Contract Management:

Observations on DOD's Financial Relationship With the Anthrax Vaccine Manufacturer

T-NSIAD-99-214: Published: Jun 30, 1999. Publicly Released: Jun 30, 1999.

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Pursuant to a congressional request, GAO discussed the contractual relationship between the Department of Defense (DOD) and the BioPort Corporation for production of the anthrax vaccine, focusing on: (1) DOD's investment in BioPort's biologic facility and contracts to produce the vaccine; (2) BioPort's cash flow situation; and (3) proposals to improve the company's financial health.

GAO noted that: (1) DOD has made a significant investment in renovating BioPort's biologic facility to meet the military's requirements for anthrax vaccine; (2) however, BioPort has experienced delays in completing its renovation efforts, and, as a result, production of the vaccine is about 5 months behind schedule; (3) because of the delays, the company has not received the revenues it expected and now faces a serious cash flow problem; (4) the cash flow problem, GAO believes, is due to the company's inability to achieve its overly optimistic business plan; (5) in response to its cash flow problem, BioPort requested--and DOD has authorized--the sale of 70,000 doses to other customers before meeting its contractual requirements with DOD; (6) in addition, the company has proposed several actions to resolve its financial problems, including asking DOD for advance payments and increasing contract prices; and (7) DOD officials are considering what actions, if any, should be taken to resolve BioPort's cash flow problem.

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