[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
VA PROCUREMENT: IDENTIFYING OBSTACLES TO REFORM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
TUESDAY, SEPTEMBER 20, 2016
__________
Serial No. 114-81
__________
Printed for the use of the Committee on Veterans' Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.fdsys.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
25-227 WASHINGTON : 2018
----------------------------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].
COMMITTEE ON VETERANS' AFFAIRS
JEFF MILLER, Florida, Chairman
DOUG LAMBORN, Colorado CORRINE BROWN, Florida, Ranking
GUS M. BILIRAKIS, Florida, Vice- Minority Member
Chairman MARK TAKANO, California
DAVID P. ROE, Tennessee JULIA BROWNLEY, California
DAN BENISHEK, Michigan DINA TITUS, Nevada
TIM HUELSKAMP, Kansas RAUL RUIZ, California
MIKE COFFMAN, Colorado ANN M. KUSTER, New Hampshire
BRAD R. WENSTRUP, Ohio BETO O'ROURKE, Texas
JACKIE WALORSKI, Indiana KATHLEEN RICE, New York
RALPH ABRAHAM, Louisiana TIMOTHY J. WALZ, Minnesota
LEE ZELDIN, New York JERRY McNERNEY, California
RYAN COSTELLO, Pennsylvania
AMATA COLEMAN RADEWAGEN, American
Samoa
MIKE BOST, Illinois
Jon Towers, Staff Director
Don Phillips, Democratic Staff Director
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATION
MIKE COFFMAN, Colorado, Chairman
DOUG LAMBORN, Colorado ANN M. KUSTER, New Hampshire,
DAVID P. ROE, Tennessee Ranking Member
DAN BENISHEK, Michigan BETO O'ROURKE, Texas
TIM HUELSKAMP, Kansas KATHLEEN RICE, New York
JACKIE WALORSKI, Indiana TIMOTHY J. WALZ, Minnesota
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Veterans' Affairs are also
published in electronic form. The printed hearing record remains the
official version. Because electronic submissions are used to prepare
both printed and electronic versions of the hearing record, the process
of converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
----------
Tuesday, September 20, 2016
Page
VA Procurement: Identifying Obstacles To Reform.................. 1
OPENING STATEMENTS
Honorable Mike Coffman, Chairman................................. 1
Honorable Ann M. Kuster, Ranking Member.......................... 2
WITNESSES
Mr. Greg Giddens, Executive Director, Acquisition, Logistics and
Construction, U.S. Department of Veterans Affairs.............. 4
Prepared Statement........................................... 23
Accompanied by:
Mr. Rick Lemmon, Acting Chief Procurement and Logistics
Officer, Veterans Health Administration, U.S. Department
of Veterans Affairs
Mr. Michele Mackin, Director, Acquisition and Sourcing
Management, U.S. Government Accountability Office.............. 5
Prepared Statement........................................... 25
MATERIALS FOR THE RECORD
Letter From Chairman Mike Coffman to: The Honorable Robert A.
McDonald....................................................... 32
Letter From Chairman Mike Coffman to: The Honorable Sloan Gibson. 35
QUESTIONS FOR THE RECORD
VA Addresses Letter From Chairman Mike Coffman................... 37
VA PROCUREMENT: IDENTIFYING OBSTACLES TO REFORM
----------
Tuesday, September 20, 2016
U.S. House of Representatives,
Committee on Veterans' Affairs,
Subcommittee on Oversight
and Investigations,
Washington, D.C.
The Subcommittee met, pursuant to notice, at 4:01 p.m., in
Room 334, Cannon House Office Building, Hon. Mike Coffman
[Chairman of the Subcommittee] presiding.
Present: Representatives Coffman, Lamborn, Roe, Benishek,
Walorski, Kuster, O'Rourke, and Walz.
Also Present: Representative Wenstrup.
OPENING STATEMENT OF MIKE COFFMAN, CHAIRMAN
Mr. Coffman. Good afternoon. This hearing will come to
order.
I want to welcome everyone to today's hearing on VA
procurement. As a preliminary matter, I would like to ask
unanimous consent that Dr. Wenstrup, Chairman of the
Subcommittee on Economic Opportunity, be permitted to join us
today.
Seeing no objection, so ordered.
Over the years, this Subcommittee has discussed countless
problems in VA contracts from unauthorized purchase cards,
purchase card commitments, and hospital construction overruns
in the billions to university affiliate contracts that take
years to award, to televisions purchased for hundreds of
thousands of dollars but never used, to a material financial
statement weakness. These problems run the gamut.
Today, we will examine the root causes. The GAO has just
completed an excellent wide-ranging report recommending changes
to organization, policy, and process. The VA's procurement and
logistics organization is very complex. There is overlap,
redundancy, and confusion about who buys what.
The VA has a headquarters run by Mr. Giddens with four
organizations awarding contracts. Most of them have multiple
locations around the country. The VHA's separate headquarters
is the procurement and logistics office run by Mr. Lemmon.
Below, there are three regional offices. Two of them have
centralized contracting offices attached. Below that are 18
network contracting offices. Then there are the logistics and
prosthetics organizations with their own component offices.
The Choice Act independent assessment found widespread
concern among VA employees about the proliferation of
contracting organizations and their ability to perform. The
procurement rules are just as complex. The VA has its own
acquisition regulations supplementing the Federal Acquisition
Regulation, the FAR. They are badly out of date. GAO actually
discovered there were two different versions simultaneously in
force. Then there are many categories of policy different at
the VA and VHA levels. Some supersede and contradict each
other. Cancelled policies are still being followed. Apparently,
VA does not even have a complete list of them. Companies doing
business with the VA don't know what the rules are, and even
the VA contracting officers get confused.
The Commission on Care recommends simplifying all this into
one vertically integrated supply chain organization. The
independent assessment recommended the same thing last year.
The VA purports to accept the recommendation, but it rejects
the quote, ``structural solution,'' end quote, meaning
reorganization. The VA says MyVA is already solving these
problems. It is not at all clear that that is accurate.
Regarding MyVA, well, what's in it? Some new analysis--some
new analytics tools and internal control improvements. Will
they be enough to resolve the financial statement/material
weakness? We will know in a few months.
But the big item in MyVA is the new version of the Medical/
Surgical Prime Vendor contracts, or MSPV. This is an effort to
pare down the number of different medical and surgical items
that VHA medical centers use and save money by buying them in
bulk. It's a good idea.
The concept called standardization is not new, but the
implementation is not going well. The reduction of items in the
MSPV product catalog is huge, down from almost half a million
items to about 8,000. Decisions about which items make the cut
and what doctors are allowed to use affect veterans' health
care. The VA is badly behind schedule in awarding the supply
contracts for these items. The VA has apparently resorted to
issuing sole source contracts for thousands of them. This
undermines the goal of negotiating the best prices. These are
very important contracts. The VA estimates altogether they are
worth more than $4 billion.
I look forward to delving into these issues today.
I now yield to Ranking Member Kuster for her opening
remarks.
OPENING STATEMENT OF ANN M. KUSTER, RANKING MEMBER
Ms. Kuster. Thank you very much, Chairman Coffman. And I
agree with everything you've said. I look forward to hearing
from our witnesses, especially Mr. Giddens, with whom I met
shortly after you took office as the principal executive
director of the VA's Office of Acquisition, Logistics, and
Construction last year. And in our meeting, you promised that
you would develop a plan to reform VA logistics and supply
chain management. So I'm very interested in hearing about the
plan and the steps that you've already taken to reform the
system, now that we've received the findings of the
recommendations from the independent assessment Commission on
Care, and now this GAO report.
It's my understanding that the VA agrees with the
recommendations made by GAO, but disagrees with some of the
recommendations made by the Commission on Care, specifically
the recommendation that VHA establish a chief supply chain
officer position to drive VHA supply chain transformation and
reorganize all VHA procurement and logistics under this
executive.
Mr. Giddens, I'm interested to hear why you disagree with
the recommendation, considering that the GAO, the Commission on
Care, and the independent assessment found that the VA's
organizational structure for procurement and supply chain
management is so confusing to VA contracting personnel and
contains duplicative functions. So I'd be interested. I myself
had a hard time following the organizational charts, and I know
that vendors have brought that same issue to us.
I'm also interested to learn more about VHA's efforts to
save taxpayer dollars by transitioning to national contracts
for medical supplies under the Medical/Surgical Prime Vendor
program. A significant problem with the MSPV is the VA's
inability to either determine which supplies should be
standardized or incorporate VISN and VAMC administrator and
staff feedback for nonstandardized supplies within its national
purchasing strategy.
As the GAO identified, VA's move to next generation MSPV
without updating obsolete VA acquisition regulations, last
updated in 2008, seemingly compounds the problem. Considering
this existing--these existing pitfalls and inefficiencies, I'm
interested to know how you will quickly ensure VA's national
purchasing strategy maintains both clinical excellence and
compliance with program standards.
The Commission on Care indicated that over 95 percent of
all clinical supplies in the VHA are acquired using purchase
cards. This process of procurement is inefficient and costly,
yet its apparent preference by VA administrators implies severe
shortfalls in VA's national purchasing strategy, such as the
lack of clinical flexibility and significant delays in
acquiring much needed medical equipment and supplies. And I'm
sure my colleagues would all appreciate knowing how the VA
intends to resolve this issue, and in particular, the use of
old computer software that makes the purchasing of supplies so
cumbersome.
I know that last year there was talk of a commercial off-
the-shelf system being purchased to help the VA manage its
supply chain. So I want to know if this is still a potential
solution to address the VA's out-of-date IT systems. And if
not, why it is taking so much time for the VA to make a
decision on that issue.
Finally, I hope to hear from GAO about how the VA can
improve its collection and analysis of contracting data to
better plan for the future and develop strategies to lower the
cost of supplies. I also want to know what the VA is doing to
attract and keep top acquisition talent. These two themes of
inaccurate data collection and lack of properly trained VA
personnel are reoccurring themes for almost every hearing in
this Subcommittee. So I want to know which plans and
recommendations can be put in place today to address these two
issues.
It's important that the VA establish a medical supply chain
that is streamlined and clinically effective. Ultimately, VHA's
ability to supply medical supplies and medication to patients
affects our veterans' access to high quality health care, and
our veterans deserve timely world-class care.
And with that, Mr. Chairman, I yield back.
Mr. Coffman. Thank you, Ranking Member Kuster.
I ask that all Members waive their openings remarks as per
the Committee's custom.
Hearing no objection, so ordered.
With that, I invite the first and only panel to the witness
table. On the panel we have Mr. Greg Giddens, the Principal
Executive Director of the Office of Acquisition, Logistics, and
Construction. He is accompanied by Mr. Rick Lemmon, the Acting
VHA Chief Procurement and Logistics Officer. We also have Ms.
Michele Mackin, the Director for Acquisition and Sourcing
Management at GAO.
I ask the witnesses to please stand and raise your right
hand.
[Witnesses sworn.]
Mr. Coffman. Very well. Please be seated.
And let the record reflect that all witnesses have answered
in the affirmative.
Mr. Giddens, you are now recognized for 5 minutes.
STATEMENT OF GREG GIDDENS
Mr. Giddens. Good afternoon, Chairman Coffman, Ranking
Member Kuster, and distinguished Members of the Subcommittee. I
appreciate the opportunity to discuss the progress that the
Department of Veterans Affairs has made towards transforming
procurement and supply chain operations leading to improved
business outcomes that benefit our Nation's veterans. I'm
joined today by Mr. Rick Lemmon, acting VHA chief procurement
and logistics officer.
Under Secretary McDonald's leadership, the VA is
transforming the way we do business by embracing a more
transparent and collaborative culture where we're putting the
needs, expectations, and interests of veterans and their
families first. We recognize that persistent challenges exist
in delivering business solutions that satisfy veterans' needs,
while simultaneously complying with the vast body of laws and
regulations that govern Federal acquisition.
The VA is committed to continuous improvement of our
procurement practices and procedures, leveraging our buying
power to achieve cost avoidances, improving our management
information system to support improved decision-making,
improving acquisition workforce competencies, and executing our
acquisition mission in an integrated manner that establishes
clear lines of authority. The VA has taken steps to improve our
internal acquisition processes to better communicate with
employees and provide the support they need to successfully
carry out their responsibilities.
Last December, I issued two VA-wide memos, the first
stating my expectations of how we would improve the way we do
business by transitioning from a rule base to procurement-
based--principle-based procurements, placing greater emphasis
on collaboration and rapid sourcing of greater requirements at
affordable prices. The second memo encourages having early and
frequent dialog with our industry partners throughout the
acquisition life cycle. Doing so will improve our ability to
articulate our requirements and will result in us receiving
better proposals and ultimately in better serving our veterans.
The agility of the VA's acquisition and supply chain
communities to adjust to both regulatory requirements and
mission challenges continues to improve.
The transformation of the VHA supply chain is one of the
MyVA breakthrough initiatives. It's focused on establishing an
enterprisewide medical/surgical supply chain that leverages the
VA's buying power to achieve best possible pricing and system
efficiencies resulting in lower operating costs. This
initiative is a comprehensive approach consistent with the
Commission on Care's intent to improve the effectiveness and
efficiency of the VHA supply chain and is already driving much
needed improvements in data visibility and quality,
synchronization of technology deployments, standardization,
contract compliance, and training. Already in fiscal year 2016,
VHA supply chain transformation efforts have yielded in excess
of $75 million in cost avoidance.
The Department has made steady and significant progress
over the past 5 years. But admittedly, there is more work to be
done, as reflected in the recent GAO report. The VA agrees with
the conclusions in the report, and we are pleased that, in most
cases, we already have strategies in place that align with
GAO's recommendations. For example, the Department's initiative
to streamline internal acquisition policy and procedures to
clearly delineate what is required by law and statute from what
are business process improvements. This deliberate separation
of policy from procedure will create a more agile management
environment that can respond more quickly to stakeholder and
customer needs.
The secretary's senior leaders, managers, and members of
the acquisition supply chain communities across the Department
are tackling the many challenges that confront us in a
transparent manner as mandated by the tenets of MyVA. We made
progress, but we still have more work to do. We're committed to
being good stewards of taxpayer resources and ensuring veterans
and their families receive a seamless unified veteran
experience across the entire organization and the country.
Mr. Chairman and Members of the Committee, this concludes
my statement. Thank you for the opportunity to testify before
the Committee today. We'd be happy to answer your questions.
[The prepared statement of Greg Giddens appears in the
Appendix]
Mr. Coffman. Well, thank you, Mr. Giddens.
Ms. Mackin, you are now recognized for 5 minutes.
STATEMENT OF MICHELE MACKIN
Ms. Mackin. Thank you, Mr. Chairman.
Good afternoon, Ranking Member Kuster and Members of the
Subcommittee. Thank you for having me here today to discuss VA
contracting.
This is a very important issue. It's essentially about how
the money goes out the door at the Department. As the Chairman
mentioned, we issued a report last week that covered a number
of topics, and we made ten recommendations to the VA. Today,
I'll hone in on three key issues. First, the VA's confusing and
outdated procurement policy framework; second, its complex
procurement organizational structure; and third, opportunities
to save money.
You may have seen the graphic in our report of a VA
contracting officer walking through a policy forest in a
confused manner. The trees represent a number of information
letters, acquisition flashes, policy memos, and, most
troubling, two active versions of the Department's acquisition
regulation, which is the key document contracting officers turn
to, one dated from 1997, and the other from 2008. It hadn't
been updated in 8 years, and contracting officers were directed
to consult each. It's not surprising that we found confusion
and problems.
After we raised these issues, the Department rescinded the
1997 regulation, and it also began to cull through over 170
information letters, many dating from the 1990s, to determine
which were still relevant. Without clear, consistent policy and
guidance, it makes it harder for contracting officers to do
their jobs.
Regarding the organizational structure, as we and others
have noted, the VA is a complex organization, and that applies
to its procurement function as well. Customers in medical
centers have to navigate a complex web of national, regional,
and local contracting organizations to buy what they need. For
example, the National Acquisition Center, or NAC, is
responsible for pharmaceuticals and high-tech medical
equipment. The Strategic Acquisition Center, or SAC, which is
in two different locations, is responsible for prosthetics and
patient mobility supplies and services. Adding to the
complexity, contracting responsibility for medical and surgical
supplies was recently transferred from the NAC to the SAC.
While the VA took steps in 2013 to clarify the roles and
responsibilities of these organizations, we recommended that
the Department consider additional guidance, and it agreed to
do so.
Finally, the VA can do more to leverage its substantial
buying power. When we looked at medical and surgical supplies,
we found that contracting and ordering officers are not making
the best use of national contracts that have significant
discounts, an average of 30 percent, according to VA officials.
In some cases this is understandable. The ordering processes
are extremely outdated and cumbersome. I'll admit I'm old
enough to remember when we first started using computers, and
that's what this ordering screen looks like. You have to enter
the exact item number for the type of bandage you need, for
example. Because these national contracts are set up to get the
best prices, it's important that the VA make it easy to use
them. The VA is in the process of developing a new ordering
interface.
A related issue is that while these national contracts are
supposed to be mandatory, the VA has acknowledged that many
purchases are occurring in the open market where these
discounts aren't available. The problem is that no one knows
the extent of this or where the problems might be because they
have not been tracking actuals. The Department's in the process
of revamping how it buys medical and surgical supplies,
including awarding new contracts, as was mentioned earlier. And
in doing so, it'll be very important that the Department make
sure the full scope of the items that medical centers need are
included on these national contracts. This effort is lagging.
The VA identified a goal of 8,000 to 10,000 items to put on
these contracts, and as of July 2016, only 1,800 were under
contract.
I'll wrap up by noting that the VA's medical centers
themselves have opportunities to leverage their buying power at
a regional level for items they all buy, like landscaping
services, elevator maintenance, and eyeglasses. While we found
small pockets of this activity, local autonomy and a preference
for using their own contracts have presented obstacles that are
difficult to overcome.
Mr. Chairman, Ranking Member Kuster, this concludes my
prepared remarks. Thank you.
[The prepared statement of Michele Mackin appears in the
Appendix]
Mr. Coffman. Thank you, Ms. Mackin.
The written statements of those who have just provided oral
testimony will be entered into the record. We will now proceed
with questions.
Mr. Coffman. Ms. Mackin, is this just a matter of sorting
out what each office is in charge of buying, or is the sheer
number of offices with similar responsibilities the problem?
Ms. Mackin. I think that the latter point is something the
Department needs to take a hard look at. As was noted, our
report wasn't the first to point out the complexity of these
organizations, but time and again, and we ourselves find in
going out to the field to the people who are actually buying
these things, they're confused. And so guidance helps. But I
think the Department needs to take a look at some streamlining
activities and what might make sense there.
Mr. Coffman. Have you seen, Ms. Mackin, the--you know,
obviously there was a concern previously in this Committee
about the use of these credit cards or these purchase cards
where they would do multiple purchases. You know, I can't
remember what the ceiling amount--not to exceed the ceiling
whereby they'd have to go through the normal procurement
process, it was a way to evade the procurement contracting
process, and they would just, you know, do enough transactions
to do whatever the price was that they were doing. And it was
very problematic.
Are you seeing any evidence that this is still occurring?
Ms. Mackin. We heard anecdotally. We didn't quantify the
use of that for this report. But, you know, the national
contracts are there for a reason. If they're not being used,
there are other options of using a purchase card or having very
small local contracts to buy the needed medical and surgical
supplies. Again, not getting the discounts.
Mr. Coffman. Well, and I think there were also health
safety issues involved. I remember, in terms of the procurement
of tissue and things like that, by evading the normal
procurement process, that they were actually getting some
contaminated tissues from that process.
Why two active sets of regulations that you mentioned, and
why not just--why haven't they consolidated into one?
Ms. Mackin. Quite frankly, that was a troubling finding.
I've never seen anything like that in my several decades of
working at GAO, and I just have to attribute it to the lack of
management attention, the lack of people looking out for what
contracting officers need to do their job. I will say that when
we raised it, the Department acted very swiftly to rectify the
situation. But not updating your acquisition regulation for 8
years is problematic.
Mr. Coffman. Mr. Giddens, where are we right now with our
acquisition regulations?
Mr. Giddens. As Ms. Mackin said, we did rescind the one VA
acquisition regulation. And we are underway, by December 2017,
to have available and ready for public comment the update of
the VA acquisition regulation. And as I mentioned, we're
separating the process and the procedures that we would use to
streamline and make business improvements from those that have
a regulatory impact. Those of a regulatory nature need to go
through the public comment period. So that's why this effort to
update, that will take us as we start that and get everything
ready for posting in 2017 and 2018.
In the meantime, we've taken steps to provide more clarity.
We've established a Web site where our procurement
professionals can go, where the most recent policy guidance is
available for them to try to streamline that. We'll also be
working to get feedback from contracting officers out in the
field, so that we can take additional steps while we work to
update that VA acquisition reg.
Mr. Coffman. Ms. Mackin, why doesn't the VA simply adopt
the FAR, the Federal Acquisitions Regulations? Or, I mean, why
have a separate--completely separate set of regulations? Is
that necessary?
Ms. Mackin. It's very common.
Mr. Coffman. Okay.
Ms. Mackin. I think almost every Federal agency has its own
supplement to the FAR--
Mr. Coffman. Right.
Ms. Mackin [continued].--where it can tailor the buying to
meet its own needs.
Mr. Coffman. Okay. Thank you.
Ranking Member Kuster, you're now recognized for 5 minutes.
Ms. Kuster. Thank you, Mr. Chairman.
I wanted to ask--and this is either Mr. Giddens or Ms.
Mackin. I wanted to focus in the GAO, and the Commission on
Care, and the independent assessment all found that VHA's
pharmaceutical supply chain performs very well, but the
medical/surgical supply chain performs poorly in comparison.
And my question is: Are there any best practices that we can
identify in the pharmaceutical supply chain policies and
processes that could be applied to the medical/surgical supply
chain to improve the outcomes, both for cost and efficiency?
Mr. Giddens. Yes, ma'am. And that is a finding with our
pharmacy program. And I'll mention a few things that we've
done, and Rick may want to add some from VHA in particular.
Because one of the things that VHA did in the procurement
logistics office is look at the pharmacy program and adopt some
of the things, like the formulary. The pharmacy program has a
formulary. Here are the drugs that are approved for use. That's
the same approach that they're taking on the med/surg prime
vendor. What are the items that are approved for use that are
proven to be clinically safe?
They do that by engaging clinicians, just like the pharmacy
program did when they established their formulary. And then
having a robust mechanism to make sure that we are meeting our
needs through that prime vendor program, and that we minimize
the activity, whether it's with purchase cards or other, that
are done outside the med/surg prime vendor program.
Rick, did you want to--
Mr. Lemmon. Yeah. The great thing about the pharmacy prime
vendor program is that there's clinical involvement and a
formulary's developed. It's well published, and we buy off that
contract. That's exactly the approach we're wanting to take
with med/surg prime vendor.
Right now, we--I believe we have 38 integrated product
teams that involve clinicians that's going to help us determine
the requirements for those products. And then when we go to the
negotiations, will help us make those decisions on what'll best
meet their needs.
And so as we develop the formulary and catalog--and I think
the Chairman mentioned the sole source contracts that are
necessary to get the current contract lifted off the ground.
But as we can replace those with these clinically driven source
contracts, it will be very similar to what was done with
pharmacy. And I think that will also produce a great outcome in
terms of quality and price.
Ms. Kuster. So thank you.
One of the issues we talked about, and referring to page 35
with the page, it looks like--is it DOS? Is this the original
computer language that you're having to find the actual
acquisition number? And I'm trying to put together, then we
learn that 95 percent of the purchases are made outside this
system with cards.
What is the status, and how do we bring this system up-to-
date so it's searchable and we can have a process that anyone
can use anywhere across the country? Because this seems
unacceptable.
Mr. Lemmon. Well, certainly what you're referring to, those
blue screens, is the MUMPS-based programming that's part of the
VistA architecture and, certainly, the integrated financial
system that we use as part of that to identify the line items.
One of the things we recently did, is we purchased what's
called GUI software. But it will overlay that system until we
can replace it. And it will provide a very efficient more like
a Windows-based environment for our clinicians and--
Ms. Kuster. Are we on task to replace it, though? I mean,
how do you find people in 2016 that even know how to use this?
Mr. Lemmon. There's a vendor that produces that software
that will overlay our VistA system and will allow us to--
Ms. Kuster. So that normal people can use the system?
Mr. Lemmon. Yes.
Ms. Kuster. All right. And then tell me when this is going
to be replaced completely so we don't have to use these patches
and overlays.
Mr. Giddens. The near-term solution with the graphical user
interface that Rick talked about will be deployed in fiscal
year 2017, so we will have that capability fully operational in
2017. The larger issue of the Department not having an
integrated financial management system is one that we are
tackling, that we're moving forward with as part of the Federal
Shared Service program. That's an effort that we started in
2016. We'll be making the selection in 2017, and working with
the shared service provider, and start to pilot that in fiscal
year 2018.
But that will be the system, in fact, that will reconcile a
lot of the issues that we're currently seeing with our
workforce. While workforce has to do procurement in one system,
and then they have to turn to another system and enter that
data into another system, anytime you do manual data entry,
we're introducing errors in reconciliation. And what this
integrated system will do now, will work from end to end, so
that information's entered once and used many through the
system. It is going to be a very powerful enabler for our
workforce.
Ms. Kuster. Well, I think I can speak for my colleagues on
both sides of the aisle that we will be anxiously awaiting the
report on that being installed. So thank you.
I yield back.
Mr. Coffman. Thank you, Ranking Member Kuster.
Mrs. Walorski, you're now recognized for 5 minutes.
Mrs. Walorski. Thank you, Mr. Chairman.
Mr. Giddens, in the past, the VA asked vendors to supply
surgical products as needed, and bill the VA after the fact.
This month, the VA started requiring contracts to be issued in
advance, but there already seems to be a backlog in the
issuance of contracts. Companies have raised strong concerns
that they are owed money, but don't have a timeframe as to when
they'll be paid. The VA apparently owes these companies
millions of dollars.
What is the VA doing to remedy the situation, and will
these be processed and paid prior to the end of this fiscal
year?
Mr. Giddens. The effort the VHA started in terms of
structuring their process so that we procure an item before we
use that, was started many months ago back in late spring,
early summer. And they're progressing that implementation. As
we do so, we have seen some instances where payments to vendors
are starting to lag behind. But I know Rick and his team have
been monitoring that, and working with vendors. In particular,
with different VISNs.
Mrs. Walorski. And do you have a--is there some kind of a
timeframe that you look for this to be completed?
Mr. Lemmon. Well, it's not a one event sort of thing,
because we're always adding more orders. But--and there's a--I
guess a typical type of lag time between when the order's
placed, when the product's provided, and when the vendor is
paid. There has been some delays due to the new process, but
we're working at it very hard as far as using overtime and
shifting resources to address it. We're hoping that within the
next 30, 60 days, most of it will be worked out.
But the other exciting thing, is our office has been
working with prosthetics and with the strategic acquisition
center at OALC to put together national contracts with these
implant vendors. And with those, we're going to add tremendous
efficiency where we can have a much more streamlined process
and fix this. So we'll have a more permanent fix instead of
always trying to muscle through an inefficient process that we
have now. But we had to do it for regulatory compliance, to
commit the orders in advance of using the products.
Mrs. Walorski. Mr. Giddens, I have another question. I also
heard concerns that implementation of a mandatory and additive
preauthorization process for medical device implants is overly
burdensome. It requires an additional three administrative
steps from three different stakeholders. Could you explain the
justification for these extra steps, and what's being done to
ensure that veterans receive the proper device in a timely
manner?
Mr. Giddens. Well, as Rick said, needs to make those
processes to be in compliance with regulation. And while
they're implementing those processes, the end state is the
national contracts that we're putting in place so that that
process, on an individual basis on order, can be supported by a
national contract.
Mrs. Walorski. And then, Mr. Lemmon, just quickly, this is
just something that's gone on in my district, and so I'm
interested. The recently released Commission on Care report
took issue with the separation of clinical supplies and
prosthetic medical devices that have caused problems in
coordinating products needed for procedures. It says that it
takes the frontline staff members 1 to 3 months to procure
simple items through your contracting and medical staff,
complaining the procurement office is not responsive.
I've had surgeries in my district be rescheduled the day of
because the medical staff didn't have the devices needed for
the procedure. I wish I could say this, like, never happened.
It has. And I wish I could say it happened once, but it hasn't.
This is happening and continues to happen in my district where
some of these veterans get a call day of. Oh, the device didn't
come in or, you know, something happened on the way.
Do you think the inclusion of more frontline medical staff
in purchasing would improve this?
Mr. Lemmon. Well, I think we have to have process
improvement. And that will be driven by the national contracts.
Of course, with surgeries, as you know, even in the private
sector, a lot of times vendors are called in the day of
surgery. Maybe it's expensive items that aren't routinely
stocked. And then the surgeon, when they're in the surgery,
will decide which particular product would best fit with the
anatomy of the patient. So there's some risk of that. But we
have to--we're looking at it holistically. We're looking at
what products we can potentially bring into inventory so we're
not relying on a vendor delivery. We're also going to implement
more streamlined processes with ordering officers.
So the idea with prosthetics, as well as other national
contracts, we want to get away from transactional contracting
at the time of need. We want to have well-leveraged national
contracts that can be efficiently executed at the time a
clinician or someone needs a product in advance of the need,
and then have a delivery that's very timely, and we know they
got a quality product at a good price. So the national
contracts that Greg's group is working on is going to be just a
tremendous help. And then we have to work the processes.
And some of the--when you talk about what we're doing now,
we're preauthorization. You're talking about an order in
advance to obligate the funds so we're compliant with
regulation. But then we have to finalize the order once we know
what was actually used. And then we have two different systems
we're doing that in. With the new processes, a lot of those
steps can be cut out. And so that's the solution to not only
the problem you mentioned, but also the vendor payment issues.
We have to unburden our staff and create a very efficient
process to get these products, and that we're getting a quality
product at the right price.
Mrs. Walorski. I appreciate that.
Thank you, Mr. Chairman. I yield back.
Mr. Coffman. Retired Sergeant Major Walz, you're now
recognized for 5 minutes.
Mr. Walz. Thank you, Chairman. And thank you all for being
here.
I'm going to build on where Mrs. Walorski was going from.
And I just--last week when the VA secretary testified over in
the Senate, they went down the same line of questioning. And I
think the question said only 38 percent of supply orders were
made through standing vendor contracts as opposed to 80 or 90
percent in the private sector. Went on to talk about how the VA
does it with pharmaceuticals. And it's kind of the gold
standard of how you can get cost savings, efficiencies, and the
mail order pharmacy gets very high--very high marks, and it's
the best.
And then they went on to just ask a very simple question:
What's preventing VHA from doing these kind of master contracts
across the board? And the answer was: Nothing. I guess the
question that's troubling me is, even someone who's not really
familiar with this, this just makes great sense. It's the way
things are done. It's kind of best practices. Why is the VA
secretary waiting until 2016 to say this? I guess I'm asking
all of you, have efforts been made over the years to do what
seems--and I'm not trying to make light of this. Procurement is
difficult. And I've been on the other end of that where I'm
running an armory and procuring. And at times, you did want to
use that card because I had to go get three cost estimates to
sharpen the lawn mower blade. By the time I got done with that,
it probably would have been simpler, more efficient, and more
cost effective to the taxpayers had I been able to use that.
But what's really funny, the standing joke was, is you cannot
use that card. That takes an act of Congress. Little did I
know, it didn't take an act of Congress. Someone's been using
them.
So I guess I'm getting at in asking you: Why did it take
this long when this is pretty much standard practice everywhere
else?
Mr. Giddens. So I don't know in years past why we didn't
move to this area. We've been working this collectively now for
almost a year to make sure we get an understanding of what the
requirements are from VHA, driving in clinicians, looking at
our spends, so we put the right contracts in place, so that we
put the right prime vendor vehicle in place. That goes live
this December. And that'll be the point where I'm sure we will
learn some things as we turn that on. And we won't get
everything right, but we'll be in a much better position. And
we've already seen that leveraging those national contracts
provide delivery as well as provide value.
So we're really working through the windshield driving this
hard to implement what is a generally accepted best practice
and--
Mr. Walz. No, and I appreciate that. And I don't want--and
I know you coming into the job--I guess maybe then I will move
to the next place, is as you're implementing and doing this--
and I think Mrs. Walorski was getting at this point on this.
The questions we talked about in our office was, are clinical
determinations of the primary care providers being taken into
consideration? Meaning, are you seeing patterns using data of
things that you know you're going to need because that care has
shifted in that direction? Are you using that as part of the
decision-making on the master contracts?
Mr. Giddens. Yes, sir, we are. And actually, that analytics
is what informed the work that we're doing to stand this up in
December. And we're also then working--and I'll let Rick speak
a little more to this--how they're teaming in clinicians to
help us understand the way forward.
But also, there's an element in here that Rick talked about
with the graphic user interface that's going to allow us to get
rid of the blue screen that Ranking Member Kuster showed in the
book. That's going to also give us standard data. One of the
things that we're suffering from now is, if I may, some medical
centers call this a water bottle, and others call it a bottle,
comma, water. We don't have a standard nomenclature. And if you
don't have that standard nomenclature, it's hard to aggregate
your data.
Now, there's some fuzzy logic algorithms that can run and
some smart computer folks can try to link those together. But
the graphical user interface that we'll be deploying is going
to lock those fields down so we all call it the same item. And
it's going to make the data analytics even more--
Mr. Walz. So that's all straight and moving forward.
Because, again, I don't want to oversimplify this, but I do
think there's somewhat of an analogy here. I go online to shop
for a dehumidifier at a Lowe's. They tell me which stores
around me have it in, and how long it would take to get to the
other one. And they know I, the user, can see that. I would
think what Mrs. Walorski's talking about is the primary care
physician should be able to tell where that prosthetic is, or
where that device is, or where that medical equipment's at.
Is that an oversimplification or is that the direction
you're going to? That user interface and that simplicity of
tracking inventory and procurement is just so simple.
Mr. Giddens. That's absolutely the direction we're going
to. And starting with standard data, nomenclature, and
inventory systems that link to that so that the field will use
that standard nomenclature is how we will get there. I would
submit, we really don't even want that physician worried about
what's going to be there. They need to set what their
requirement is, and then it show up.
Mr. Walz. Yeah. True enough. And that is happening. And
when you say going live in December, what percentage of those
medical facilities out there are going to be in this
consolidated supply chain, and who's able to use it?
Mr. Giddens. I believe we'll be at the 70, 80 percent when
we go live in December. And that will be available for VHA to
use across their enterprise.
Mr. Walz. Great. I yield back.
Mr. Coffman. Thank you, Sergeant Major Walz.
Dr. Benishek, you're now recognized for 5 minutes.
Mr. Benishek. Thank you, Mr. Chairman.
You know, I was reading some of this stuff here about
475,000 line items of medical/surgical supplies being narrowed
down to 16,000. Is that quite right there?
Mr. Lemmon. Well, no. If you look at maybe every item
that's available on a Federal supply schedule, I think that's
where that number came from. The 16,000, in that range, is,
based on our data analysis, is what we're buying now under the
old contract. So no. And in the private sector, what we've
heard from some--like Ascension Health and the Cleveland
Clinic, they actually, you know, can get down to even a lower
number as they do a better job working with clinicians.
Mr. Benishek. Well, I'll tell you what my concern is, and
that is this. And I worked at the VA. You know, I'm a surgeon.
And all of a sudden, there would be a new IV catheter, okay,
that nobody liked. People that were putting in the IV catheters
didn't like the new IV catheters. But the VA changed their
brand of IV catheters that they purchased, and nobody seemed to
know that that was going to happen. All right? And I can
imagine--you know, I use certain equipment in the operating
room, but I'm not familiar with another equipment. And there's
going to be surgeons all over the country that are trained
differently, that have different experience, they use different
equipment. So you're going to need to have a lot of different
equipment.
So to me--I mean, I understand, you know, having a
reasonable amount of equipment. But without input from the
practitioners, that's very difficult to do. And I don't see
why--you know, Amazon sells 470,000 items, I'm sure. And they
procure it probably more efficiently than you guys do. So why
don't we have, you know, more emphasis on the process of
procurement rather than narrowing down the items? Because, to
me, that's a critical item.
I mean, when I find out that I'm going to implant, you
know, a chemotherapy port, and then all of a sudden they change
the type of port because they got a better deal, and they
didn't talk to me about it, well, I'm sort of upset because I
don't know the details of this port, and I'm going to put it in
for the first time on a patient that--you know what I mean? I'm
unfamiliar. That happens. Okay? And I'm sure Dr. Wenstrup might
have similar experience.
So, I mean, this is kind of worrisome to me when I hear
that your primary--or not--maybe not primary, but a significant
part of your way of solving this problem is to cut down on the
number of things and not improve the overall efficiency. So I
just want to make that comment, and that scares me. Okay? So,
but what is the--are you going to fix this two headquarter
thing that Ms. Mackin was talking about? I can't remember which
one it was, the SAC has two separate--what's that about? I
mean, how does that--why are there two separate locations for
the same thing?
Mr. Giddens. That organization has two operating locations.
It's not that unusual to have. There's a group that's in
Fredericksburg and a group in Frederick. The group in Frederick
focuses more on services, and the group in Fredericksburg more
on supplies and commodities.
Mr. Benishek. Well, you know, I'm just trying to see that
there's a lot of thing, to me, about the procurement process
that could be made better rather than simply diminishing the
amount of possible supplies. You know what I mean? I understand
the formulary, how that works in the pharmacy. But even at the
VA where--and at any hospital that I worked in, frankly, has a
formulary. And I wasn't very happy with it sometimes because I
wanted to use a drug that wasn't on a formulary.
So what--let me ask this other question. So, now, if I'm a
surgeon and I want to get a product that's not on your thing,
what do I got to do?
Mr. Lemmon. Well, it depends on the value of the product.
Certainly, there's purchase card holders in logistics. If it's
under the micropurchase threshold, $3,500. We also have network
contracting offices that can do buys larger than that for
individual hospitals. But then we're tracking what's being
bought on the back end for compliance just to make sure we're
buying the right stuff.
Mr. Benishek. Right.
Mr. Lemmon. You know, the idea of having a formulary is not
that you purchase every product from every vendor. You have to
do some narrowing to get the cost-savings and value. But at the
same time, it's critical that we have clinical-driven sourcing.
The clinicians are involved in making the decisions and then we
use that.
Mr. Benishek. What is the clinical process now?
Mr. Lemmon. Clinicians participate in the individual teams
that determine what the requirements are.
Mr. Benishek. What clinicians are those? Now, if I go back
to the VA and start working again, am I going to have an
opportunity to provide input? Or is it somebody at some
university somewhere? I mean, is it a limited number of
clinicians or does everybody who does that, use that device,
get a chance to provide input?
Mr. Lemmon. Certainly, we don't have every clinician in the
VA that would use a particular item participating in the team.
But there's--they do have clinical representatives that--
Mr. Benishek. Well, that's the part I don't like. Okay?
Because why shouldn't every clinician have input? I mean,
they're the ones that are actually doing the damn procedure.
Mr. Lemmon. They do in a way. We do have clinical product
review Committees in hospitals.
Mr. Benishek. Well--okay.
Mr. Lemmon [continuied]. And they forward up the items they
want us to look at.
Mr. Benishek. All right. I'm out of time.
Mr. Coffman. Thank you, Dr. Benishek.
Mr. O'Rourke, you're now recognized for 5 minutes.
Mr. O'Rourke. Thank you, Mr. Chairman.
Ms. Mackin, I wanted to--others have given examples, but I
wanted to hear from you. Who does this right? Who's the model?
Who should we be emulating?
Ms. Mackin. That's hard to answer. I think every government
agency has its own set of issues. What strikes us about the VA
is how decentralized it is. And I think there are some
duplicative functions that the Department might want to take a
look at, as we've noted, as the Commission on Care noted, as
the independent assessment noted. This isn't new. I'm not
saying it's easy, but I think over time, it has become a little
too convoluted. And I say that because, again, the contracting
officers and the ordering officials at the medical centers are
confused.
Mr. O'Rourke. And, you know, something you said struck home
with me, which is that this is not the first time that these
challenges and shortcomings have been brought to the attention
of Congress. And I recognize that Mr. Giddens is new,
relatively, in this position. But it is a familiar theme before
this Committee, at least in the 4 years I've been here is:
Look. The VA's royally screwed this thing up for a long time.
But the people who are--were responsible for screwing it up are
gone. We've got new people in place, and we've got these
transformational plans that are going to completely, you know,
bring the VA into line. You guys got nothing to worry about.
So what cause for optimism do you have, Ms. Mackin, when
you look at what the VA's doing right now in response either to
your findings or to previous findings? And what causes for
concern do you have? And what's your advice to me in my
oversight function? What should I be looking at in the years
ahead so that we don't find you or your successor here 5 years
saying: Look. The VA's now got a graphical user interface, but
essentially, it's the same screwed-up system and it's still not
working? What--if you could answer those three questions in the
3 minutes that we have remaining, that would be helpful to me.
Ms. Mackin. I mean, it's a multilayered issue. You have the
procurement policy framework, which I think should be pretty
easy to streamline. You want one updated acquisition
regulation. You want to get rid of these 170 information
letters so people know what they're supposed to be doing. The
organizational issues we point out will probably be more
difficult to deal with. But focusing in on the medical/surgical
supply program, I think the VA is on the right track. They have
national contracts. That's a good practice. You want to get the
best prices you can while having all the items, as I mentioned,
that the clinical staff need.
What was troubling to us there, though, is are they being
used? Not as much as the VA would hope. How much are they not
being used? Nobody knows. There's--you know, they have not been
tracking the actuals, and you're not going to get the strategic
savings unless you know who's using the national contracts. And
just as importantly, who's not using them and why? Is it the
ordering interface? Is it the items aren't available? You have
to kind of dig down and understand why they're not being used
to get the best value.
Mr. O'Rourke. And to the first question, I mean, any cause
for optimism? Is there anything that you're seeing in the VA's
response, say, over the last year, to these problems before
this report was published, and then the VA's responses report
specifically that give you cause for hope or show you that the
VA's essentially on the right track--
Ms. Mackin. I mean, during our--
Mr. O'Rourke [continued].--or not? Let me know.
Ms. Mackin [continued]. During our audit, when we raised
the procurement policy framework that you have two versions of
your acquisition regulation, they took immediate action. I
don't know why it took us to point that out. I mean, that's
still a concern. But, you know, once we raised the concerns,
they did start taking action. And so I think that's a good
thing.
I think in terms of oversight, you know, are they using
these national contracts? Are they getting the best value for
the taxpayer? They have a lot in the works. MyVA, this
initiative is huge and broad. And there's a lot of, we will do
this, and we will do that statements.
Mr. O'Rourke. Right.
Ms. Mackin. I think for GAO and perhaps Congress, you want
to see the documentation and the evidence that the outcomes are
happening.
Mr. O'Rourke. Yeah. And, Mr. Giddens, just--you don't have
to answer this if you don't want to, but my constructive
criticism would be that--and it's something that I see a lot of
folks from the VA do when they testify before us, they use very
aspirational language. We're going--we're pursuing supply chain
transformation efforts. We're responding to stakeholders and
customer needs. What would be very helpful to me is just the
numbers. What have you done? What have you not done? When will
you do the things that you aspire to do? How can we best hold
you to account?
The aspirational we will be the best, we'll deliver for
veterans, we all know that, but--we know you're in this for the
right reason, that you're going to try your hardest. But it's
very helpful to me if you could have a concise by-the-numbers
response to, you know, perhaps the questions that were raised
today, and perhaps in future testimony, look, here's where we
are. That is very helpful, because I get that from GAO, for
which I'm very grateful, and I don't always get that from the
VA. And, again, you're not unique in that, and I appreciate the
aspirations that you, you know, set out to achieve. It's just
that the numbers are going to be very helpful, especially in an
O&I setting.
Mr. Giddens. Sir, I'd welcome the opportunity to do that,
to show the plans and the milestones that we have that support
those aspirations.
Mr. O'Rourke. Thank you.
Mr. Giddens. It's going to happen.
Mr. Coffman. Thank you, Mr. O'Rourke.
Dr. Wenstrup, you're now recognized for 5 minutes.
Mr. Wenstrup. Thank you, Mr. Chairman.
You know, I appreciate the attempt to bring some order to
this process. And, you know, Mr. Walz brought up the example of
Lowe's. You know, they've got to do these types of things
because customer service is of the utmost importance. And maybe
that's something that's missing from time to time in your
situation.
But you have tremendous buying power. I mean, what hospital
system would not love to have the buying power of the VA health
care system and use it to their advantage. It seems to me
you're holding a lot of cards. And so that goes to withholding
all those cards, sole source type of purchasing doesn't even
make sense. Now, you may have something like, hey, a suture
removal kit. Yeah, anybody can use the same one. You know, that
kind of thing is fine. But it seems to me what we're doing
right now is very much related to cost concerns. Now, and
doctors get that. You know, we've had to deal with that.
And, you know, when it comes to medical and surgical tools,
though, when you're operating on somebody, it's what's best for
the patient. And that patient care comes first and foremost
over anything else. And so it seems like we're kind of more
contract driven right now, and the bean counters are making the
decisions of what we have and don't have. And, you know, what
happens when doctors don't have a legitimate choice, they
leave. This happened in our group.
One of the hospital systems we were heavily entrenched with
said: This is the only knee implant you can use. Well, guess
what? It's not the right one for every patient. We left. We
left that system. Later, they had to come around. They found a
way to make it work.
And so, you know, you talk about physician recruitment for
the VA. You know, you don't want to tie people's hands when
you're trying to get the best in place. And you talked about
the vendors delivering that day. You know, sometimes I'd have
two opposing vendors and say: You know what? Once I get in
there, I'm going to decide which one is going to be best for
this patient. That's not a bad thing. That's a good thing.
So the question comes in, is who's always making these
calls for the items that are put in the catalog? Maybe
something's in the catalog that you got to, say request early,
something like that, but don't make it obsolete, and in no way
available. And I believe what you were looking for is the
integrated procurement team that includes physicians. Well, I
hope it includes the right physicians. Because a lot of times,
since I've been dealing with health care and the government,
they'll have physicians, but not physicians that are familiar
with the things they're making decisions on. So we got to be
careful on that.
So the question does come in, what happens when a doc says:
I need this? And, Mr. Giddens, in August, I think you were on
the radio and you were talking about ordering officers that
don't have to decide which is the right kind of bandage. Well,
I don't consider that a positive because there's a difference
between Kling, and Kerlix and Webril, and different bandages.
And they're used for different things. So one size doesn't fit
all. So sometimes you do have to make a decision on what type
of bandage and not just say: Well, this is easy. This is the
only one you got.
And so the questions come in, what happens when a doc says:
I need this? And is it a fact right now that the VA is
selecting one company to supply each type of product? Because
that, I think, is dangerous.
The other question I had is, when do we get to see the
catalog and take a look at it for ourselves? If you would, Mr.
Giddens.
Mr. Giddens. Sir, first, to make sure that--to clarify one
of the earlier points, this is not bean counting first. We are
putting veterans first. We think as we do that, we will be able
to realize savings. And talking with health care organizations
across the country, that's what they've told us too, that they
could serve their patients, and at the same time be more cost
effective. They also told us this is not an overnight journey.
Now, some of them said it took them 5, 7, 8 years.
So we don't want to rush to this in any way that puts our
patient and health care delivery at risk. So we intend to be
deliberate, methodical, and to make best be.
You mentioned the radio show. The point I was trying to
make on that is, right now, if you're that ordering officer out
in the field and you do a search, you may get 5, 7, 10 pages of
different kind of bandages. We want to, based on clinically
driven sourcing and getting the right input from the health
care community, what--if you're looking for a bandage that has
bacterial properties of this and an absorption rate of this, we
don't want you to have to look through five different pages. We
want to provide you the ones for what you need that have
already been approved for use in the VA, and that we know give
good clinical outcomes.
Mr. Wenstrup. I appreciate that clarity.
Mr. Giddens. And if we can leverage that and now buy at the
market instead of buying at the eaches, we think we can also
have some cost avoidance.
Mr. Wenstrup. And the catalog, when do you anticipate that
that might be available? Or tentative catalog.
Mr. Giddens. In December. We'll be happy to, as we start to
go live, to share that with you.
Mr. Wenstrup. Okay. I appreciate it.
Mr. Giddens. And it will be--as Rick stated, it will be
evolving. That catalog in December, as we continue to get
feedback, as clinicians continue to work on the integrated
product teams and procurement teams, that will be adjusted, and
we'll look at our spend and our analytics, and we'll--so it
will be an evolving catalog. It is not going to be static. It
will be dynamic.
Mr. Wenstrup. And I just--again, I know you've heard it
already, but the provider input to what they need is best for
their patient has got to be a big component of this. And I
understand the need for cost savings as well.
I yield back. Thank you.
Mr. Coffman. Yes, sir. Thank you, Dr. Wenstrup.
Doctor Roe, you're now recognized for 5 minutes.
Mr. Roe. Thank you, Mr. Chairman.
A rush in the VA is an oxymoron, Mr. Giddens. And now since
I've been here, I haven't seen them get in a rush for anything.
Ms. Mackin, you--
Mr. Giddens. Well, sir--
Mr. Roe.--you mentioned confusing, complex, but
opportunities. And I'd hope that we're going to take advantage
of some opportunities. And I know that this is a huge system. I
understand that. And there have to be, when we've seen abuses
of the system. And I know you have to have rigid ways to do it.
And I know, Dr. Wenstrup, we all like our toys when we go
to the operating room, we like what we do. But obviously, there
needs to be some way that you don't have every gadget in the
world on there. We understand that.
Dr. Cosgrove mentioned last week when he was here sitting
right where you are, about how a different EHR system would
benefit the VA, instead of having to lay something over--Ms.
Kuster mentioned a minute ago about that, about it would work
for an EHR health care system, a supply chain, billing, all the
things the VA is struggling with with this legacy system. Would
that be something that would help where you have an off-the-
shelf system, that's number one?
And, Ms. Mackin, I guess I've got a question for you. Why
did it take an OIG audit to make the changes? Why didn't the VA
make those changes before you audited--had to audit the system
and point these things out?
Ms. Mackin. If you're referring to the actions that they
took during our audit?
Mr. Roe. Yes.
Ms. Mackin. I mean, I have to just think it wasn't on
anybody's radar screen enough to start moving. They realized
that they had two acquisition regulations out there. It just
was a very slow moving process. And then when we raised it,
they pretty quickly rescinded the old one. So that was good.
But, you know, they're still looking at a couple of years
before they've updated the 2008 version.
They did agree with all ten of our recommendations. We
didn't get the letter in time to publish in our report, but we
heard from Mr. Giddens. So we'll be following up on those
individual recommendations as well.
Mr. Roe. Well, it's the--in our Veterans Choice Act, when
the Committee on care came--the VA seems to always agree, but
it's implementation of it that seems to be held up. But what
Mr. Walz was saying a minute ago, you know, I can go--I can go
to--if I want a product in the world now with the technology we
have, I can literally go on Amazon and find six, seven
different versions of what I want at different price points. I
can do that with airline tickets, I can do that with insurance
policies. I can do that--and I believe there are health systems
that do exactly the same thing, to find the best price for a
product in a competitive system.
And I don't know whether the VA's system of looking at it
won't allow them to do it. I don't know whether that's the case
or whatever. But right now, the technology's out there. You can
find the best price for almost anything now.
Mr. Roe. I don't care if it is a pulse oximeter, a blood
pressure cuff, stethoscope, whatever you're looking at.
Is that the system, Mr. Giddens, that's going to be in
place?
Mr. Giddens. Yes, sir. That's the system that we'll begin
using this December, where we have looked and put those
contracts in place that supports that, so that when somebody is
looking to order, it'll start pushing that with the graphical
user interface so that they see the right item and how to--
Mr. Roe. It will search out the lowest price for the same
product. Is that what you're saying?
Mr. Giddens. Well, I've actually already done the
analytics, and I can let Rick talk a little about the
analytics. We'll have already done the analytics and put the
right contracts in place so they are getting the best price,
but we'll continue to monitor the market. We may have a
contract in place that in 9 months the market has shifted, and
now that price is not as good. So we want to be looking at what
the market prices are on an ongoing basis and understand maybe
our contract price is still good and maybe not, and then we'll
start making shifts.
Mr. Roe. Well, that segues into the next question I have,
which is, in strategic buying contracts, the VA concentrates
its business with a few big companies. A small orthopedic
implant startup submitted a statement for the record. They say
the VA is paying 68 percent too much with the big
manufacturers. The VA seems to shut these small companies out
because it's more convenient to get the whole product line from
one company. That puts the convenience over competition and
savings. How would you respond to that?
Mr. Giddens. I don't know any of the details on that
particular procurement. It's probably in the VHA's--
Mr. Roe. We can get that for you for the record. You don't
have to answer now. We can get that for you.
I notice my time is about out. I yield back.
Mr. Coffman. Thank you, Dr. Roe.
We'll do a second round for anybody that has additional
questions. I have three additional questions.
Ms. Mackin, GAO's report says the VA is working on an
updated version of its acquisition regulations, but it won't be
finished until 2019. Is this reasonable?
Ms. Mackin. It's a slow process. I will say that they began
working on it in 2011. I think Mr. Giddens just said they
expect to be complete in December of 2018. That is a long time.
I know there's public rulemaking, that's part of it. But it
seems like a long time.
Mr. Coffman. Mr. Giddens, Congress has given the VA
numerous special procurement authorities over the years, none
of which seem to make the situation any better. Why isn't
maintaining these regulations more of a priority?
Mr. Giddens. Sir, I think as we've looked at that, it is a
priority as we've indicated in working with GAO. We're going to
look to accelerate that. But there is a large part of
rulemaking in public comment that we must go through as we
update the VAAR. That's why we want to separate that and only
update in the VAAR what is required for rulemaking, and take
the rest and put in a manual that we can more update as
business processes are improved.
Mr. Coffman. Mr. Giddens, how can you demand businesses, a
lot of them being small businesses, live under these
regulations if the VA can't even maintain them?
Mr. Giddens. Well, the regulations that govern us in the
FAR don't govern those businesses, large or small. They govern
the interfaces that we have with them, but those interfaces are
large and defined by the solicitation and the proposal process,
which are clearly articulated.
Mr. Coffman. Ms. Mackin, summing this all up, what has
MyVA, the program MyVA demonstrably accomplished in the supply
chain realm?
Ms. Mackin. I think the goals of MyVA are all good, but as
noted, they're very broad and ``we will'' kind of statements.
I've seen some numbers about cost savings. I haven't seen any
backup for those numbers, so that's something I'd be interested
in taking a look at.
And I'll just say an organization can't manage what it
can't measure. And if the VA can't get a good understanding of,
even after these national contracts are up and running, who's
not using them and why, they're not going to get where they
want to get with the cost savings.
Mr. Coffman. Let me just say, I think Mr. O'Rourke well
articulated the need to have metrics instead of these
aspirational goals. You know, what we want are a plan with
specific metrics that we can measure and that you can measure,
Mr. Giddens, to say where you are in terms of improving this
process. Can you comment on that?
Mr. Giddens. As indicated before, we welcome the
opportunity to share those plans.
Mr. Coffman. When do you think you can share those with
this Subcommittee?
Mr. Giddens. We can--next week.
Mr. Coffman. Okay. And I'd like Mr. O'Rourke to take a look
at those and see if they meet your objectives. I think they
were very well expressed.
Any other questions, Mr. O'Rourke, Mr. Walz?
Let's see where we're at here.
Our thanks to the witnesses. The witnesses are excused.
Today, we have had a chance to examine the underlining
challenges in VA procurement. I hope the VA will consider
streamlining these organizations and cleaning up the rules.
One final note, the VA urges us to pass provider agreement
legislation in every single letter we get from the Department.
Chairman Miller originally attempted to bring it to the floor
in May, and it was derailed by last minute objections to the
cost offset proposed by the President that this Committee under
both parties has used for years. Chairman Miller again tried to
bring it to the floor just last week. The bill had to be pulled
over new objections, but at the last minute by the Secretary of
Labor that even the VA was not aware of. I reject any
implication that the Committee has not been working diligently
on this legislation. I would ask the VA to be vocal in its
support when it really counts, not just privately.
I ask unanimous consent that all Members have 5 legislative
days to revise and extend their remarks, and include extraneous
materials.
Without objection, so ordered.
I would like to once again thank all of our witnesses and
audience members for joining in today's conversation. With
that, this hearing is adjourned.
[Whereupon, at 5:09 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Prepared Statement of Greg Giddens
Good afternoon, Chairman Coffman, Ranking Member Kuster, and
distinguished members of the Subcommittee. I appreciate the opportunity
to discuss the progress that the Department of Veterans Affairs (VA) is
making towards transforming procurement and supply chain operations
leading to improved business outcomes that benefit our Nation's
Veterans, and taxpayers. I am joined today by Mr. Rick Lemmon, the
Acting Chief Procurement and Logistics Officer for the Veterans Health
Administration (VHA).
VA recognizes that persistent challenges exist in delivering
business solutions that satisfy Veterans needs while simultaneously
complying with the vast body of laws and regulations that govern
Federal acquisitions. VA is committed to: continuous improvement of our
procurement practices and procedures; leveraging our buying power to
achieve cost avoidances; improving our management information systems
to support improved decision making; improving acquisition workforce
competencies; and executing our acquisition mission in an integrated
manner that establishes clear lines of authority and holds people
accountable for mission outcomes.
To that end, the Department has made steady and significant
progress over the past 5years, but admittedly, there is more work to be
done, as reflected in the recent Government Accountability Office (GAO)
report titled, ``Veterans Affairs Contracting: Improvement in Policies
and Processes Could Yield Cost Savings and Efficiency''. VA agrees with
the conclusions in the report, and we are pleased to report that in
most cases, VA already has strategies in place that align with GAO's
recommendations. For example, the Department initiative to streamline
internal acquisition policy and procedures to clearly delineate what is
required by law and regulation from what are business process
requirements. This deliberate separation of policy from procedure will
create a more agile management environment that can respond more
quickly to stakeholder and customer needs.
Other examples of the Department's focus on improving acquisition
across the enterprise include enhanced training for members of the
acquisition team, including both acquisition professionals and the
customers they support; process improvements to improve visibility over
acquisition workforce training, certifications, and warrants; and
improvements in VA's contract writing system to improve visibility of
contract actions across the entire acquisition life cycle from
requirements generation to contract closeout. The Department is
implementing a 5 year acquisition information technology systems
modernization plan that is replacing legacy, proprietary systems
technology with world-class, agile, and user-friendly capabilities that
will be simpler and cheaper to sustain, and will also support rapid
response to changing customer requirements thereby improving customer
satisfaction.
Significantly, under the leadership of Secretary McDonald, VA has
evolved a new management culture that embraces: industry best practices
such as continuous process improvement using LEAN principles; an
overarching leadership philosophy, which values employee creativity and
diversity and fosters decision making that relies less on bureaucratic
rules in deference to ``guiding principles'' that focus attention and
energy squarely on Veteran needs and hold people accountable for
individual and enterprise business outcomes.
Apart from improvements that are focused on developing a
professional contracting workforce, VA has focused heavily on
establishing an acquisition management framework to provide a
disciplined, repeatable process for managing programs throughout the
acquisition lifecycle. Similar to the approach used by the Department
of Defense (DoD), implementation of a Acquisition Program Management
Framework (APMF) will complement and support the Department's efforts
to integrate business functions more effectively to achieve enterprise
outcomes and results. Specifically, the APMF will help drive desired
business outcomes and firmly establish accountability for acquisition
programs as a component of VA's overarching ``Managing for Results''
process.
Key tenets of VA's approach to acquisition service delivery include
the centralization of policy and workforce development functions, and
decentralized execution. Centralization of acquisition policy and
workforce development allows the Department to implement a standardized
acquisition system and adapt the system to quickly adapt to changes. A
recent example of this is the Supreme Court ruling in the case
Kingdomware Technologies, Inc. v. United States. As a result of the
ruling, contracting in the Department has fundamentally changed. Due to
continuous efforts to improve integration across VA's acquisition
community, the Department was able to rapidly revise numerous internal
acquisition policies and procedures to ensure full compliance with the
law. In addition, our award winning VA Acquisition Academy was able to
quickly develop and deliver targeted training for both contracting
professionals and internal customers to ensure rapid implementation of
the Court's ruling. Through central management of the enterprise
acquisition policy framework, VA adapted to the ruling with minimal
impact to critical timely acquisitions.
The agility of VA's acquisition and supply chain communities to
adjust to both regulatory requirements and mission challenges continues
to improve as VA evolves through the MyVA transformation agenda which
is focused on optimizing Veteran outcomes and customer experience,
effective stewardship of resources, operational efficiency, and
employee satisfaction. Transformation of VHA's supply chain is one of
the ``MyVA Breakthrough Initiatives''. This initiative is focused on
establishing an enterprise-wide medical-surgical supply chain that
leverages VA's scale to drive both effectiveness of acquisitions
(leveraging VA's buying power to achieve best possible pricing) and
system efficiencies resulting in lower operating costs.
This initiative is a comprehensive approach consistent with the
Commission on Care's intent to improve the effectiveness and efficiency
of VHA's supply chain and is already driving much needed improvements
in data visibility and quality, synchronization of technology
deployments, standardization, contract compliance, and training.
Already in fiscal (FY) 2016, VHA supply-chain transformation efforts
have yielded in excess of $75 million in cost avoidance. VHA has also
developed a 2 year supply-chain transformation stabilization and
standardization plan that will establish a common operational
environment to inform investment decisions beyond FY 2018. The
Department believes that it is prudent to avoid significant technology
investments beyond those currently in the pipeline until such time that
a mature supply-chain baseline is established, upon which future
incremental IT investment decisions can be based. This is especially
important given VA's Financial Management Business Transformation
initiative and emerging plans for a new Digital Healthcare Platform
(DHP), both of which will impact legacy and contemporary supply-chain
systems and interfaces, as well as influence system-improvement
alternatives and investment decisions over the next 2 to 5 years.
Supply-chain system improvements must be integrated and synchronized
with enterprise financial and health care system enhancements to
achieve efficiencies in service delivery and support analysis of
integrated data to meet VA's current and future needs.
One of the Commission on Care report's recommendations that the
Department does not believe is prudent at this time is the following.
Specifically, the Commission suggested establishment of a Chief Supply
Chain Officer (CSCO) and realignment of all procurement and logistics
operations under the CSCO executive position. This isolated
recommendation would not adequately address underlying management
challenges associated with organizational complexity and the need to
improve integration processes impacting the supply chain. The
Department believes that realignment of VHA's supply-chain structure,
including roles and responsibilities of the various VA Central Office
staff offices, health networks, and medical facilities, should derive
from and be integrated with the transformation of the overall VHA
health care organization structure. The intent of the Commission is
being met by addressing alignment issues as the supply-chain
breakthrough initiative evolves and is synchronized with the
Department's overarching strategies to transform VHA through the MyVA
initiative.
The Secretary, senior leaders, managers, and members of the
acquisition and supply chain communities across the Department are
keenly aware of the key business drivers fueling the MyVA
Transformation. For members of the acquisition and supply chain
communities, these compel us to continuously improve business processes
and procedures to overcome long-standing system deficiencies; improve
program execution, oversight and accountability; improve business
outcomes; provide sound stewardship over resources generously provided
by Congress and the American people; and be accountable to our
stakeholders. We are tackling the many challenges that confront us in a
transparent manner as mandated by the tenets of the MyVA transformation
initiative. As stated by the Secretary, VA cannot accomplish the
ongoing transformation through MyVA or recommendations from the
Commission on Care without critical legislative changes. VA has
aggressively pursued these needed changes with Congress. Many of these
proposals are vital to maintaining our ability to purchase community
care and best serve our Veterans. One of the Secretary's top
legislative priorities concerns Provider Agreements, which enable
delivery of necessary care for Veterans through the fullest complement
of non-VA providers. VA purchased care authorities must be clarified
and modernized. The future of these authorities will have a direct
impact on the workload of VA's acquisition workforce. VA and its
provider partners who use provider agreements are facing continuing
uncertainty, so expeditious action is necessary. VA transmitted the VA
Purchased Health Care Streamlining and Modernization Act to Congress on
May 1, 2015. We strongly support its passage.
Mr. Chairman and Members of the Committee, this concludes my
statement. Thank you for the opportunity to testify before the
Committee today. Mr. Lemmon and I would be happy to respond to any
questions.
Prepared Statement of Michele Mackin
VETERANS AFFAIRS CONTRACTING
Improvements in Policies and Processes Could Yield Cost Savings and
Efficiency
Chairman Coffman, Ranking Member Kuster, and Members of the
Subcommittee:
The Department of Veterans Affairs (VA) spent about $20 billion on
goods and services in fiscal year 2015. \1\ The wide range of goods and
services that VA procures-including construction, information
technology, medical supplies, and many other categories-is essential to
meeting its mission to provide health care, pensions, and other
benefits to the nation's military veterans. Prior assessments of VA
management, both internal and external, have found shortcomings in VA
procurement. In 2015, GAO added VA Health Care to our High Risk list
because of issues including ambiguous policies, inconsistent processes,
and inadequate oversight and accountability. \2\
---------------------------------------------------------------------------
\1\ For our purposes, "spent" means obligated, as defined in A
Glossary of Terms Used in the Federal Budget Process, GAO-05-734SP; 31
U.S.C. Sec. 1501 (a).
\2\ GAO, High Risk Series: An Update, GAO 15 290 (Washington, D.C.;
Feb. 11, 2015).
---------------------------------------------------------------------------
My remarks today are based on our recently issued report on VA
contracting, and I will summarize a few key findings from that report.
\3\ I will address 1) the organizational structure of VA's procurement
function, 2) VA procurement policies, and 3) the extent to which
opportunities exist to improve VA's key procurement functions and to
save money.
---------------------------------------------------------------------------
\3\ GAO, Veterans Affairs Contracting: Improvements in Policies and
Processes Could Yield Cost Savings and Efficiency, GAO 16 810
(Washington, D.C.; September 16, 2016).
---------------------------------------------------------------------------
As part of our work for our September 2016 report, in order to
evaluate VA's procurement organizational structure, we reviewed policy
documents and interviewed officials in leadership, local contracting
office management, and contracting officer roles. To assess VA's
procurement policies, we obtained and analyzed policy documents, and
interviewed officials responsible for making and implementing
procurement policy. To assess opportunities to improve VA's key
procurement functions and to save money, we obtained and analyzed
information regarding VA's medical-surgical prime vendor program and
interviewed officials with roles in management, contracting, and
operations for the program. We also reviewed a non-generalizable sample
of 37 contracts and 19 associated task orders from fiscal years 2013
through 2015. The selected contracts were chosen from the national
contracting offices and local Veterans Health Administration (VHA)
contracting offices we visited, and the basis for selection included
dollar value and whether these contracts were competed or not.
Additionally, we interviewed contracting officers responsible for each
of the selected contracts.
More detailed information on our objectives, scope, and methodology
for our work can be found in our September 16, 2016 report. We
conducted the work on which this statement is based in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
Background
VA serves veterans of the U.S. armed forces, and provides health,
pension, burial, and other benefits. In fiscal year 2015, VA spent
about $20 billion on goods and services via contracts-more than a
quarter of its discretionary budget. As shown in the organizational
chart below, these contracts were awarded by VA's eight heads of
contracting activity (HCAs). The department's three operational
administrations-VHA, the Veterans Benefits Administration, and the
National Cemetery Administration-operate largely independently from one
another.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
In addition to the operating administrations, several VA
procurement organizations have department-wide roles:
The Office of Acquisition, Logistics, and Construction
(OALC) is a VA headquarters organization responsible for directing the
acquisition, logistics, construction, and leasing functions within VA.
The Office of Acquisition Operations (OAO), which falls
under OALC's purview, conducts procurement activities for customers
across the department and has two primary operating divisions-the
Technology Acquisition Center (TAC), which focuses on IT purchasing,
and the Strategic Acquisition Center (SAC), which is responsible for
procurement of certain types of goods and services for the operating
administrations, such as VHA.
The Office of Acquisition and Logistics (OAL) is
responsible for oversight of contracting across VA, including setting
policy and issuing warrants to contracting officers.
The National Acquisition Center (NAC) is an OAL
contracting organization which serves VHA by providing contracting for
certain health care-related goods and services.
VHA provides medical care to veterans and is by far the largest
administration in VA, with a budget of $61.1 billion for fiscal year
2016, representing the majority of VA's $75 billion discretionary
budget. Its 167 medical centers are currently organized into 19
Veterans Integrated Service Networks (VISN), regional networks that
manage some aspects of operations. VHA has 19 Network Contracting
Offices, each of which serves one of the 19 VISNs.
VA has some organizational and programmatic changes in progress
that affect procurement. In July 2015, the Secretary of Veterans
Affairs announced an organizational transformation for the department
called MyVA. In a related effort, responsibility for the medical-
surgical prime vendor (MSPV) program-a logistics provider that
facilitates ordering and delivery of supplies to medical centers from
many different contractors-was recently transferred from NAC to SAC.
VA's Complex Procurement Structure Creates Challenges for Users
Given VA procurement's highly decentralized structure, a given
customer-such as a department in a medical center or a program office-
may need to work with multiple contracting entities to meet its
procurement needs. Figure 2 illustrates the complex working
relationship between contracting offices and their customers across VA.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
This can contribute to confusion. Several of the contracting
officials we spoke with stated that they were, at times, uncertain
about which contracting office handled what requirements. VA issued a
memorandum in 2013 to clarify areas of responsibility for the national
contracting organizations, but confusion remains. VA's Acting Chief
Acquisition Officer stated that he is aware of overlap in the functions
of some contracting organizations, especially the NAC and the SAC. At
one VISN we visited, an official reported procuring one type of high-
tech medical equipment through the SAC even though this area is
specifically designated as NAC's responsibility because she expected
that the SAC could execute the purchase more quickly.
Without clearly delineated organizational roles and customer
relationships-beyond what was provided in the 2013 memorandum-the
possibility of duplication in these roles and relationships is
increased, and customers lack clear guidance on which organization to
approach for certain types of procurements. In our September 2016
report, we recommended that OALC assess whether additional policy or
guidance is needed to clarify the roles of VA's national contracting
organizations. The Acting Chief Acquisition Officer, OALC said that the
department agreed with this recommendation.
VA Procurement Policies Are Outdated and Not Always Cohesive and
Effectively Communicated
Key VA procurement policies are outdated and difficult for
contracting officers to use. Standards for Internal Control in the
Federal Government state that it is important for an organization's
management to update its policies over time to reflect changing
statutes or conditions, and that those policies should be communicated
to those who need to implement them. \4\ However, many of VA's
regulations and policies are outdated, most notably the VA Acquisition
Regulation (VAAR), which has not been updated since 2008. \5\ The
department has issued a patchwork of policy documents in the interim to
fill this gap. VA asks contracting officers to refer to two different
versions of the VAAR, one from 1997 and the other from 2008. This
causes confusion among contracting officers. In addition, VA
communicates interim procurement policies in a number of different
forms, some of which can be duplicative. Figure 3 illustrates the
numerous sources that contracting officers must turn to for guidance.
---------------------------------------------------------------------------
\4\ GAO, Standards for Internal Control in the Federal Government,
GAO 14 704G, (Washington, D.C.: Sept. 10, 2014).
\5\ While we have not reviewed all Federal Register notices since
2008 to determine whether there have been any updates, agency officials
confirmed that the VAAR has not been updated since 2008.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Note: A regulatory deviation is a policy, procedure, method, or
practice at any stage of the procurement process that is inconsistent
with the Federal Acquisition Regulation. Acquisition Flashes
disseminate information relevant to day-to-day procurement operations.
Information Letters are policy memoranda.
The sheer volume and number of different forms of communications-
many of which are outdated-are confusing and present challenges for
contracting officials seeking appropriate guidance. While VA recently
fully rescinded the 1997 VAAR after our inquiries, the 2008 version
remains out of date. A new revision of the VAAR is also in development,
but has faced delays. VA began the process in 2011 but does not plan to
finalize the new VAAR until December 2018, including the required
rulemaking process. The lengthy delay in updating this fundamental
source of policy impedes contracting officers' abilities to effectively
carry out their duties. In our September 2016 report, we recommended
that VA identify measures to expedite the revision of the VAAR, and
take interim steps to clarify its policy framework; the Acting Chief
Acquisition Officer, OALC stated that the department agreed with both
of these recommendations.
VA Can Improve Its Processes for Medical Supply Purchasing and Identify
Other Cost Savings Opportunities
VA medical centers use contractors called medical-surgical prime
vendors to obtain many of the supplies they use on a daily basis, such
as bandages and surgical sutures. Officials known as ordering officers,
who work at the medical centers, regularly place orders. In turn, the
prime vendor delivers those orders via a local warehouse. The prices
for these medical supplies are established by VA national contracts,
which typically provide significant discounts over the Federal Supply
Schedule prices-an estimated 30 percent on average, according to a
senior NAC official. Use of these national contracts is also required
by VA policy and regulation. \6\ Figure 4 provides an overview of the
MSPV process.
---------------------------------------------------------------------------
\6\ VA is required to purchase through the MSPV all medical and
surgical supplies that are available from an MSPV contract. Department
of Veterans Affairs Memorandum, June 22, 2015, Use of Medical/Surgical
Prime Vendor (MSPV) Contracts is Mandatory. VA is also required to
satisfy supplies and services requirements using the order of priority
listed in VAAR 808.002(a)(2), which lists a higher priority of use for
national contracts, such as the MSPV contracts, than for Federal Supply
Schedule Contracts. See also, Department of Veterans Affairs
Memorandum, May 5, 2016, Class Deviation Veterans Affairs Acquisition
Regulation (VAAR) Part 808, Required Sources of Supplies and Services,
and VAAR Subpart 808.002, Priorities for Use of Government Supply
Sources.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
However, the current MSPV process is confusing and cumbersome. Most
orders are placed through the Integrated Funds Distribution Control
Point Activity, Accounting and Procurement (IFCAP) system, a decades-
old IT system with a text-based interface, which does not include a
tool to look up items that are available on the national contracts. For
instance, ordering officers must know the exact item number-which is
different for each vendor-to enter into IFCAP. The existing tools to
look up available national contracts are also cumbersome. Along with
discounted items on national contracts, the MSPV system also allows
ordering officers to buy thousands of items directly from VA's Federal
Supply Schedule contracts, which lack the degree of discounted pricing
of the national contracts. Because of the challenges posed by the
system, ordering officers in some cases purchase items directly from
the Federal Supply Schedules, and might miss opportunities to obtain
discounts on the national contracts.
Administration of the MSPV program is being transferred from NAC to
SAC, and, along with this transfer, VHA and SAC are making changes to
the MSPV program in an effort to address the issues discussed above and
streamline the process. To support the next generation MSPV, SAC has
already awarded new prime vendor contracts and is in the process of
awarding the supporting national contracts for individual types of
supplies.
VHA and SAC also plan to implement a new online ordering interface,
developed by a contractor for VHA, which will provide ordering officers
a more intuitive interface for the outdated and difficult-to-use IFCAP
system. Further, unlike the current system, this new interface will
only permit ordering officers to purchase items from a specific catalog
of items, not the wider range of Federal Supply Schedule items. VA
estimates that this catalog will eventually contain 8,000 to 10,000
items to meet the needs of its medical centers. However, there have
been some delays in VHA's development of supply requirements and SAC's
award of new supply contracts, with only about 1,800 items on national
contracts as of July 2016. VA does not anticipate that SAC will be able
to award contracts for the full catalog by the time the new MSPV
contracts become operational in December 2016. In the interim, SAC and
VHA officials stated that they will allow ordering of Federal Supply
Schedule items (approximately 4,500) that are not on national
contracts, to ease the transition.
Work remains to ensure that the transition to this new approach
will be successful. Updating the MSPV process affects how essential
supplies are ordered and delivered at 167 medical centers on a daily
basis, and facility logistics staff, including ordering officers, must
be able to implement the new approach. VHA has an outreach plan in
place, but chief logistics officers at medical centers we visited
expressed some concerns about the transition-for instance, one reported
that his office's analysis found 14 items deemed critical to the
function of the medical center were not on a preliminary list of
supplies available through the new MSPV, nor were acceptable
substitutes. If medical centers instead purchase items through their
local contracting offices because the new MSPV does not meet their
needs, it will undermine the program's potential to increase efficiency
and cost savings.
In our September 2016 report, we recommended that VA take steps to
facilitate the transition to the new MSPV process, including ensuring
that SAC collects data to monitor the use of national contracts in the
new system, that SAC and VHA establish achievable time frames for
eliminating Federal Supply Schedule items from the MSPV catalog once
national contracts are in place, and that the new ordering interface
clearly distinguish between items on national contracts and the 4,500
items on the Federal Supply Schedules. The Acting Chief Acquisition
Officer, OALC said that the department agreed with this recommendation.
VA's substantial buying power presents many opportunities for
procurement cost savings, but the department has not consistently taken
advantage of them. A key aspect of strategic sourcing is consolidating
similar requirements to manage them collectively, reaping cost savings
and efficiency gains. \7\ VA has done this successfully in some areas,
such as pharmaceuticals, and the planned changes to the MSPV program
could result in greater use of discounted national contracts for
medical supplies if they are successfully implemented.
---------------------------------------------------------------------------
\7\ GAO, Strategic Sourcing: Improved and Expanded Use Could Save
Billions in Annual Procurement Costs, GAO 12 919 (Washington, D.C.;
Sept. 20, 2012).
---------------------------------------------------------------------------
There are opportunities to better apply strategic sourcing
principles at the regional level, as well. Within VHA, each of the 19
VISNs is responsible for a regional network of multiple medical centers
and clinics. Individual medical centers within each VISN procure many
goods and services separately, despite the fact that their requirements
are similar. Consolidating these requirements-such as security
services, elevator maintenance, and eyeglasses for patients-can realize
both cost savings and greater efficiency in awarding and administering
contracts.
We found efforts underway to consolidate requirements at the
regional level, but local autonomy and limited planning capacity pose
obstacles. For instance, one VISN we visited recently began an
initiative to consolidate requirements for purchases made by all of its
medical centers, especially services. VISN managers explained that they
began with the easiest requirements, such as landscaping services and
parking administration. They issued a draft memorandum with plans to
broaden this approach to most purchases, but medical center staff
provided feedback that they preferred their own local contracts and did
not want VISN-wide contracts to become the default approach. In our
review of 37 selected contracts, we did find several instances of VISN
and contracting officials consolidating requirements for greater
efficiency and to obtain better pricing. This indicates that
consolidating procurement is possible with leadership buy-in, and that
there are opportunities to share lessons learned across VISNs. Within
VHA, in VISNs where there is not a consistent push by local leadership
to pursue consolidation, it is challenging for efforts driven by
individual departments or contracting personnel to overcome cultural
obstacles.
To provide the necessary leadership commitment to take advantage of
these opportunities, we recommended in our September 2016 report that
VHA Procurement and Logistics conduct a review of VISN-level strategic
sourcing efforts, identify best practices, and, if needed, issue
guidance. The Acting Chief Acquisition Officer, OALC said that the
department agreed with this recommendation.
Chairman Coffman, Ranking Member Kuster, and Members of the
Subcommittee, this concludes my prepared statement. I would be pleased
to respond to any questions that you may have at this time.
GAO Contacts and Staff Acknowledgements
If you or your staff have any questions about this statement,
please contact Michele Mackin at (202) 512-4841 or [email protected]. In
addition, contact points for our Offices of Congressional Relations and
Public Affairs may be found on the last page of this statement.
Individuals who made key contributions to the report on which this
testimony is based are Lisa Gardner, Assistant Director; Emily Bond;
George Bustamante; Margaret Hettinger; Julia Kennon; Katherine Lenane;
Ethan Levy; Teague Lyons; Jean McSween; Sylvia Schatz; Erin Stockdale;
and Roxanna Sun.
This is a work of the U.S. government and is not subject to
copyright protection in the United States. The published product may be
reproduced and distributed in its entirety without further permission
from GAO. However, because this work may contain copyrighted images or
other material, permission from the copyright holder may be necessary
if you wish to reproduce this material separately.
GAO's Mission
The Government Accountability Office, the audit, evaluation, and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the Federal government for the American people.
GAO examines the use of public funds; evaluates Federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's website (http://www.gao.gov). Each weekday
afternoon, GAO posts on its website newly released reports, testimony,
and correspondence. To have GAO e mail you a list of newly posted
products, go to http://www.gao.gov and select ``E-mail Updates.''
Order by Phone
The price of each GAO publication reflects GAO's actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black
and white. Pricing and ordering information is posted on GAO's website,
http://www.gao.gov/ordering.htm.
Place orders by calling (202) 512-6000, toll free (866) 801-7077,
or TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
Connect with GAO
Connect with GAO on Facebook, Flickr, Twitter, and YouTube.
Subscribe to our RSS Feeds or E-mail Updates. Listen to our
Podcasts.
Visit GAO on the web at www.gao.gov.
To Report Fraud, Waste, and Abuse in Federal Programs
Contact: Website: http://www.gao.gov/fraudnet/fraudnet.htm
E-mail: [email protected]
Automated answering system: (800) 424-5454 or (202) 512-7470
Congressional Relations
Katherine Siggerud, Managing Director, [email protected], (202)
512-4400, U.S. Government Accountability Office, 441 G Street NW, Room
7125, Washington, DC 20548
Public Affairs
Chuck Young, Managing Director, [email protected], (202) 512-4800
U.S. Government Accountability Office, 441 G Street NW, Room 7149,
Washington, DC 20548
Strategic Planning and External Liaison
James-Christian Blockwood, Managing Director, [email protected], (202)
512-4707
U.S. Government Accountability Office, 441 G Street NW, Room 7814,
Washington, DC 20548
Materials for the Record
Letter From Chairman Mike Coffman to: The Honorable Robert A. McDonald
October 14, 2016
The Honorable Robert A. McDonald
Secretary
U.S. Department of Veterans Affairs
810 Vermont Avenue, N W
Washington, DC 20420
Dear Secretary McDonald,
Please provide written responses to the attached questions for the
record regarding the oversight hearing of the Committee on Veterans'
Affairs Subcommittee on Oversight and Investigations entitled, ``VA
Procurement: Identifying Obstacles to Reform,'' that took place on
Tuesday, September 20, 2016.
In responding to these questions for the record, please answer each
question in order using single-spaced formatting. Please also restate
each question in its entirety before each answer. Your submission is
expected by the close of business on Thursday, November 10, 2016, and
should be sent to Ms. Bernadine Dotson at
[email protected].
If you have any questions, please do not hesitate to have your
staff contact Jon Hodnette, Majority Staff Director, Subcommittee on
Oversight and Investigations, at 202-225-3569.
Sincerely,
MIKE COFFMAN
Chairman
Subcommittee on Oversight and Investigations
MC/wm
Attachment
Cc:Ann McLane Kuster, Ranking Member
Questions for the Record
House Committee on Veterans' Affairs
Subcommittee on Oversight and Investigations
"VA Procurement: Identifying Obstacles to Reform"
1. Please provide a complete response to Chairman Coffman and
Subcommittee on Economic Opportunity Chairman Wenstrup's letter of
August 26, 2016 regarding the Next Generation Medical/Surgical Prime
Vendor (NG-MSPV) program. A copy is attached for reference.
2. The NG-MSPV contracts, which were awarded in February, require
the contractors to provide an electronic product database, consisting
of individual product records in standard format data elements, within
90 days after award. The electronic product database is a precursor to
the product catalog, which the contract requires within 120 days after
award. Please provide the electronic product database.
3. Please provide the NG-MSPV product catalog to the Committee as
it currently exists.
4. Will there be only one product catalog which is used in all NG-
MSPV regions? Or will product catalogs vary from region to region?
5. Will the final NG-MSPV product catalog be posted online, as the
existing MSPV catalog is now?
a. If so, will it be updated dynamically as items are removed and
added, or will it be updated periodically?
b. If it will be updated periodically, at what intervals?
6. The NG-MSPV prime vendor contracts, which were awarded in
February, stipulate that they shall be implemented within 120 days
after award. The contracts define implementation as the contractors
"begin[ning] accepting orders and delivering medical/surgical supplies
for all facilities." In addition, the contracts' requirements for
implementation are to (1) "provide an electronic catalog-like
capability to aid Government personnel in finding non-recurring demand
or unique medical/surgical supplies;" (2) provide Electronic Data
Interchange (EDI) interface capabilities in accordance with ANSI ASC
X.12M Supply Chain Standard Transaction sets; and (3) provide an
electronic supply chain management interface system, accessible through
the Internet for each VHA facility.
Mr. Giddens testified that NG-MSPV ".goes live this December."
a. When will the NG-MSPV contractors begin accepting orders and
delivering medical/surgical supplies for all VHA facilities? Please
also notify the Committee when this begins.
b. When will the NG-MSPV contractors provide the electronic
catalog-like capability? Please also notify the Committee when this
happens.
c. When will the NG-MSPV contractors provide EDI interface
capabilities? Please also notify the Committee when this happens.
d. When will the NG-MSPV contractors provide the electronic supply
chain management interface system? Please also notify the Committee
when this happens.
7. The NG-MSPV prime vendor contracts, awarded in February,
stipulate that, "The MSPV(s) shall be responsible for all contract
costs associated with the implementation of the contract." Recognizing
that implementation is still ongoing, which implementation costs are
the contractors absorbing and which implementation costs are VA paying?
8. VA issued solicitation VA119-16-Q-0644 for sheath introducers,
under NG-MSPV. It contemplates the issuance of a single-award Blanket
Purchase Agreement. The solicitation requires four categories of sheath
introducers, each consisting of multiple individual items. The
solicitation attaches a list of the required items, which are described
on a "brand name or equal" basis. Multiple brand names are referenced.
The solicitation employs a "cascading" set-aside methodology.
a. Based on its market research, has VA determined that it is
possible for one contractor to provide all four categories of sheaths?
Please provide the market research and acquisition plan.
b. Did the contracting officer execute a "brand name or equal"
determination for this solicitation?
c. Please provide a copy of the non-manufacturer rule waiver,
pertaining to NAICS 339112, referenced in the solicitation.
d. Under the "cascading" set-aside methodology, if an award cannot
be made under the highest priority, Service Disabled Veteran Owned
Small Business set-aside and VA proceeds to the next highest priority
set-aside, will VA reissue the solicitation or amend the solicitation
to change its set-aside and extend the offeror due date?
9. VA issued solicitation VA119-16-Q-0027 for endoscopic snares,
under NG-MSPV. It contemplates the issuance of a single-award or
multiple-award Blanket Purchase Agreement(s). The solicitation requires
four categories of endoscopic snares, each consisting of one item.
a. Formerly, how many individual varieties of endoscopic snares
were ordered under the previous Medical/Surgical Prime Vendor program?
b. Please provide the analysis through which VA determined to
reduce to four the number of varieties of endoscopic snares that may be
ordered.
c. Does a non-manufacturer rule waiver exist for endoscopic snares?
If a waiver does not exist, has VA ever requested one? If a waiver does
exist, please provide it.
10. Please provide a list of all national contracts awarded by OALC
and VHA, including their names, contract numbers, names of contractors,
and periods of performance. This includes national contracts related to
MSPV and NG-MSPV, as well as other national contracts.
11. Mr. Giddens' stated in his written testimony that, "Already in
fiscal (FY) 2016, VHA supply-chain transformation efforts have yielded
in excess of $75 million in cost avoidance." Please explain how this
figure was calculated and provide a numerical accounting.
12. How much (in total dollars among all purchase orders and other
contracts) does VA currently owe to vendors for surgical implants that
have already been implanted in Veterans? Please provide VA's intended
timeframe to process the purchase orders and pay the invoices. Please
also notify the Committee when all such vendors have been paid.
13. During the hearing, Mr. Lemmon and Mr. Giddens indicated a new
contract vehicle or contracting process is being put into place, which
will address the issue of delayed payments to surgical implant vendors.
Does this refer to NG-MSPV or another contract vehicle/process? Please
explain how the new contract vehicle/process will improve this
situation. Please indicate when the contract vehicle/process will be in
place.
14. Please provide a list of all NG-MSPV Integrated Product Teams
(IPTs), including their areas of responsibility and members' names,
titles, and locations. If IPTs have members designated as industry
liaisons or otherwise tasked to communicate with industry, please
indicate them.
15. Will all contracts comprising items on the NG-MSPV product
catalog (meaning national contracts or any other categories of
contracts) be single-award? If there will be a mix of single-award and
multiple-award contracts, how is it decided when each will be used? How
is clinician input considered to determine whether VA will rely on one
vendor or multiple vendors for a given category of products?
16. Is it correct that the Strategic Acquisition Center charges a
3% user fee on its contract vehicles? Why is this fee much higher than
the National Acquisition Center's Industrial Funding Fee?
17. The Strategic Acquisition Center has issued multiple draft
versions of its prosthetics catalog and is requiring contractors to
submit proposals (not capabilities statements, but proposals) in
response to the draft versions. Please explain why VA is asking for
proposals during market research.
18. On September 30, 2016, VA provided the below response
[excerpted] to an inquiry about national contracts for orthopedic
implants. Please determine whether Impact Medical/BZ Medical's offered
products are comparable, if the pricing is a result of an overstock, if
the products are gray market products, if the market has changed since
the national contracts were originally awarded, and whether the
national contract pricing should be renegotiated. Please advise the
Committee whether VA determines the products to be comparable and
whether VA renegotiates the national contract pricing.
When VHA learns of vendors offering pricing that is more favorable
than national contract pricing, we must first determine if the products
offered are in-fact comparable. Next it is important to determine is
[sic] the lower pricing is due to overstock situations, gray market
products, or has the market legitimately changed since the award of the
contract. If the market has changed VHA will engage the National
Contracting Office responsible for the contract and ask that the
contract price be renegotiated. Depending on the outcome of the
negotiation the entire requirement could be re-competed. This activity
is managed by the VHA Vendor Relations Office and the VHA Program
Executive Office.
Letter From Chairman Mike Coffman to: The Honorable Sloan Gibson
August 26, 2016
The Honorable Sloan Gibson Deputy
Secretary
U.S. Department of Veterans Affairs
810 Vermont Avenue, N W
Washington, DC 20420
Dear Deputy Secretary Gibson,
We are concerned that implementation of the Next Generation
Medical/Surgical Prime Vendor (NG-MSPV) program, as it is currently
conceived, will result in drastic reductions in medical and surgical
product availability within the Veterans Health Administration (VHA).
Overly restricting the range of available products could damage the
quality of veterans' care as well as lead clinicians to circumvent NG-
MSPV, undermining the success of the program.
The process of designing the NG-MSPV product catalog seems to be
entirely led by the procurement and standardization offices, not the
clinicians who actually use the medical and surgical supplies. We have
been informed, variously, that VA intends to reduce the catalog from
between 476,000 and 506,000 line items to between 8,000 and 14,000 line
items. The catalog will go from being unwieldly large to inadequately
small. Furthermore, VA has given itself an unrealistically short
timeframe to implement these changes. When the Strategic Acquisition
Center (SAC) awarded the NG-MSPV distribution contracts in late
February, VA set a 120-day implementation period in which to re-compete
and award the underlying supplier contracts before NG-MSPV becomes
mandatory for ordering all medical and surgical items. This
implementation period has elapsed, and VA does not appear close to
finishing the supplier contracts. According to available data, SAC is
able to award up to a few dozen supplier contracts \1\ per month. At
this pace it will take several years to re-compete and award supplier
contracts for 14,000 product line items. For this reason, it is our
understanding that VA has decided to delay the NG-MSPV implementation
deadline until the end of the year and has imminent plans to issue
sole-source contracts for as many as 5,000 product line items. Sole
sourcing such a large number of contracts is alarming because it locks
in higher pricing and indicates VA has run out of time.
---------------------------------------------------------------------------
\1\ Typically these are Blanket Purchase Agreements (BPAs) created
by the SAC against Federal Supply Schedules (FSS), which are created
and administered by the National Acquisition Center (NAC).
We support VA's ongoing standardization efforts where they are
appropriate. The supply chain must be manageable and rational. However,
the available information about NG-MSPV's implementation seems to
indicate that VA created an unrealistic goal motivated by logistical,
not medical, considerations and now risks neither saving money nor
ensuring clinicians have adequate access to the medical and surgical
---------------------------------------------------------------------------
products they need.
The key question is how VA determined the appropriate size of the
NG-MSPV product catalog, and how meaningfully clinicians were involved
in making this decision. NG-MSPV program officials have explained
several times that development of the catalog is an ongoing process and
items will be continually added and removed as needed. Nonetheless, it
is crucial that the product catalog meets the needs of providers on the
day NG-MSPV becomes mandatory. For NG-MSPV to be successful, clinician
buy-in is imperative. The NG-MSPV program office, SAC, and VHA must
support a clinically-led process to develop the requirements and make
the standardization decisions.
Please provide answers to the following questions:
1) How were clinical end-users and experts involved in designing
the NG-MSPV program strategy and product catalog? Please identify these
personnel by name and title.
2) How many product lines does VA intend to include in the NG-MSPV
catalog? Please provide the list of product lines intended for the
catalog.
3) How many individual contracts, roughly, will these product lines
comprise?
4) How did VA decide which product lines in the old MSPV catalog
are unnecessary and should be removed?
5) Please detail the process by which NG-MSPV program personnel and
the SAC consulted VISNs and VAMCs while designing the NG-MSPV program
strategy and catalog.
6) When will NG-MSPV become mandatory for use?
7) Which product lines will the sole-source supplier contracts
include? Please provide complete copies, including attachments, of all
sole-source supplier contracts as they are awarded.
8) How did VA determine this reduction in the range of available
medical and surgical items will not degrade the standard of care for
veterans?
9) VHA has gone to great lengths to hire and retain medical
professionals. What steps has VHA taken to ensure that frustration with
perceived limited choice of products under NG-MSPV does not deter
clinicians from practicing in VHA?
10) In designing the NG-MSPV product catalog, how did VA consider
the variations of VAMCs' needs across different geographic regions,
patient mixes, and academic affiliations?
11) Has VA determined whether the removal of familiar items or the
addition of unfamiliar items will necessitate retraining medical or
surgical staff? If so, what is VA's plan to provide the training?
12) Please detail the process by which physician and surgeon input
into the product catalog was collected. Please provide copies of any
surveys, desired product lists, or reports that were generated.
13) Please detail the process by which, after NG-MSPV becomes
mandatory for use, physicians and surgeons will be consulted as to
which items should be added to the catalog. Who will make the final
decision about adding items?
14) Please detail, step-by-step, the procedure for approving and
adding items to the catalog after NG-MSPV becomes mandatory for use.
How long will an addition take?
15) Will any other avenues be allowed, besides NG-MSPV, to procure
categories of medical and surgical items included in NG-MSPV? For
instance, if an uncommon surgical instrument is suddenly needed that is
not specifically included in the product catalog but whose category is
included. Please detail these avenues and their procurement procedures.
16) Will anyone in VA be allowed to procure any of the over 450,000
items that are being removed from the product catalog, or will these
items cease to be available? If these items will remain available in
some way, please detail the procurement procedures.
17) How have VAMCs been instructed to respond to clinicians who
express objections or reservations about the reduced NG-MSPV product
catalog? How will these objections or reservations be cataloged?
18) In July 2015, VA requested and obtained from the Small Business
Administration (SBA) a Non-manufacturer Rule waiver for MSPV. At the
time, VA conducted incomplete market research and identified 16 items
in the product catalog available from small business manufacturers. SBA
instructed VA to submit revised market research by May 31, 2016, at
which time SBA would reissue a modified waiver. Please provide VA's
revised market research that was submitted to SBA, and the modified
Non-manufacturer Rule waiver that SBA issued.
Please provide this information in electronic, soft-copy format by
the close of business Friday, September 16, 2016. Do not alter the
documents in any way, including but not limited to application of
redactions or a water mark or by disabling printing. The Committee will
continue to consider these deliverables to remain open until it is
satisfied by the responses provided. If you have any questions, please
do not hesitate to have your staff contact Dr. Eric Hannel, Majority
Staff Director of the Subcommittee on Oversight & Investigations, at
(202) 225-3569.
Thank you for your time and attention. We know that we share the
same desire to ensure that our veterans' health care providers have
access to the proper implements and equipment. We look forward to
continuing to work on this issue together.
Sincerely,
MIKE COFFMAN
Chairman
Subcommittee on Oversight and Investigations
BRAD WENSTRUP, D.P.M.
Chairman
Subcommittee on Economic Opportunity
Cc: Mark Takano, Acting Ranking Member
MC/wm
Questions for the Record
House Committee on Veterans' Affairs
Subcommittee on Oversight and Investigations
``VA Procurement: Identifying Obstacles to Reform''
1. Please provide a complete response to Chairman Coffman and
Subcommittee on Economic Opportunity Chairman Wenstrup's letter of
August 26, 2016 regarding the Next Generation Medical/Surgical Prime
Vendor (NG-MSPV) program. A copy is attached for reference.
VA Response: Enclsoure 1 is VA's responsed jointly signed letter,
signed December 16, 2016.
2. The NG-MSPV contracts, which were awarded in February, require
the contractors to provide an electronic product database, consisting
of individual product records in standard format data elements, within
90 days after award. The electronic product database is a precursor to
the product catalog, which the contract requires within 120 days after
award. Please provide the electronic product database.
VA Response: The required electronic product database is required
within the 120 day implementation period. VA issued the notice to
proceed starting the implementation period on July 29, 2016; therefore
the prime vendors are currently in the process of creating their
databases. Veterans Health Adminstration (VHA) is currently in the
process of compiling the electronic product database .
3. Please provide the NG-MSPV product catalog to the Committee as
it currently exists.
VA Response: The most current product catalog is available at:
http://www.va.gov/officeofacquisitionoperations/sac/mspvng.asp.
4. Will there be only one product catalog which is used in all NG-
MSPV regions? Or will product catalogs vary from region to region?
VA Response: VA is developing and will maintain one product catalog
to be used across VHA. The product catalog will include items that are
available to all facilities, with few exceptions if there are
facilities, VISN, or region specific contracts in place for items that
do not conflict with the catalog, requests to add those contracted
items may be submitted directly to the MSPV-NG Program Management
Office in VHA.
5. Will the final NG-MSPV product catalog be posted online, as the
existing MSPV catalog is now?
a. If so, will it be updated dynamically as items are removed and
added, or will it be updated periodically?
b. If it will be updated periodically, at what intervals?
VA Response: The MSPV-NG product catalog is a dynamic document and
will be continuously updated and maintained through the duration of the
MSPV-NG program. Updates to the product catalog are scheduled to be
posted on the 1st and 15th of each month at: http://www.va.gov/
officeofacquisitionoperations/sac/mspvng.asp.
6. The NG-MSPV prime vendor contracts, which were awarded in
February, stipulate that they shall be implemented within 120 days
after award. The contracts define implementation as the contractors
``begin[ning] accepting orders and delivering medical/surgical supplies
for all facilities.'' In addition, the contracts' requirements for
implementation are to: (1) ``provide an electronic catalog-like
capability to aid Government personnel in finding non-recurring demand
or unique medical/surgical supplies;'' (2) provide Electronic Data
Interchange (EDI) interface capabilities in accordance with ANSI ASC
X.12M Supply Chain Standard Transaction sets; and (3) provide an
electronic supply chain management interface system, accessible through
the Internet for each VHA facility.
Mr. Giddens testified that NG-MSPV ``.goes live this December.''
a. When will the NG-MSPV contractors begin accepting orders and
delivering medical/surgical supplies for all VHA facilities? Please
also notify the Committee when this begins.
b. When will the NG-MSPV contractors provide the electronic
catalog-like capability? Please also notify the Committee when this
happens.
c. When will the NG-MSPV contractors provide EDI interface
capabilities? Please also notify the Committee when this happens. When
will the NG-MSPV contractors provide the electronic supply chain
d. management interface system? Please also notify the Committee
when this happens.
VA Response: The contractors will provide their electronic catalog
submissions, EDI interface capabilities, and electronic supply chain
management interface systems no later than November 28, 2016.
Contractors began accepting orders on December 1, 2016, with deliveries
starting the following day.
7. The NG-MSPV prime vendor contracts, awarded in February,
stipulate that, ``The MSPV(s) shall be responsible for all contract
costs associated with the implementation of the contract.'' Recognizing
that implementation is still ongoing, which implementation costs are
the contractors absorbing and which implementation costs are VA paying?
VA Response: As stipulated in the contract, contractors are
responsible for the following activities and associated costs:
``34.1.1. Assist facilities with the identification of facility
recurring and nonrecurring medical/surgical supplies and gather product
usage data from each individual facility covered by the contract.
34.1.2. Negotiate distribution agreements, as necessary, with
Federal Government product contractors for 100% of the medical/surgical
supplies identified in the Government provided master listing of
approved medical/surgical supplies and their associated pricing for
inclusion in the electronic catalog, by the contract effective date.
The MSPV shall provide immediate notification to the Contracting
Officer concerning problems with the execution of distribution
agreements.
34.1.3. Load all facility medical/surgical supplies into the MSPV
data base using Federal Government contract pricing as provided at
www.va.gov/vastorenac, located under the topic?Med/Surg MSPV Program
and Standardization. Maintain accuracy by utilizing this source in
resolving pricing discrepancies. Update the MSPV data base when change
notices are received from the VA by the effective contract date.
34.1.4. Ensure full capability to deliver 100% of the medical/
surgical supplies required by the contract customers timely at the
appropriate inventory levels within the phase-in period.
34.1.5. Set-up facilities with any value added services requested
by facilities (reference Section 5.5).
34.1.6. Mutually establish delivery days, times and delivery
points.
34.1.7. Coordinate and provide necessary training to using
facilities..''
VA has taken on the cost for creating the product catalog
(formulary), creation of an ordering officer tracking tool, creation of
other tracking tools to monitor compliance and usage of the contract.
8. VA issued solicitation VA119-16-Q-0644 for sheath introducers,
under NG-MSPV. It contemplates the issuance of a single-award Blanket
Purchase Agreement (BPA). The solicitationrequires four categories of
sheath introducers, each consisting of multiple individual items. The
solicitation attaches a list of the required items, which are described
on a ``brand name or equal'' basis. Multiple brand names are
referenced. The solicitation employs a ``cascading'' set-aside
methodology.
a. Based on its market research, has VA determined that it is
possible for one contractor to provide all four categories of sheaths?
Please provide the market research and acquisition plan.
VA Response: VA intends to issue a single BPA to one contractor
that will serve as the single source of supply to provide all four
types of sheath introducers enterprise-wide. The intention is that no
more than one contractor will be selected to provide products for a
particular type of forceps, considering standardization is a top
priority of this acquisition. Successful award of this acquisition will
allow VHA to maintain uniformity amongst the four types of sheath
introducers being utilized by its field activities. Our market research
and acquisition plan are included as enclosures 2 and 3, respectively.
b. Did the contracting officer execute a ``brand name or equal''
determination for this solicitation?
VA Response: VA did not execute a brand name of equal
determination, because it is not required under Federal Acquisition
Regulation (FAR) 6.302-2.
c. Please provide a copy of the non-manufacturer rule waiver,
pertaining to NAICS 339112, referenced in the solicitation.
VA Response: Enclosure 4 provides the responsive document.
d. Under the ``cascading'' set-aside methodology, if an award
cannot be made under the highest priority, Service Disabled Veteran
Owned Small Business set-aside and VA proceeds to the next highest
priority set-aside, will VA reissue the solicitation or amend the
solicitation to change its set-aside and extend the offeror due date?
VA Response: As indicated in the solicitation, the procurement
opportunity is a single event welcoming all interested offerors,
precluding VA from having to reissue or amend the solicitation as a
set-aside:
``1. Any award(s) resulting from the items listed on Tab 1 of this
solicitation will be made using the following the tiered set-aside
order of precedence:
a. Any award under this solicitation will be made on a competitive
basis first to an eligible Service Disabled Veteran Owned Small
Business [SDVOSB] in accordance with VAAR 819.7005, provided that there
is adequate competition among such firms.
b. If there is inadequate competition for award to a SDVOSB
concern, award will be made competitively to a Veteran Owned Small
Business (VOSB) concern in accordance with VAAR 819.7006, provided that
there is adequate competition among such firms.
c. If there is inadequate competition for award to a SDVOSB or VOSB
concern, award will be made competitively to a Small Business (SB)
concern in accordance with FAR Subpart 19.5.
d. If there is inadequate competition for award to any of the small
business concerns provided in paragraphs (a) through (c), award will be
made on the basis of full and open competition considering all offers
submitted by responsible business concerns.
2. Adequate competition shall be deemed to exist if-
a. At least one acceptable offer is received from a SDVOSB concern;
or
b. At least two competitive offers are received from qualified,
responsible business concerns at the tier under consideration; and
c. Award will be made at fair market prices as determined in
accordance with FAR 13.106-3(a).''
9. VA issued solicitation VA119-16-Q-0027 for endoscopic snares,
under NG-MSPV. It contemplates the issuance of a single-award or
multiple-award Blanket Purchase Agreement(s). The solicitation requires
four categories of endoscopic snares, each consisting of one item.
a. Formerly, how many individual varieties of endoscopic snares
were ordered under the previous Medical/Surgical Prime Vendor program?
VA Response: The previous Medical/Surgical Prime Vendor included
all varieties of endoscopic snares including specialized items that had
a low volume.
b. Please provide the analysis through which VA determined to
reduce to four the number of varieties of endoscopic snares that may be
ordered.
VA Response:
Based upon our historical procurement spend and market
research (enclosure 4), VA, with clinical expertise from the Integrated
Product Team (IPT), determined that the national BPA would focus on the
80% endoscopic snares solution for this national BPA. Consequently, low
volume specialized snares were excluded.
After SMEs analyzed the historical spend endoscopic
snares; it was determined there were four logical groupings; micro,
mini, medium (standard), and jumbo. After additional analysis of
historical spend the SMEs combined the Micro/mini into one contract
line-item number within the solicitation.
A formal technical evaluation was conducted by the
clinician SMEs which included physical testing, inspection, and
literature review.
An award was made as a national BPA with a procurement
value estimated at $1.35 million over 5 years (base and 4 option years)
for micro/mini, medium, and jumbo endoscopic snares.
c. Does a non-manufacturer rule waiver exist for endoscopic snares?
If a waiver does not exist, has VA ever requested one? If a waiver does
exist, please provide it.
VA awarded a national BPA with a procurement value estimated at
$1.35 million over 5 years (base and 4 option years) for micro, mini,
medium, and jumbo endoscopic snares. Market research (Enclosure 5)
along with the technical evaluation process, which included physical
testing, inspection, and literature review supported the solicitation
for four contract line-item numbers. As the solicitation sought only
``manufacturers'' for endoscopic snares, a non-manufacturer rule waiver
is not applicable.
10. Please provide a list of all national contracts awarded by OALC
(Office of Acquisition, Logistics, and Construction) and VHA, including
their names, contract numbers, names of contractors, and periods of
performance. This includes national contracts related to MSPV and NG-
MSPV, as well as other national contracts.
VA Response: Enclosure 6 lists OALC and VHA national contracts.
11. Mr. Giddens' stated in his written testimony that, ``Already in
fiscal (FY) 2016, VHA supply chain transformation efforts have yielded
in excess of $75 million in cost avoidance.'' Please explain how this
figure was calculated and provide a numerical accounting.
VA Response: By September 20, 2016, VA recorded $91.8 million in
cost avoidance across the following categories. By the end of September
2016, VHA supply chain transformation efforts recorded $101 million in
cost avoidance/savings.
``Inventory Management'' (Reduce/Reutilize) realized
$14.9 million in cost avoidance and savings combined. Facilities are
better managing stocks on hand to ensure that stockage levels are
right-sized and that consumables no longer required in one location are
reutilized within the VHA supply chain.
``Redistribution of Equipment'' realized $9 million in
cost avoidance. Facilities report excess equipment that is available to
other facilities in need, preventing the purchase of new equipment for
those receiving the reported excess.
``Medical Product Databank'' (MedPDB) realized $5.9
million in savings. Facilities utilize this tool to find better pricing
opportunities through contracts that are in place and available for the
same item they may be purchasing locally at a higher price.
``National Contracts'' realized $44.8 million in savings.
Through strategic sourcing efforts, products that are purchased by
multiple facilities are competed for better pricing and placed on
national contracts available to all facilities.
``Regional Contracts'' realized $8.9 million in savings.
Where appropriate, regional contacts have been and continue to be
awarded for better pricing when combining the demands of all facilities
within the specific region.
``De-Obligation of Equipment Funds'' realized $8.2
million in cost avoidance. Prior to purchase, funds that were
previously obligated for equipment that is no longer required is
returned for redistribution for other purchases as the orders for
unneeded equipment are cancelled.
12. How much (in total dollars among all purchase orders and other
contracts) does VA currently owe to vendors for surgical implants that
have already been implanted in Veterans? Please provide VA's intended
timeframe to process the purchase orders and pay the invoices. Please
also notify the Committee when all such vendors have been paid.
VA Response: VHA will routinely have a balance owed to implant
vendors because the ordering and payment processes are continuous. As
of October, the open obligations were approximately $30.8 million. As
discussed at the hearing, calculating a total dollar amount for vendor
payments owed is a constantly moving target as the ``open obligations''
include orders awaiting cancellation, not yet delivered orders,
delivered orders pending payment, and paid orders.
The intended payment date is within 30 days of receipt, which
complies with the Prompt Payment Act. Payments to implant vendors are
high priority until late payments are reconciled. VHA is focused on
making payments older than 60 days from delivery and continuous
improvement of our payment process by working with the vendor community
to identify overdue payments and reduce payment backlog. As we pursue
these holistic efforts to improve efficiencies, unburden our staff, and
reconcile vendor payments within 30 days, we anticipate more accurate
and verifiable calculations at each stage of the ordering process will
result.
13. During the hearing, Mr. Lemmon and Mr. Giddens indicated a new
contract vehicle or contracting process is being put into place, which
will address the issue of delayed payments to surgical implant vendors.
Does this refer to NG-MSPV or another contract vehicle/process? Please
explain how the new contract vehicle/process will improve this
situation. Please indicate when the contract vehicle/process will be in
place.
VA Response: There are three initiatives to increase efficiency in
our implant supply chain management. First is the award of contracts to
our top 20 implant vendors which is in effect as of November 2016. The
second initiative is to put implants into the NG-MSPV catalog during
fiscal year 2017 for stock-level ordering to support just-in-time
ordering. Finally, VHA is investigating the clinical and economic
feasibility of maintaining many more implants as stock items within
each hospital to accelerate delivery of care and reduce just-in-time
ordering within the next few years.
14. Please provide a list of all NG-MSPV Integrated Product Teams
(IPTs), including their areas of responsibility and members' names,
titles, and locations. If IPTs have members designated as industry
liaisons or otherwise tasked to communicate with industry, please
indicate them. (Jodi Cokl/Jaime Friedel)
VA Response: Enclosure 7 lists MSPV-NG IPT members by focus.
15. Will all contracts comprising items on the NG-MSPV product
catalog (meaning national contracts or any other categories of
contracts) be single-award? If there will be a mix of single-award and
multiple-award contracts, how is it decided when each will be used? How
is clinician input considered to determine whether VA will rely on one
vendor or multiple vendors for a given category of products?
VA Response: The MSPV-NG Formulary development employed Clinical
Product Review Committees (CPRC) and the IPTs to help to identify new
items while the MSPV-NG program management office regularly reviews
proposed items with IPTs. All clinicians on the Clinical Product Review
Committees (CPRCs) and the IPTs are practicing in the VISNs and VAMCs
across VHA. This broad spectrum engagement ensures that the program
will simultaneously meet clinicians' needs by improving product safety
and ensuring the right supplies are available without regard to the
product supplier. VA conducts extensive market research using the
identified minimum technical requirements, which is then validated for
inclusion into MSPV-NG. Also, national BPA and blanket operational
agreements (BOA) are examined for MSPV-NG inclusion, and solicitations
will include the MSPV-NG language to obtain vendor buy-in once awarded.
If clinicians and vendor agree to participate, then these commodity
items will also be added into the MSPV-NG Formulary. There will be a
mix of single and multiple-award contracts issued, with the majority
being single. The decision is ultimately guided by the work of the
CPRCs and IPTs, however, the Contracting Officer retains the authority
to determine which approach will be the most advantageous to the
Government.
16. Is it correct that the Strategic Acquisition Center charges a
3% user fee on its contract vehicles? Why is this fee much higher than
the National Acquisition Center's Industrial Funding Fee?
VA Response: The Strategic Acquisition Center rate for assisted
contracting services (open market procurements) was 3 percent for
fiscal year (FY) 2016. The industrial funding fee rate pertains to
schedule-based procurements (Federal Supply Schedule) and was 0.5
percent for both the National and Strategic Acquisition Centers
17. The Strategic Acquisition Center has issued multiple draft
versions of its prosthetics catalog and is requiring contractors to
submit proposals (not capabilities statements, but proposals) in
response to the draft versions. Please explain why VA is asking for
proposals during market research.
VA Response: The Strategic Acquisition Center rate for assisted
contracting services (open market procurements) was 3 percent for
fiscal year (FY) 2016. The industrial funding fee rate pertains to
schedule-based procurements (Federal Supply Schedule) and was 0.5
percent for both the National and Strategic Acquisition Centers.
Enclosure 8 provides the FY 2016 VA Supply Fund Fee Structure The
Strategic Acquisition Center has issued multiple draft versions of its
prosthetics catalog and is requiring contractors to submit proposals
(not capabilities statements, but proposals) in response to the draft
versions. VA actively engaged Industry in the design and development of
prosthetic implant and accessories catalogs. To ensure availability of
implants for nationwide usage, VA reviewed clinical procurement
histories and identified the specific items, by manufacturer, that were
the most requested by VA physicians, to meet patient-specific
requirements. Based on the clinical demand history and anticipated
demands over a 5-year period, VA pursued efforts to ensure the
availability of the vendor's product line with clinical demands for
product(s). In accordance with 38 U.S. Code Sec. 8123 - Procurement of
Prosthetic Appliances, VA may procure prosthetic appliances and
necessary services required in the fitting, supplying, and training and
use of prosthetic appliances by purchase, manufacture, contract, or in
such other manner as determined to be proper, without regard to any
other provision of law. Under this authority, VA issued draft requests
for proposal (RFP) for prosthetics implantable devices and required
that sole source offerors submit proposals. VA completed the market
research prior to the release of the draft RFPs. VA issued solicitation
amendments to the draft RFPs, when change was necessary. VA issued the
final RFP on September 13, 2016, which resulted in seven sole source
awards on September 30, 2016.
18. On September 30, 2016, VA provided the below response
[excerpted] to an inquiry about national contracts for orthopedic
implants. Please determine whether Impact Medical/BZ Medical's offered
products are comparable, if the pricing is a result of an overstock, if
the products are gray market products, if the market has changed since
the national contracts were originally awarded, and whether the
national contract pricing should be renegotiated. Please advise the
Committee whether VA determines the products to be comparable and
whether VA renegotiates the national contract pricing.
When VHA learns of vendors offering pricing that is more favorable
than national contract pricing, we must first determine if the products
offered are in-fact comparable. Next it is important to determine is
[sic] the lower pricing is due to overstock situations, gray market
products, or has the market legitimately changed since the award of the
contract. If the market has changed VHA will engage the National
Contracting Office responsible for the contract and ask that the
contract price be renegotiated. Depending on the outcome of the
negotiation the entire requirement could be re-competed. This activity
is managed by the VHA Vendor Relations Office and the VHA Program
Executive Office.
VA Response: A determination has not yet been made whether the
products are comparable. Our next course of action will be determined
after an assessment of Impact Medical/BZ Medical's products is made.
The VHA Vendor Relations Office will coordinate this effort with the
Healthcare Commodity Program Executive Office. It is anticipated that
the assessment will be completed by January 2017.
[all]