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WASHINGTON (Reuters) - The Biden administration plans to announce on Wednesday a $137 million contract for Millipore Sigma, a unit of Germany's Merck KGaA, to boost production capacity of a highly constrained component of rapid coronavirus tests, a senior administration official told Reuters.

The money will allow the company over three years to build a new facility to produce nitrocellulose membranes, the paper that displays test results, in Sheboygan, Wisconsin. That, in turn, will allow for 85 million more tests to be produced per month, the official said.

It was not immediately clear when the facility would ramp up to full production.

"It's probably the most constrained piece of technology in expanding capacity, in making more of these over-the-counter or point-of-care tests," the official said. "This amount they're going to produce is roughly equivalent to another billion over-the-counter tests being able to be made," he added.

Millipore Sigma is a supplier to major U.S. COVID-19 antigen test manufacturers, he said, without providing further details.

The contract, which will be announced by the Department of Defense for the Department of Health and Human Services, is part of a bid by the Biden administration to ramp up production of scarce rapid COVID-19 tests, which has taken on more urgency as nations grapple with the highly infectious Omicron variant of the coronavirus.

The average number of daily COVID-19 cases in the United States has hit a record high of 258,312 over the past seven days, according to a Reuters tally.

Earlier this month, President Joe Biden announced a plan to distribute 500 million at-home coronavirus test kits to help address the crisis, building on prior pledges to invest $3 billion in test kits.

But U.S. testing is behind the curve because of a lack of skilled workers, a shortage of at-home tests and under-investment in recent months, and health experts in the U.S. said Biden's latest plan was "too little, too late."

The government is invoking the Defense Production Act (DPA) to award the contract and has many more similar contracts in the works, the official said.

The Biden administration has used the DPA - a 1950s Korean war-era law which gives federal agencies the power to prioritize procurement orders related to national defense - to speed production of swabs and pipettes for COVID-19 test production previously.

(Reporting by Alexandra Alper; Additional Reporting by Carl O'Donnell; Editing by Chris Reese)

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