Veterans Affairs Contracting: Improvements in Buying Medical and Surgical Supplies Could Yield Cost Savings and Efficiency

GAO-18-34 Published: Nov 09, 2017. Publicly Released: Dec 04, 2017.
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Fast Facts

The VA launched a new program last year, MSPV-NG, to streamline the way its medical centers buy supplies for treating 7 million vets.

As with any organizational transformation, the program's success depended on having a strong strategic plan, stable leadership, good communication, and stakeholder buy-in. But as we report here, the VA was missing these elements when it launched the program; as a result, the program has yet to achieve key goals of cost savings and greater efficiency.

We made 10 recommendations for how the VA can better manage future phases of the program and improve its purchasing.

 

Exterior photograph of a Department of Veterans Affairs medical center.

Exterior photograph of a Department of Veterans Affairs medical center.

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Highlights

What GAO Found

The Department of Veterans Affairs (VA) established the Medical Surgical Prime Vendor-Next Generation (MSPV-NG) program to provide an efficient, cost-effective way for its facilities to order supplies, but its initial implementation was flawed, lacked an overarching strategy, stable leadership, and sufficient workforce that could have facilitated medical center buy-in. VA developed requirements for a broad range of MSPV-NG items with limited clinical input. As a result, the program has not met medical centers' needs, and usage remains far below VA's 40 percent target. VA also established cost avoidance as a goal for MSPV-NG, but currently only has a metric in place to measure broader supply chain cost avoidance, not savings specific to MSPV-NG. Also, starting in June 2015, VA planned to award competitive contracts for MSPV-NG items, but instead, 79 percent were added using non-competitive agreements. (See figure.) This was done primarily to meet VA's December 2016 deadline to establish the formulary, the list of items available for purchase through MSPV-NG.

Total Number of Items by Award Type on MSPV-NG Formulary, Jan. 2017

Total Number of Items by Award Type on MSPV-NG Formulary, Jan. 2017

The roll-out of MSPV-NG ran counter to practices of leading hospitals that GAO spoke with, which highlighted key steps, such as prioritizing supply categories and obtaining continuing clinician input to guide decision-making. VA has taken steps to address some deficiencies identified in the first phase of implementation and is considering a new approach for this program. However, until VA addresses the existing shortcomings in the MSPV-NG program, such as the lack of medical center buy-in, it will face challenges in meeting its goals.

Medical centers often rely on emergency procurements to obtain routine goods and services—some of which could be made available at lower cost via MSPV-NG. Sixteen of the 18 contracts in GAO's sample were not competed, which puts the government at risk of paying more. For instance, one medical center procured medical gas on an emergency basis through consecutive non-competitive contracts over a 3-year period. VA policy clearly defines emergency actions; however, inefficiencies in planning, funding, and communication at the medical centers contributed to emergency procurements, resulting in the contracting officers quickly awarding contracts with no competition.

Why GAO Did This Study

VA medical centers spend hundreds of millions of dollars annually on medical supplies and services. In December 2016, VA instituted a major change in how it purchases medical supplies—the MSPV-NG program—to gain effectiveness and efficiencies.

GAO was asked to examine VA's transition to the MSPV-NG program and its use of emergency procurements. This report assesses the extent to which (1) VA's implementation of MSPV-NG was effective in meeting program goals, and (2) VA awards contracts on an emergency basis. GAO analyzed VA's MSPV-NG requirements development and contracting processes, and identified key supply chain practices cited by four leading hospital networks. GAO also reviewed a non-generalizable sample of 18 contracts designated in VA's database as emergency procurements with high dollar values; and met with contracting, logistics, and clinical officials at 6 medical centers, selected based on high dollar contract obligations in fiscal years 2014-2016 and geographic representation.

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Recommendations

GAO is making 10 recommendations, including that VA expand clinician input in requirements development, calculate MSPV-NG cost avoidance, establish a plan for awarding future competitive contracts, and identify opportunities to strategically procure supplies and services frequently purchased on an emergency basis. VA agreed with GAO's recommendations.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Veterans Affairs
Priority Rec.
This is a priority recommendation.
The Director of the MSPV-NG program office should, with input from the Strategic Acquisition Center (SAC), develop, document, and communicate to stakeholders an overarching strategy for the program, including how the program office will prioritize categories of supplies for future phases of requirement development and contracting. (Recommendation 1)
Open – Partially Addressed
VA agreed with our recommendation. VA had planned to implement a new Medical Surgical Prime Vendor (MSPV) program, called MSPV 2.0, starting in 2020; it has also been piloting the Defense Logistics Agency's (DLA) MSPV program since 2019. However, as of February 2022, VA's plans for the next version of its MSPV program are still being developed and its planned switch to the DLA MSPV program has been halted by a court order. While VA has made progress in developing the next iteration of its own MSPV contracts, there is substantial uncertainty in the path forward, and VA's strategy is unclear.
Department of Veterans Affairs The Veterans Health Administration (VHA) Chief Procurement and Logistics Officer should take steps to prioritize the hiring of the MSPV-NG program office's director position on a permanent basis. (Recommendation 2)
Closed – Implemented
VA concurred with this recommendation and hired a program office director in May 2018.
Department of Veterans Affairs The Secretary of Veterans Affairs should assign the role of Chief Acquisition Officer to a non-career employee, in line with statute. (Recommendation 3)
Closed – Implemented
VA concurred with this recommendation and appointed a non-career employee in August 2018 to be its Chief Acquisition Officer.
Department of Veterans Affairs The Director of the MSPV-NG program office should provide complete guidance to medical centers for matching equivalent supply items, which could include defining the roles of clinicians and local Clinical Product Review Committees. (Recommendation 4)
Closed – Implemented
The Department of Veterans Affairs (VA) agreed with GAO's November 2017 recommendation. VA implemented a tool-the Medical Product Data Bank's eZSAVE application-to improve the matching of equivalent supply items. In November 2018, VA reported that it holds monthly meetings with selected clinical and logistics staff to obtain their input on the matching process. Further, as of December 2020, the Veterans Health Administration's directive on supply chain management clarifies both the required usage of the MSPV program and procedures for local Clinical Product Review Committees to approve new products for their facilities.
Department of Veterans Affairs The Director of the MSPV-NG program office should, with input from SAC, communicate to medical centers the criteria and processes for adding or removing items from the formulary. (Recommendation 5)
Closed – Implemented
VA concurred with this recommendation and the MSPV-NG program office took steps in early 2018 to communicate the criteria and processes for adding and removing items from the catalog, such as using the program's newsletters to explain the process for adding items and to notify staff when items were removed.
Department of Veterans Affairs The VHA Chief Procurement and Logistics Officer, in coordination with SAC, should calculate cost avoidance achieved by MSPV-NG on an ongoing basis. (Recommendation 6)
Closed – Implemented
VA agreed with this recommendation. In November 2018, VA officials reported that they have begun using the Medical Product Data Bank (MedPDB) tool that calculates the extent to which VA medical centers purchase products via MSPV-NG instead of the open market and the cost avoidance that is achieved when that occurs. VA officials provided documentation on the output of this tool and also reported that they share this cost avoidance data on a bi-weekly basis with senior supply chain leadership.
Department of Veterans Affairs The MSPV-NG program office and SAC should establish a plan for how to mitigate the potential risk of gaps in contract coverage while SAC is still working to make competitive Phase 2 awards, which could include prioritizing supply categories that are most likely to yield cost avoidance. (Recommendation 7)
Closed – Implemented
VA agreed with this recommendation. The MSPV-NG program took actions to keep the catalog viable and to increase the number of items on it. For example, the program used distribution and pricing agreements from September 2017 to April 2018 to maintain the current number of items on the catalog. In March 2018, the program modified the prime vendor contracts so that the prime vendors could serve as distributors and suppliers. This enabled over 13,000 items to be added to the catalog from June 2018 to November 2018.
Department of Veterans Affairs The VHA Chief Procurement and Logistics Officer should use input from national clinical program offices to prioritize its MSPV-NG requirements development and standardization efforts beyond Phase 2 to focus on supply categories that offer the best opportunity for standardization and cost avoidance. (Recommendation 8)
Closed – Implemented
The Department of Veterans Affairs (VA) agreed with GAO's November 2017 recommendation. VA's most recent iterations of its Medical-Surgical Prime Vendor (MSPV) program include engaging selected clinicians in its requirement development for a set list of products, known as Clinician-Driven Strategic Sourcing. In April 2019, VA began a pilot for this clinician review process, including input from national clinical program offices. As part of this effort, VA started conducting Product Analysis Briefings with clinicians in March 2020. Additionally, since May 2020, VA has conducted 16 outreach briefings and reported that the collaboration has streamlined the value analysis process and improved communication. Based on these steps, VA has demonstrated that they are using input from clinicians to identify and prioritize opportunities for supply standardization.
Department of Veterans Affairs The VHA Chief Procurement and Logistics Officer should direct Veterans Integrated Service Network (VISN) Network Contracting Offices to work with medical centers to identify any opportunities to more strategically purchase goods and services frequently purchased on an emergency basis. For example, offices could do this by analyzing existing data. (Recommendation 9)
Open
The Department of Veterans Affairs (VA) agreed with GAO's November 2017 recommendation. In August 2019, senior VA acquisition officials agreed to conduct an analysis of its spending to identify items that the department frequently purchases on an emergency basis and to develop plans to purchase those goods and services more strategically, such as by issuing a national contract or adding the items to the formulary as needed. However, as of September 2022, VA had not provided any evidence that it had performed analyses of emergency procurements to inform plans for purchasing recurring items more strategically.
Department of Veterans Affairs VHA Chief Procurement and Logistics Officer should analyze data on items that are frequently purchased on an emergency basis, determine whether such items are suitable to be added to the MSPV-NG formulary, and work with SAC to make any suitable items available via MSPV-NG. (Recommendation 10)
Open
The Department of Veterans Affairs (VA) agreed with GAO's November 2017 recommendation. VA reported that it added thousands of items to the Medical-Surgical Prime Vendor (MSPV) formulary from June 2018 through December 2018, some of which had previously been purchased on an emergency basis. VA also reported in June 2018 and updated in March of 2020 that it is tracking items purchased on an emergency basis. However, as of September 2022, VA has not provided documentation showing whether and how this analysis has informed its selection of which products to add to the formulary. Without documentary support, GAO cannot assess the extent to which items that VA added to the formulary were previously purchased on an emergency basis. If VA does not use analysis of emergency procurements to help inform which items should be added to the MSPV formulary, it will miss opportunities to avoid emergency procurements and increase efficiency.

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