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VA Acquisition Management

The Department of Veterans Affairs (VA) Acquisition Management is a new high-risk area as VA must demonstrate greater leadership commitment and strategic planning to ensure efficient use of its acquisition funding and staffing resources.

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VA spends tens of billions of dollars to procure a wide range of goods and services—including medical supplies and construction—to meet its mission of providing health care and other benefits to millions of veterans. In fiscal year 2019, the VA received the largest discretionary budget in its history—$86.5 billion. About a third of VA’s discretionary budget in fiscal year 2017, or $26 billion, has been used to contract for goods and services. VA has one of the most significant acquisition functions in the federal government, both in obligations and number of contract actions. VHA provides medical care to veterans and is VA’s largest administration.

Since 2015, we have made 31 recommendations (10 have been implemented; 21 remain open) to address challenges in VA’s acquisition management, including (1) outdated acquisition regulations and policies; (2) lack of an effective medical supplies procurement strategy; (3) inadequate acquisition training; (4) contracting officer workload challenges; (5) lack of reliable data systems; (6) limited contract oversight and incomplete contract file documentation; and (7) leadership instability. In light of these challenges and given the significant taxpayer investment, it is imperative that VA use its funding in the most efficient manner possible when acquiring goods and services. As such, we have added VA Acquisition Management as a new high-risk area in 2019.
 

Enforcement of Tax Laws

We are adding VA Acquisition Management as a new high-risk area in light of numerous contracting challenges and given the significant investment in resources to fulfill its critical mission of serving veterans. The department needs to use these resources in the most efficient manner possible when acquiring goods and services to meet the needs of those who served our country.

Outdated acquisition regulations and policies. VA’s procurement policies have historically been outdated, disjointed, and difficult for contracting officers to use. In September 2016, we reported that (1) the acquisition regulations contracting officers currently follow have not been fully updated since 2008 and (2) VA had been working on completing a comprehensive revision of its acquisition regulations since 2011.

VA’s delay in updating this fundamental source of policy has impeded the ability of contracting officers to effectively carry out their duties. We recommended in September 2016 that VA identify measures to expedite the revision of its acquisition regulations and clarify what policies are currently in effect. VA concurred with this recommendation and has made some progress in updating its acquisition regulations and rescinding outdated policies, but more work remains to be done over the next several years.

Of the 41 parts in the new version of VA’s acquisition regulations, VA reports that:

  • 14 have been published as final rules,
  • 5 have completed the public comment process and VA is addressing the comments received,
  • 1 is undergoing further evaluation by the Office of Management and Budget, and
  • 21 are at an earlier stage of the rulemaking process.

VA reported that it is unsure when all parts will be out for public comment but the updated final version of its acquisition regulations will not be complete until April 2021. VA has also reported that it has rescinded many irrelevant policy documents and updated those that remain relevant. Officials said they plan to rescind or update the few remaining outdated policy documents in January 2019.

Lack of an effective medical supplies procurement strategy. VA’s program for purchasing medical supplies has not been effectively executed, nor is it in line with practices at leading hospitals. To support more efficient purchasing of medical supplies for its 172 medical centers that serve the needs of about 9 million veterans, VA launched the Medical Surgical Prime Vendor-Next Generation (MSPV-NG) program in December 2016. MSPV-NG was part of its overall effort to transform its supply chain and achieve $150 million in cost avoidance.

In November 2017, we reported that VA’s approach to developing its catalog of supplies was rushed, lacked key stakeholder involvement and buy-in, and relied on establishing non-competitive blanket purchase agreements for the overwhelming majority of products, resulting in low utilization by medical centers. VA had set a target that medical centers would order 40 percent of their supplies from the MSPV-NG catalog, but utilization rates were below this target with a nationwide average utilization rate across medical centers of about 24 percent as of May 2017. This low utilization adversely affected VA’s ability to achieve its cost avoidance goal. We recommended in November 2017 that VA develop, document, and communicate to stakeholders an overarching strategy for the program. VA concurred with this recommendation and reported that it would develop and communicate a new medical supplies procurement strategy to clinical and logistics staff. This strategy was originally planned to be completed by December 2017 but has now been delayed to March 2019.

Inadequate acquisition training. VA acquisition training, at times, has not been comprehensive nor provided to staff that could benefit from it. A 2006 statute required, and a 2016 Supreme Court decision (Kingdomware Technologies, Inc. v. United States) reaffirmed, that VA is to give preference to veteran-owned small businesses when competitively awarding contracts—a program known as Veterans First. In September 2018, we reported that training on VA’s Veterans First policy did not address some of its more challenging aspects. For example, many of the contracting officers we interviewed were uncertain about how to balance the preference for veteran-owned small businesses with fair and reasonable price determinations when lower prices might be found on the open market.

In addition, VA provided several installments of online training sessions on the Veterans First policy to contracting officers but did not make them mandatory. As a result, only 52 percent of VA contacting officers completed the follow-up training by the spring of 2018. We recommended in September 2018 that VA provide more targeted training to contracting officers on how to implement the Veterans First policy, particularly in the area of making fair and reasonable price determinations, and assess whether this training should be designated as mandatory. VA concurred with these recommendations and stated that it is taking steps to implement them.

Contracting officer workload challenges. The majority of our reviews since 2015 have highlighted workload as a contributing factor to the challenges that contracting officers face. Most recently, in September 2018, we reported that about 54 percent of surveyed VA contracting officers said their workload was not reasonable and found that workload stresses have exacerbated the struggles that they face implementing the department’s Veterans First policy.

In addition, in September 2016, we reported that the contracting officers at the Veterans Health Administration (VHA) processed a large number of small dollar-value actions to support medical center operations, many of which involve emergency procurements of routine items to support immediate patient care. Contracting officers and the department’s Acting Chief Acquisition Officer (CAO) told us that these frequent and urgent small-dollar transactions reduce contracting officers’ efficiency and ability to take a strategic view of VHA’s overarching procurement needs. We reported in November 2017 that emergency procurements accounted for approximately 20 percent—$1.9 billion—of VHA’s overall contract actions in fiscal year 2016. Figure 13 shows the percent of VHA contract actions designated as emergencies in fiscal year 2016 by each network contracting office.

Figure 13: Percent of VHA Contract Actions Designated as Emergencies, Fiscal Year 2016

Enforcement of Tax Laws

 

 

 

 

 

 

 

 

 

 

aVeterans Integrated Service Networks (VISNs), organizations that manage medical centers and associated clinics across a given geographic area, are served by a corresponding network contracting office. Some VISNs have been consolidated over time, and in fiscal year 2016, there were 19 VISNs despite being numbered up to 23. As of fiscal year 2017, there are only 18 in total.

We recommended in November 2017 that VHA network contracting offices work with medical centers to identify opportunities to more strategically purchase goods and services frequently purchased on an emergency basis. VA concurred with this recommendation and reported in December 2018 that it is utilizing a supply chain dashboard to track items purchased on an emergency basis and determine which of those items to include on the catalog. VA noted that it added 13,300 items to the catalog from June 2018 to December 2018, including items often purchased on an emergency basis. We requested documentation showing that items added to the catalog were previously purchased on an emergency basis, but as of January 2019, VA had not yet provided it. If implemented, this would allow for both greater contracting officer efficiency and cost savings. For example, based on a similar recommendation we made in 2012, VA reported about $10 billion in savings over a 5-year period.

Lack of reliable data systems. The lack of accurate data has been a long-standing problem at VA. In September 2016, we reported that VA had not integrated its contract management and accounting systems, resulting in duplicative efforts on the part of contracting officers and increased risk of errors. We and VA’s Inspector General each recommended that VA perform data checks between the two systems. VA concurred with this recommendation and some VA contracting organizations have made efforts to address this risk. Further, VA reported in December 2016 that it had selected the Department of Agriculture as the service provider for a new integrated financial system, but told us in June 2018 that the new system would not be piloted until fiscal year 2020.

In November 2017, we reported that the MSPV-NG program office relied almost exclusively on flawed data to identify medical and surgical items to be included in the catalog. The program office estimated that the items in the initial release of the MSPV-NG catalog would meet 80 percent or more of the medical centers’ needs. However, the contracting office managing the program indicated that, as of June 2017, only a third of the items in the initial MSPV-NG catalog would meet medical centers’ needs. Senior VHA acquisition officials attributed this mismatch to shortcomings with VA’s historical purchase data.

Limited contract oversight and incomplete contract file documentation. VA has had difficulty ensuring that its contracts are properly monitored and documented. In September 2018, we reported that, although VA obligated $3.9 billion to veteran-owned small businesses in fiscal year 2017, its contracting officers were not effectively monitoring compliance with key aspects of the department’s Veterans First policy, such as limits on subcontracting (which ensure that the goal of the program—to promote opportunities for veteran-owned businesses—is not undermined). In many cases, we found that clauses requiring compliance were not included in the VA’s contracts and orders with veteran businesses because the contracting officers either forgot to include them or were unaware of the requirement.

The contracting officers we spoke with also said that they do not have sufficient time or knowledge to conduct oversight. Through limited reviews, VA has identified a number of violations that would warrant a broader assessment of the fraud risks to the program. We recommended in September 2018 that VA establish a mechanism to ensure that mandatory subcontracting-related clauses be consistently incorporated into set-aside contracts with veteran-owned businesses and that VA conduct a fraud risk assessment for the Veterans First program. VA concurred with these recommendations and is taking steps to implement them.

We also reported in September 2016 that a number of VA contract files we reviewed were missing key documents, increasing the risk that key processes and regulations were not followed. We recommended that VA focus its internal compliance reviews to ensure that required contract documents are properly prepared and documented. VA concurred with this recommendation and stated that it plans to hold quarterly reviews of compliance review results in order to improve the quality of contract file documentation.

Leadership instability. We have previously reported, most recently in September 2018, that procurement leadership instability has made it difficult for the VA to execute and monitor the implementation of key acquisition programs and policies. For example, changes in senior procurement leadership, including the CAO and VHA’s Chief Procurement and Logistics Officer, occurred during the implementation of MSPV-NG and similar instability in leadership affected the MSPV-NG program office itself. Overall, the MSPV-NG program office has had four directors, two of whom served in an acting capacity, since its inception in 2014.

To address this instability, we recommended in November 2017 that VA appoint a non-career employee as the CAO and prioritize the hiring of the MSPV-NG program office’s director position on a permanent basis. VA concurred with these recommendations and implemented them in 2018. Stable leadership should help bring consistent and much needed direction to the MSPV-NG program, but we recently identified other areas within the VA where sustained leadership is also needed. For instance, in September 2018, we reported there have been six Acting Directors within the past two and a half years within an oversight office that helps assess whether VA is in compliance with aspects of its Veterans First policy.

Since 2015, we have made 31 recommendations to improve VA acquisition management. As of December 2018, VA has implemented 10 of these recommendations; 21 of them remain open including those listed below. We have identified the following steps, among others, that VA needs to take to demonstrate greater leadership commitment and strategic planning to ensure efficient use of its acquisition funding and staffing resources. VA should:

  • prioritize completion of the revision of its acquisition regulations, which has been in process since 2011;
  • develop, document, and communicate to stakeholders a strategy for the Medical Surgical Prime Vendor program to achieve overall program goals;
  • provide targeted training for the more challenging aspects of implementing the Veterans First policy;
  • identify opportunities to strategically purchase goods and services that are frequently purchased on an emergency basis;
  • update its contract management system’s functionality; and
  • conduct a fraud risk assessment of its Veterans First program.
Looking for our recommendations? Click on any report to find each associated recommendation and its current implementation status.
  • portrait of Shelby S. Oakley
    • Shelby S. Oakley
    • Director, Contracting and National Security Acquisitions
    • oakleys@gao.gov
    • (202) 512-4841