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MSPV 2.0 Is Dead – Long Live MSPV

It’s official: the Department of Veterans Affairs (“VA”) Medical Surgical Prime Vendor (“MSPV”) 2.0 Program is no more.  The VA has announced that it will not revive MSPV 2.0 following several unusually painful protests at the U.S. Court of Federal Claims (see our prior blogs here and here). Instead the VA will move on to MSPV-“Z”.  Generally speaking, there seems to be little difference between “2.0” and “Z,” except that some division of geographies may change.  But importantly, the VA plans to make clear in the MSPV-Z solicitation—which currently is in the works—whether and when it will transfer the contracts’ requirements to the Defense Logistics Agency (“DLA”), an issue that has drawn significant criticism to date.  The VA says it is developing the business case for the transfer, and the business case analysis will determine both whether it will happen at all, and how the VA will execute the transfer.  In the meantime, the VA will extend the current bridge contracts under MSPV-Next Generation (“MSPV-NG”) for a full year, running December 2021 to December 2022, while the VA (and likely the DLA) get their ducks in a row.

If you sell (or want to sell) any kind of medical product to the VA, you likely have been following the tumultuous rollout of the MSPV 2.0 Program over the past few years.  The VA has been talking about MSPV 2.0 since at least 2017 as the VA’s solution to inadequate supply availability and other problems under the prior MSPV-NG program.  After the MSPV-NG contracts expired, the VA entered bridge contracts with the same contractors to fill the gap until the VA could get MSPV 2.0 up and running.  The VA finally awarded MSPV 2.0 prime vendor contracts in October 2020, only to announce in March 2021—before performance had even begun—that the VA planned to transition all of the MSPV 2.0 contract requirements over to the DLA by fall 2023, to be filled and distributed by DLA’s existing MSPV contractors.  Surprised contractors, some of whom had expected up to nine years on their MSPV 2.0 contracts, filed bid protests at the U.S. Court of Federal Claims.  The court held that the VA’s planned transfer was arbitrary and capricious based on the administrative record, permanently enjoining the VA’s transfer to the DLA, and enjoining awards under the existing MSPV 2.0 solicitation.  One of the court’s chief concerns was that there appeared to be no developed business case—or much meaningful analysis at all—to support the transfer, especially where it was unclear whether DLA MSPV contractors could even accommodate the VA’s additional requirements.

In response, the VA now has announced that it intends to start over, issuing a brand new solicitation under MSPV-Z.  Distributors and vendors apparently can expect to see a draft solicitation in the near future.  The VA claims that it has not yet decided whether the transfer to the DLA will occur, and that it will depend on the business case analysis.  According to the VA, it will need the MSPV-Z program as a stop-gap, regardless of what happens with the DLA, as the transfer to the DLA would take some time.

The VA says MSPV-Z is coming, but not until December 2022 at the earliest, and only until the transfer to DLA (provided there is a tenable business case).  Pardon the skepticism, but it seems doubtful that MSPV-Z will ever launch, unless the VA decides against the DLA transfer in the first place (which seems highly unlikely).  Just a few months ago, the VA was prepared to transition everything to the DLA by September 2023, and some pieces earlier.  Even with the bid protest bump in the road, it is plausible the VA could still maintain that schedule, assuming it is able to justify the business case.  But if this happens, then the result would be an MSPV-Z program so short-lived that the arduousness of the procurement hardly seems worth it.  Why not just extend the MSPV-NG bridge contracts a little longer?

If you’re having déjà vu, you are not alone.  More than two years ago while everyone was awaiting MSPV 2.0, the VA and DLA announced their “strategic partnership” allowing the VA to purchase from the DLA MSPV formulary.  We questioned then whether MSPV 2.0 would go forward at all given the redundancy with the DLA MSPV program.  After all, why stand up a brand new, complex procurement when the VA could just use the system the DLA already had running?  As it turned out, the VA eventually announced its planned transfer to the DLA, and MSPV 2.0 never made it out of the gate, albeit not for the VA’s lack of trying.

Until the VA announces whether it will pursue the transfer to the DLA, the bottom line is this: MSPV 2.0 is dead, and things will continue in the current MSPV-NG bridge contract status quo until at least December 2022.  In the unlikely event that the VA cannot make the business case for the DLA transfer, we can look forward to a brand new (sort of) MSPV-Z program that hopefully will accomplish what MSPV 2.0 never could (but which may be substantively different only in name).  The draft “Z” solicitation should be available in the near future, along with a clearer picture of where the VA plans to go.  We will stay tuned and let you know the developments as they occur.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 320
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About this Author

Keeley A. McCarty, Sheppard Mullin, Government Investigations Lawyer, International Trade Attorney
Associate

Keeley McCarty is an associate in the Government Contracts, Investigations & International Trade Practice Group in the firm's Washington, D.C. office.

Ms. McCarty’s practice focuses on government contracts litigation and counseling, including contract termination appeals, litigation and arbitration of subcontractor disputes, and internal investigations.  Ms. McCarty has counseled clients on a broad range of legal topics, including FAR mandatory disclosure rules, title passage under government contracts, and corporate compliance with the FCPA...

202-747-2186
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