Veterans Affairs Contracting: Improved Oversight Needed for Certain Contractual Arrangements

What GAO Found

In July 2015, GAO found that the Department of Veterans Affairs (VA) cannot document the extent to which it used interagency agreements in fiscal years 2012 through 2014, and in some cases its management of these agreements did not comply with policy. GAO reviewed data from VA’s contract management system and found that VA obligated about $1.7 billion to other government agencies via such agreements. However, GAO’s analysis of data from VA’s accounting system found that the total amount transferred to other agencies over this period was between $600 million to $900 million more than that for the same period. GAO found that VA’s contract management system data are incomplete due to several shortcomings. For example, no direct link exists between VA’s contract management system and VA’s accounting system, thus, actions can be initiated directly in the accounting system without being recorded in the contract management system, counter to VA policy requirements. In addition, VA recently revised its policy to no longer require certain interagency agreements to be entered into the contract management system, further limiting its visibility into the full extent of its use of interagency agreements. Thus, GAO recommended that VA revise its policies on interagency agreements so that it can better record and track them; VA agreed, but in its response, did not address what steps it would take to improve the completeness of the data in its contract management system. Moreover, VA’s management of the award and oversight of the interagency agreements GAO reviewed varied, and in some cases did not comply with its policy. Nearly half of the 21 interagency agreements GAO reviewed were missing items such as documentation of VA’s reasons for using an interagency agreement instead of another procurement approach, for example. Some contracting officials were not aware of policy requirements, in part due to an absence of training opportunities. VA has begun developing training, but it may not cover all who need it. Thus, GAO recommended that VA ensure that planned training reach the full range of program and contracting officials; to which VA agreed, stating that training will reach the intended audience.

As GAO reported in July 2015, VA obligated over $244 million to Federally Funded Research and Development Centers (FFRDC) from fiscal years 2012 through 2014, and has opportunities to improve documentation and oversight. Almost all of these obligations were to FFRDCs operated by the MITRE Corporation (MITRE). Contracts with FFRDCs can be advantageous, but are noncompetitive, which can pose risks to the government in that it lacks the leverage to negotiate that it would otherwise have in a competitive environment. VA used MITRE for strategic and technical management support and other consulting services. GAO found that VA has processes to review individual FFRDC task order requirements, but not all awards are subject to these reviews, as VA does not centrally track contract actions to non-MITRE FFRDCs. As a result, VA is missing opportunities to provide more effective oversight for all of its FFRDC awards. In addition, all 10 MITRE task orders GAO reviewed complied with VA’s basic requirements. However, these contract files contained limited documentation of some of the factors VA is to consider during pre-award reviews to determine the appropriateness of an FFRDC, and for some awards the contract files did not fully explain how VA determined that the contractor’s proposed price was acceptable. Without this information, contracting officials who later revisit the file to make modifications will be limited in their abilities to make well-informed decisions. In addition, VA has opportunities for costs savings by reassessing whether to continue paying a fixed fee on travel costs. GAO recommended, among other things, that VA ensure all FFRDC actions are centrally reviewed and appropriately documented. VA agreed.

VA spent about $19 billion to buy goods and services in fiscal year 2014—partly through agreements where other agencies award contracts on VA’s behalf. VA also uses FFRDCs—government-funded entities that have relationships with federal agencies—to perform certain tasks. These arrangements can help VA meet its needs and take advantage of unique expertise.

In light of questions about VA’s use of interagency agreements and FFRDCs, GAO was asked to look at how VA uses and manages these methods of procuring goods and services. This testimony is based on GAO-15-581, and like the report, assesses (1) the extent of use and effectiveness of VA’s management of interagency agreements for fiscal years 2012 through 2014, and (2) the extent of use and effectiveness of VA’s management of FFRDCs during this same period. GAO reviewed VA procurement policies, federal acquisition regulations, VA contract data, a sample of 21 interagency agreements and 10 FFRDC task orders, chosen, in part, based on obligation amounts; and interviewed officials from VA, other agencies, and MITRE, the primary FFRDC with which VA does business.