Pentagon Awards Contracts for $1.34 Billion in Medical Supplies

The Department of Defense awarded several medical and surgical equipment suppliers a series of supply contracts Wednesday, worth more than $1.34 billion in aggregate. By far the biggest winner here was Cardinal Health (NYSE: CAH  ) , which won a contract modification exercising the first (of two possible) 20-month optional extensions on an initial 20-month-long base contract. Potentially valued in excess of $1 billion, Cardinal's contract hires instructs the firm to supply U.S. Army, Navy, Air Force, Marine Corps, and federal civilian agencies with unspecified "prime vendor medical and surgical supplies" through Aug. 15, 2015.

Among the other winners of medical-oriented defense contractors:

  • Owens & Minor (NYSE: OMI  ) received a similar 20-month long "option" extension on a contract to for "prime vendor medical and surgical supplies" -- again with U.S. Army, Navy, Air Force, Marine Corps, and federal civilian agencies being the beneficiaries. As with Cardinal's contract, Owens & Minor's will now run through Aug. 15, 2015. It, too, may be extended by one final 20-month-long optional extension thereafter.
  • Tyco's (NYSE: TYC  ) Healthcare Group subsidiary won a shorter one-year optional extension on a separate contract for "various medical and surgical products." Tyco's original contract length was only one year, however, and its contract has a potential seven subsequent one-year-long option periods -- of which this is the second being exercised. Tyco will be supplying U.S. Army, Navy, Air Force, Marine Corps, and federal civilian agencies in Massachusetts through at least Nov. 16, 2014 (and possibly much longer).
  • And finally, CareFusion (NYSE: CFN  ) was awarded a new $23.4 million fixed-price with economic-price-adjustment contract for the supply of various ventilators and accessories to the U.S. Army, Navy, Air Force, Marine Corps, and federal civilian agencies. The Pentagon noted that this contract will run through Nov. 12, 2014. However, the Pentagon's announcement also says that the contract has "a five-year base with no option year periods." It is possible, therefore, that CareFusion's contract could run as far out as 2019. 

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