, HHS awarded over
$14 billion in contracts in response to COVID-19 Testing in Accordance With Federal and
the COVID-19 pandemic. Of these Contract Requirements
contracts, HHS’s Assistant Secretary
for Administration (ASA) awarded five
What OIG Found
sole source COVID-19 testing contracts
ASA awarded and managed five sole source COVID-19 testing contracts,
to national pharmacy and grocery
totaling $1.8 billion, in accordance with Federal regulations and contract
retail chains to provide Americans
requirements. Specifically, ASA complied with sole source justification
convenient access to COVID-19 testing
requirements when awarding the contracts and set reasonable payment rates
at testing site locations throughout the
for COVID-19 tests in accordance with Federal regulations. ASA appropriately
United States. The contracts provided
managed the contracts by establishing and maintaining ongoing
a flat-fee payment to participating
communications with contractors, by verifying that lab result numbers
retailers for each test administered.
matched the number of tests administered, and by reviewing invoices to
Our objective was to determine ensure payment rates were in accordance with the contract terms and
whether ASA awarded and managed conditions.
the COVID-19 testing contracts in
accordance with applicable Federal What OIG Recommends
regulations, and contract terms and This report contains no recommendations.
conditions.
How OIG Did This Audit
Our audit covered five sole source
COVID-19 testing contracts awarded
by ASA in April 2020, totaling
$1.8 billion. As of October 2021, over
$1.2 billion had been paid to the
contractors.
We reviewed: (1) ASA’s justification
and awarding process for the
contracts; (2) signed contracts,
contract modifications, statements of
work, and negotiated payment rates
for COVID-19 tests; and (3) a
judgmental sample of 18 invoices
totaling $217 million from the
contracts.
The full report can be found at https://oig.hhs.gov/oas/reports/region5/52100014.asp.
TABLE OF CONTENTS
INTRODUCTION ............................................................................................................................ 1
Why We Did This Audit..................................................................................................... 1
Objective .......................................................................................................................... 1
Background ...................................................................................................................... 1
How We Conducted This Audit ........................................................................................ 2
RESULTS OF AUDIT ....................................................................................................................... 3
The Assistant Secretary for Administration Complied With Sole Source Contract
Justification Requirements .......................................................................................... 3
The Assistant Secretary for Administration Appropriately Managed Contracts
for COVID-19 Testing ................................................................................................... 4
CONCLUSION................................................................................................................................ 4
APPENDIX
Audit Scope and Methodology .......................................................................................... 5
ASA Awarded and Managed Five Sole Source Contracts for COVID-19 Testing in Accordance With Federal and
Contract Requirements (A-05-21-00014)
INTRODUCTION
WHY WE DID THIS AUDIT
The Department of Health and Human Services (HHS) is one of the largest contracting agencies
in the Federal Government. In fiscal year (FY) 2020, HHS awarded over $14 billion in contracts
in response to the COVID-19 pandemic. Of these contracts, HHS’s Assistant Secretary for
Administration (ASA) awarded five sole source COVID-19 testing contracts to national pharmacy
and grocery retail chains to provide Americans convenient access to COVID-19 testing at testing
site locations throughout the United States. Approximately 70 percent of these testing sites are
in underserved communities with populations most vulnerable to COVID-19. The contracts
provided a flat-fee payment to participating retailers for each test administered, with retailers
responsible for coordinating the full end-to-end testing. 1
COVID-19 has created extraordinary challenges for the delivery of health care and human
services to the American people. As the oversight agency for HHS, the Office of Inspector
General (OIG) oversees HHS’s COVID-19 response and recovery efforts. This audit is part of
OIG’s COVID-19 response strategic plan. 2
OBJECTIVE
Our objective was to determine whether ASA awarded and managed the COVID-19 testing
contracts in accordance with applicable Federal regulations, and contract terms and conditions.
BACKGROUND
On March 13, 2020, the President declared the COVID-19 outbreak a national emergency. 3
Congress passed legislation, including the Public Health Emergency Fund, to respond to the
COVID-19 pandemic. 4
1
End-to-end testing includes scheduling, testing, and providing results of the tests.
2
OIG’s COVID-19 response strategic plan and oversight activities can be accessed at HHS-OIG's Oversight of COVID-
19 Response and Recovery | HHS-OIG.
3
Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19)
Outbreak, accessed at https://trumpwhitehouse.archives.gov/presidential-actions/proclamation-declaring-
national-emergency-concerning-novel-coronavirus-disease-covid-19-outbreak/ on October 20, 2021.
4
The Public Health Emergency Fund provided the Secretary of HHS funding to take action in the face of a public
health emergency, including facilitating coordination between Federal, State, Tribal, and private health care
entities; making grant awards and entering into contracts; accelerating advanced research and development;
strengthening bio-surveillance capabilities and laboratory capacity; and other actions deemed necessary to
support emergency operations.
ASA Awarded and Managed Five Sole Source Contracts for COVID-19 Testing in Accordance With Federal and
Contract Requirements (A-05-21-00014) 1
ASA provides leadership for HHS departmental administration, including human resource
policy, information technology, and departmental operations. ASA awarded the five sole
source COVID-19 testing contracts through HHS’s partnership with national pharmacy and
grocery retail chains to continue to provide Americans access to COVID-19 testing.
Eligible health care providers, including public entities, for-profit entities, and not-for-profit
entities, provided testing, diagnoses, and care for individuals with possible or actual cases of
COVID-19. Certain health care providers were awarded sole source contracts that were not
subject to full and open competition due to an unusual and compelling urgency necessitated by
the pandemic.
HOW WE CONDUCTED THIS AUDIT
Our audit covered five sole source contracts that ASA awarded in April 2020 for COVID-19
testing. The five contracts were awarded to CVS, Rite-Aid, Walgreens, Quest (through services
provided at Walmart), and eTrueNorth (through services provided at Kroger, Health Mart, and
Walmart). These contracts totaled $1.8 billion. As of October 2021, over $1.2 billion had been
paid to the contractors.
We reviewed ASA’s justification for awarding these contracts as sole source contracts instead of
using full and open competition and whether ASA was in compliance with the applicable
requirements of Federal Acquisition Regulation (FAR) subpart 6.3, Other Than Full and Open
Competition. 5 We interviewed ASA staff and reviewed the process used to identify and
mitigate the risks associated with awarding these government contracts by other than full and
open competition, and with emergency funding. We reviewed signed contracts, contract
modifications, statements of work, documentation of negotiations for the establishment of
contracted rates for COVID-19 tests, and invoices for each of the five sole source contracts to
determine whether the contracts were awarded and managed in accordance with applicable
Federal regulations, and stated terms and conditions.
We selected a judgmental sample of 18 invoices totaling $217 million from the 5 sole source
contracts. To help ensure that our judgmental sample covered the entire audit period, we
selected invoices dated at various points throughout the contract periods.
We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
5
For purposes of this audit, “other than full and open competition” and “sole source” are used interchangeably
and refer to situations where exceptions to the FAR requirements for competition to the maximum extent
practicable (i.e., full and open competition) are expressly permittable.
ASA Awarded and Managed Five Sole Source Contracts for COVID-19 Testing in Accordance With Federal and
Contract Requirements (A-05-21-00014) 2
The Appendix contains the details of our audit scope and methodology.
RESULTS OF AUDIT
ASA managed 5 sole source contracts totaling $1.8 billion awarded to national pharmacies and
retail chains to administer COVID-19 tests to over 8 million patients at over 8,000 different
testing sites across all 50 States, the District of Columbia, and Puerto Rico. ASA’s awarding
process complied with sole source justification requirements described in applicable Federal
regulations. 6 The contracts provided a flat-fee payment for each test administered, with
participating retailers responsible for coordinating the full end-to-end testing. ASA set
reasonable payment rates for COVID-19 tests in accordance with Federal regulations. 7 ASA
appropriately managed the contracts by establishing and maintaining ongoing communications
with contractors, by verifying that lab result numbers matched the number of tests
administered, and by reviewing invoices to ensure payment rates were in accordance with the
contract terms and conditions.
The Assistant Secretary for Administration Complied With Sole Source Contract
Justification Requirements
The FAR requires the Government to maximize the use of full and open competition. However,
FAR subpart 6.3 allows for contract awards using other than full and open competition in
certain circumstances. ASA awarded the five contracts in April 2020 to purchase critically
needed supplies and services 8 to support containment of and recovery from the COVID-19
outbreak. The contracts were awarded as sole source contracts using, as justification, the
circumstance identified in FAR 6.302-2 (Unusual and Compelling Urgency).
According to FAR § 6.302-2(d)(2), the total period of performance of a contract awarded or
modified using this authority may not exceed 1 year, including all options, unless the head of
the agency determines that exceptional circumstances apply. The contracts were initially
awarded for 1-year periods, but ASA determined that continued outbreak-related testing,
onboarding new testing sites, and implementing new process workflows were critical as the
Nation expanded testing to support back-to-school and return-to-work strategies under the
National Strategy for the COVID-19 Response and Pandemic Preparedness. 9 These exceptional
circumstances warranted the extension of four contracts by 6 months through September
6
FAR subpart 6.3.
7
FAR §§ 31.201-2 and 46.102(b).
8
Services included patient registration, application of screening criteria, operation of the testing site, cost of
conducting the test, and notification of results to patients.
9
Published January 21, 2021, the National Strategy for the COVID-19 Response and Pandemic Preparedness is a
coordinated pandemic response outlining an actionable plan across the Federal Government to address the
COVID-19 pandemic.
ASA Awarded and Managed Five Sole Source Contracts for COVID-19 Testing in Accordance With Federal and
Contract Requirements (A-05-21-00014) 3
2021, 10 as the continuation of the contracts would support diagnosis of individuals with COVID-
19, reduce the spread of disease, and save lives. ASA provided us with a memorandum
approved by the Assistant Secretary for Health and the Secretary of HHS, as authorized by FAR
§ 6.302-2(d)(2), requiring the determination and justification of exceptional circumstances to
extend the contracts beyond 1 year.
The Assistant Secretary for Administration Appropriately Managed Contracts for
COVID-19 Testing
The FAR requires that agencies ensure that supplies or services tendered by contractors meet
contract requirements (FAR § 46.102(b)). The FAR also requires that costs chargeable to a
contract, in order to be allowable, are reasonable, allocable, and comply with the terms of the
contract (FAR § 31.201-2).
ASA appropriately managed the contracts for COVID-19 testing by communicating daily and
weekly with the contractors; by reviewing invoices and verifying that lab result numbers
matched the number of tests administered, and payment rates charged complied with the
contract requirements; and by approving invoices. We found no issues from our review of 18
sampled invoices. We also determined that the average payment rates were fair and
reasonable, and the use of a flat-fee payment met the purpose and intention of the contracts.
CONCLUSION
ASA awarded and managed five sole source contracts for COVID-19 testing, totaling $1.8 billion,
in accordance with applicable Federal regulations, and contract terms and conditions.
Accordingly, this report contains no recommendations.
10
One of the contracts (Quest) ended in February 2021.
ASA Awarded and Managed Five Sole Source Contracts for COVID-19 Testing in Accordance With Federal and
Contract Requirements (A-05-21-00014) 4
APPENDIX: AUDIT SCOPE AND METHODOLOGY
SCOPE
Our audit covered five sole source contracts awarded by ASA in April 2020 for COVID-19 testing,
totaling $1.8 billion. The five contracts were awarded to CVS, Rite-Aid, Walgreens, Quest
(through services provided at Walmart), and eTrueNorth (through services provided at Kroger,
Health Mart, and Walmart). As of October 2021, over $1.2 billion of the awards were paid to
the contractors.
Our review of internal controls involved obtaining an understanding of the controls that ASA
had in place related to awarding and managing contracts.
We conducted fieldwork from February through November 2021.
METHODOLOGY
To accomplish our objective, we:
• reviewed applicable Federal laws, regulations, and guidance;
• reviewed HHS policies and procedures, including the HHS Acquisition Regulations;
• reviewed signed contracts, contract modifications, statements of work, negotiated
payment rates, and invoices for each of the five sole source contracts;
• interviewed ASA staff and reviewed the process for selecting the five contractors to
identify and mitigate the risks associated with using emergency funding to award these
government contracts by other than full and open competition;
• selected a judgmental sample of 18 invoices totaling $217 million, and for each of the
sampled invoices, reviewed:
o the rate billed on the invoice and compared it with the contracted rate,
o the number of tests invoiced and compared it with the number of lab results
reported to HHS, 11 and
11
Contractors reported testing data to the COVID Responder Network, which serves as a web-based common
operating platform service enabling personnel among Federal, State, local, Tribal, territorial, and private-sector
organizations to collect important data related to COVID-19 testing and associated critical supply tracking. The
application enables Federal organizations such as the Federal Emergency Management Agency and HHS to
aggregate large quantities of data to maintain situational awareness of COVID-19 testing progress in an effort to
facilitate their decision making.
ASA Awarded and Managed Five Sole Source Contracts for COVID-19 Testing in Accordance With Federal and
Contract Requirements (A-05-21-00014) 5
o the contracting official’s approval of the invoices; and
• discussed the results of our audit with ASA officials.
We provided ASA with a draft report on December 13, 2021, for review. ASA elected not to
provide formal written comments.
We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
ASA Awarded and Managed Five Sole Source Contracts for COVID-19 Testing in Accordance With Federal and
Contract Requirements (A-05-21-00014) 6
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