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Report to the Chairman, Subcommittee on Oversight and Investigations, 
Committee on Veterans' Affairs, 

House of Representatives: 

United States Government Accountability Office: 

GAO: 

October 2005: 

Contract Management: 

Further Action Needed to Improve Veterans Affairs Acquisition Function: 

GAO-06-144: 

GAO Highlights: 

Highlights of GAO-06-144, a report to the Chairman, Subcommittee on 
Oversight and Investigations, Committee on Veterans’ Affairs, House of 
Representatives: 

Why GAO Did This Study: 

The Department of Veterans Affairs (VA) is among the largest federal 
acquisition agencies, spending $7.3 billion on product and service 
acquisitions in 2004 alone. Recent reports by VA and other 
organizations identified weaknesses in the agency’s acquisition 
function that could result in excess costs to the taxpayer. One report 
by the Naval Supply Systems Command (NAVSUP) made 24 recommendations to 
improve VA’s acquisition function. VA has accepted these 
recommendations. GAO was asked to review the progress VA has made in 
implementing the key NAVSUP recommendations. GAO identified 7 of the 24 
recommendations as key, based primarily on its professional judgment 
and prior experience. 

What GAO Found: 

Progress made by the Department of Veterans Affairs in implementing the 
key recommendations from the NAVSUP report has been limited. In fact, a 
year after the report was issued, VA has not completed actions on any 
of the seven key recommendations GAO identified. While VA agrees 
implementation of the key recommendations is necessary, the steps it 
has taken range from no action to partial action. No action has been 
taken on three key recommendations: to develop a long-term improvement 
plan, adequate management metrics, and a supplement to the agency’s 
strategic plan. No more than partial action has been taken on four 
others: establishment of a contract review board for reviewing files at 
key milestones along with improvement of postaward contract management, 
customer relationships, and employee morale. 

Status of Key Recommendations: 

[See Table 1] 

A lack of permanent leadership in key positions has contributed to the 
lack of further progress in revising acquisition policies, procedures, 
and management and oversight practices, according to VA officials. For 
example, two key VA acquisitions management positions were unfilled—one 
for 15 months and the other for 25 months. In addition, VA has neither 
set time frames for completing actions on the NAVSUP recommendations 
nor established a method to measure progress. Until VA establishes a 
process for completing action on the NAVSUP recommendations, the 
benefits of the study may not be fully realized. 

What GAO Recommends: 

GAO recommends that the Secretary of Veterans Affairs direct the Deputy 
Assistant Secretary for Acquisition and Materiel Management to 

* identify specific time frames and milestones for completing actions 
on the key NAVSUP recommendations and 

* establish a method to measure progress in implementing the 
recommendations. 

VA concurred with GAO’s recommendations. 

www.gao.gov/cgi-bin/getrpt?GAO-06-144. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact William T. Woods, 202-512-
4841, or woodsw@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Progress Limited in Implementing Key NAVSUP Recommendations: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: NAVSUP's Report Recommendations: 

Appendix II: Scope and Methodology: 

Appendix III: Comments from the Department Of Veterans Affairs: 

Tables: 

Table 1: Status of Key Recommendations: 

Table 2: Listing of Recommendations Contained in NAVSUP Report: 

Abbreviations: 

AOS: Acquisition Operations Service: 
CoreFLS: Core Financial and Logistics System: 
IG: Inspector General: 
NAVSUP: Naval Supply Systems Command: 
OA&MM: Office of Acquisition and Materiel Management: 
VA: Department of Veterans Affairs: 

United States Government Accountability Office: 

Washington, DC 20548: 

October 19, 2005: 

The Honorable Michael Bilirakis: 
Chairman, Subcommittee on Oversight and Investigations: 
Committee on Veterans' Affairs: 
House of Representatives: 

Dear Mr. Chairman: 

The Department of Veterans Affairs (VA) operates one of the largest 
health care systems in the world and is among the largest acquisition 
agencies in the federal government. In fiscal year 2004 alone, VA spent 
$7.3 billion acquiring the products and services needed to carry out 
its mission on behalf of the nation's veterans. Recently, reports by 
entities within VA as well as outside organizations have identified 
various weaknesses in the agency's acquisition function that could 
affect the successful accomplishment of its mission or result in higher 
than necessary costs to the taxpayer. Among these reports is one 
prepared by the Naval Supply Systems Command (NAVSUP),[Footnote 1] a 
Navy acquisition organization VA had requested to assess its 
acquisition function. The NAVSUP report identified a wide range of 
areas needing VA management attention and made 24 recommendations, 
which VA agrees should be implemented. 

Given the importance of acquisition to VA's mission, you asked us to 
review the progress VA has made in implementing the key recommendations 
in the NAVSUP report. In selecting 7 key recommendations from among the 
24 in the report, we relied primarily on our professional judgment and 
the experience gained from previous reviews of acquisition issues at 
various federal agencies. We also considered the importance the NAVSUP 
report and VA officials assigned to the specific recommendations. We 
chose recommendations that, if implemented successfully, are likely to 
have the broadest and most significant impact on VA's operations. 
Appendix I lists the 24 recommendations of the NAVSUP report, starting 
with the 7 recommendations we identified as key. To determine the 
status of the seven key recommendations, we met with acquisition 
officials at VA's Office of Acquisition and Materiel Management (OA&MM) 
and with officials at VA's Office of Inspector General (IG) who are 
responsible for audits of contracting practices. We also reviewed 
relevant agency documents. We did not independently assess the state of 
the acquisition function at VA. We conducted our review from March to 
August 2005 in accordance with generally accepted government auditing 
standards. A more detailed discussion of our scope and methodology is 
in appendix II. 

Results in Brief: 

Progress made by the Department of Veterans Affairs in implementing the 
key recommendations from the NAVSUP report has been limited. In fact, a 
year after the report was issued, VA has not completed action on any of 
the seven key recommendations we identified. While VA agrees that 
implementation of the key recommendations is necessary, the steps it 
has taken range from no action--such as a decision to defer the 
development of a long-term improvement plan--to partial action--for 
example, drafting updated standard operating procedures, which await 
final approval. A lack of permanent leadership in key positions is 
contributing to the limited progress in revising acquisition policies, 
procedures, and management and oversight practices, according to VA 
officials. In addition, VA has neither set time frames for completing 
actions on the NAVSUP recommendations nor established a method to 
measure progress. Until VA establishes a process for completing action 
on the NAVSUP recommendations, the benefits of the study may not be 
fully realized. 

We are recommending that VA establish a schedule for completing actions 
on the key recommendations from the NAVSUP report and establish a 
method to measure progress. In commenting on a draft of this report, VA 
agreed with our conclusions and concurred with our recommendations. 
VA's comments are included in appendix III. 

Background: 

The Office of Acquisition and Materiel Management is the principal 
office within VA headquarters responsible for supporting the agency's 
programs. The OA&MM includes an Office of Acquisitions that, among 
other things, provides acquisition planning and support, helps develop 
statements of work, offers expertise in the areas of information 
technology and software acquisition, develops and implements 
acquisition policy, conducts business reviews, and issues warrants for 
contracting personnel. As of June 2005, the Office of Acquisitions was 
managing contracts valued at over $18 billion, including option 
years.[Footnote 2] 

In recent years, reports have cited inadequacies in the contracting 
practices at VA's Office of Acquisitions and also have identified 
actions needed to improve them. In fiscal year 2001, the VA IG issued a 
report that expressed significant concerns about the effectiveness of 
VA's acquisition system.[Footnote 3] As a result, the Secretary of 
Veterans Affairs established, in June 2001, a Procurement Reform Task 
Force to review VA's procurement system. The task force's May 2002 
report set five major goals that it believed would improve VA's 
acquisition system: (1) leverage purchasing power, (2) standardize 
commodities, (3) obtain and improve comprehensive information, (4) 
improve organizational effectiveness, and (5) ensure a sufficient and 
talented workforce. 

Issues related to organizational and workforce effectiveness were at 
the center of the difficulties VA experienced implementing its Core 
Financial and Logistics System (CoreFLS).[Footnote 4] The VA IG and an 
independent consultant issued reports on CoreFLS in August 2004 and 
June 2004, respectively, and both noted that VA did not do an adequate 
job of managing and monitoring the CoreFLS contract and did not protect 
the interests of the government. Ultimately, the contract was canceled 
after VA had spent nearly $250 million over 5 years. 

In response to deficiencies noted in the CoreFLS reports, VA sought 
help to improve the quality, effectiveness, and efficiency of its 
acquisition function by requesting that NAVSUP perform an independent 
assessment of the Acquisition Operations Service (AOS). NAVSUP looked 
at three elements of the contracting process: management of the 
contracting function; contract planning and related functions; and 
special interest items such as information technology procurements, use 
of the federal supply schedule, and postaward contract management. In a 
September 2004 report, NAVSUP identified problems in all three 
elements. 

Progress Limited in Implementing Key NAVSUP Recommendations: 

While VA agrees with the NAVSUP report's recommendations, limited 
progress has been made in implementing the seven key recommendations of 
the report. VA officials indicate that factors contributing to this 
limited progress include the absence of key personnel, a high turnover 
rate, and a heavy contracting workload. We found that VA has neither 
established schedules for completing action on the recommendations nor 
established a method to measure its progress. Until VA establishes well-
defined procedures for completing action on the NAVSUP recommendations, 
the benefits of this study may not be fully realized. 

Range of Actions on Recommendations: 

The status of the seven key recommendations we identified is summarized 
in Table 1: 

Table 1: Status of Key Recommendations: 

Key NAVSUP recommendations: Develop a long-term improvement plan; 
Status: No action. 

Key NAVSUP recommendations: Develop adequate management metrics; 
Status: No action. 

Key NAVSUP recommendations: Supplement strategic plan; 
Status: No action. 

Key NAVSUP recommendations: Establish contract review board for 
reviewing files at key milestones; 
Status: Partial action. 

Key NAVSUP recommendations: Improve postaward contract management; 
Status: Partial action. 

Key NAVSUP recommendations: Improve customer relationships; 
Status: Partial action. 

Key NAVSUP recommendations: Improve employee morale; 
Status: Partial action. 

Source: GAO analysis. 

[End of table] 

Action taken by VA on the seven key recommendations in the NAVSUP 
report has varied from no action, to initial steps, to more advanced 
efforts in specific areas. 

* Long-term improvement plan. NAVSUP recommended that AOS develop a 
long-term approach to address improvements needed in key areas. VA 
acknowledges that establishing a long-term improvement plan is 
necessary to maintain its focus on the actions that will result in 
desired organizational and cultural changes. During the course of our 
review, however, we found that no action has been taken to develop a 
long-term improvement plan with established milestones for specific 
actions. 

* Adequate management metrics. NAVSUP recommended that AOS develop 
metrics to effectively monitor VA's agencywide acquisition and 
procurement processes, resource needs, and employee productivity 
because it found it that AOS was not receiving information needed to 
oversee the contracting function. VA officials agree that they need to 
have the ability to continuously and actively monitor acquisitions from 
the pre-award to contract closeout stages to identify problem areas and 
trends. VA officials acknowledge that, without adequate metrics, its 
managers are unable to oversee operations and make long-term decisions 
about their organizations; customers cannot review the status of their 
requirements without direct contact with contracting officers; and 
contracting officers are hampered in their ability to view their 
current workload or quickly assess deadlines. During our review, VA 
officials stated that they intend to use a balanced scorecard approach 
for organizational metrics in the future. However, no steps had been 
taken to establish specific metrics at the time we completed our 
review. 

* Strategic planning. NAVSUP recommended that AOS develop a supplement 
to the OA&MM strategic plan that includes operational-level goals to 
provide employees with a better understanding of their roles and how 
they contribute to the agency's strategic goals, objectives, and 
performance measures. VA officials indicated that progress on the 
strategic plan had been delayed because it will rely heavily on 
management metrics that will be identified as part of the effort to 
develop a balanced scorecard. With the right metrics in place, VA 
officials believe they will be in a much better position to supplement 
the strategic plan. VA had not revised the strategic plan by the time 
we finished our review. 

* Process to review contract files at key acquisition milestones. 
NAVSUP recommended that AOS establish a contract review board to 
improve management of the agency's contract function. NAVSUP believed 
that a contracting review board composed of senior contracting officers 
would provide a mechanism to effectively review contracting actions at 
key acquisition milestones and provide needed overall management. To 
enhance these reviews, VA has prepared draft standard operating 
procedures on how contract files should be organized and documented. 
Final approval is pending. VA officials indicated, however, that no 
decisions have been made about how or when they will institute a 
contract review board as part of the agency's procurement policies and 
processes. 

* Postaward contract management. NAVSUP recommended that the AOS 
contracting officers pay more attention to postaward contract 
management by developing a contract administration plan, participating 
in postaward reviews, conducting contracting officer technical 
representative reviews, and improving postaward file documentation. We 
found that VA has taken some action to address postaward contract 
management. For example, AOS is training a majority of its contracting 
specialists on the electronic contract management system. VA officials 
indicated that the electronic contract management system will help 
improve its postaward contract management capability. The electronic 
contract management system is a pilot effort that VA expects to be 
operational in early 2006. Also, final approval for a draft standard 
operating procedure for documenting significant postaward actions is 
pending. 

* Customer relationships. NAVSUP reported that VA's ability to relate 
to its customers is at a low point and recommended VA take action to 
improve customer relations. Some mechanisms VA officials agreed are 
needed to improve customer relations include requiring that program 
reviews include both the customer and contracting personnel, greater 
use and marketing of the existing customer guide to customers and 
contracting communities, the establishment of a customer feedback 
mechanism such as satisfaction surveys, placing a customer section on 
the World Wide Web, and engaging in strategic acquisition planning with 
customer personnel. We noted that VA is taking some of the actions 
recommended by NAVSUP. For example, VA has established biweekly 
meetings with major customer groups, created customer-focused teams to 
work on specific projects, and nearly completed efforts to issue a 
comprehensive customer guide. Pending are efforts to include customers 
in the AOS review process and to develop a customer section on the web 
site. 

* Employee morale. The NAVSUP report said that VA employee morale is at 
a low point and is having an impact on employee productivity. NAVSUP 
said that AOS needs to respond to its employee morale issue by 
addressing specific employee concerns related to workload distribution, 
strategic and acquisition planning, communication, and complaint 
resolution. VA has taken several actions related to employee morale. 
Workload distribution issues have been addressed by developing a 
workload and spreadsheet tracking system and removing restrictions on 
work schedules for employees at ranks of GS-15 and below. Strategic 
planning actions completed include the development of mission and 
vision statements by a cross section of VA personnel and collective 
involvement in approval of organizational restructuring efforts. 
Communication and complaint resolution issues are being resolved by 
facilitating a meeting between AOS management and employees to air 
concerns. Partially completed actions include the development of new 
employee training module, including a comprehensive new employee 
orientation package. According to VA, new employee training includes 
the dissemination of draft standard operating procedures. VA is also in 
the process of developing an employee survey to measure overall 
employee satisfaction. 

Factors Contributing to Limited Progress: 

Discussions with VA officials indicate that the agency believes its 
limited progress has largely been due to the absence of permanent 
leadership and insufficient staffing levels. Officials told us that the 
recommendations will be implemented once key officials are in place. 
For example, positions for two key VA acquisition managers--Associate 
Deputy Assistant Secretary for Acquisitions and the Director for AOS-- 
were unfilled for about 25 months and 15 months, respectively. But 
during the course of our review these positions were filled. 

As of August 25, 2005, AOS has still not selected permanent personnel 
for 17 of its 62 positions. This includes two other key management 
positions--the Deputy Director of Field Operations and the Deputy 
Director for VA Central Office Operations, both filled by people in an 
acting role. Supervisory leadership has also suffered as a consequence 
of understaffing, VA officials said. Four of the eight supervisory 
contract specialist positions are filled by people in an acting role. 
Critical nonsupervisory positions also have remained unfilled, with 11 
contract specialists' positions vacant. The absence of contract 
specialists has largely been caused by a high turnover rate. According 
to VA officials, the high turnover rate can be attributed to a heavy 
contracting workload, as well as the other factors identified in the 
NAVSUP report. 

When asked, the VA officials we spoke with could not provide specific 
time frames for completing actions on the recommendations or a method 
to measure progress. We believe the lack of an implementation plan with 
time frames and milestones, as well as a way to measure progress, 
contributed to VA's limited progress in implementing the key NAVSUP 
recommendations. 

Conclusions: 

The seven key NAVSUP recommendations we identified have not been fully 
implemented. While some progress is being made, progress is lacking in 
those areas that we believe are critical to an efficient and effective 
acquisition process. If key recommendations for improvement are not 
adequately addressed, VA has no assurance that billions of its Office 
of Acquisitions contract dollars will be managed in an efficient and 
effective manner, or that it can protect the government's interest in 
providing veterans with high-quality products, services, and expertise 
in a timely fashion at a reasonable price. 

While personnel-related factors have contributed to VA's lack of 
progress, the absence of schedules for completion of actions and of 
metrics that could be used to determine agency progress is also an 
important factor. Current VA officials, even those in an acting 
capacity, can identify timetables for completing action on key NAVSUP 
recommendations and establish a means to determine progress. Without 
these elements of an action plan, the benefits envisioned by the study 
may not be fully realized. 

Recommendations for Executive Action: 

We recommend that the Secretary of Veterans Affairs direct the Deputy 
Assistant Secretary for Acquisition and Materiel Management to: 

* identify specific time frames and milestones for completing actions 
on the key NAVSUP recommendations, and: 

* establish a method to measure progress in implementing the 
recommendations. 

Agency Comments: 

In commenting on a draft of this report, the Deputy Secretary of 
Veterans Affairs agreed with our conclusions and concurred with our 
recommendations. VA's written comments are included in appendix III. 

We will send copies of this report to the Honorable R. James Nicholson, 
Secretary of Veterans Affairs; appropriate congressional committees; 
and other interested parties. We will also provide copies to others on 
request. In addition, the report will be available at no charge on the 
GAO Web site at http://www.gao.gov. 

If you have any questions concerning this report, please contact me at 
(202) 512-4841 or by e-mail at woodsw@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Key contributors to this report were 
Blake Ainsworth, Penny Berrier, William Bricking, Myra Watts Butler, 
Christina Cromley, Lisa Simon, Shannon Simpson, and Bob Swierczek. 

Signed by: 

William T. Woods: 
Director: 
Acquisition and Sourcing Management: 

[End of section] 

Appendix I: NAVSUP's Report Recommendations: 

In September 2004, the Naval Supply System Command (NAVSUP) issued a 
report, Procurement Performance Management Assessment Program on its 
review of the Department of Veterans Affairs, Office of Acquisition and 
Materiel Management, Acquisition Operations Service. The 24 
recommendations contained in the NAVSUP report are listed in table 2 
below. The first seven recommendations listed are the key 
recommendations we identified. 

Table 2: Listing of Recommendations Contained in NAVSUP Report: 

No.: 1; 
Issue Area: Long-term improvement plan; 
Recommendation: Develop a long-term plan to address key management 
areas such as establishing attainable milestones for remedial and long-
term actions and keeping workforce involved in organizational 
transformation. 

No.: 2; 
Issue Area: Management metrics; 
Recommendation: Develop adequate management metrics to effectively 
monitor critical acquisition processes and thus provide visibility over 
status of contract requirements, operations, and contract due dates. 

No.: 3; 
Issue Area: Strategic planning; 
Recommendation: Revise the business plan to identify operational goals, 
objectives, and performance measures for the entire workforce, and 
encourage employees to participate in its development. 

No.: 4; 
Issue Area: Contract file reviews; 
Recommendation: Expand and institutionalize a process review at 
critical acquisition milestones rather than a single review prior to 
award. A standard process, such as instituting a contract review board, 
should involve the customers as key participants. 

No.: 5; 
Issue Area: Postaward functions; 
Recommendation: Emphasize greater attention to postaward contract 
management such as developing a contract administration plan, 
participating in postaward and technical reviews, and placing a greater 
emphasis on postaward file documentation. 

No.: 6; 
Issue Area: Customer relations; 
Recommendation: Establish mechanisms to improve customer relations by 
developing customer and contracting teams to coordinate purchases and 
conduct program reviews, and establishing a survey to obtain customer 
feedback on contractor performance. 

No.: 7; 
Issue Area: Employee morale; 
Recommendation: Take the necessary steps to improve employee morale in 
the problem areas cited, and conduct annual employee satisfaction 
surveys and give results to employees. 

No.: 8; 
Issue Area: Communication; 
Recommendation: Ensure that improved communication processes are 
established with employees to include regular staff meetings and 
appropriate dissemination of information and contract policy. 

No.: 9; 
Issue Area: Warranting; 
Recommendation: Review the levels of contracting authority granted to 
the workforce and adjust as deemed appropriate. 

No.: 10; 
Issue Area: Current standard operating procedures; 
Recommendation: Review and revise content contained within the agency's 
current standard operating procedures to more accurately and thoroughly 
cover the topics discussed. 

No.: 11; 
Issue Area: New standard operating procedure; 
Recommendation: Establish a standard operating procedure implementing a 
contract review board process for key acquisition milestones. 

No.: 12; 
Issue Area: Legal involvement; 
Recommendation: Review current list of legal issues to provide seamless 
and continuous support throughout the acquisition process. 

No.: 13; 
Issue Area: Acquisition planning; 
Recommendation: Engage customers early in the development of the 
acquisition to allow sufficient advance notice of contracting 
requirements to facilitate acquisition planning. 

No.: 14; 
Issue Area: File documentation; 
Recommendation: Ensure file documentation identifies the correct 
Federal Acquisition Regulation citation as the authority for the 
action. Additionally, discussion of source selection criteria in sole 
source situations is misleading and should be avoided. 

No.: 15; 
Issue Area: Supporting rationale for modifications; 
Recommendation: Ensure that the rationale and authority supporting 
contract modifications are documented. 

No.: 16; 
Issue Area: Description of contract type; 
Recommendation: Be conscientious to properly describe contract types. 

No.: 17; 
Issue Area: Fund/identify guaranteed minimum under indefinite delivery 
indefinite quantity contracts; 
Recommendation: Ensure indefinite delivery indefinite quantity 
contracts are awarded correctly with the appropriate elements, such as 
guaranteed minimums and maximum ordering limitations. 

No.: 18; 
Issue Area: Lease-purchase analysis and screenings; 
Recommendation: Personnel should become familiar with and employ proper 
leasing practices when deemed appropriate. Further, pricing of all 
contract actions should be meaningfully analyzed to ensure fairness and 
reasonableness. 

No.: 19; 
Issue Area: Processing Federal Supply Schedule orders; 
Recommendation: Ensure General Service Administration schedule orders 
are being placed in accordance with Federal Acquisition Regulation Part 
8 requirements. Specifically, performance-based statements of work, 
evaluation criteria, price reductions, and complete documentation of 
price negotiation memorandums. 

No.: 20; 
Issue Area: File organization; 
Recommendation: Issue a standard operating procedure that will clearly 
establish uniform guidance for contract file organization and 
documentation. 

No.: 21; 
Issue Area: Contract modifications; 
Recommendation: Establish a process to ensure the underlying rationale 
for modifications is documented. 

No.: 22; 
Issue Area: Contract administration; 
Recommendation: Establish a standard operating procedure for 
documenting significant postaward contract actions. 

No.: 23; 
Issue Area: Letter contracts/undefinitized contractual actions; 
Recommendation: Develop documented process for approval of letter 
contracts to ensure consistency and ensure the proper level of review 
is provided for these actions. 

No.: 24; 
Issue Area: Claims; 
Recommendation: Create a database or other system for tracking claims 
and disputes. 

Source: NAVSUP report. 

[End of table] 

[End of section] 

Appendix II: Scope and Methodology: 

To select the key recommendations from those identified in the NAVSUP 
September 2004 report, we focused on recommendations that, if 
successfully implemented, are likely to have the broadest and most 
significant impact on the Department of Veterans Affairs' (VA) 
operations. We chose recommendations that are crosscutting in nature. 
Accordingly, in many instances recommendations we did not identify as 
being key are nevertheless, we believe, covered to some extent by one 
or more of the key recommendations. In making our selections, we relied 
primarily on our professional judgment and the experience gained over 
many years in reviews of acquisition management issues governmentwide. 
In particular, we relied on the observations and guidance captured in a 
draft of a GAO report entitled Framework for Assessing the Acquisition 
Function at Federal Agencies.[Footnote 5] With this insight, we 
determined that 7 of the 24 NAVSUP recommendations were key. 

To identify the progress VA has made in implementing these seven key 
NAVSUP recommendations, we met with acquisition officials at VA's 
Office of Acquisition and Materiel Management (OA&MM). We also reviewed 
documents intended to demonstrate the status of VA's actions. 

In order to attain a broader view of VA acquisition issues, we 
identified and reviewed other VA and independent reports issued prior 
to the NAVSUP report. This included VA's Procurement Reform Task Force 
(May 2002) report, which recommended ways to improve procurement 
practices across VA, and reports by the VA Inspector General (August 
2004) and Carnegie Mellon (June 2004) that noted contract management 
problems on a VA contract for the Core Financial and Logistics System 
(CoreFLS). We reviewed past and current policies, procedures, and 
internal controls associated with VA acquisition processes. We obtained 
statistics from OA&MM on the authorized size of the VA Acquisitions 
Operations Service (AOS) contracting workforce and positions that still 
need to be filled. We obtained data from the Federal Procurement Data 
System on what VA spent during fiscal year 2004 for products and 
services. Further, we obtained data from VA on the amount of contract 
dollars being managed by VA's Office of Acquisitions as of June 2005. 
We did not conduct an independent assessment of the state of the 
acquisition function at VA. 

We conducted our work from March to August 2005 in accordance with 
generally accepted government auditing standards. 

[End of section] 

Appendix III: Comments from the Department Of Veterans Affairs: 

THE DEPUTY SECRETARY OF VETERANS AFFAIRS: 
WASHINGTON: 

September 30, 2005: 

Mr. William T. Woods: 
Director: 
Acquisition and Sourcing Management Team: 
U. S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Woods: 

The Department of Veterans Affairs (VA) has reviewed your draft report, 
CONTRACT MANAGEMENT. Further Action Needed to Improve Veterans Affairs 
Acquisition Function (GAO-05-1001) and agrees with your conclusions and 
concurs in your recommendations. I anticipate that the challenges VA's 
Office of Acquisition and Materiel Management (OA&MM) has faced this 
past year will be alleviated soon through appointment of a new 
permanent Assistant Secretary for Management whose confirmation hearing 
is scheduled for September 29, 2005. Additionally, since the Naval 
Supply Systems Command (NAVSUP) report was published, three key 
leadership positions within OA&MM were filled (the Deputy Assistant 
Secretary for OA&MM, the Associate Deputy Assistant Secretary for 
Acquisitions, and the Director, Acquisition Operations Service). 

The Office of Management has set a target date of March 31, 2006, for 
implementing three key recommendations: (1) develop a long-term 
improvement plan, (2) develop adequate management metrics, and (3) 
develop a supplement to the OA&MM strategic plan. 

OA&MM has completed an independent assessment of its entire 
organization, which has identified opportunities to improve. The 
assessment will serve as a basis to align the organization in the most 
effective manner. Also, Acquisition Operation Service (AOS) has 
established an electronic contract management system, to better manage 
its contracting actions. Finally, the newly appointed Deputy Assistant 
Secretary is developing organization-wide metrics for a balanced score 
card based on the Department of Commerce model. 

It is my vision that the above actions will be instrumental to 
improving the overall management of the Office of Acquisition and 
Materiel Management's acquisition program and to ensure taxpayer 
dollars are spent wisely. 

Thank you for the opportunity to comment on your draft report. 

Sincerely yours, 

Signed by: 

Gordon H. Mansfield: 

[End of section] 

FOOTNOTES 

[1] Naval Supply Systems Command, Procurement Performance Management 
Assessment Program Review, Department of Veterans Affairs, Office of 
Acquisition and Materiel Management, Acquisition Operations Service 
(Washington, D.C.: Sept.13, 2004). 

[2] The Office of Acquisitions consists of three components: 
Acquisition Operations Service, Acquisition Resources Service, and the 
National Acquisition Center. The $18 billion represents contracts 
managed by the Acquisition Operations Service. 

[3] Department of Veterans Affairs, Office of Inspector General, 
Evaluation of VA's Purchasing Practices, Report No. 01-01855-75 
(Washington, D.C.: May 15, 2001). 

[4] CoreFLS is an integrated commercial off-the shelf software 
financial and logistics system that, when fully implemented, is 
intended to be used by every financial and logistics office in VA. 

[5] To help assess the strengths and weaknesses of agencies' 
acquisition processes, GAO developed a framework of general guidance-- 
using input from federal government and industry experts. The framework 
has four interrelated elements that promote an efficient, effective, 
and accountable acquisition process: (1) organizational alignment and 
leadership, (2) policies and processes, (3) human capital, and (4) 
knowledge and information management. GAO, Framework for Assessing the 
Acquisition Function at Federal Agencies, GAO-05-218G, (Washington, 
D.C.: Sept. 2005). 

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