[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]











  LACK OF OVERSIGHT OF INTERAGENCY AGREEMENTS_VA PROCUREMENT FAILURES 
                               CONTINUED

=======================================================================

                                HEARING

                               before the

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 of the

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                         TUESDAY, JULY 21, 2015

                               __________

                           Serial No. 114-33

                               __________

       Printed for the use of the Committee on Veterans' Affairs

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                     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

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                            C O N T E N T S

                              ----------                              

                         Tuesday, July 21, 2015

                                                                   Page

Lack of Oversight of Interagency Agreements--VA Procurement 
  Failures Continued.............................................     1

                           OPENING STATEMENTS

Mike Coffman, Chairman...........................................     1
    Prepared Statement...........................................    25
Ann Kuster, Ranking Member.......................................     2

                               WITNESSES

Mr. C. Ford Heard III, Associate Deputy Assistant Secretary, 
  Procurement Policy, Systems and Oversight, U.S. Department of 
  Veterans Affairs...............................................     4
    Prepared Statement...........................................    26
        Accompanied by:
    Mr. David A. Orso, Executive Director, Enterprise Program 
        Management Office, Office of Policy and Planning, U.S., 
        Department of Veterans Affairs
        And
    Ms. Michele R. Foster, Associate Executive Director, 
        Technology Acquisition Center, Office of Acquisition 
        Operations, U.S. Department of Veterans
Ms. Michele Mackin, Director, Acquisition and Sourcing Management 
  Team, U.S. Government Accountability Office, Executive Summary.     5
    Prepared Statement...........................................    34

                   SUBMITTED MATERIALS FOR THE RECORD

Executive Summary................................................    50
Questions and Responses..........................................    51
 
 LACK OF OVERSIGHT OF INTERAGENCY AGREEMENTS--VA PROCUREMENT FAILURES 
                               CONTINUED

                         Tuesday, July 21, 2015

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
              Subcommittee on Oversight and Investigations,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 4:02 p.m., in 
Room 334, Cannon House Office Building, Hon. Mike Coffman 
[chairman of the subcommittee] presiding.
    Present: Representatives Coffman, Lamborn, Roe, Huelskamp, 
Walorski, Kuster, O'Rourke, and Walz.

           OPENING STATEMENT OF CHAIRMAN MIKE COFFMAN

    Mr. Coffman. Good afternoon. This hearing will come to 
order.
    I want to welcome everyone to today's hearing entitled 
``Lack of Oversight of Interagency Agreements--VA Procurement 
Failures Continued.'' This hearing will examine serious 
problems with VA's use of interagency agreements to procure 
certain services and will also focus on Federally Funded 
Research and Development Centers, which we will refer to as 
FFRDCs for ease of reference.
    Interagency agreements, in this case where other agencies 
may contract or perform services for VA, can be a proficient 
procurement method. However, these acquisitions may pose a 
variety of risks in part because of the need for stronger 
internal controls and clear definitions of agency roles and 
responsibilities. As we see today, and we have seen from VA for 
years, internal controls, management, and oversight are 
tremendous problems for VA.
    Additionally, VA has relationships with FFRDCs, privately 
owned but government-funded entities that have long-term 
relationships with Federal agencies intended to meet special 
long-term research or development needs that cannot be met as 
effectively by existing in-house or contractor resources. 
FFRDCs are granted special access beyond that which is common 
for normal contractual relationships to government and supplier 
data.
    Following an investigation of these issues begun last 
Congress, I asked GAO to look into VA's oversight and 
management of these relationships. Unfortunately, what GAO 
found is typical regarding data reliability within VA.
    For instance, VA cannot account for the extent to which it 
utilized interagency agreements for fiscal year 2012 through 
fiscal year 2014. For this period, VA had data showing that it 
obligated at least $1.7 billion for this period, when in fact 
GAO found that this amount was actually between $2.6 billion 
and $2.9 billion, amounting to a $600 million to $900 million 
inconsistency.
    Further, half of the interagency agreements GAO reviewed 
did not contain necessary documentation, which is another of 
the many instances where VA's poor oversight and management of 
its procurement processes leaves the Department open to rampant 
waste, potential fraud, and certain abuse.
    Similarly, VA obligated $260 million in this same fiscal 
year 2012 through fiscal year 2014 period to FFRDCs.
    One downfall with FFRDCs is that they are noncompetitive, 
as is evidenced by the fact that nearly all of VA's 
relationships with them are with those operated by one 
corporation.
    Additional, shortfalls GAO found with VA's data include a 
failure to centrally track some contract actions, limited 
documentation of pre-award reviews, and in some cases contract 
files that did not indicate why VA determined a contract price 
was acceptable.
    This hearing will highlight yet another set of contracting 
problems within VA, where hundreds of millions, if not billions 
of dollars are unaccounted for. In a time where VA has come 
back to Congress to ask for an additional $3 billion because it 
has run out of money it should have to serve veterans, I 
consider this another grave failure.
    I look forward to the discussions we will have here today 
on this important issue.
    With that, I now yield to Ranking Member Kuster for any 
opening remarks she may have.

    [The prepared statement of Chairman Mike Coffman appears in 
the Appendix]

         OPENING STATEMENT OF RANKING MEMBER ANN KUSTER

    Ms. Kuster. Thank you, Chairman Coffman, for holding this 
hearing.
    And thank you to our witnesses for joining us here today.
    We are here yet again to address VA's longstanding 
procurement problems. Today it is interagency agreements and 
Federally Funded Research and Development Centers, the FFRDCs 
that the chair has spoken about, and the VA's inability to 
oversee and properly manage these agreements and contracts.
    VA has known from at least 2009, when the first IG report 
came out, that these interagency agreements were not being 
properly documented in VA's contract management system. In 
2014, a second IG report found VA has the same problem, 
incomplete and inaccurate documentation.
    The first report should have been a wake-up call. The 
second report was certainly a distress signal. And GAO's most 
recent report shows that little has been done to address these 
issues, and in some cases unclear guidance has caused greater 
confusion and contributed to additional reporting inaccuracies. 
VA's procurement organization and business practices need 
serious reform now.
    Tomorrow our committee will address VHA's almost $3 billion 
budget shortfall. Like many of the other problems VA faces, and 
like most of the issues we address here in this committee, this 
is the direct result of VA's inability to accurately report and 
use data.
    If VA had accurate data, it wouldn't be here today 
explaining why it doesn't have clear processes in place to 
ensure it is accurately managing its interagency agreements. If 
VA had accurate data, we wouldn't be here having questioning 
why MITRE Corporation has been awarded contracts instead of 
commercial contractors. And if VA had accurate data, it would 
be able to plan and request a budget that would meet the needs 
of our veterans and we wouldn't be holding a hearing tomorrow 
on the budget shortfall.
    I'd like to know from our VA witnesses why it is so 
difficult for VA to accurately manage its contracts and 
agreements. VA has promised us a solution earlier this summer 
to manage procurement and ensure accurate data reporting, and 
I'd like to know when we will have this solution.
    Finally, I'd like to know why VA has not used the tools it 
has at its disposal to hold employees accountable for not 
accurately documenting these transactions or acting to address 
these numerous IG and GAO reports. I'm more convinced than ever 
that major reforms are needed across VA to accurately manage 
procurement. VA needs an agency-wide transformation to bring 
its business practices into the 21st century to meet the needs 
of our well-deserving veterans.
    Thank you, Mr. Chairman, and I yield back the balance of my 
time.
    Mr. Coffman. Thank you, Ranking Member Kuster.
    I ask that all members waive their opening remarks as per 
this committee's custom.
    With that, I invite the first and only panel to the witness 
table. On the panel for the Department of Veterans Affairs we 
have Mr. Ford Heard, Associate Deputy Assistant Secretary for 
Procurement Policy, Systems, and Oversight. He is accompanied 
by Mr. David Orso, Executive Director of the Enterprise Program 
Management Office in the Office of Policy and Planning, and Ms. 
Michele Foster, Associate Executive Director of the VA's 
Technology Acquisition Center.
    For the Government Accountability Office, we have Ms. 
Michele Mackin, Director of the Acquisition and Sourcing 
Management Team.
    I ask the witnesses to please stand and raise your right 
hand.
    [Witnesses sworn.]
    Mr. Coffman. Please be seated.
    Mr. Heard, you are now recognized for 5 minutes.

TESTIMONY OF MR. C. FORD HEARD III, ASSOCIATE DEPUTY ASSISTANT 
  SECRETARY, PROCUREMENT POLICY, SYSTEMS AND OVERSIGHT, U.S. 
  DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY MR. DAVID A. 
ORSO, EXECUTIVE DIRECTOR, ENTERPRISE PROGRAM MANAGEMENT OFFICE, 
  OFFICE OF POLICY AND PLANNING, U.S. DEPARTMENT OF VETERANS 
    AFFAIRS, AND MS. MICHELE R. FOSTER, ASSOCIATE EXECUTIVE 
DIRECTOR, TECHNOLOGY ACQUISITION CENTER, OFFICE OF ACQUISITION 
   OPERATIONS, U.S. DEPARTMENT OF VETERANS AFFAIRS; AND MS. 
 MICHELE MACKIN, DIRECTOR, ACQUISITION AND SOURCING MANAGEMENT 
          TEAM, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

                 TESTIMONY OF C. FORD HEARD III

    Mr. Heard. Good afternoon, Chairman Coffman, Ranking Member 
Kuster, and members of the subcommittee. I appreciate the 
opportunity to discuss the Department's use of interagency 
agreements and Federally Funded Research and Development 
Centers, FFRDCs. I'm joined today by Michele Foster, Associate 
Executive Director, Technology Acquisition Center, and David 
Orso, Executive Director, Office of Policy and Planning, 
Enterprise Program Management Office.
    The Department of Veterans Affairs relies on both internal 
and external contract vehicles to meet its mission of providing 
the very best goods and services for our Nation's veterans. As 
the recently published GAO report explains, the VA will utilize 
interagency agreements or Federally Funded Research and 
Development Center support when appropriate to meet these 
aforementioned needs.
    Interagency agreements for the purpose of the GAO review 
centered around assisted acquisitions. Assisted acquisitions 
are those where an agency requests the acquisition services of 
another to satisfy its schedule, performance, and delivery 
requirements in a manner that is cost effective.
    FFRDCs, the second focus of the GAO review, are independent 
nonprofit entities sponsored and funded primarily by the United 
States government to meet specific long-term technical needs 
that cannot appropriately be met by any for-profit commercial 
organization. FFRDCs are managed by a nonprofit parent 
organization in accordance with statute and regulation.
    The long-term strategic relationship between the government 
and an FFRDC is encouraged to enable the FFRDC to develop and 
maintain in-depth knowledge of its sponsored programs and 
operations. VA cosponsors an FFRDC with the Internal Revenue 
Service through MITRE Corporation, which has five core 
competencies: Strategic management, procurement support and 
evaluations, program and project management, technical 
management, and independent evaluation and audit.
    To ensure proper management and oversight of our use of the 
FFRDC, VA established an enterprise-wide executive-level 
governance structure. The FFRDC Governance Plan provides 
guidelines and procedures for ensuring compliance with the FAR 
and applies to all administrations and staff offices within the 
VA that seek to use the services of an FFRDC.
    As it relates to the GAO report recommendations, five 
distinct areas were highlighted for VA's consideration. 
Specifically, GAO recommended VA revise its policies to improve 
the recording of interagency transaction data and to ensure 
interagency training reaches the full range of program and 
contracting officials. We concur on both of these 
recommendations and are currently in the process of revising 
our current financial and procurement policy to more clearly 
address recording procedures, as well as developing a robust 
training program designed to mitigate gaps in compliance with 
interagency procurement policy.
    In addressing FFRDCs, GAO substantially validated the VA's 
administrative processes and overall utilization of MITRE 
Corporation. However, they did present three recommendations 
that they believe would provide consistency throughout VA. GAO 
recommended VA develop a strategy to ensure Department-wide 
adherence to the Governance Plan, improving support file 
documentation, and reassessing its approach towards travel 
costs. We concur on all three recommendations.
    As previously stated, VA concurs with the recommendation 
offered by GAO. We've already begun to execute corrective 
action and believe that they will sufficiently address the 
GAO's suggestions.
    Mr. Chairman and members of the committee, this concludes 
my oral statement. Thank you for the opportunity to testify 
before the committee. My colleagues and I would be happy to 
respond to any questions that you may have.

    [The prepared statement of Mr. Heard appears in the 
Appendix]

    Mr. Coffman. Thank you, Mr. Heard.
    Ms. Mackin, you are now recognized for 5 minutes.

                  TESTIMONY OF MICHELE MACKIN

    Ms. Mackin. Thank you, Mr. Chairman. Good afternoon, 
Ranking Member Kuster and members of the subcommittee. I 
appreciate the opportunity to discuss our recent report on VA's 
use of interagency agreements and Federally Funded Research and 
Development Centers, or FFRDCs.
    Interagency agreements can take different forms, but as was 
mentioned, our focus was on those where VA pays a fee to 
another agency to award a contract on its behalf. FFRDCs are 
not-for-profit entities that have a long-term special 
relationship with government agencies. By their very nature, 
all work to FFRDCs is awarded without competition.
    Interagency agreements and FFRDCs account for a relatively 
small slice of VA's overall procurement spending, a little over 
$2 billion from fiscal years 2012 to 2014. But a key component 
for both is oversight and accountability as to where VA's 
dollars are going. Each also has potential for certain risks 
that need to be properly managed.
    Our key findings with regard to interagency agreements were 
that, first, the full extent of VA's use of these agreements is 
unknown. We analyzed data from the Department's Electronic 
Contract Management System and found $1.7 billion reported from 
2012 to 2014. But when we did more digging into VA's accounting 
system, we found another $600 million to $900 million in 
potential interagency agreements.
    Second, we reviewed 21 interagency agreements in more 
detail and found that almost half were missing required 
documentation. In some cases, this included VA's reasons for 
using the agreement instead of another contracting mechanism. 
Because VA is paying a fee when it uses interagency agreements, 
the lack of complete documentation places VA at risk of paying 
these fees without proper oversight.
    And now regarding FFRDCs. Since 2008, VA has cosponsored an 
FFRDC under the MITRE Corporation. It also has a large task 
order with a second MITRE FFRDC. In total, these have a 
potential value of over $400 million.
    We found that VA has processes in place to review and 
oversee its FFRDC use, but we also found some areas where 
documentation was not as comprehensive as it could be. I'll 
mention two key areas.
    First, we reviewed 10 task orders and found that in all 10 
cases VA accepted MITRE's exact proposed price. In six of these 
cases, the contractor's proposal was higher than VA's own cost 
estimate, but we found no evidence of price negotiation, 
specifically to lower the number of labor hours or change the 
mix of the contractor's staff.
    Further, the contract files did not reflect the factors VA 
considered in determining that requirements were appropriate 
for an FFRDC. There was no record, for example, of decisions to 
carve out certain requirements that could be competed among 
other contractors. VA officials said these discussions do 
happen, but they weren't documented in the files we reviewed.
    A final issue I will note is that while VA's Technology 
Acquisition Center, or TAC, is responsible for overseeing all 
of VA's FFRDC use, we found this was not happening in practice. 
We identified four non-MITRE FFRDCs that TAC was not aware of. 
This means that VA organizations were obligating funds to these 
other FFRDCs without the required review and oversight.
    We made five recommendations to VA to address the issues we 
found, and as Mr. Heard mentioned, the Department concurred 
with all of them. We will, as usual, take steps to identify the 
specific actions the Department is taking.
    This concludes my prepared remarks. Thank you.

    [The prepared statement of Ms. Mackin appears in the 
Appendix]

    Mr. Coffman. Thank you, Ms. Mackin, for your testimony.
    The written statements of those who have just provided oral 
testimony will be entered into the hearing record. We will now 
proceed with questions.
    Mr. Heard, we had initially invited Ms. Phyllis Bower, 
Executive Director, Office of Acquisition Operations, and Mr. 
Robert Snyder, former Assistant Secretary for Policy and 
Planning, but they both asserted excuses not to attend. Are you 
the appropriate VA official to answer all of my questions today 
on IAAs and FFRDCs?
    Mr. Heard. I believe I am, sir.
    Mr. Coffman. I certainly expect to hear few answers that 
are deferred for later or taken for the record.
    Mr. Heard, in your written testimony, you correctly noted 
that, quote: ``The decision to enter into an IAA is based on 
the information in the business case, which is the result of 
market research,'' unquote. Then explain to the committee why 
the market research was so poorly conducted on these matters.
    Mr. Heard. That's a vulnerability, sir, and that's part of 
the reason why we need to develop a comprehensive training plan 
for all of our acquisition professionals that utilize 
interagency agreement authority for their programs.
    Mr. Coffman. Ms. Mackin, how would you characterize the 
market research related to your report on this matter?
    Ms. Mackin. I would say it was a mixed bag. We looked at 21 
interagency agreements, and a quarter simply had nothing at 
all. Some others had the words ``market research,'' but when 
you read it, it was just a statement that VA liked the services 
the other agency was providing or they liked the contractor the 
other agency was using. It wasn't really robust market 
research. We did see robust market research in a few cases.
    Mr. Coffman. Thank you.
    Mr. Heard, your written testimony mentions that FFRDCs are 
prohibited from competing with any non-FFRDC, and that's not an 
issue. What I want to know is how VA determined to use an FFRDC 
when there's little or no documentation that indicates such a 
decision was the best option.
    Mr. Heard. Sir, I'd like to refer that to Michele Foster, 
who oversees that process at the TAC for the MITRE contract.
    Mr. Coffman. Ms. Foster.
    Ms. Foster. Chairman, we use a multidisciplinary team 
called an acquisition integrated product team, whose 
responsibility is to vet the requirements that come forward. 
The team ensures that the requirements fall within MITRE's core 
competencies, the five core competencies outlined in the GAO 
report, but they also ensure that the work requires a special 
relationship of an FFRDC. I'd like to think that this is a best 
practice because it's part of the overall governance structure 
which GAO had actually recommended that all of the FFRDCs go 
through.
    Mr. Coffman. Ms. Mackin, can you elaborate on your report 
that explains VA's inability to justify the use of FFRDCs?
    Ms. Mackin. It's really a matter of documentation. Again, 
there's several key questions that the TAC needs to consider in 
determining a requirement to be appropriate for an FFRDC 
because, again, we're in a sole source environment with very 
broad, closely associated with inherently governmental work 
that these entities are allowed to do.
    As was mentioned, in the pre-award discussions we were told 
that this vetting is taking place, but we did not see it in the 
task order files we reviewed, and that was one of the 
recommendations we made to the Department for more 
transparency.
    Mr. Coffman. Mr. Heard, several years ago the VA OIG 
identified various weaknesses in VA's oversight of interagency 
agreements and reported that VA completed various corrective 
measures in 2013 by issuing a new policy on interagency 
agreements which complied with current law and regulations. The 
GAO report released last week found that VA is still failing to 
implement its own policy. Why is it taking so long for the VA 
to correct these problems?
    Mr. Heard. It's a good question, sir. The policy that we 
put in place as a result of the recommendations that the IG 
found were based on ensuring that we had more management 
structure overseeing those acquisitions. These were assisted 
acquisitions where acquisition personnel were somehow 
disconnected from that process. So putting that back into play, 
we wanted to make sure that acquisition professionals provided 
a higher level of oversight to those contracts. In this case, 
the IG was identifying vulnerabilities in the execution of 
various contracts that the VA had entered into.
    Today what we're talking about is ensuring that we're doing 
a better job in documenting those efforts and a better job in 
training those individuals that perform those duties. This 
effort is going to be multidisciplinary. It's something that is 
not just going to be done with our acquisition professionals. 
But as GAO reported, the differences with some of the 
accounting, we are going to ensure that our CFO's office works 
with us, as well as our own general counsel too.
    Mr. Coffman. Thank you.
    Ranking Member Kuster, you are now recognized for 5 
minutes.
    Ms. Kuster. Thank you, Mr. Chair. I appreciate it.
    I have the impression that we're in sort of an Alice in 
Wonderland world a little bit. I'm having that picture in my 
mind of the Land O'Lakes butter and the little girl is holding 
the box that has her picture who's holding the box that has her 
picture. Because as you talked about the purpose of these 
contracts, you started out strategic management, the second one 
was procurement, and I'm thinking do we have any sense of 
whether these contracts are helpful to help VA straighten out 
their procurement policy. So it's getting a little circular in 
my brain here.
    But one of the questions that I have, given these GAO 
recommendations, can you talk, either Mr. Heard or Ms. Foster 
or Mr. Orso, about training? How are we going to solve this 
going forward? How are we going to do better to make sure that 
not just the veterans get better service, but the balance that 
our committee constantly has, that the taxpayers are getting 
what they're paying for as well?
    Mr. Heard. Yes, ma'am. Best solution to many of our 
problems is our ability to provide training. As a Department, 
we have the benefit of having a very robust training program at 
our VA Acquisition Academy. I believe some members and staff 
for the subcommittee has visited that organization up in 
Frederick, Maryland.
    That's a delivery. That's where we plan to deliver some of 
our efforts, whether it's face to face or perhaps online. But 
that is our----
    Ms. Kuster. And what would you----
    Mr. Heard. Yes, ma'am.
    Ms. Kuster. I don't mean to interrupt. Our time gets 
limited. What would you do differently about--because it's not 
just a question of documentation, right? I mean, that's what 
we're picking up on. But what we're really concerned about is 
the value proposition.
    How are you going to change the training so that the 
individuals that are making these decisions and making these 
analyses about the contracts are getting what we need, which 
clearly is strategic management, procurement, all the five 
steps that you talked about.
    Mr. Heard. Well, those five steps are within the core 
competencies of the FFRDC. Our interagency agreements for 
assisted acquisition services is more of a reliance on another 
agency that may have expertise in a certain type of 
procurement, whether it's for a management skill, an 
engineering skill, a developmental skill, a training skill. As 
an organization, we may see that might be the best suitable 
solution for the Department.
    And so when we look at interagency agreements, we also look 
at interagency agreements as a form of an assisted acquisition 
service, and we also look at it as a form of a transference of 
funds for services that the VA may be responsible to pay for. 
That's why we see in some respects the large delta between how 
much has been obligated and then how much is in our contract 
writing system.
    Ms. Kuster. So that gets to my next question. My 
understanding is in the past the VA transferred millions of 
dollars under just one of these interagency agreements. This 
was the OPM. And the money actually, and I believed it was 
millions of dollars, sat unobligated for more than 2 years. 
What controls either had been put in place or will be put in 
place?
    Part of what we need to do as Members of Congress is we're 
bean counters. We're trying to figure out--tomorrow your 
colleagues are coming to us for $3 billion. Where I come from 
in New Hampshire, that's real money, where I'm from. And I 
don't want to lose $2 million sitting around in some office 
over here that was unobligated because somebody lost track of 
it.
    So I understand the theory behind the interagency and 
somebody else has expertise in a different part of the 
government. At this point, it concerns me because that's just--
the money's running even further out from what limited controls 
seem to be in place at the VA central. So how can we do better 
to keep track of that, I guess I'm asking.
    Mr. Heard. Ma'am, that is a very specific issue that I 
don't feel equipped to talk about today. I would like to take 
that for the record so that is based on an IG report----
    Ms. Kuster. Sure.
    Mr. Heard [continuing]. And so that we can bring back 
remedial action for that.
    Ms. Kuster. How about if we skip the detail of that 
particular one, just assure me, give me some assurance that 
going forward we've got some new procedures in place to keep 
track.
    Mr. Heard. Yes. And part of it is our policy on our use of 
electronic contract writing system. Part of it is our training. 
Part of it may be also to relook at our policy and make it more 
of an overall or overarching review of our internal controls.
    This is a serious problem and we recognize that. I'd like 
to say that it was--it would be an easy fix just to say that we 
have to make some changes in a policy letter and then put out a 
training. But we have to make sure that the training hits home.
    So that, frankly, I'm sad to say that when I read the GAO 
report I see management issues, where an individual who doesn't 
feel comfortable doing an acquisition of this nature feels that 
they're stuck doing it. We want the best people that have the 
knowledge, experience to do these contracts, and that's what we 
want to be able to move forward with.
    Ms. Kuster. Thank you.
    Thank you, Mr. Chair.
    Mr. Coffman. Thank you, Ranking Member Kuster.
    Mr. Huelskamp, you're recognized for 5 minutes.
    Mr. Huelskamp. Thank you, Mr. Chairman. And I must note and 
report, for my 8-year-old this is probably the highlight of his 
summer to be in your subcommittee, Mr. Chairman. And he was 
going to take notes, but it's all being recorded. But thank you 
for calling this hearing. He is still awake, I'll report that. 
We haven't been here long enough.
    But thank you for coming here. And I think we're hearing 
here what we hear in so many other hearings, is it's either the 
lack of data or lack of belief in the data. And on this 
contracting issue, it's probably some of both as we look at 
that, Mr. Chairman.
    But one response, I think that was from Mr. Heard, and I 
wanted to repeat that. You mentioned something about the CFO at 
the VA was going to help us figure this problem out. Could you 
restate that and explain your answer there?
    Mr. Heard. Sure. And it was regarding training. And we see 
that the training here is really a concerted effort among three 
primary organizations. And when I say primary, I think the 
fourth is also our acquisition workforce. But this is actually 
a responsibility of the CAO, Chief Acquisition Officer, the 
CFO, Chief Financial Officer, and the general counsel.
    And when I talk about the Chief Financial Officer, there 
are rules on interagency agreements and interagency 
transference of funds, and that's where we see a lot more money 
being expended because it's not just about interagency 
agreements for assisted acquisition services. And that is one 
of the focuses that I have. That's some of the exposure that 
GAO identified in their report.
    Mr. Huelskamp. Mr. Chairman, that's what troubles me here. 
I guess we're going to hear from the CFO maybe tomorrow, or 
data, that's going to explain how he came, he or she came, $2.5 
billion short, and we're just entering the fourth quarter of 
the year. And this is the individual that was charged with 
tracking them, and somehow they're going to fix our training 
problem.
    But aren't there policies already in place that requires 
this? And why is the VA not following clear policies of, I 
think, the entire Federal Government?
    Mr. Heard. Sir, if I could clarify one point. What we 
report or what's seen for assisted acquisitions, that's in our 
contract writing system. That's really a subset of how much 
money is being spent overall in inter- and intra-agency 
expenditures or transactions. So our focus there is what our 
contracting officers use to build interagency agreements to 
support assisted acquisition services from other agencies.
    Mr. Huelskamp. And so why do you not--the GAO estimates 
that between $600 million and $900 million worth of assisted 
acquisition obligations in the VA's accounting system were not 
reported on eCMS, despite the requirement. Explain why you're 
ignoring the requirement. Is that your responsibility, then, 
Mr. Heard?
    Mr. Heard. It is my responsibility, but what I'm saying, 
that delta is not in our eCMS contract writing system. It is 
not an accounting system. It's a system that we use, using----
    Mr. Huelskamp. So that's not a requirement to be in eCMS, 
or it is?
    Mr. Heard. Only for assisted acquisition services it is.
    Mr. Huelskamp. So everything on assisted acquisition 
services is in eCMS.
    Mr. Heard. Should be in eCMS.
    Mr. Huelskamp. No, is it in eCMS? Did the GAO say it was 
all in there?
    Mr. Heard. I don't know.
    Ms. Mackin. We identified that $600 million to $900 million 
in potential interagency agreement obligations that should be 
captured in eCMS. We all know there's been a history of data 
reliability problems with the contract system. In fact, we 
found it not to be reliable for our purposes. So we recommended 
that VA do some spot checking with the accounting system to see 
if those are assisted acquisitions or the other type.
    Mr. Huelskamp. Now, in 2009 the GAO made this 
recommendation as well, and if I understand it correctly, 5 
years later, follow-up, those recommendations were never 
implemented?
    Ms. Mackin. I believe that was an IG report. As I said, 
this most recent review we could not rely on eCMS for our 
purposes.
    Mr. Huelskamp. Mr. Heard, any response for 5 years versus 
where we are today, which apparently little or no change?
    Mr. Heard. From a technical standpoint, sir, that there's 
been a considerable amount of change to make eCMS perform 
better. Those changes occurred in 2012-2013 timeframe, and we 
are very pleased with the success that we have and the utility 
it offers.
    It does not change the fact that back in 2009, and somewhat 
later, that there were areas of missing data, lack of support 
to our organization. But the fixes that have been put in place 
have showed some dramatic change in its utility across the 
Department.
    Mr. Huelskamp. Mr. Heard, one last thing, and maybe you 
need to answer that for the record, but I see a reference to 
one particular entity maybe pulled out as an example, something 
called the MITRE Corporation. And GAO reviewed 10 task orders 
to them and found they were all missing documentation. Do you 
have any quick explanation of why they don't have to follow the 
rules or your relationship with them?
    Mr. Heard. Sir, I would like Michele Foster to answer that 
question for you.
    Ms. Foster. Sir, as it relates to the missing document, it 
was our understanding that the report was highlighting that 
during the AIPT process what we're doing is when we're vetting 
whether the requirements are right for MITRE or perhaps for 
just a commercial entity, that discussion, all of the 
participants, that multidisciplinary team, they're all taking 
notes, minutes on the discussion, but they weren't putting 
anything formal in the record, in the contract record.
    What was going in the record was once they settled on that 
piece that was appropriate for MITRE, that's what was going in 
the record via an R&J, a requirements and justification 
document. But the explanation of how it got there, that was 
missing from the file. But as far as the FPDS system, all of 
the obligations for the FFRDC were found to be within that 
system.
    Mr. Huelskamp. And lastly, could you provide that to the 
committee, that missing documentation that would answer the GAO 
concerns?
    And with that, I yield back, Mr. Chairman.
    Mr. Coffman. Thank you, Mr. Huelskamp.
    Mr. O'Rourke, you're now recognized for 5 minutes.
    Mr. O'Rourke. Thank you, Mr. Chairman.
    Mr. Heard, I appreciated you beginning by saying that you 
concur with the findings and the recommendations, and you then 
said that you're working on policy and training programs to 
come into compliance. How long before you will be where you 
should be and where the GAO can come back to us and say clean 
bill of health for the VA on these issues that we uncovered?
    Mr. Heard. Congressman, I don't have our timeframe. But 
from a management standpoint, it is managed through our Chief 
Acquisition Officer. So we will be reporting on a routine basis 
to him, Greg Giddens, on our status.
    Mr. O'Rourke. Can I ask you a question? Did you not, after 
reading this report, meet with whoever's responsible for 
correcting this and say: ``I want to get these things done by 
this date,'' or, ``Here are the issues. When can you get them 
done? Great. Here's the commitment.'' Did that take place and 
you just don't happen to have that date with you today, or have 
you not had that conversation?
    Mr. Heard. We have not had that sit down. We had the----
    Mr. O'Rourke. It would be a good thing to do, right?
    Mr. Heard. Yes, sir.
    Mr. O'Rourke. Yes. When do you plan on having that 
conversation at which you will establish the deadline that you 
will commit to and bring back to us so that we can hold you 
accountable for that?
    Mr. Heard. We're going to organize that meeting next week.
    Mr. O'Rourke. Okay. Appreciate that.
    Do you know for the last fiscal year what the total in fees 
paid through the IAA program is?
    Mr. Heard. I do not know, sir.
    Mr. O'Rourke. Does the GAO happen to know?
    Ms. Mackin. We don't know that either, because in the files 
it didn't always indicate what the fee was. We know it ranged 
from 2 percent to about 14 percent, with the average around 5 
percent. But I don't have dollar figures.
    Mr. O'Rourke. And is there a way to extrapolate based on 
those averages and say we think this much went through and 
these were the average percentages paid and so it could be 
this?
    Ms. Mackin. I actually asked my staff to look into this 
very question in preparation for today, and we just couldn't 
get there with the documentation that was in the files.
    Mr. O'Rourke. Okay.
    So, Mr. Heard, I'll ask for that number for the record, and 
I don't know if the chairman knows, but you have so many days.
    Or is there a deadline for witnesses to get back to us? 
Okay. Great. There's a deadline for us to ask the questions for 
the record. Okay.
    So we'll just ask that question today, ask that you get 
back to us within a week.
    Mr. Heard. We will.
    Mr. O'Rourke. Okay. Appreciate that.
    On trying to put this into context, another question for 
the GAO. Do you or your colleagues at GAO see similar problems 
in accounting and reporting in other agencies or departments? 
Is this a problem through the Federal Government, or do we find 
this to be pretty specific at the VA?
    Ms. Mackin. Actually, we do find it across the government. 
Almost every time we do a deep dive on any contracting issue we 
find data errors. And interagency agreements were actually on 
GAO's High Risk List for almost 10 years because of the risk of 
out-of-scope work, lack of competition, unauthorized work, and 
the fees that are being paid. So these issues are not limited 
to VA.
    Mr. O'Rourke. And then I have a question both for you and 
for Mr. Heard on a specific example that is used to illustrate 
the problem in your report, and it's the Defense Logistics 
Agency, where it turns out VA was paying a percent more than 
they would have if they had used their own acquisition agency. 
And it wasn't--I don't know if it was uncovered until you 
uncovered it.
    What I want to get at is, do we know what the total cost of 
that was to the taxpayer, the difference, that 1 percent? What 
did that amount to?
    Ms. Mackin. That was a $60,000 per year saving to VA, 
taking it from DLA and bringing it in-house.
    Mr. O'Rourke. And for how long was that contract in place?
    Ms. Mackin. This contract had been in place with DLA since 
2008. And when DLA raised its fee from 2 to 2.5 percent, which 
equated to $140-some-odd-thousand per year, that's when the VA 
people started asking questions about the basis for the fee 
increase. So they did recognize it and start looking into it at 
that point.
    Mr. O'Rourke. So DLA should have just kept their fee the 
same. They could have kept that $60,000 in their pocket.
    Ms. Mackin. I guess so.
    Mr. O'Rourke. Another question on the numbers and the 
scope. Do we know how many instances--is there any way to know 
how many instances like this DLA one occurred over the last so 
many years and what the total cost to the taxpayer was? In this 
case it was $60,000 a year.
    Ms. Mackin. It's a legitimate question. As I said, I looked 
into this in preparation for today, and based on the 
information we saw in the files, we can't get there in every 
single case. This one just happened to be clear cut enough that 
we could quantify the impact.
    Mr. O'Rourke. And, Mr. Heard, is that an answerable 
question? Does the data exist for you and your team to go back 
and find out?
    Mr. Heard. It would be difficult to mine. But a perspective 
to share is that DLA, like GSA, like many other organizations, 
including the VA, may use, rather than appropriated funds, 
revolving funds to manage these types of contracts. And that 
revolving fund is money to bring back to cover its cost of 
operations. And so not knowing what the 2.5 percent is, and I 
actually don't know what the commodity is, there's a business 
sense behind that percentage.
    Mr. O'Rourke. Okay. I don't know if I understand that, but 
if there is the ability to, for the committee, document total 
lost opportunities or costs borne by the taxpayer that were 
unnecessary because you could have acquired it in-house like 
this DLA example, I'd love to know it. But if not, this DLA 
example I think is illustrative of the problem that you have 
there. And just the fact that it's unknowable, I think, invites 
additional skepticism. So I think it's within the VA's interest 
to answer that if you can.
    I yield back to the chair.
    Mr. Coffman. Thank you, Mr. O'Rourke.
    Ms. Walorski, you have 5 minutes.
    Ms. Walorski. Thank you, Mr. Chairman.
    I just am sitting here thinking and kind of associating 
myself with the comments from our ranking member about the fact 
that we're going to be sitting in a hearing tomorrow with the 
VA Secretary, and I think to much of our surprise, asking the 
question and listening to the testimony as to how in the world 
we are $2.5 billion, $3 billion off all of a sudden in the 
context of the VA. And then we sit here today and we're asking 
more specific questions again based on a GAO report.
    And it just surprises me, Mr. Chairman, that we sit here 
time and time again and we hear it, and it doesn't seem to 
matter which particular entity of the VA is sitting here, but 
the answers that we even get today about these interagency 
contractual agreements on missing data, lack of support, 
managerial problem, missing documents, no training, and all 
these things continue to persist.
    And I have got to think that when the American people, at 
least the folks in my district in Indiana, listen to these 
hearings--and they really do, Americans are at the table with 
their ears on because they're fighting for veterans just like 
we are--I think they're so confused and distressed when we hear 
the kind of answers coming that we're hearing today.
    And it's usually always at the impetus of a GAO report. If 
the GAO hadn't looked into these situations they would never 
rise to the occasion to even be talking about this at a 
hearing. And I think it just adds to the anxiety the country 
has, the Nation has, as we're all together fighting for 
veterans, and it seems like we're fighting the very entity that 
was created to help veterans, and an entity that seems to have 
lost itself in questions that literally no answers can be 
provided anymore, it's just too big of a mess.
    And so with that--and I think it's distressing as well, 
because our fellow Americans have made it very clear that they 
are standing with this bipartisan committee fighting for 
veterans and trying to help do everything we can legislatively. 
But I think we've also found out that legislative fixes aren't 
going to save the VA. It's going to be the people inside the VA 
that are going to save the VA.
    And I guess with that I would ask--I think, Ms. Foster, you 
were the one talking about the issue with the MITRE proposal, 
but the GAO found that you always accepted--always accepted--
MITRE's price proposal, even when it was higher than your own 
cost estimate. Why is that?
    Ms. Foster. Ma'am, you have to remember for MITRE 
Corporation, really what we are negotiating with MITRE, and Ms. 
Mackin mentioned it during her opening testimony, was the labor 
hours, right, and the mix of labor. The rest of it we're 
relying on an Air Force CACO, corporate administrative 
contracting officer, to go ahead and negotiate with MITRE 
Corporation on behalf of many of the other agencies, the VA 
included. So the overheads, they're already given to us, right, 
so what we're negotiating is that labor piece.
    And what you saw in the report was the contracting officer 
was relying on the technical expert, right, so it's typically 
the PM who's giving you the requirement, they're the expert in 
that area, looking at the labor mix provided by the MITRE 
Corporation and comparing it to what they had. But what they 
may have been thinking about when they put their independent 
government cost estimate together may not match MITRE initially 
because MITRE might have a different approach.
    So what they do is, and it was listed in the report, the 
two groups sit down together and say: This is what I was 
thinking, how is that different? And as long as that technical 
expert who's advising the contracting officer that works for me 
feels comfortable, they go ahead and they'll accept that 
position.
    At the end of the day, as the report highlights, it's a 
cost-type contract, right? So MITRE's going to get their 
actuals. So what that proposal gives you is a top level 
ceiling. But ultimately when you go to close out the record, 
what it is that they actually performed is what they are going 
to get paid for except the fee gets lobbed on top of that.
    Ms. Walorski. Let me ask you this in light of that. Do you 
have some examples of some types of work where the VA has 
developed its own in-house capacity through working with MITRE 
and no longer reaching back to MITRE for support?
    Ms. Foster. Ma'am, I'd defer that to Mr. Orso. He's the 
business office that handles that.
    Mr. Orso. Thank you, ma'am.
    We have a very robust governance process that looks at the 
requirements, the out-year requirements. And then as the 
projects are actually accomplished within MITRE, the process 
that we use ensures that they have a plan to scope--down scope 
or down scale their support to any given program. And that's 
built in at the AIPT level and all of the other activities that 
we're placing on contract with the vendor.
    Ms. Walorski. Do you have specific examples, though, of 
working with MITRE where the VA's developed its own in-house 
capacity without having to reach back to MITRE for support?
    Mr. Orso. I would have to go bring you something for the 
record, ma'am. I'd have to take that for the record.
    Ms. Walorski. Could you do that for the record?
    Mr. Orso. Yes, ma'am.
    Ms. Walorski. I appreciate it.
    And I yield back, Mr. Chairman.
    Mr. Coffman. Thank you, Ms. Walorski.
    Mr. Walz, you are now recognized for 5 minutes.
    Mr. Walz. I'm good, Mr. Chairman.
    Mr. Coffman. Mr. Lamborn, you're now recognized for 5 
minutes.
    Mr. Lamborn. Thank you, Mr. Chairman.
    Mr. Heard, in the past the VA has transferred millions of 
dollars to OPM under an interagency agreement where the money 
sat unobligated for more than 2 years. What controls have you 
put in place to ensure this doesn't happen again?
    And this is a very timely question because we're going to 
have the Secretary come in tomorrow, I believe it's the 
Secretary, and say that you need billions of dollars more. And 
the controls for accounting for where the money goes and how 
it's spent seem to be lacking.
    So how would you answer that question? What controls have 
you put in place to ensure that this doesn't happen again with 
these types of contracts?
    Mr. Heard. Sir, there was a previous question that we did 
take that one for the record. We are going to be providing some 
very detailed information on what occurred there and what has 
actually happened.
    But if I may add that part of our improvements, maybe more 
accountability to our policy, was to ensure that contracting 
professionals, contracting officers, are engaged in those 
contracts as opposed to having just the program office oversee 
or manage. We want to make sure that we have the right 
expertise involved in those contracts so that they just can't 
run amuck or go rogue, as we may have seen in the past.
    Mr. Lamborn. Okay. Thank you.
    Now, when it comes to assessing the contracts and how well 
they perform, how would you assess FFRDC performance and ensure 
that we're getting--the VA is getting their money's worth out 
of these programs?
    Mr. Heard. Sir, if I could, I think we want to answer that 
both with Michele and from David from a program standpoint. So 
Michele can address it from a contracting perspective on 
performance, and then as a consumer user David can give that 
perspective.
    Ms. Foster. I'll start, if I may, sir.
    So we monitor MITRE on cost, schedule, and performance, and 
we have several different ways in which we do that. We get 
monthly progress reports from them, invoice, and we also get 
the corresponding invoices, right? So the CORs and the contract 
specialists are reviewing those on a monthly basis.
    We also include a performance-based assessment survey which 
gets used prior to the performance management team monthly 
reviews, which I believe were mentioned in the GAO's report as 
well. And of course we rely on the audit services of DCAA to 
help us with that.
    And, David.
    Mr. Orso. On the program side, sir, we have a feedback 
loop, a mechanism, where from the PMT and from feedback from 
the program offices in particular, they'll either come to the 
EPMO, my organization, or Michele's organization, and Ms. 
Foster and I have a weekly call in which we discuss the 
performance of the contractors or the vendors, in this case the 
FFRDC. And where there is--if there is an issue, we will 
address it accordingly.
    So the program offices that are being provided the support 
have routine check-ins with either my staff or Michele's staff 
in various capacities.
    Mr. Lamborn. Okay. Thank you.
    And, Ms. Mackin, I have a question for you now. By their 
very nature, FFRDC contracts are noncompetitive. Is VA at risk 
of paying too much for FFRDC work that could potentially be 
competitively awarded?
    Ms. Mackin. I think any time the government's in a sole 
source environment they have a weakened negotiation position in 
terms of setting the prices. So I would say for any sole source 
arrangement that that's a risk. And that's why we hope that VA, 
in agreeing with our recommendation, will document their 
decisions to carve out certain requirements that can be 
competed. They've looked at this in the past, in 2012, for 
example, and saved $7 million in doing so. So we think that has 
to happen routinely to save money for the Department.
    Mr. Lamborn. Okay. Thank you.
    Mr. Chairman, I yield back.
    Mr. Coffman. Thank you, Mr. Lamborn.
    Ms. Mackin, we have heard allegations that VA has even 
compensated MITRE for performing market research for its own 
proposals. Is that true?
    Ms. Mackin. I don't have any information on that.
    Mr. Coffman. Okay. Mr. Heard, that is true?
    Mr. Heard. I am not familiar with that. You know, I can ask 
Michele to maybe opine on that, you know, based on her 
oversight to that contract.
    Ms. Foster. Sir, it wouldn't surprise me. I'm thinking of 
one situation actually almost a year ago where MITRE was asked 
as it related to Section 101 of the Choice Act to help with 
market research. Unfortunately I wasn't the contracting 
organization that was doing the Section 101 work, but if I 
recall correctly, they were trying to determine, the 
contracting office was trying to determine if the PC3 contract 
would be appropriate to meet the needs of Section 101. And so 
MITRE was asked to help when they were going to have an 
industry day, I believe, was the case.
    And so it is not uncommon, certainly in my world in IT, if 
you're going to have an industry day and you're trying to 
determine who has technical capabilities, to invite a technical 
expert to that meeting; so I suspect that is why MITRE was 
invited to that particular one, and that would have been 
considered the market research.
    Mr. Coffman. Ms. Mackin, if we add up the amount GAO 
identified for interagency agreements, as well as the FFRDCs 
from fiscal year 2012 to fiscal year 2014, it is over $2 
billion. How would you characterize the risk VA faces with this 
amount of money given the problems you found?
    Ms. Mackin. I think there is the potential for significant 
risk. As I mentioned, interagency agreements were on our high-
risk list for 10 years almost. And because of the potential for 
out-of-scope work, unauthorized work, lack of competition, and 
paying too much in fees, FFRDCs, again, you are in a sole-
source situation where this contractor is authorized to do work 
that is very closely associated with inherently governmental 
work. So this is why both of these need to be very closely 
monitored and overseen.
    Mr. Coffman. Well, I think the tragedy here today is this 
is an organization, the Veterans Administration, really in 
crisis. You know, and I think, you know, we'll have, we'll call 
you back 3, 4 years from now, or whoever is sitting in this 
chair; and, of course, the principals won't show up. They will 
have some underlings show up who won't be able to answer all 
the questions, and it'll be the same thing. We will try harder. 
And, you know, I'm confident nothing will occur.
    And what is amazing to me is here is an organization in 
crisis that suffers from a lack of accountability and 
transparency, and here we are adding another layer of 
unaccountable, you know, not transparent, you know, acquisition 
people who are a nonprofit, structured as a nonprofit, sole 
source outside the Veterans Administration. I mean this just 
compounds the kind of problems that we have here. These FFRDCs, 
these folks need to go by the wayside. I don't see any--You 
know, you all need to up your game in terms of acquisition, and 
I know that that is probably never going to happen; but, you 
know, it is not going to work out anyway.
    I am just not optimistic right now, given the leadership 
that the VA has at the very top. The President is not engaged. 
The Secretary of the VA is not engaged in making a difference. 
You all are just placeholders until somebody does want to make 
a difference, and I don't know how long that is going to take.
    Ranking Member Kuster.
    Ms. Kuster. Thank you, Mr. Chair. I wanted to follow up 
from where Ms. Mackin just left off. And if anyone has a 
response, it is fine by me.
    I want to get at this role of MITRE and whether it is 
always an appropriate role, and I see that the VA has a 
committee that reviews potential FFRDC work before it is 
offered to MITRE. Does anyone in the panel know if this 
committee ever finds that something isn't appropriate for this?
    Ms. Foster. Ma'am, I can take that question. So that was 
the acquisition integrated product team that I mentioned in the 
beginning, right, so they are the ones that are vetting those 
requirements. I am going to give you an example. So a requiring 
activity would come to this team, and legal is on there also. 
There is a couple of attorneys on there, my staff, Mr. Orso's 
staff and, of course, the person who wants to use MITRE. Right?
    So one example was an organization came in and they wanted 
organizational change management support from a strategic 
direction trying to transform their part of the organization. 
So, yes, that piece would be appropriate when you look and see 
the details of it; but then there was another piece where I 
think in this case they were looking to do some database 
development as part of that, and the group that got it on the 
organizational change management. That other piece, that gets 
carved off.
    Now we recognize that ultimately the veteran is going to be 
the benefactor of all of these things, so we don't just say 
that piece gets carved off and you are on your own. If we know 
of other existing contracts that are in place, whether my 
organization or a different one, then we'll shepherd that over 
to those organizations that can go ahead and execute. And this 
is the piece that the GAO rightly said, you know what, that 
discussion needs to be for the record, and it was missing.
    You know, people were taking their own notes, their minutes 
of it, but it wasn't making its way into the record. The only 
thing that was as it relates to that discussion was ultimately 
in this case if you settle on organizational change management, 
fine, that was justified, but not the stuff that didn't make 
it. So I hope that helps.
    Ms. Kuster. And do you identify instances where the VA 
should do the work? In other words, I'm concerned about 
instances where MITRE is performing work that is inherently 
governmental in nature that the VA could be performing? I mean, 
in other words, we're as Members of Congress, appropriating 
dollars to pay salaries for people that we've hired with the 
expertise to do a particular type of work.
    Now it may not be the changes in management style, which 
probably would be very helpful at the VA, but are there other 
pieces of this, and maybe this is what you are referring to, in 
a carve out? Is that something, the database piece is something 
that could be done in-house?
    Ms. Foster. So I will let Mr. Orso talk to that piece. Go 
ahead, Dave.
    Mr. Orso. Thank you, Michele.
    Ma'am, Ranking Member Kuster, so the way that the process 
works, there is another layer that we should talk about to make 
this clear. At the executive level across every business line, 
we have representatives to bring their out year requirements to 
a forum in which we review them for consideration and to plan, 
and we can look at them across the agency and integrate those 
requirements in a very comprehensive way. And that in and of 
itself is a huge mechanism for savings and for integrating 
activity.
    Those recommendations as they're brought forward go to the 
FERC, what we refer to as the FERC--it is the next level up; 
it's the highest level of leadership within VA below the 
Secretary really--and they validate those requirements, which 
then the business owners, the program managers, those folks, 
will plan for in the out years.
    Now, when those requirements are developed and procurement 
packages are created, they'll go through a vetting process 
where a business line is going to determine whether he or she 
has the capacity within his organization to perform some of 
those activities on his own with his own staff, government FTE, 
or whether it should be--potentially go to the FFRDC, as had 
been planned.
    I will give the example of the My VA activities; those 
things were not planned. So they've come out, and we are 
responding to those as they are emerging from the initiatives 
themselves. However, the consideration is still made for 
whether or not it is appropriate for the FFRDC or should it be 
a commercial vendor. That happens at the AIPT.
    I would add that as far as the expertise goes, so My VA in 
particular is a monumental undertaking. Clearly we have a huge 
organization dispersed across a Nation in pockets of places. I 
mean, it's a tremendously difficult thing to change and to 
integrate. And that is really what the Secretary is trying to 
do, is to deliver an integrated enterprise that supports the 
veteran with the veteran at the center of our business model. 
We don't----
    Ms. Kuster. Are you trying to say that the My VA has been 
done by FFRDCs?
    Mr. Orso. Ma'am, let me clarify.
    Ms. Kuster. Thank you.
    Mr. Orso. We certainly have some support from the FFRDC 
within my VA; but, yes, that is being run by the government, by 
Mr. Snyder is the executive director.
    But the point I am trying to make is it is a very complex 
effort that we don't have the expertise to carry out or the 
capacity in some cases. And it would not be appropriate for a 
commercial vendor in most of these cases to support us in those 
efforts. And the reason really is because it would create a 
conflict of interest where they could come back on the 
execution end of the planning and have an insight into what we 
were already attempting to do; and they would have an increased 
position to receive that award because of the information they 
had received or been a party to.
    So in my view, the governance structure that we have in 
place is about as effective as it could possibly get. I do 
realize there are some gaps that GAO has identified. But from a 
balancing of resource perspective, this is a very solid 
governance system, ma'am.
    Ms. Kuster. All right. Well, I appreciate that. My time is 
well past, but I think we will bring this up tomorrow with the 
Secretary to see if he agrees with your assessment, as he is 
coming forward to ask for these extra funds. So thank you, Mr. 
Chair.
    Mr. Coffman. Thank you and you can always contract out with 
acquisition consultants on a competitive basis versus a Soviet-
style system.
    Dr. Roe, you are now recognized for 5 minutes.
    Dr. Roe. Thank you, Mr. Chairman.
    I am sorry I had to leave. I had to go to the House floor 
to testify on a VA bill. So I missed some of the testimony. And 
I am going to back up a little bit and just ask a few 
questions.
    So someone can walk me through, how is the FFRDC, how and 
why and when is it used? It's as simple as that? I want to ask 
that question first.
    Mr. Heard. Sir, we'll do that as a two part. We'll talk 
about it as a contracting point, the rigors of that 
decisionmaking----
    Dr. Roe. Walk me through why you would need them at all.
    Mr. Heard. Okay. Go ahead.
    Ms. Foster. Sir, we talked about, especially in this 
particular FFRDC, MITRE Corporation. We mentioned the five core 
competencies----
    Dr. Roe. I heard that testimony. My question is just give 
me an example of where they would be used. Why would the VA 
need to use this organization?
    Ms. Foster. Okay so that goes to the special relationship, 
sir. They are expected to give us an unbiased opinion, right, 
where they are not going to have any conflicts of interest in 
the back end.
    So for example, in my own office, right, we have a big 
acquisition called T4 NextGen. Well, as it relates to portions 
of it, we are using MITRE Corporation to help us with some of 
the technical evaluations.
    Dr. Roe. Is that a private corporation, private company, 
MITRE?
    Ms. Foster. MITRE Corporation. It is a federally funded 
research and development company.
    Dr. Roe. Okay. It's federally funded then, okay.
    Mr. Heard. It's a nonprofit, sir.
    Dr. Roe. Okay. But Federal dollars flow to that. Correct?
    Ms. Foster. Right.
    Dr. Roe. Go ahead. I'll let you finish.
    Ms. Foster. So that would be an example because they are 
not going to be competing for that work. They don't have any 
skin in that game, if you will. There won't be any conflicts of 
interest. So we are relying on their technical expertise to 
help us to go ahead and make the right decisions as far as who 
is going to be winning that competition----
    Dr. Roe. Well GAO indicates that maybe that is not 
happening. At least from the GAO report that I read, that maybe 
that isn't happening right now.
    And the FFRDC, who do they report to? What is their chain 
of command, and where are they located in the Federal 
Government, what department?
    Mr. Heard. They; re a nonprofit organization.
    Dr. Roe. So it is a nonprofit, outside the Federal 
Government?
    Mr. Heard. Yes, sir.
    Dr. Roe. Okay. So it is a federally funded----
    Mr. Heard. Right.
    Dr. Roe [continuing]. Outside, and again with the choice--
the chairman just said, and how long have they been in 
existence?
    Mr. Heard. They are a contracting authority under the 
Federal acquisition regulations.
    Dr. Roe. Okay so they are a contracting authority then.
    Mr. Heard. And they have been in existence for many years. 
I can take it for the record to give you maybe a sheet, fact 
sheet, on FFRDCs if you would like.
    Dr. Roe. Yeah. I guess the reason I am trying to understand 
is exactly what their purpose is because there is another way 
you do this. I have been in public service before I got here, 
and we didn't use anything like this complicated to get a 
contract done.
    I mean there's a way to get a contract. You have basically 
whether you are building something or whether it is a technical 
service or whatever, there is a way to bid those out, unless 
this is just a consultant that you use. Is that basically what 
this is? A consulting is you're asking their opinion? It is a 
pretty expensive opinion, I think.
    Mr. Orso. All right, I'll take that. I'll try to respond to 
that, Mr. Roe, sir, if I may.
    So I represent the programs in VA, or the business as we 
would describe it. And with the FFRDC, what they really provide 
is, if we are building something new, the program structure 
maybe that would have performance requirements, and let's say 
it is a large acquisition that we are looking for, a large new 
program.
    The FFRDC folks would help us think through those 
requirements in a way that we could operationalize or execute 
them. But the execution of that, the development of those 
things, would be given to a commercial vendor to satisfy the 
thinking, the planning portion of that, the generating of the 
ideas and how it would be best resolved. They would assist us 
with those types of things. It depends on the type of 
requirement. They have competencies----
    Dr. Roe. So basically they are a consulting--is that what 
they do?
    Mr. Orso. I would say, so they are very sophisticated 
consultants, yes, that have a special relationship with us, and 
they can have access to information that we wouldn't give to a 
commercial vendor. Because that commercial vendor would have an 
unfair advantage when it came time to execute or to bid on the 
contract that was going to result from that development 
activity.
    Dr. Roe. So what you are saying is they're supposed to be 
an unbiased observer that looks at whatever you, and gives you 
an unbiased opinion. Is that correct?
    Mr. Orso. That's a great way to describe it, yes, sir.
    Dr. Roe. That's what they are supposed to do. How many 
people work there? What kind of budget do they have? And is 
this for all of government?
    Mr. Orso. So I think----
    Ms. Foster. Sir, it's a very large corporation, and MITRE 
Corporation supports many of the agencies certainly, Army, all 
of DoD, Treasury, IRS. We have a----
    Dr. Roe. They weren't involved in Aurora, were they? Did 
they have anything to do with any of that?
    Ms. Foster. I don't--sir, I couldn't----
    Dr. Roe. Do you know, I mean seriously, were they?
    Ms. Foster. Yeah. That we would have to take back.
    Dr. Roe. I would like to have that answered because if they 
were, they need to be fired, whoever was there.
    Ms. Foster. Okay.
    Dr. Roe. I yield back.
    Mr. Coffman. Thank you, Dr. Roe.
    Mr. O'Rourke, you are now recognized for 5 minutes.
    Mr. O'Rourke. Thank you, Mr. Chairman.
    Mr. Heard, how would you respond to additional budget 
pressure related to these two programs, the federally funded 
research and development program, and these interagency 
agreement programs?
    I don't know what is going to happen at tomorrow's hearing, 
and I don't know what is going to happen with this $3 billion 
budget shortfall, but if the Secretary comes back and says I 
need to find these kinds of savings across the board throughout 
the department, how would that change your view of how 
essential FFRDCs are and these additional fees that you are 
paying on these interagency agreements? In other words, are 
there savings there? How would you respond to that?
    Mr. Heard. It could have a significant impact on the 
performance of those agreements. If we had to look at it from 
that budget perspective, you know, at this point it's part of 
the budget, the execution.
    But if those savings were to be found, you know, VA would 
be looking under rocks to find where those dollars can be 
found, and that could have an impact on those programs as well.
    Mr. O'Rourke. Yes. And I appreciated the comments earlier 
about the larger context in government, and we have these 
FFRDCs that serve other Federal departments and agencies. We 
have some of these similar issues in other agencies and 
departments. And certainly--I also sit on the Armed Services 
Committee. Lots of examples there where we overpay and don't 
get perhaps the best bang for taxpayer dollars. So.
    But today we are focused on the VA, and tomorrow we are 
going to hear about this $3 billion shortfall. And I have got 
to think that not knowing the total value of fees paid or just 
in that one $60,000 annual example that the GAO uncovered, that 
if we extrapolate might be much, much larger than that, perhaps 
there is not enough pressure today to uncover savings or check 
these contracts or even know if we have contracts in place, as 
the chairman has helped us uncover in other hearings.
    So that is just, I guess, a point I would like to make and 
a question I would like for the VA to think about, which is, 
certainly Congress could appropriate more money or shift money 
out of a program like Choice to fund a budget shortfall, but 
perhaps there are savings within agencies and departments under 
VA right now, including in these fees that we're paying in 
these FFRDCs; and it is hard to get a concise, compelling 
answer from you or Ms. Foster--and it may just be a difficult, 
complex issue to articulate--about the value of them. And why 
are we paying this much? And what of that could we bring in-
house? And what is essential and what is not when we are facing 
these shortfalls and have these other crises in the VA.
    So I appreciate your answers, and I am looking forward to 
the two things you committed to me within a week on the record, 
your deadline that we can count on and hold you accountable 
for, for fixing these problems, and then the total paid in 
interagency fees within the last fiscal year. And I have your 
commitment to get those within a week?
    Mr. Heard. We had two issues, and the one was the fees paid 
for it. To the best of my knowledge, we are looking at those 
that came up through this interagency agreement, review by the 
GAO, the audit that they conducted. So we are going to go back 
to each one of those contracting organizations and ask them to 
extrapolate those fees based on the total costs associated with 
those agreements.
    Mr. O'Rourke. I would like to know all fees. What does this 
cost the VA annually? And the thing that I don't think we could 
get to but I would love to know is, how many examples like that 
1 percent extra, $60,000 a year in that one contract, are we 
seeing?
    And the other was just your deadline, your commitment for 
we will fix and address and be where we want to be per the 
GAO's findings by this date.
    Mr. Heard. Sir, my commitment there was by next week I will 
have that meeting scheduled with all those parties.
    Mr. O'Rourke. Got you. When do you think you could come 
back to this committee, either in person or writing, and tell 
us what the deadline is?
    Mr. Heard. I would really like to have at least 2 weeks 
after that meeting. I think that is very, very important.
    Mr. O'Rourke. So by September 1?
    Mr. Heard. Yes.
    Mr. O'Rourke. We would have a commitment from you I'm going 
to fix these----
    Mr. Heard. By said date.
    Mr. O'Rourke. I appreciate that. Thank you, Mr. Chair.
    Mr. Coffman. Mr. Walz. Okay.
    Today we have had a chance to hear about problems that 
exist within the Department of Veterans Affairs with regard to 
oversight of its interagency agreements and Federally Funded 
Research and Development Centers.
    This hearing was necessary to identify the continuing 
widespread problems with VA procurement and to allow VA to 
provide answers as to why these problems persist. As I 
mentioned in my opening statement, VA has informed the 
committee that it has run out of money, which may result in its 
need to close VA medical centers. To that end, VA has told the 
committee that it will need an additional $3 billion.
    Based on evidence and testimony provided in our four recent 
procurement hearings, VA misspent or plainly cannot account for 
around $7 billion annually, over twice the shortfall caused by 
VA's poor stewardship of money intended to provide services to 
veterans. As such, VA must be held accountable for the sheer 
incompetence that has somehow led to its squandering these 
funds needed to give veterans the care they deserve.
    I ask unanimous consent that all members have 5 legislative 
days to revise and extend their remarks and include extraneous 
material. Without objection, so ordered.
    Mr. Coffman. 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 5:18 p.m., the subcommittee was adjourned.]

                                APPENDIX

              Prepared Statement of Chairman Mike Coffman

    Good afternoon. This hearing will come to order.
    I want to welcome everyone to today's hearing titled, ``Lack of 
Oversight of Interagency Agreements--VA Procurement Failures 
Continued.'' This hearing will examine serious problems with VA's use 
of Interagency Agreements to procure certain services and will also 
focus on Federally Funded Research and Development Centers (which we 
will refer to as FFRDCs for ease of reference).
    Interagency agreements, in this case where other agencies may 
contract or perform services for VA, can be an efficient procurement 
method. However, these acquisitions may pose a variety of risks, in 
part because of the need for stronger internal controls and clear 
definitions of agency roles and responsibilities. As we will see today, 
and we have seen with VA for years, internal controls, management, and 
oversight are tremendous problems for VA.
    Additionally, VA has relationships with FFRDCs, privately owned but 
government-funded entities, that have long-term relationships with 
federal agencies intended to meet special, long-term research or 
development needs that cannot be met as effectively by existing in-
house or contractor resources. FFRDCs are granted special access, 
beyond that which is common for normal contractual relationships, to 
government and supplier data.
    Following an investigation of these issues begun last Congress, I 
asked GAO to look into VA's oversight and management of these 
relationships. Unfortunately, what GAO found is typical regarding data 
reliability within VA. For instance, VA cannot account for the extent 
to which it utilized interagency agreements for FY12 through FY14. For 
this period, VA had data showing that it obligated at least $1.7 
billion for this period, when in fact, GAO found that this amount was 
actually between $2.6 and $2.9 billion, amounting to a $600 to $900 
million inconsistency.
    Further, half of the interagency agreements G-A-O reviewed did not 
contain necessary documentation, which is another of the many instances 
where VA's poor oversight and management of its procurement processes 
leaves the department open to rampant waste, potential fraud, and 
certain abuse. Similarly VA obligated over $260 million in this same 
FY12 through FY14 period to FFRDCs. One downfall with FFRDCs is that 
they are noncompetitive, as is evidenced by the fact that nearly all of 
VA's relationships with them are with those operated by one 
corporation.
    Additional shortfalls GAO found with VA's data include a failure to 
centrally track some contract actions, limited documentation of pre-
award reviews, and in some cases, contract files that did not indicate 
why VA determined a contract price was acceptable. This hearing will 
highlight yet another set of contracting problems within VA, where 
hundreds of millions, if not billions, of dollars are unaccounted for.
    In a time where VA has come back to Congress to ask for an 
additional $3 billion because it has run out of money it should have to 
serve veterans, I consider this another grave failure. I look forward 
to the discussion we will have here today on this important issue.
    With that, I now yield to Ranking Member Kuster for any opening 
remarks she may have.




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