THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Wednesday, September 21, 1994 TAG: 9409210396
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY STEPHANIE STOUGHTON, STAFF WRITER
LENGTH: Medium: 51 lines
Owens & Minor said Tuesday it has been awarded a contract potentially worth up to $48 million to deliver plastic gloves, diapers and other medical products to four military hospitals in Virginia.
The Richmond-based company - a middle man who transports medical supplies from manufacturer to user - said it will serve Portsmouth Naval Hospital and the Langley Air Force Base infirmary in Hampton. It also will supply Fort Lee Kenner Army Hospital in Petersburg and the Fort Eustis McDonald Hospital near Newport News.
Historically, the military has been its own distributor, storing everything from penicillin to disposable hospital gowns in warehouses and then shipping them to base hospitals and infirmaries.
That didn't work out so well.
Instead of saving money by cutting out the middle man, the military found it was wasting it. At the warehouses, some supplies had reached their expiration dates and others simply weren't available.
At the same time the Defense Department began axing military bases, it decided to begin contracting out some of its distribution work to cut costs. So far, it has contracted out five of 21 regions in the United States. The four hospitals in Tuesday's announcement make up the department's Hampton Roads region.
``I think the ultimate goal is for the military to go through and systematically assign all of the regions,'' Owens & Minorspokesman Hugh F. Gouldthorpe Jr. said. ``They're trying to get extra costs out of their system. We help them manage their inventory.''
So far, Owens & Minor has grabbed two of the five regions that the military has contracted out. Last year, it got a $20 million contract covering 11 military facilities in the Washington region for one year. The contract can be extended for four years, making it worth up to $100 million.
Tuesday's contract is for $9.6 million the first year, with four optional one-year extensions.
Owens & Minor has grown to become the nation's second largest distributor of medical supplies. In 1959, it had $7 million in sales and three distribution centers in Richmond, Norfolk and Wilson, N.C. It now has $1.5 billion in revenues and 53 distribution centers.
The publicly traded company projects $2.5 billion in sales this year, Gouldthorpe said. by CNB