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April 23, 2007: 

The Honorable Stephanie Herseth: 
Chairwoman: 
The Honorable John Boozman: 
Ranking Minority Member: 
Subcommittee on Economic Opportunity: 
Committee on Veterans' Affairs: 
House of Representatives: 

Subject: VA Vocational Rehabilitation and Employment: Service Contract 
Management Is Improving, but Challenges Remain: 

The Department of Veterans Affairs' (VA) Vocational Rehabilitation and 
Employment (VR&E) program provides services such as vocational 
counseling and job training to assist veterans with service-connected 
disabilities obtain and maintain suitable employment and achieve 
maximum independence in daily living. In fiscal year 2006, the VR&E 
program obligated about $702 million and served about 89,000 veterans. 

The Veterans Benefits Administration (VBA), which administers the VR&E 
program, provides some services to veterans through two types of 
contracts--national contracts and local contracts. In fiscal year 2003, 
VA adopted the National Acquisition Strategy (NAS) to award contracts 
at the national level to ensure that veterans have access to the same 
quality and types of VR&E services across regional offices. These 
national contracts, once awarded, are implemented by VA's regional 
offices. Services available under these national contracts include 
initial evaluations, case management, and employment placement 
assistance. In fiscal year 2006, VR&E spent about $15 million through 
national contracts. There are 165 national contracts currently active 
in fiscal year 2007. Regional offices also can negotiate and implement 
local contracts for services that are not provided through national 
contracts such as tutoring and computer skills evaluations. In fiscal 
year 2006, VR&E spent about $12 million through local contracts. VR&E 
contracting officers are responsible for negotiating the terms of local 
contracts. Contracting officer's technical representatives, often VR&E 
counselors themselves, assist in managing both national and local 
contracts. 

Recent studies of the VR&E program have raised concerns about its 
contracting practices. In March 2004, the VR&E Task Force recommended 
that VA enhance VR&E contracting practices by taking several actions, 
including revising the scope of national contracts and developing 
contracting training and hiring contracting specialists to improve the 
contracting expertise of VR&E staff. According to the VR&E Task Force, 
VR&E's capacity to manage its contracts could be further improved by 
enhancing the usefulness of its case management data system. For 
example, the VR&E Task Force recommended that VA improve its case 
management data system so that purchased contract services could be 
tracked by the counselor who orders the services or by the veteran that 
receives the services. In February 2005, the VA Inspector General 
recommended that existing national contracts be renegotiated to better 
reflect market rates for services because VA was at risk of paying 
excessive prices for VR&E services purchased through its current 
national contracts. The report also noted that VA should strengthen 
regional office oversight and management of contracts. 

To address your interest in VR&E contract management, we conducted a 
study to determine how VA has improved VR&E contract management 
practices and identify challenges VA continues to face. Specifically, 
you asked us to answer the following questions: (1) What progress has 
VA made in implementing selected recommendations on contracting for 
VR&E services made by the VR&E Task Force and the VA Inspector General? 
(2) What are VA's key challenges in improving its management of VR&E 
service contracting? 

On March 29, 2007, we briefed your staff on the results of our study of 
VR&E service contract management (see app. I). This report formally 
conveys the information provided during that briefing. In summary, we 
found that: 

* VA reports progress in implementing contracting-related 
recommendations made by the VR&E Task Force and VA Inspector General. 
However, some key recommendations have not yet been implemented. 
Specifically: 

- VA regional offices requested and obtained lower prices under 
existing national contracts. 

- VA has taken steps to increase regional office VR&E staff contracting 
expertise. 

- VA has taken steps to develop additional regional office internal 
control policies and procedures for contracting activities. 

- VA's efforts to address issues with contracting data are on hold. 

- VA has not yet awarded new national contracts. 

* Key challenges remain to improving VA's management of VR&E service 
contracting. Specifically, we found that: 

- Regional offices are not fully applying VA's contracting guidance. 

- Current training does not adequately prepare contracting officers to 
manage contracts. 

- Regional offices report delays in communication with VA headquarters 
on contracting questions, but VA is taking actions to address these 
concerns. 

- VA's management of VR&E contracting is limited by inadequate 
reporting capabilities. 

- Inadequate internal controls over contracting data raise reliability 
concerns. 

To assess VA's progress in implementing contracting-related 
recommendations made by the VR&E Task Force and the VA Inspector 
General and identify the challenges VA has experienced in improving 
management of VR&E service contracting, we (1) conducted site visits of 
four diverse regional offices to interview VR&E officials and review 
contract files, (2) conducted telephone interviews with officials from 
a fifth regional office, (3) interviewed officials at VA headquarters 
knowledgeable about contracting practices and policies, (4) analyzed 
VR&E contract-related management data, and (5) reviewed contract files 
at VA's Office of Acquisition and Materiel Management (OA&MM) to 
determine the maximum prices allowed for services available from 
national contracts used by the regional offices we visited. We assessed 
the reliability of VR&E contracting data captured by VR&E's case 
management data system--Corporate WINRS--through several methods, 
including comparing these data against local data provided to us by the 
four regional offices we visited and by reviewing existing evaluations 
of VR&E's case management data system. While we identified accuracy 
limitations with the contracting data captured by VR&E's case 
management data system--discussed in the slide entitled "Objective 2: 
Management Data: Inadequate Internal Controls over Contracting Data 
Raise Reliability Concerns" in appendix I (page 30)--we found that 
generally VR&E's contracting data are sufficiently reliable for the 
purposes of our study. We conducted our work from March 2006 to 
February 2007 in accordance with generally accepted government auditing 
standards. (See app. II for more details on our objectives, scope, and 
methodology.) 

Conclusions: 

Contracting is a valuable tool for the VR&E program. A well-managed 
contracting system can help VA provide VR&E services to veterans in 
several ways, such as by gathering the information needed to make 
entitlement decisions. Several regional offices felt that prices were 
too high for services available through national contracts and 
subsequently requested and obtained lower prices. VA has positioned 
itself to be at less risk of overpaying this time around, because VA 
has conducted market research in preparation for issuing its new 
national contracts, something it did not do last time. VA's oversight 
and communication with regional offices are a work in progress, but in 
the absence of continued improvement, regional offices may be putting 
VA at risk for overpaying local contractors. Given their current level 
of training, regional VR&E officials may continue to use noncompetitive 
contracts even when they are not necessarily appropriate. While 
negotiating competitive contracts requires greater contracting 
expertise, these contracts may also provide better prices and outcomes. 
Gains from improved contract management will be minimized without an 
information system to provide usable and reliable data on contract use. 
VA plans to improve the reporting capabilities of Corporate WINRS, but 
without improvements to internal controls and data reliability, reports 
produced by the system will not be as fully useful as they could be. 

Recommendations for Executive Action: 

To address the key challenges we identified that VA faces in improving 
its management of VR&E contracting, we recommend that the Secretary of 
Veterans Affairs direct the Under Secretary for Benefits to take the 
following actions: 

(1) Conduct a management review to assess how regional offices are 
implementing VA's contracting guidance and take necessary actions to 
make needed improvements. For example, VA could clarify to VR&E 
employees how existing VR&E guidance on contract file maintenance 
applies to local contracts. 

(2) Require regional offices to report on the efficacy of contracting 
training and take necessary actions to make needed improvements. For 
example, VA could develop VR&E-specific contracting training. 

(3) Improve VA management of VR&E contracting by improving Corporate 
WINRS reporting capabilities and its internal controls over contracting 
data. 

Agency Comments: 

We provided a draft of this report to the Department of Veterans 
Affairs for review and comment. On March 23, 2007, VA provided written 
comments agreeing with our conclusions (See app. III). However, while 
VA concurred with our recommendations, we have concerns about the 
actions it reported it will take to respond to two of the 
recommendations. 

In response to our first recommendation, VA said that it will continue 
to assess regional office performance through its site visits to 12 
regional offices per year. VA also stated that it will reiterate that 
its file maintenance guidance applies to both national and local 
contracts. While these actions are useful in helping to ensure that 
regional offices are following contracting guidance, in our view they 
are insufficient. We believe that a systematic, one-time review of all 
regional office practices is needed. This review would allow VA to 
identify the full extent of compliance with contracting guidance and 
determine the needs for additional or clarified guidance. 

VA also said that it will continue to provide specific annual VR&E 
contract training as well as conduct specialized VR&E contract training 
to VR&E regional office staff responsible for managing contracts. 
However, our second recommendation was for VA to require regional 
offices to report on the efficacy of VA's training and take necessary 
actions to make needed improvements. We maintain that contracting 
training could benefit from a systematic effort to obtain information 
from regional VR&E staff on the efficacy of existing training. 

In response to our third recommendation, VA said that it will modify 
the VR&E case management system to incorporate additional internal 
controls and reporting capabilities. VA stated that this would be done 
in an upgrade to Corporate WINRS, scheduled for fiscal year 2008. VA 
reported that the upgrade project is currently in VA's internal project 
prioritization process. 

In addition, VA provided technical comments, which are incorporated as 
appropriate. After our briefing of your staff, we made further 
technical corrections to the slides based on the comments we received 
from VA on a draft of the information (concerning price reductions 
requested and obtained by VA regional offices) we sent to you on April 
11, 2007. The pricing information was requested by your staff during 
the March briefing. 

We are sending copies of this report to the Secretary of Veterans 
Affairs, relevant congressional committees, and other interested 
parities and will make copies available to others upon request. In 
addition, this report will be available at no charge on GAO's Web site 
at www.gao.gov. If you or your staff have any questions about this 
report, please contact me on 202-512-7215 or fantoned@gao.gov. Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of this report. Brett S. Fallavollita 
(Assistant Director), Greg Whitney (Analyst-in-Charge), Irene J. 
Barnett (Senior Analyst), Avrum Ashery, Jessica Botsford, Irene Chu, 
Jennifer Lutzy McDonald, Walter Vance, and Charles Willson also made 
significant contributions to this report. 

Sincerely yours, 

Signed by: 

Denise M. Fantone: 
Acting Director, Education, Workforce, and Income Security Issues: 

[End of section] 

Appendix I: Briefing Slides: 

VA Vocational Rehabilitation and Employment: Service Contract 
Management Is Improving, but Challenges Remain: 

Briefing for the Staff of the Subcommittee on Economic Opportunity, 
Committee on Veterans' Affairs House of Representatives: 
March 29, 2007: 

Objectives: 

The House Subcommittee on Economic Opportunity, Committee on Veterans' 
Affairs, asked that we conduct this study. We answered the following 
questions: 

1. What progress has the Department of Veterans Affairs (VA) made in 
implementing selected recommendations on contracting for Vocational 
Rehabilitation and Employment (VR&E) services made by the VR&E Task 
Force and the VA Inspector General? 

2. What are VA's key challenges in improving its management of VR&E 
service contracting? 

Key Findings: 

VA Reports Progress in Implementing Recommendations on VR&E Service 
Contracting, but Some Key Recommendations Are Not Yet Implemented: 

Guidance Application, Training, Communication, and Management Data Are 
Key Challenges to Improving VA's Management of VR&E Service 
Contracting: 

Scope and Methodology: 

To Address Our Research Objectives, We Took Several Approaches: 

Focused on contracting-related recommendations in the VR&E Task Force 
report (March 2004) and the VA Inspector General report on VR&E 
contracting (February 2005). Specifically, we focused on 
recommendations related to: 

* national contracts revise scope and award new contracts; 

* human capital issues related to contracting increase regional office 
contracting expertise, 

* regional office internal controls over contracting activities-improve 
documentation of contracting actions and controls over payments to 
contractors, and: 

* contracting data enhance the usability of VR&E's management data 
system for internal control and financial management. 

Interviewed VA officials on the implementation status of the VR&E Task 
Force and VA Inspector General contracting-related recommendations. 

Analyzed data on contracted services from VR&E's Corporate WINRS data 
system to identify the types of services and the amounts spent on 
contracts. 

Conducted case study reviews of the Boston, Denver, Houston, and St. 
Petersburg regional offices, which were selected to provide diversity 
in geography, veteran workload, and types of contracts and 
expenditures. At each office, we interviewed VR&E officials, obtained 
contracting data, and reviewed national and local contract files. We 
also interviewed Waco regional office VR&E officials because, like 
Houston, Waco was a pilot for national contracts. 

Reviewed contract files maintained by VA's Office of Acquisition and 
Material Management for the national contracts available to our case 
study sites, to calculate the ranges of prices allowed. 

Case Study Sites (Fiscal Year 2006 Data): 

[See PDF for image] 

Source: GAO analysis. 

[End of figure] 

Data Reliability: 

We interviewed officials about the completeness and accuracy of 
contracting data and reviewed existing documentation and VA's internal 
evaluation of its data system. 

We compared the Corporate WINRS contracting data we obtained from VA 
headquarters to data we obtained from the four regional offices. 

We found the data to be sufficiently reliable for our purposes, with 
some exceptions as discussed under Finding 2. 

Our work was conducted from March 2006 to February 2007 in accordance 
with generally accepted government auditing standards. 

Background: 

VR&E Provides Services to Veterans with Disabilities: 

To assist veterans with service-connected disabilities obtain suitable 
employment and achieve maximum independence in daily living, services 
such as vocational counseling and job training services are generally 
provided by VR&E counselors at VA's 57 regional offices. 

Contracts are used when: 

* The demand for VR&E services exceeds a regional office's capacity to 
provide the services in-house. 

* Specific services cannot be provided by VR&E staff. 

* Veterans living far from regional office locations cannot be 
reasonably served by regional office VR&E counselors. 

VA Awarded National Service Contracts under a National Acquisition 
Strategy (NAS): 

For fiscal year 2003, VA awarded 241 contracts for VR&E services under 
a National Acquisition Strategy. The objective of this strategy was to 
standardize the provision of services and procurement strategies across 
VR&E offices. The contracts awarded under the National Acquisition 
Strategy were fixed price, indefinite delivery, indefinite quantity 
contracts. 

* Each contract was awarded for a base year (fiscal year 2003) and four 
1-year options, with fiscal year 2007 being the last option year. 

* A total of 165 national contracts remain available to provide 
services in fiscal year 2007. 

Although negotiated and awarded nationally, each contract only applies 
to the particular regional offices for which contractor proposals were 
accepted and awarded. 

Contracting Officers in the Regional Offices Can Negotiate Local 
Service Contracts: 

Regional office Contracting Officers can negotiate local contracts when 
services are not available through a national contract. 

* Regional office VR&E Contracting Officers are responsible for 
negotiating the terms of local contracts, including services and 
prices. 

* Contracting Officers hold warrants allowing them to negotiate 
contracts for specific amounts (to a maximum of $100,000). 

* Contract Officer's Technical Representatives, often VR&E counselors 
themselves, assist in managing contracts. 

Different Types of Services Are Available through National and Local 
VR&E Contracts: 

[See PDF for image] 

Source: GAO analysis. 

[End of figure] 

The Contracting Process: 

[See PDF for image] 

Source: GAO analysis. 

[End of figure] 

Overview of Finding 1: 

VA Reports Progress in Implementing Recommendations on VR&E Service 
Contracting, but Some Key Recommendations Are Not Yet Implemented: 

Progress has been reported: 

* VA regional offices negotiated lower prices under existing national 
contracts. 

* VA has taken steps to increase regional office VR&E staff contracting 
expertise. 

* VA has taken steps to develop additional regional office internal 
control policies and procedures for contracting activities. 

Action remains to be taken: 

* VA's efforts to address issues with contracting data are on hold. 

* VA has not yet awarded new national contracts. 

Objective 1: Status of Recommendations: 

VR&E Task Force and VA Inspector General Recommendations: 

[See PDF for image] 

Source: GAO analysis. 

[End of figure] 

Objective 1: National Contracts Recommendation Status: 

VA Regional Offices Negotiated Lower Prices under Existing National 
Contracts: 

VA's Inspector General noted that VA did not conduct market research 
before awarding national contracts in 2002, and was at risk of paying 
excessive prices. 

* Officials at the three regional offices we visited that use national 
contracts said that some contractors' original prices were too high, 
based on previous experience contracting for comparable services. 

* These offices negotiated price reductions for individual services 
provided by 8 of their 20 national contracts. Reductions under these 
contracts ranged from less than 5 percent to 81 percent of the original 
individual service price. For example, one regional office negotiated a 
reduction from $395 to $76 (81 percent) for an individual case 
management service. 

Objective 1: Human Capital Recommendation Status: 

VA Has Taken Steps to Increase Regional Office VR&E Staff Contracting 
Expertise: 

In an effort to increase contracting expertise, VA's goal is to have at 
least two Contracting Officers and two Contracting Officer Technical 
Representatives (COTR) at each regional office by the end of fiscal 
year 2007. 

At the end of fiscal year 2006, VA reported having at least one 
Contracting Officer and one COTR at each regional office. 

As of February 2007, VA reported that it has hired VR&E contracting 
specialists for 11 of its 57 regional offices and warranted them as 
Contracting Officers. 

VA's proposed fiscal year 2008 budget includes a request for increased 
funding to hire more contract specialists. 

VA has established contracting training requirements for regional VR&E 
staff. 

* VA reports tracking the completion of training requirements by 
regional office staff in fiscal year 2007. 

Objective 1: Internal Controls Recommendation Status: 

VA Has Taken Steps to Develop Additional Regional Office Internal 
Control Policies and Procedures for Contracting Activities: 

In September 2005, VA issued guidance on documentation that must be 
maintained in contract files. For example, when a regional office uses 
a higher-priced contractor over others providing the same service, it 
must document its reasons, which may include better contractor 
performance or greater capacity to provide services in a timely manner. 

VA officials told us that, as part of VA's periodic quality assurance 
reviews, they now track how contract files are maintained by reviewing 
all contract files during regional office site visits to ensure that 
the files are being maintained in accordance with VA policy and Federal 
Acquisition Regulations. 

VA assembled a Business Process Reengineering team to study how to best 
improve controls over VR&E payments, including payments to contractors. 
As part of this effort, VA is considering consolidating payment 
processing from all regional offices into fewer regional offices. 

Objective 1: Contracting Data Recommendation Status: 

VA Efforts to Address Issues with Contracting Data Are On Hold: 

The VR&E Task Force recommended that VA improve the capability of 
Corporate WINRS to provide data for program management. 

In response to the Task Force's recommendations, VA plans to develop a 
new version of Corporate WINRS with improved reporting capabilities, 
including reporting of contracting data. At the time of our review, 
this effort was on hold, as VA has not requested funding to upgrade the 
system in its fiscal year 2007 or 2008 budgets. 

Objective 1: Awarding New National Contracts Recommendation Status: 

VA Has Not Yet Awarded New National Contracts: 

VA did not meet its own deadline to award new contracts by October 1, 
2006, so it exercised the fourth and final option year for the current 
national contracts, through fiscal year 2007. VA expects to award new 
contracts by August 31, 2007 for fiscal year 2008 (10/1/07). If VA 
cannot award new contracts by then, it has the option to extend the 
current national contracts through March 2008. 

VA completed market research for the new national contracts. 

VA organized its regional offices into 26 sub-areas for the purpose of 
awarding new national contracts. In order to be competitive, 
contractors must demonstrate the capacity to provide services to all 
regional offices in a given sub-area. 

Overview of Finding 2: 

Guidance Application, Training, Communication, and Management Data Are 
Key Challenges to Improving VA's Management of VR&E Service 
Contracting: 

Regional offices are not fully applying VA's contracting guidance. 

Current training does not adequately prepare contracting officers to 
manage contracts. 

Regional offices report delays in communication, but VA headquarters is 
taking actions to address these concerns. 

In addition to having inadequate reporting capabilities, inadequate 
internal controls over contracting data raise reliability concerns. 

Objective 2: Contracting Guidance: 

Regional Offices Are Not Fully Applying VA's Contracting Guidance: 

VA quality assurance reviews of 10 regional offices in fiscal year 2006 
found that some regional offices were not fully implementing VA's 
contracting guidance. For example, some regional offices were not 
maintaining their contract files in accordance with VA's contract file 
maintenance guidance or requiring staff with contractor oversight 
responsibilities to complete contracting training. 

During our site visits to four regional offices, we found that no 
offices had implemented all aspects of the contract file maintenance 
guidance. 

Some regional offices said they were not sure under which circumstances 
the guidance applies to local contracts. 

Objective 2: Training: 

Current Training Does Not Adequately Prepare Contracting Officers to 
Manage Contracts: 

Required contracting training does not provide local officials with an 
adequate level of contracting expertise to manage contracts. 

* Contracting Officers at three of the five sites we contacted said 
that VA's training has not prepared them to adequately manage 
contracts. 

* A few Contracting Officers do not feel adequately prepared to handle 
larger, more complex contracts that must be competed among several 
vendors. Consequently, they are purchasing services through smaller, 
noncompetitive contracts. 

Objective 2: Communication: 

Regional Offices Report Delays in Communication, But VA Headquarters Is 
Taking Actions to Address These Concerns: 

Regional office officials told us that VR&E headquarters is not always 
timely in responding to questions or requests to clarify contracting- 
related guidance, resulting in service delays to veterans and misuse of 
inactive contracts, among other problems. 

VR&E headquarters officials said that they are aware of these concerns, 
and VA is taking actions to address them. 

* VR&E headquarters hired an additional contracting specialist who will 
act as the primary liaison to regional offices. 

* VA established an electronic mailbox for all regional office 
contracting questions. 

* VA will continue allocating time during regular VR&E Officer call-in 
sessions for contract-related questions. 

Objective 2: Management Data: 

VA's Management of VR&E Contracting Is Limited by Inadequate Reporting 
Capabilities: 

Corporate WINRS was originally designed to capture case management 
information on veterans. As the Task Force noted, the system is now 
used to collect program management data as well. Currently, Corporate 
WINRS can: 

* provide data for a range of automated reports to track certain 
activities such as regional offices' caseloads, the case status of 
veterans by counselor, and contractor timeliness. 

However, automated reports that would facilitate contract management 
have not yet been fully developed. Currently, Corporate WINRS cannot: 

* readily track contracting activities such as contractor costs by 
regional office and: 

* readily and reliably separate spending on national versus local 
contracts. 

Inadequate Internal Controls over Contracting Data Raise Reliability 
Concerns: 

VR&E officials at all five regional offices we contacted told us that 
Corporate WINRS lacks adequate internal controls, a condition that 
could lead to errors, including: 

* obligating funds to expired contracts and: 

* obligating funds from an incorrect funding source. 

VA officials recognize that current restrictions in Corporate WINRS 
affect the integrity of any process used to measure the exact payments 
or pending obligations on any contract. 

When we compared contracting data provided by regional offices we 
visited to data provided by VA, we found some discrepancies-potentially 
affecting data reliability-in the: 

* number of contracts used, 

* type of contract used (national versus local), and: 

* amount paid to contractors. 

Conclusions: 

Contracting is a valuable tool for the VR&E program. A well managed 
contracting system can help VR&E provide services to veterans by: 

* gathering the information needed to make entitlement decisions and 
evaluate veterans' employability, 

* supplementing services provided by VA staff, and; 

* obtaining services at the best value to the government. 

Because several regional offices felt that prices were too high under 
the current national contracts, they negotiated lower prices. Because 
VA has conducted market research in preparation for issuing its new 
national contracts, which it did not do last time, VA has positioned 
itself to be at less risk of overpaying this time around. 

VA's oversight and communication with regional offices is a work in 
progress, but in the absence of continued improvement, regional offices 
may be putting VA at risk for overpaying local contractors. 

Given their current level of training, regional VR&E officials may 
continue to use noncompetitive contracts even when they are not 
necessarily appropriate. Negotiating competitive contracts requires 
greater contracting expertise, but may also provide better prices and 
outcomes. 

Gains from improved contract management will be minimized without an 
information system to provide usable, reliable data on contract use. VA 
plans to improve the reporting capabilities of Corporate WINRS, but 
without improvements to internal controls and data reliability, reports 
produced by the system will not be as useful as they could be as 
management tools. 

Recommendations for Executive Action: 

To help improve VA's management of VR&E service contracting, both at 
the headquarters and regional office levels, we recommend that the 
Secretary of Veterans Affairs direct the Under Secretary for Benefits 
to: 

Conduct a management review to assess how regional offices are 
implementing contracting guidance and take necessary actions to make 
needed improvements. For example, VA could clarify to VR&E employees 
how existing VR&E guidance on contract file maintenance applies to 
local contracts. 

Require regional offices to report on the efficacy of contracting 
training and take necessary actions to make needed improvements. For 
example, VA could develop VR&E-specific contracting training. 

Improve VA management of VR&E contracting by improving Corporate WINRS 
reporting capabilities and its internal controls over contracting data. 

[End of section] 

Appendix II: Objectives, Scope, and Methodology: 

We examined (1) the progress VA has made in implementing selected 
recommendations on contracting for VR&E services made by the VR&E Task 
Force and VA Inspector General reports, and (2) the key challenges in 
improving its management of VR&E service contracting. To address these 
issues, we identified contracting-related recommendations from the 2004 
VR&E Task Force and 2005 VA Inspector General reports, interviewed 
officials from VA headquarters, conducted case studies of four VA 
regional offices, analyzed VR&E contract-related management data, and 
reviewed contract files at VA's Office of Acquisition and Materiel 
Management (OA&MM). We conducted our work from March 2006 to February 
2007 in accordance with generally accepted government auditing 
standards. 

To identify contract-related recommendations from the 2004 VR&E Task 
Force and 2005 VA Inspector General reports, we examined all 
recommendations from both reports, selecting recommendations related to 
(1) national contracting, (2) human capital issues related to 
contracting activities, (3) internal controls over contracting 
activities at the regional office level, and (4) data on contracting. 
Overall, we identified 10 recommendations to include in our review 
(table 1). To obtain information on the status of contract-related 
recommendations and to determine the changes VA has made to its VR&E 
contracting policies and procedures in response to these 
recommendations, we interviewed VA officials, including officials from 
the VR&E Service. Additionally, we obtained updated status reports on 
VR&E Task Force and VA Inspector General recommendations from VA 
headquarters. 

Table 1. VR&E Task Force and VA Inspector General Contracting-Related 
Recommendations: 

Area of focus: National contracts; 
VR&E Task Force recommendations: Revise the scope of current national 
contracts; 
VA OIG recommendations: Revise the scope of and compete new contracts. 

Area of focus: Human capital issues; 
VR&E Task Force recommendations: (1) Create and staff a new position 
for contract specialists at regional offices and implement a training 
program for these staff; 
(2) Develop a contract training program for all VR&E staff with direct 
responsibility for contract oversight; 
VA OIG recommendations: Provide contracting staff with appropriate 
training and contract warrant authority. 

Area of focus: Regional office internal controls over contracting 
activities; 
VR&E Task Force recommendations: Enhance VA's capacity to manage 
contracts; 
VA OIG recommendations: (1) Require that regional offices maintain 
documentation related to the following: contracts used by the office, 
instances when one contractor is used instead of another despite the 
fact that a higher price is being paid for services, and instances when 
actions are taken to address identified quality assurance review 
deficiencies; 
(2) Implement adequate contract payment internal controls. 

Area of focus: Contracting data; 
VR&E Task Force recommendations: (1) Enhance the usability of Corporate 
WINRS for internal control and financial management purposes and to 
manage and monitor all contractor services; 
(2) Elevate funding priority of Corporate WINRS and accelerate the 
development and adoption of financial and process enhancements; 
VA OIG recommendations: [Empty]. 

Source: GAO analysis. 

[End of table] 

To evaluate VA's progress in implementing the recommendations made by 
the VR&E Task Force and the VA Inspector General and to identify key 
challenges in doing so, we visited four regional offices representing 
each of VBA's geographic areas. Our case study sites were Boston, 
Denver, St. Petersburg, and Houston. In addition to geographic 
diversity, sites were selected that used different types of contracts 
(national and/or local) and that represented a range of regional office 
size and contracting expenditures among VA's 57 regional offices (table 
2). We also contacted VBA's Waco regional office. Waco, like Houston, 
piloted VA's strategy for purchasing VR&E services through national 
contracts, although neither regional office had any national contracts 
available to it for use during the time of our review. 

Table 2. Case Study Site Selection Criteria, Fiscal Year 2006: 

Case study site: Boston; 
VBA area: Eastern; 
Number of veterans served: 1,011; 
Payments for national contracts: $148,349; 
Number of national contracts: 3; 
Payments for local contracts: $17,198; 
Number of local contracts: 18. 

Case study site: Denver; 
VBA area: Western; 
Number of veterans served: 2,825; 
Payments for national contracts: $592,253; 
Number of national contracts: 8; 
Payments for local contracts: $504,115; 
Number of local contracts: 21. 

Case study site: St. Petersburg; 
VBA area: Southern; 
Number of veterans served: 4,977; 
Payments for national contracts: $1,394,212; 
Number of national contracts: 7; 
Payments for local contracts: $128,290; 
Number of local contracts: 114. 

Case study site: Houston; 
VBA area: Central; 
Number of veterans served: 4,921; 
Payments for national contracts: [A]; 
Number of national contracts: [A]; 
Payments for local contracts: $626,731; 
Number of local contracts: 64. 

Source: Corporate WINRS and data provided by regional offices. 

[A] No national contracts were available to the Houston VA regional 
office. 

[End of table] 

At each of the case study sites, we interviewed VR&E officials involved 
in the management and oversight of contracted services, discussing the 
use of national and local contracts, implementation of VA's contracting 
policies and procedures, and challenges they experienced. We also 
obtained regional office data on the number of contracts used and 
payments made for contracted services during fiscal year 2006. We 
assessed the implementation of VA's guidance on contracting by 
reviewing national and local contract files for contracts that were 
still being used after January 2006, in order to allow regional offices 
adequate time to implement VA's policy guidance that went into effect 
in September 2005. To determine the number of available national 
contracts at each case study site using national contracts in fiscal 
year 2006, we reviewed data from VA's OA&MM and interviewed OA&MM 
officials. To determine the maximum allowable price for services, we 
reviewed contract files for national contracts available to the Boston, 
Denver, and St. Petersburg regional offices at VA's OA&MM. 

Review of VA's Management Data on Contracting: 

To determine the types of services purchased through VR&E contracts and 
the amount spent on contracted services nationwide, we analyzed fiscal 
year 2006 data on contracted services from VA's Corporate WINRS case 
management data system. The information we reviewed included data on 
national and local contract usage, services provided through contracts, 
and payments for contracted services. 

To assess the reliability of Corporate WINRS contracting data, we 
interviewed knowledgeable VA officials and compared contract-related 
data contained in Corporate WINRS to local data we collected from the 
four case study sites. We also reviewed existing documentation for the 
data system, including (1) the Corporate WINRS Users Manual, (2) the 
VR&E Task Force and VA Inspector General reports, and (3) an internal 
evaluation of the data system conducted by VA's Office of Business 
Oversight, Systems Quality Assurance Service. While we identified 
accuracy limitations with Corporate WINRS contracting data--discussed 
in the slide entitled "Objective 2: Management Data - Inadequate 
Internal Controls Over Contracting Data Raise Reliability Concerns" in 
appendix I (page 30)--we found that generally VA's Corporate WINRS data 
on contracting were sufficiently reliable for the purposes of our 
study. We determined during our reliability assessment of the data that 
the data were reliable enough to use to report on national trends. 

[End of section] 

Appendix III: Comments from the Department of Veterans Affairs: 

The Deputy Secretary Of Veterans Affairs: 
Washington: 

March 23, 2007: 

Ms. Denise M. Fantone: 
Director: 
Education, Workforce, and Income Security Team: 
U. S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Ms. Fantone: 

The Department of Veterans Affairs (VA) has reviewed your draft report, 
VA Vocational Rehabilitation and Employment. Service Contract 
Management Is Improving but Challenges Remain (GAO-07-568R) and agrees 
with your conclusions and concurs with your recommendations. 

To strengthen its management of Vocational, Rehabilitation, and 
Employment (VR&E) contracting, VA will: 

* Emphasize contract maintenance guidance and continue to assess 
regional office performance through oversight visits; 

* Continue to provide specific annual VR&E contract training as well as 
conduct specialized VR&E contract training to VR&E regional office 
staff responsible for managing contracts; and: 

* Modify the VR&E case management system to incorporate additional 
internal controls and reporting capabilities. 

The enclosure addresses your recommendations in more detail and 
provides suggested rewording for technical clarity. VA appreciates the 
opportunity to comment on your draft report. 

Sincerely yours, 

Signed by:  

Gordon H. Mansfield: 

Enclosure: 

Department of Veterans Affairs (VA) Comments to Government 
Accountability Office (GAO) Draft report VA Vocational Rehabilitation 
and Employment: Service Contract Management Is Improving but Challenges 
Remain (GAO-07-568R): 

To help improve VA's management of VR&E service contracting, both at 
the headquarters and regional office levels, we recommend that the 
Secretary of Veterans Affairs direct the Under Secretary for Benefits 
to: 
* Conduct a management review to assess how regional offices are 
implementing contracting guidance and take necessary actions to make 
needed improvements. For example, VA could clarify to VR&E employees 
how existing VR&E guidance on contract file maintenance applies to 
local contracts. 

Concur - The Veterans Benefits Administration (VBA) will reiterate to 
Vocational Rehabilitation and Employment (VR&E) field employees that 
the guidance in VR&E Letter 28-05-16, "VR&E Contract File Maintenance," 
and the modified VR&E Site Visit Protocol (which is outlined in VR&E's 
manual) is applicable to both National Acquisition Strategy and local 
contracts. As a management review tool, VR&E Service uses periodic site 
visits of the VBA Regional Office VR&E Divisions to assess regional 
offices program management to include oversight of contracting. VR&E 
Service will continue to conduct approximately 12 of these visits each 
year. Both the VR&E Letter and the Site Visit Protocol are available 
for review by VARO staff on the VR&E Intranet website. At the beginning 
of fiscal year (FY) 2007, VA also published on the VR&E Intranet Web 
site a list of all the action items and commendable items found during 
the FY 2006 Site Visits to include contracting issues. 

* Require regional offices to report on the efficacy of contracting 
training and take necessary actions to make needed improvements. For 
example, VA could develop VR&E specific contracting training. 

Concur - VA will continue to provide VR&E specific contracting training 
annually at the VR&E Management Training Conference as well as conduct 
specialized VR&E Contract Training to VR&E regional office staff 
responsible for managing contracts. 

* Improve VA management of VR&E contracting by improving Corporate 
WINRS reporting capabilities and its internal controls over contracting 
data. 

Concur - VA will make modifications to VR&E's case management system 
"Corporate WINRS" that will incorporate additional internal controls 
and reporting capabilities on contract management. These additional 
internal controls and reporting capabilities will be installed during 
the CWINRS Upgrade, scheduled for FY 2008. This upgrade is currently 
undergoing the internal VA project prioritization process. 

[End of section] 

Related GAO Products: 

Contract Management: Further Action Needed to Improve Veterans Affairs 
Acquisition Function. GAO-06-144. Washington, D.C.: October 19, 2005. 

Framework for Assessing the Acquisition Function at Federal Agencies. 
GAO-05-218G. Washington, D.C.: September 2005. 

Vocational Rehabilitation: VA Has Opportunities to Improve Services, 
but Faces Significant Challenges. GAO-05-572T. Washington, D.C.: April 
20, 2005. 

Vocational Rehabilitation: More VA and DOD Collaboration Needed to 
Expedite Services for Seriously Injured Servicemembers. GAO-05-167. 
Washington, D.C.: January 14, 2005. 

VA Vocational Rehabilitation and Employment Program: GAO Comments on 
Key Task Force Findings and Recommendations. GAO-04-853. Washington, 
D.C.: June 15, 2004. 

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