What We Found
The Department of Veterans Affairs has established a governance structure for improving its acquisition function, but several long-standing issues remain that, if addressed, would increase its efficiency and effectiveness, including delayed supply chain modernization initiatives.
Since we added the Department of Veterans Affairs (VA) Acquisition Management as a high-risk area in 2019, VA has partially met the criteria for leadership commitment and capacity but has not made significant progress on the action plan, monitoring, and demonstrated progress criteria.
Leadership commitment: partially met. The Secretary of Veterans Affairs and VA acquisition leaders have taken steps to demonstrate their commitment to addressing the department’s high-risk designation. The Secretary appointed a Chief Acquisition Officer in August 2018, as we had recommended in November 2017.
VA also established a governance structure and an Executive Steering Committee, which VA senior acquisition officials noted has a top priority to focus on the high-risk areas of concern. The Veterans Health Administration (VHA) leadership also has goals to modernize key systems, but each has experienced implementation delays. VA leaders need to collaborate on an overall strategy for VA acquisition management and set realistic goals and execute steps to achieve them.
Capacity: partially met. VA has begun several enterprise-wide acquisition initiatives, but VA officials are still working to build the agency’s capacity to foster an effective and strategic acquisition approach. VA made good progress in expediting its Veterans Affairs Acquisition Regulation (VAAR) revisions. As of December 2020, VA reports that, of the total 41 planned VAAR revisions, 31 have been issued as draft or final rules. VA also created an acquisition knowledge portal and deployed it to all contracting officers. VA told us that the completed VAAR update will be uploaded into this portal.
In addition, VA’s draft high-risk action plan has goals to address the acquisition training gaps and VA has made some progress. Specifically, VA implemented two of the recommendations from our 2018 report on the Veterans First program. Namely, VA provided training for the more challenging components of the Veterans First Policy implementation and made Veterans First policy training mandatory.
However, in January 2020, we reported that VA’s Federal Supply Schedule (FSS) lacked comprehensive contracting staff training and recommended that VA develop a FSS-specific training program. In August 2020, VA stated that it was taking steps to improve the coverage and comprehensiveness of training for its FSS contracting staff. Because it will take some time to administer this training, we will review the content of this training in early 2021 to assess whether it addresses our recommendation.
As we reported when adding VA Acquisition Management to our High-Risk List in 2019, consistent leadership is necessary to execute and monitor the implementation of key programs. This is essential to ensure that major programs like Medical-Surgical Prime Vendor (MSPV) 2.0 and VA’s FSS—two of VA’s main programs for obtaining medical supplies and services—have the direction, resources, and support needed to execute their missions.
However, we reported in January 2020 that past leadership vacancies in VA’s FSS program led to delays in key policy decisions. Namely, the FSS program director position was vacant for more than 2 years and a key program chief position was also vacant for about 19 months. In November 2017, we also reported repeated vacancies in the MSPV program director position while VA implemented a major change to the way medical centers obtained supplies.
We recommended that VA prioritize hiring a permanent MSPV program director. Although VHA filled this position May 2018 and we closed the recommendation, the position was again vacant in June 2019. As of December 2020, an acting director currently serves in this position.
VHA has also experienced significant delays in its plans to implement procedures and systems to modernize its medical supply chain. As we reported in September 2020:
- VA delayed implementation of MSPV 2.0, originally planned for April 2020, and based on our assessment, VA’s plans will not fully remedy several existing challenges. For example, VA’s formulary—a list of medical and surgical items through MSPV—is managed manually through a series of spreadsheets. This manual process is vulnerable to administrative errors, such as inadvertent omission of supply items or incorrect prices, and will not be addressed by MSPV 2.0.
- VA has a program underway to implement a more modern inventory management system, among other things, through the use of the Department of Defense’s Defense Medical Logistics Standard Support system. However, VA delayed its rollout at initial locations by at least 1 year due to systems integration challenges. According to a senior VA acquisition official, nationwide implementation will occur in 2025 at the earliest. Until then, VA’s inventory system will continue to be a manual, outdated process that leads to inefficiencies.
- VA is expanding a pilot effort to use the Defense Logistics Agency’s (DLA) MSPV program to provide medical and surgical supplies to VA medical centers and eventually replace MSPV 2.0. However, this pilot also faced delays of almost a year. Also, VA lacks a comprehensive methodology to measure pilot success prior to enterprise-wide expansion. In September 2020, we recommended that VA develop a plan to measure the success and scalability of its DLA MSPV pilot and VA agreed.
Action plan: not met. Senior VA acquisition officials told us they are finalizing a high-risk action plan that describes how VA will take corrective actions in the near term. As of December 2020, VA stated that it expects to complete its high-risk action plan by March 2021.
In response to our September 2018 recommendation, VA drafted a fraud risk assessment for the Veterans First Program and, when finalized, plans to post risk assessment tools to its acquisition knowledge portal.
In November 2017, we recommended that VA should, among other things, develop, document, and communicate to stakeholders an overarching strategy for the MSPV program. VA agreed with this recommendation and had planned to implement a new MSPV 2.0 program by April 2020. However, according to a VA senior acquisition official, VA delayed this program and expects implementation in June 2021.
Under MSPV 2.0, clinicians will review requirements for a set list of products, but full implementation of more robust clinician involvement will not occur until after MSPV 2.0 begins. In September 2020, we also recommended that VA seek input from stakeholders within the agency—such as medical center staff—to help inform any needed improvements.
Finally, VA’s Strategic Plan for Fiscal Years 2018-2024 calls for coordination of related efforts to achieve cross-organizational unity of purpose. In January 2020, we recommended that VA take steps to assess duplication between VA’s FSS and MSPV programs to determine if this duplication is necessary or if efficiencies can be gained. This is a priority recommendation.
VA officials stated they are assessing this duplication as part of a broader category management effort. As we reported in November 2020, category management is a federal government-wide initiative to reduce contracting duplication and gain efficiencies, among other things. According to a senior VA acquisition official, VA provided its category management plan, which includes a medical category, to the Office of Management and Budget in October 2020, and VA is taking steps to implement this plan.
Monitoring: not met. Many of VA’s actions to improve acquisition management remain incomplete, thus we cannot substantiate their effectiveness. For example, VA has not demonstrated how it will institute a program to monitor and independently validate the effectiveness and sustainability of its fraud risk assessment. In addition, as we reported in September 2020, VA has an antiquated supply chain inventory system; this restricts effective monitoring and strategic decision-making.
We also found issues with VA’s monitoring of data for the FSS and MSPV programs. In January 2020, we reported that VA does not analyze existing data on the number of veteran-owned small businesses that hold FSS contracts, the types of goods and services they offer, or which schedules have the most or least participation by these businesses.
VHA contracting officers need this information because they must restrict competition to veteran-owned small businesses if (1) the contracting officer reasonably expects that at least two such businesses will submit offers, and (2) the award can be made at a fair and reasonable price that offers best value to the United States, known as the Veterans First preference. We recommended that VA assess data on the participation of and items and services offered by veteran-owned small businesses in the FSS program. VA concurred with our recommendation.
In September 2020, we reported that, for its MSPV program, VA has not defined how it will use prime vendor performance data to conduct program oversight. Without processes to use order completion data to assess prime vendor contract performance, the MSPV program office will be unable to use this information to ensure prime vendors meet the MSPV 2.0 contract terms and to inform actions needed, if any, to improve prime vendor performance.
We recommended that VA develop processes to routinely use transaction-level data to validate prime vendor performance on key program metrics, such as order completion rate, and identify how this information will be used to oversee the prime vendors. VA concurred with this recommendation.
Demonstrated progress: not met. Our work continues to indicate that VA has yet to demonstrate progress for acquisition management. For example, significant delays in VA’s implementation of critical supply chain modernization initiatives, among other things, will continue to strain VA’s acquisition resources and efficiency.
Completion of these initiatives is especially important as VA continues to respond to the Coronavirus Disease 2019 (COVID-19) pandemic. As noted in our June and September 2020 testimonies, VA faces several long-standing medical supply chain challenges, further exacerbated by the demands of the COVID-19 pandemic, causing VA to rely on other supply sources and agencies to get needed supplies to its medical centers.
This situation put stress on an already overburdened acquisition and logistics workforce to address supply chain shortfalls while working within VA’s antiquated inventory system. This resulted in inefficient use of VA’s acquisition funding and staffing resources.
While VA’s supply chain modernization efforts should address some of the issues that led to this High-Risk designation, these efforts are significantly delayed and will take many years to put in place so that VA can provide the most efficient and effective service to our nations veterans.
VA has among the highest obligations and number of contract actions in the federal government. In fiscal year 2021, VA is set to receive the largest discretionary budget in its history—$105 billion—to meet its mission to provide health care and other benefits to millions of veterans.
VA used almost one-third of its discretionary budget, or $27 billion, in fiscal year 2019 to contract for products and services, including medical supplies. As of July 2020, VA had also received an additional $19.6 billion to address the COVID-19 pandemic.
Given this significant taxpayer investment, we added VA’s numerous challenges to efficient acquisitions to our High-Risk List in 2019. We identified seven specific areas of concern: (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.
VA needs to address these areas of concern and other issues to use its resources in the most efficient manner possible to meet the needs of those who served our country.
Since 2015, we have made 48 recommendations to improve VA acquisition management. As of December 2020, VA has implemented 22 of these recommendations; 26 of them remain open, including those listed below.
VA should take action in the following areas to increase resource efficiency and demonstrate progress:
- complete the revision of its acquisition regulations, which has been in process since 2011, and post to VA’s acquisition knowledge portal;
- implement supply chain modernization initiatives;
- for the DLA MSPV pilot, (1) develop a plan for assessing implementation outcomes at initial VA medical centers; (2) seek input from stakeholders; and (3) provide written guidance to VA logistics officials at VA medical centers on how to prioritize veteran-owned small businesses when purchases are made through this program to achieve VA’s Veterans First goals; and
- assess FSS and MSPV program overlap to determine if this duplication is necessary or if efficiencies can be gained.
Additionally, VA should finalize its High-Risk action plan to identify the root causes of inefficiencies in its acquisition system. Legislation enacted in January 2021 requires VA to submit to congressional committees a plan addressing two of the VA high-risk areas identified in our 2019 High-Risk report—acquisition management and health care—and provide annual updates on its progress in these areas.