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This article was originally published in The Gray Sheet

Executive Summary

MCGAW TO APPEAL VA'S REJECTION OF IV PRODUCTS CONTRACT BID, the firm announced July 26. On July 23, the Department of Veterans Affairs notified McGaw that its bid for a five-year, sole-source VA supply contract for intravenous solutions and administration sets "had been found to be non-responsive based on being mathematically and materially unbalanced." McGaw and VA officials met on July 26 to discuss the firm's appeal plans. McGaw has three administrative appeals options: the firm can appeal to the VA contracting officer, the VA assistant secretary for acquisitions and the General Accounting Office. The firm says it will take judicial action if the administrative appeals are unsuccessful. McGaw, Baxter, and, reportedly, Abbott submitted bids for the contract. When the bids were unsealed in May, McGaw was deemed the "apparent low bidder," the company says. However, Baxter subsequently protested McGaw's bid, and upon closer examination, the VA determined that it was unacceptable. McGaw says that the VA's objections focus on the declining cost structure in its bid. Under the McGaw plan, prices at the beginning of the contract would be higher than those later in the contract. The prices would decline as McGaw further refines its manufacturing process for its Excel IV non-polyvinyl chloride container system, the company says. McGaw believes that the VA may be concerned that its largest product orders will be in the first years when prices are highest. The aggregate value for McGaw's bid over the five-year period is $129.7 mil. The current contract, which also was based on a declining price structure, has generated $66 mil. in revenues, McGaw notes. The firm says that if its appeals are unsuccessful and it is unable to replace the VA business with other hospital accounts, 1993 revenues "could be reduced by approximately $7 mil.," and earnings per share "could be reduced by between .04 and .05. McGaw Chairman and CEO James Sweeney said that McGaw's bid for the new contract "is completely responsive to the criteria the VA established and represents the lowest cost to the government. By lowering cost to the VA continually over the length of the contract, we are sharing the benefits of our manufacturing cost reductions as they are achieved. We can demonstrate that our declining prices to the government are balanced with declining production costs." He continued: "We insist that the VA abide by the criteria that were established very clearly before bid submission -- that the award would be made to the company that submitted the lowest bid, defined in terms of the aggregate total cost over the five years of the contract."

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