[House Report 107-600]
[From the U.S. Government Publishing Office]



                                                                       
107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     107-600

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



 
      VETERANS HEALTH CARE AND PROCUREMENT IMPROVEMENT ACT OF 2002

                                _______
                                

 July 22, 2002.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Smith of New Jersey, from the Committee on Veterans' Affairs, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 3645]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Veterans' Affairs, to whom was referred 
the bill (H.R. 3645) to amend title 38, United States Code, to 
provide for improved procurement practices by the Department of 
Veterans Affairs in procuring health-care items, having 
considered the same, reports favorably thereon with an 
amendment and recommends that the bill as amended do pass.

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Veterans Health Care 
and Procurement Improvement Act of 2002''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. References to title 38, United States Code.
Sec. 3. Limitation on use of local contracts for Department of Veterans 
Affairs procurement of health-care items.
Sec. 4. Enhancements to enhanced-use lease authority.
Sec. 5. Eligibility for Department of Veterans Affairs health care of 
certain additional Filipino World War II veterans residing in the 
United States.
Sec. 6. Outpatient dental care for all former prisoners of war.
Sec. 7. Improved accountability of research corporations established at 
Department of Veterans Affairs medical centers.
Sec. 8. Department of Defense participation in Revolving Supply Fund 
purchases.
Sec. 9. Name of Department of Veterans Affairs outpatient clinic, New 
London, Connecticut.

SEC. 2. REFERENCES TO TITLE 38, UNITED STATES CODE.

  Except as otherwise expressly provided, whenever in this Act an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of title 38, United States 
Code.

SEC. 3. LIMITATION ON USE OF LOCAL CONTRACTS FOR DEPARTMENT OF VETERANS 
                    AFFAIRS PROCUREMENT OF HEALTH-CARE ITEMS.

  (a) IN GENERAL.--Section 8125 is amended to read as follows:

``Sec. 8125. PROCUREMENT OF HEALTH-CARE ITEMS

  ``(a) Except as provided in subsection (b), any procurement of a 
health-care item by the Department shall be made through the use of a 
Federal Supply Schedule contract, or a national contract, that meets 
the requirements of subsection (d).
  ``(b)(1) Subsection (a) does not apply to a procurement of a health-
care item in any of the following cases:
          ``(A) A procurement that is necessary to meet a current or 
        near-term medical emergency at a medical center.
          ``(B) A procurement that is for a health-care item that is 
        not listed in the Federal Supply Schedule or as part of a 
        national contract and for which there is a valid clinical need.
          ``(C) A procurement that is for a specialized health-care 
        item not listed in the Federal Supply Schedule or as part of a 
        national contract and that is to meet the special needs of an 
        individual patient who has one of the special needs identified 
        in section 1706(b) of this title and who has a valid clinical 
        need for the item.
          ``(D) A procurement that is part of an approved sharing 
        agreement between the Department of Defense and the Department 
        of Veterans Affairs with demonstrable cost-per-item savings for 
        a health-care item listed on the Federal Supply Schedule or a 
        national contract.
          ``(E) A procurement that supports a prime contract or a 
        subcontract with a small business concern qualifying for a 
        procurement preference program under section 8 or 15 of the 
        Small Business Act (15 U.S.C. 637, 644), if the cost of the 
        item to be procured is no more than the cost (taking price and 
        value into consideration) of the comparable item on the Federal 
        Supply Schedule or national contract and if the item meets the 
        requirements of subsections (d)(1)(A) and (d)(2).
  ``(2) A procurement may be made as authorized under subparagraph (B) 
of paragraph (1) only if the procurement is specifically authorized in 
advance in writing by the Secretary. The authority of the Secretary 
under the preceding sentence may only be delegated to the Deputy 
Secretary or to an official of the Veterans Health Administration not 
below the level of a Deputy Under Secretary (or equivalent) acting 
jointly with a procurement executive of the Department not below the 
level of an Associate Deputy Assistant Secretary.
  ``(c) In the case of an emergency procurement of a health-care item 
as authorized by subsection (b)(1)(A), the quantity of the item 
procured may not exceed the quantity of that item that is the 
reasonably foreseeable need for the item at the medical center 
concerned until resupply can be achieved through procurement actions 
other than emergency procurement.
  ``(d) A contract meets the requirements of this subsection if--
          ``(1) the contract includes--
                  ``(A) provisions referred to as `preaward and 
                postaward audit clauses'; and
                  ``(B) a provision referred to as a `price reduction 
                clause'; and
          ``(2) in the case of a contract to be made with a vendor that 
        is a distributor, the contract will be for distribution 
        services only unless the manufacturer of the product can 
        clearly demonstrate that at least 60 percent of its sales of 
        the item through that vendor is to commercial customers with 
        negotiated product prices and that the vendor actually stocks 
        and distributes the product.
  ``(e)(1) The Secretary shall establish procedures to assure 
compliance by each Department medical facility with the provisions of 
this section and with applicable Federal and Department procurement 
regulations.
  ``(2) The procedures established by the Secretary under paragraph (1) 
shall be designed to maximize health-care item variety and the use of 
the Federal Supply Schedule.
  ``(3) The Secretary shall establish and enforce procedures limiting 
the standardization of items at the local, regional, or national level 
to provide special patient populations (as identified in section 
1706(b) of this title) with the range and types of health-care items 
required to meet their clinical and quality-of-life needs.
  ``(4) The Advisory Committee on Prosthetics and Special-Disabilities 
Programs established under section 543 of this title shall review the 
procedures established under paragraph (3), including the 
implementation of those procedures, and shall advise the Secretary when 
those procedures are not effectively enforced by the Department.
  ``(f)(1) The Secretary shall establish annual goals for Department 
medical centers for the purchase of health-care items from Federal 
Supply Schedule and national contracts meeting the requirements of 
subsection (d). Such goals shall be designed to maximize the percentage 
of such purchases that are made through such contracts.
  ``(2) The Secretary shall establish goals for the Department for 
procurements from small business concerns qualifying for a procurement 
preference program under section 8 or 15 of the Small Business Act (15 
U.S.C. 637, 644). Such goals shall be no less than the national goal 
for each such procurement preference program under either of those 
sections.
  ``(3) Achievement of the goals established under this subsection 
shall be an element in the performance standards for employees of the 
Department who have the authority and responsibility for achieving 
those goals.
  ``(g) A provision of law that is inconsistent with any provision of 
this section shall not apply, to the extent of the inconsistency, to 
the procurement of a healthcare item for the Department.
  ``(h)(1) Not later than December 31 each year, the Secretary shall 
submit to the Committees on Veterans' Affairs of the Senate and House 
of Representatives a report on the procurement of health-care items 
during the preceding fiscal year. Each such report shall include, for 
the year covered by the report, the following:
          ``(A) The total dollar amount of all items listed in Federal 
        Supply Classification (FSC) Group 65 or 66 and the total dollar 
        value of the exceptions to subsection (a) under each of 
        subparagraphs (A), (B), (C), (D), and (E) of subsection (b)(1), 
        shown by medical facility.
          ``(B) A detailed explanation for exceptions to subsection 
        (a), including--
                  ``(i) the rationale for use of emergency procurement 
                at Department medical facilities;
                  ``(ii) the rationale for approval of requests under 
                subsection (b)(1)(B) for procurement of items not 
                listed on the Federal Supply Schedule or on national 
                contracts; and
                  ``(iii) exceptions granted for special health-care 
                needs of veterans with disabilities described in 
                section 1706(b) of this title.
          ``(C) Analysis of sharing agreements between the Department 
        and the Department of Defense to indicate the basic written 
        sharing initiative and the division of financial responsibility 
        between the two Departments.
          ``(D) The stated goal under each procurement preference 
        program, together with an assessment of the performance of the 
        Department toward achievement of that goal, especially with 
        respect to the goal for contracting with businesses that are 
        owned by veterans with service-connected disabilities.
  ``(2) The Advisory Committee on Prosthetics and Special- Disabilities 
Programs of the Department shall submit comments on each report under 
paragraph (1) before the report is submitted under that paragraph, and 
the Secretary shall include those comments in the report as submitted.
  ``(i) For the purposes of this subsection:
          ``(1) The term `health-care item' includes any item listed 
        in, or (as determined by the Secretary) of the same nature as 
        an item listed in, Federal Supply Classification (FSC) Group 65 
        or 66.
          ``(2) The term `national contract' means a contract for 
        procurement of an item that is entered into by the National 
        Acquisition Center of the Department or another Department 
        procurement activity, as authorized by the Secretary, that is 
        available for use by all Department medical facilities.
          ``(3) The term `valid clinical need' means in the 
        professional judgment of an appropriate clinician. Such term 
        applies to health care items, prosthetic appliances, sensory or 
        mobility aids and supplies that are prescribed by a physician 
        for special patient populations such as veterans with spinal 
        cord dysfunction, blindness, amputations, and other veterans 
        included in section 1706(b) of this title.
          ``(4) The term `Federal Supply Schedule contract' means a 
        contract that is awarded and administered by the National 
        Acquisition Center of the Department under a delegation of 
        authority from the Administrator of the General Services 
        Administration.
          ``(5) The term `emergency procurement' means a procurement 
        necessary to meet an emergency need affecting the health or 
        safety of a person being furnished health-care services by the 
        Department.''.
  (b) Effective Date.--The amendment made by subsection (a) shall take 
effect on September 30, 2003, and shall apply to procurements by the 
Secretary of Veterans Affairs after that date.

SEC. 4. ENHANCEMENTS TO ENHANCED-USE LEASE AUTHORITY.

  (a) Increased Flexibility Under Enhanced-Use Leases.--Section 
8162(a)(2)(B) is amended--
          (1) by striking ``proposed by the Under Secretary for 
        Health'' and inserting ``proposed by one of the Under 
        Secretaries''; and
          (2) by striking ``to the provision of medical care and 
        services'' and inserting ``to the programs and activities of 
        the Department''.
  (b) Notification of Property To Be Leased.--Section 8163 is amended--
          (1) in the first sentence of subsection (a)--
                  (A) by striking ``designate a property to be leased 
                under an enhanceduse lease'' and inserting ``enter into 
                an enhanced-use lease with respect to certain 
                property''; and
                  (B) by striking ``before making the designation'' and 
                inserting ``before entering into the lease'';
          (2) in subsection (b), by striking ``of the proposed 
        designation'' and inserting ``to the congressional veterans' 
        affairs committees and to the public of the proposed lease''; 
        and
          (3) in subsection (c)--
                  (A) in paragraph (1)--
                          (i) by striking ``designate the property 
                        involved'' and inserting ``enter into an 
                        enhanced-use lease of the property involved''; 
                        and
                          (ii) by striking ``to so designate the 
                        property'' and inserting ``to enter into such 
                        lease'';
                  (B) in paragraph (2), by striking ``90-day period'' 
                and inserting ``45-day period'';
                  (C) in paragraph (3)--
                          (i) by striking ``general description'' in 
                        subparagraph (D) and inserting ``description of 
                        the provisions''; and
                          (ii) by adding at the end the following new 
                        subparagraph:
          ``(G) A summary of a cost-benefit analysis of the proposed 
        lease.''; and
          (D) by striking paragraph (4).
  (c) Disposition of Leased Property.--Section 8164 is amended--
          (1) in subsection (a)--
                  (A) by striking ``by requesting the Administrator of 
                General Services to dispose of the property pursuant to 
                subsection (b)'' in the first sentence; and
                  (B) by striking the third sentence;
          (2) in subsection (b)--
                  (A) by striking ``Secretary and the Administrator of 
                General Services jointly determine'' and inserting 
                ``Secretary determines''; and
                  (B) by striking ``Secretary and the Administrator 
                consider'' and inserting ``Secretary considers''; and
          (3) in subsection (c), by striking ``90 days'' and inserting 
        ``45 days''.
  (d) Use of Proceeds.--Section 8165 is amended--
          (1) in subsection (a)--
                  (A) by striking ``(1)'' after ``(a)'';
                  (B) by inserting after ``of this title'' the 
                following: ``, except that any funds received by the 
                Department under an enhanced-use lease in support of 
                the Veterans Benefits Administration or the National 
                Cemetery Administration and remaining after any 
                deduction from such funds under subsection (b) shall be 
                credited to applicable appropriations of that 
                Administration''; and
          (C) by striking paragraph (2);
          (2) in subsection (b), by adding at the end the following new 
        sentence: ``The Secretary may use the proceeds from any 
        enhanced-use lease to reimburse applicable appropriations of 
        the Department for any expenses incurred in the development of 
        additional enhanced-use leases.''; and
          (3) by striking subsection (c).
  (e) Clerical Amendments.--(1) The heading of section 8163 is amended 
to read as follows:

``Sec. 8163. Hearing and notice requirements regarding proposed 
                    leases''.

  (2) The item relating to section 8163 in the table of sections at the 
beginning of chapter 81 is amended to read as follows:

``8163. Hearing and notice requirements regarding proposed leases.''.

SEC. 5. ELIGIBILITY FOR DEPARTMENT OF VETERANS AFFAIRS HEALTH CARE OF 
                    CERTAIN ADDITIONAL FILIPINO WORLD WAR II VETERANS 
                    RESIDING IN THE UNITED STATES.

  (a) Eligibility for Health Care.--The text of section 1734 is amended 
to read as follows:
  ``(a) The Secretary shall furnish hospital and nursing home care and 
medical services to any individual described in subsection (b) in the 
same manner, and subject to the same terms and conditions, as apply to 
the furnishing of such care and services to individuals who are 
veterans as defined in section 101(2) of this title. Any disability of 
an individual described in subsection (b) that is a service-connected 
disability for purposes of this subchapter (as provided for under 
section 1735(2) of this title) shall be considered to be a service-
connected disability for purposes of furnishing care and services under 
the preceding sentence.
  ``(b) Subsection (a) applies to any individual who is a Commonwealth 
Army veteran or new Philippine Scout and who--
          ``(1) is residing in the United States; and
          ``(2) is a citizen of the United States or an alien lawfully 
        admitted to the United States for permanent residence.''.
  (b) Limitation.--The amendment made by subsection (a) shall take 
effect on the date on which the Secretary of Veterans Affairs submits 
to the Committees on Veterans' Affairs of the Senate and House of 
Representatives and publishes in the Federal Register a certification 
that sufficient resources are available for the fiscal year during 
which the certification is submitted to carry out section 1734 of title 
38, United States Code, as amended by such amendment, during that 
fiscal year at those facilities of the Department of Veterans Affairs 
where the majority of veterans described in subsection (b) of such 
section will receive hospital and nursing home care and medical 
services authorized by subsection (a) of such section.

SEC. 6. OUTPATIENT DENTAL CARE FOR ALL FORMER PRISONERS OF WAR.

  Section 1712(a)(1)(F) is amended by striking ``and who was detained 
or interned for a period of not less than 90 days''.

SEC. 7. IMPROVED ACCOUNTABILITY OF RESEARCH CORPORATIONS ESTABLISHED AT 
                    DEPARTMENT OF VETERANS AFFAIRS MEDICAL CENTERS.

  (a) Audits and Improved Annual Report.--Subsection (b) of section 
7366 is amended to read as follows:
  ``(b)(1) Not later than March 1 each year, each such corporation 
shall submit to the Secretary a report concerning the preceding 
calendar year. Each such annual report shall include the following:
          ``(A) A detailed statement of the corporation's operations, 
        activities, and accomplishments during the preceding calendar 
        year.
          ``(B) A description of each research project or activity for 
        which funds were provided by the corporation during that year 
        or for which funds were provided by the corporation during a 
        preceding year and that is ongoing during the year covered by 
        the report, including, for each such project or activity, the 
        title of the project or activity and a description of the 
        purpose of the project or activity.
          ``(C) A statement of the amount of funds controlled by the 
        corporation as of the first day, and as of the last day, of the 
        year covered by the report and a statement of the amount of 
        funds received, shown by source, during the year.
          ``(D) An itemized accounting of all disbursements made during 
        the year.
          ``(E) The most recent audit of the corporation under 
        paragraph (2).
          ``(F) Such other information as may be necessary to enable 
        the Secretary to prepare the annual report to congressional 
        committees required under section 7367 of this title.
  ``(2) A corporation with a balance of funds under its control in 
excess of $300,000 at any time during a calendar year shall obtain an 
audit of the corporation for that year. Any other corporation shall 
obtain an independent audit of the corporation at least once every 
three years. The report on any such audit shall specifically state 
whether the corporation audited made any payment, or provided any 
travel, during the period covered by the audit to a member of the board 
of directors of the corporation and, if so, the amount and recipient of 
any such payment or travel.
  ``(3) Any audit under paragraph (2) shall be performed by an 
independent auditor and shall be performed in accordance with generally 
accepted Government auditing standards and in accordance with Office of 
Management and Budget Circular A-133.
  ``(4) The Inspector General of the Department shall each year review 
the most recent audit under paragraph (2) of not less than 10 percent 
of the corporations described in the first sentence of paragraph (2) 
and not less than 10 percent of the corporations described in the 
second sentence of that paragraph. As part of such review, the 
Inspector General shall determine whether the audit was carried out in 
accordance with generally accepted Government auditing standards, as 
required by paragraph (3).''.
  (b) Annual Report of Secretary.--(1) Subchapter IV of chapter 73 is 
amended--
          (A) by inserting after subsection (c) of section 7366 the 
        following:

``Sec. 7367. Annual report to congressional committees''; and

          (B) in the text immediately following the section heading 
        inserted by subparagraph (A)--
                          (i) by striking ``(d)'' and inserting 
                        ``(a)'';
                          (ii) by inserting after the first sentence 
                        the following new sentence: ``Each such report 
                        shall be based on the annual reports submitted 
                        by the corporations to the Secretary under 
                        section 7366(b) of this title and shall be 
                        submitted not later than May 1 of the year 
                        following the year covered by such reports.''; 
                        and
                          (iii) by striking ``The report shall'' and 
                        inserting the following:
  ``(b) Each such report shall''.
  (2) The table of sections at the beginning of such chapter is amended 
by inserting after the item relating to section 7366 the following new 
item:

``7367. Annual report to congressional committees.''.
  (c) EXTENSION OF AUTHORITY TO ESTABLISH RESEARCH CORPORATIONS.--
Section 7368 is amended by striking ``December 31, 2003'' and inserting 
``December 31, 2006''.

SEC. 8. DEPARTMENT OF DEFENSE PARTICIPATION IN REVOLVING SUPPLY FUND 
                    PURCHASES.

  (a) Enhancement of Department of Defense Participation.--Section 8121 
is amended--
          (1) by redesignating subsection (b) and (c) as subsections 
        (d) and (e), respectively;
          (2) by designating the last sentence of subsection (a) as 
        subsection (c); and
          (3) by inserting after paragraph (3) of subsection (a) the 
        following new subsection:
  ``(b) The Secretary may authorize the Secretary of Defense to make 
purchases through the fund in the same manner as activities of the 
Department. When services, equipment, or supplies are furnished to the 
Secretary of Defense through the fund, the reimbursement required by 
paragraph (2) of subsection (a) shall be made from appropriations made 
to the Department of Defense, and when services or supplies are to be 
furnished to the Department of Defense, the fund may be credited, as 
provided in paragraph (3) of subsection (a), with advances from 
appropriations available to the Department of Defense.''.
  (b) Effective Date.--The amendments made by subsection (a) shall 
apply only with respect to funds appropriated for a fiscal year after 
fiscal year 2002.

SEC. 9. NAME OF DEPARTMENT OF VETERANS AFFAIRS OUTPATIENT CLINIC, NEW 
                    LONDON, CONNECTICUT.

  The Department of Veterans Affairs outpatient clinic located in New 
London, Connecticut, shall after the date of the enactment of this Act 
be known and designated as the ``John J. McGuirk Department of Veterans 
Affairs Outpatient Clinic''. Any reference to such outpatient clinic in 
any law, regulation, map, document, record, or other paper of the 
United States shall be considered to be a reference to the John J. 
McGuirk Department of Veterans Affairs Outpatient Clinic.

                              Introduction

    H.R. 3645, the Veterans Health Care and Procurement 
Improvement Act of 2002, addresses issues raised by the 
Committee in hearings, meetings, and through other oversight 
mechanisms during the course of this Congress.
    On May 16, 2002, the Subcommittees on Oversight and 
Investigations and Health held a joint hearing on VA Research 
Corporations. Witnesses who appeared before the subcommittees 
included Mr. Michael Slachta, Jr., Assistant Inspector General 
for Audit, Department of Veterans Affairs, accompanied by Mr. 
John Bilobran, Deputy Assistant Inspector General for Audit, 
and Dr. John Mather, Chief Officer, Office of Research 
Compliance and Assurance; the Honorable Robert H. Roswell, 
M.D., Under Secretary for Health, Veterans Health 
Administration, Department of Veterans Affairs, accompanied by 
the Honorable Tim S. McClain, General Counsel, John R. 
Feussner, M.D., Chief Research and Development Officer, and 
Mindy Aisen, M.D., Director of Rehabilitation Research and 
Development; Mr. Antonio Laracuente, Chairman, National 
Association of Veterans' Research and Education Foundations and 
Executive Director, Atlanta Research and Education Foundation; 
Franklin Zieve, M.D., Ph.D., President, McGuire Research 
Institute, Inc.; Mr. Ken Hickman, Executive Director, Brentwood 
Biomedical Research Institute; and Wendy Baldwin, M.D., Deputy 
Director for Extramural Research, National Institutes for 
Health. Written testimonies were received from Mr. James R. 
Fischl, Director of the National Veterans Affairs and 
Rehabilitation Commission, The American Legion; Ms. Joy J. 
Ilem, Assistant National Legislative Director, Disabled 
American Veterans; and Mr. Richard B. Fuller, National 
Legislative Director, Paralyzed Veterans of America.
    On June 13, 2002, the Subcommittee on Health held a hearing 
on the health care of Filipino World War II veterans within the 
Department of Veterans Affairs. Witnesses who appeared before 
the subcommittee included His Excellency Albert Del Rosario, 
Ambassador to the United States, Embassy of the Philippines; 
the Honorable Anthony J. Principi, Secretary, Department of 
Veterans Affairs, accompanied by Mr. John H. Thompson, Deputy 
General Counsel; the Honorable Benjamin Gilman, Member of 
Congress from the State of New York; the Honorable Randy 
``Duke'' Cunningham, Member of Congress from the State of 
California; the Honorable Dana Rohrabacher, Member of Congress 
from the State of California; the Honorable Patsy T. Mink, 
Member of Congress from the State of Hawaii; the Honorable 
Juanita Millender-McDonald, Member of Congress from the State 
of California; the Honorable Robert A. Underwood, Member of 
Congress from the Territory of Guam; Mr. Lou Diamond Phillips, 
actor and Filipino veterans activist, Los Angeles, California; 
Mr. Fritz Friedman, Chair, Assembly for Justice, Los Angeles, 
California; Mr. Resty Supnet, President, Filipino World War II 
Veterans Foundation of San Diego County, accompanied by Mr. 
Romy Monteyro; Mr. Patrick Ganio, President, American Coalition 
for Filipino Veterans; Ms. Susan Espiritu Maquindang, Executive 
Director, Filipino-American Service Group; Ms. Lourdes Santos 
Tancinco, President, San Francisco Veterans Equity Center; Ms. 
Joy J. Ilem, Assistant National Legislative Director, Disabled 
American Veterans; Mr. Richard Weidman, Director of Government 
Relations, Vietnam Veterans of America; and Mr. James Fischl, 
Director of National Veterans Affairs and Rehabilitation 
Commission, The American Legion. Written testimonies were 
received from the Honorable Barbara Boxer, United States 
Senator from the State of California; the Honorable Barbara 
Lee, Member of Congress from the State of California; the 
Honorable Nancy Pelosi, Member of Congress from the State of 
California; the Honorable Maxine Waters, Member of Congress 
from the State of California; General Tagumpay Nanadiego, 
Former Special Presidential Representative, Embassy of the 
Philippines; Ms. Wendy Lawrence, Associate Director, National 
Legislative Service, Veterans of Foreign Wars; and Mr. Richard 
Jones, National Legislative Director, AMVETS.
    On June 26, 2002, the Subcommittee on Health held a 
legislative hearing to consider H.R. 3645, the Veterans Health 
Care Items Procurement Reform and Improvement Act of 2002. 
Witnesses who appeared before the subcommittee included Mr. 
Mark Catlett, Principal Deputy Assistant Secretary for 
Management, Department of Veterans Affairs, accompanied by Mr. 
Gary Krump, Deputy Assistant Secretary for Acquisition and 
Materiel Management, and Ms. Phillipa Anderson, Assistant 
General Counsel; Ms. Cynthia A. Bascetta, Director, Health 
Care-Veterans' Health and Benefits Issues, General Accounting 
Office; Mr. John S. Bilobran, Deputy Assistant Inspector 
General for Auditing, Department of Veterans Affairs, 
accompanied by Ms. Maureen T. Regan, Counselor to the Inspector 
General. Written testimonies were received from Mr. Terry 
Baker, Executive Director of Veterans Aimed Toward Awareness, 
Allied Health for Veterans Care; Mr. David Gorman, Executive 
Director, Disabled American Veterans; Mr. Paul A. Hayden, 
Deputy Director, National Legislative Service, Veterans of 
Foreign Wars of the United States; Mr. John F. Sommer, Jr., 
Executive Director, The American Legion; Mr. Richard B. Fuller, 
National Legislative Director, Paralyzed Veterans of America; 
Mr. Richard Weidman, Director of Government Relations, Vietnam 
Veterans of America; and Mr. Thomas H. Miller, Executive 
Director, Blinded Veterans Association.
    On July 12, 2002, the Subcommittee on Health met and 
unanimously ordered H.R. 3645, with an amendment in the nature 
of a substitute, reported favorably to the full Committee.
    On July 16, 2002, the full Committee met and ordered H.R. 
3645, with an amendment in the nature of a substitute, reported 
favorably to the House by voice vote.

                      Summary of the Reported Bill

    H.R. 3645, as amended, would:

    1. LProvide reform of Department of Veterans Affairs (VA) 
programs and policies regarding procurement of certain health 
care items used by the VA to care for veterans by requiring 
increased use of the Federal Supply Schedule or national 
contracts, with improved accountability and strengthened 
reporting for exceptions made to the reformed policies.
    2. LStreamline the procedures that govern the VA's use of 
enhanced-use lease authority; provide the VA additional 
flexibility to enhance use of VA properties in complementary 
activities.
    3. LProvide hospital and nursing home care and medical 
services to certain Filipino World War II veterans of the 
Philippines Commonwealth Army and former Philippines ``New 
Scouts'' who now legally and permanently reside in the United 
States.
    4. LExpand eligibility for outpatient dental care for all 
former prisoners of war.
    5. LStrengthen auditing and reporting requirements for VA 
research and education corporations established at VA medical 
centers.
    6. LAuthorize the Department of Defense to participate in 
VA's Revolving Supply Fund for the purchase of health care 
items.
    7. LName the VA outpatient clinic in New London, 
Connecticut, for the late John J. McGuirk.

                       BACKGROUND AND DISCUSSION

                     Health Care Procurement Reform

    The largest health care systems in the United States are 
managed by the Federal government, and the Department of 
Veterans Affairs (VA) is a major component of the Federal 
health care system, with 6,470,224 veterans currently enrolled 
for fiscal year 2002. VA's procurement programs spend 
approximately $5 billion each year to obtain a wide array of 
goods and services needed by VA to provide high-quality health 
care to veterans. Based on the Committee's analysis of reviews 
by the VA Inspector General (IG) and the General Accounting 
Office (GAO), as well as other reports, improved management of 
the purchasing of health care items in Federal Supply 
Classification (FSC) categories 65 (medical and dental 
supplies) and 66 (instruments and laboratory equipment), could 
provide significant savings that may be used in furtherance of 
VA's essential mission.
    In prior years, numerous indicators suggested that VA was 
not achieving its potential as a large purchaser of medical and 
surgical supply and equipment items to secure the best pricing. 
This general perspective was reinforced by a May 31, 2001, VA 
IG report on the evaluation of purchasing practices in VA, as 
well as testimony provided by the GAO to the Subcommittee on 
Health at its hearing on June 26, 2002.
    The IG evaluation and GAO testimony identified numerous 
deficiencies in current purchasing practices. Among other 
findings, the reports linked the cause of many deficiencies to 
a VA policy relieving agency procurement officials from the 
requirement to purchase health care items from the Federal 
Supply Schedule (FSS). In effect, this policy decentralized 
VA's contracting and procurement processes for a very 
substantial part of procurements. Decentralization may have had 
the unintended effect of giving many vendors of health care 
items an incentive to remove their products from the FSS and to 
seek product sales in a generally more profitable VA local-
market arena.
    In recent years, VA local-market purchases have 
proliferated, often under contracts without the advantage of 
audit requirements or ``most-favored customer pricing'' for the 
government, both practices normally required under FSS 
procedures. Seemingly cost-effective local purchases of health 
care items for a VA facility or a small network of facilities 
have been touted as significant gains in economies, but they 
obscure other, less efficient contracts and the higher 
administrative costs of contracting locally. These practices 
frustrate the aims of the FSS to obtain good products at the 
best prices on a national basis for the Federal establishment 
at large.
    Claims of continued cost-effective purchases have been made 
by VA, but VA's data reporting on local purchases is often 
contradictory and difficult to reconcile. Numerous exceptions 
for various classes of health care items purchased under 
differing circumstances, coupled with a lack of standardized 
definitions for particular items have culminated in reports of 
widely variable local purchases. Tracking local purchases is 
further complicated by a growing VA practice of small-scale 
purchasing using government-issued credit cards, in particular 
for purchases below the $25,000 reporting threshold for such 
purchase cards.
    In June 2001, the Secretary appointed a VA procurement task 
force to evaluate the nature and scope of these problems and 
recommend solutions. The task force recommended leveraging the 
purchasing power of VA through mandated use of the FSS for 
medical and surgical purchases.
    The Committee bill would require the Secretary to take 
actions consistent with the Department's procurement task force 
report, and would hold the Secretary accountable to Congress 
for tangible results. The Committee bill advances two goals: to 
gain greater efficiency for the resources obligated by the 
Department for specific classifications of health care items in 
FSC categories 65 (medical and dental supplies) and 66 
(instruments and laboratory equipment), and to instill more 
accountability.

    All current indicators demonstrate the desirability of 
greater centralization of the Department's acquisition process, 
but the Committee considers certain exceptions to this policy 
to be necessary and beneficial. The Committee developed five 
exceptions to address these needs. They are:

          Near-term emergency needs.--Emergency purchases of 
        health care items would be permitted, not to exceed the 
        quantities reasonably necessary to meet the foreseeable 
        need until resupply could be achieved through other 
        actions. Authority for emergency purchases would remain 
        a local authority and would be based on defined need. 
        Bona fide emergency procurements would not require pre- 
        or post-audit reviews or price reduction clauses 
        otherwise required by the Committee's bill for all 
        health care items.

          Non-FSS-listed items to meet valid clinical needs.--A 
        health care item not listed on the Federal Supply 
        Schedule or on a national contract could be purchased 
        under the Committee bill if a valid clinical need 
        existed for the item and its procurement were approved 
        in advance. While procurement of such an item would be 
        conducted locally, its ultimate approval would rest 
        with Departmental senior executives specified in the 
        Committee bill. The Committee concluded that a 
        centralization of the level of approval was necessary 
        to assure the validity and relative rarity of 
        procurements of this type. The Committee bill would 
        require reports to the Committees on Veterans' Affairs 
        of the House and Senate of the Department's use of this 
        exceptional authority.

          Non-FSS-listed items for valid clinical needs 
        specific to certain patients.--This exception to the 
        general policy is similar to the previous one, but it 
        would target the health care item needs of special 
        patient populations such as veterans with spinal cord 
        injury, severe visual impairments, amputations, and 
        other veterans whose disabilities are described in 
        title 38, United States Code, section 1706(b). Medical 
        care items procured under this exception would be 
        obtained to meet the special needs of one of these 
        severely disabled veterans, determined by the 
        Department to exhibit a valid clinical need for the 
        item or items in question. The Committee bill would 
        require the Secretary of Veterans Affairs to promulgate 
        procedures to govern such purchases.

          Anticipated greater efficiencies from VA-DOD sharing 
        initiatives.--Department of Veterans Affairs-Department 
        of Defense health resources sharing initiatives have 
        long been recognized as a method for improving 
        efficiency and leveraging the potential of two very 
        large health care delivery systems under separate 
        governance. The Committee bill's exception for VA-DOD 
        sharing ventures involving procurement of medical care 
        items would be intended to promote the sharing process 
        and associated joint procurements when in the interest 
        of the government. However, this exception would 
        require demonstrable savings (taking price and value 
        into consideration) in comparison to similar items 
        procured independently by either Department using FSS 
        pricing or national contracts.

          Protection for small business set-asides.--This 
        exception would afford protection to small business 
        concerns qualifying for procurement preference programs 
        under the Small Business Act. Any contract under this 
        exception would be required to include pre- and post-
        award audit clauses. Also, any such small business 
        vendor that was a distributor (for other than 
        distribution services per se) would be required to 
        clearly demonstrate the commercial value of an item the 
        Department procured, in accordance with a given 
        standard.

    The Secretary would be required to issue and enforce 
procedures that would limit the standardization of items for 
patient populations as identified in section 1706(b) title 38, 
United States Code. A ``one-size-fits-all'' approach to the 
particular needs of severely disabled veterans would be 
inappropriate. The Department's clinical practitioners would 
not be constrained by limited choices for severely disabled 
veterans. When selecting a health care item for the 
specialized-care needs of veterans, the clinician would be 
authorized under the Committee bill to consider both clinical 
and quality of life needs. Under the Committee bill, the 
Advisory Committee on Prosthetics and Special Disabilities 
Programs, established in section 543 of title 38, United States 
Code, would be authorized to oversee the Department's 
implementation of the Committee's bill as it would affect 
veterans under care in the various programs defined in section 
1706(b), title 38, United States Code. The Advisory Committee 
would review the procedures promulgated by the Secretary and 
advise the Secretary whenever those procedures were not 
effectively enforced by the Department.
    In summary, the Committee bill would require the Secretary 
to establish Department-wide goals for compliance with 
specified procurement requirements to maximize the percentage 
of purchases that are made from Federal Supply Schedule and 
national contracts. The Secretary would be required to 
establish performance goals for agency procurements from the 
FSS or national contracts, and would be required to report 
actual performance toward achievement of these goals to the 
Committees on Veterans' Affairs of the House and Senate at the 
conclusion of each fiscal year. The Secretary would be required 
to analyze and report purchases not made from the FSS or a 
national contract, and to evaluate Department employees 
responsible for procurement programs of their degree of 
compliance with the policies that would be promulgated by 
enactment of the Committee bill.

                      ENHANCED-USE LEASE AUTHORITY

    Chapter 81 of title 38, United States Code, authorizes the 
Department to conduct an enhanced-use lease program to assist 
the Department in providing complementary uses of VA buildings 
and land holdings that are not needed for the direct care of 
veterans. The Department requested certain amendments be 
considered by the Committee to provide more flexibility to the 
Department in expanding the enhanced-use lease program to more 
facilities and in improving efficiency.
    Under current law, business plans for enhanced-use lease 
projects are proposed by the Department's Under Secretary for 
Health for properties under direct control of the Under 
Secretary. The Committee bill would expand this authority to 
permit business plans for enhanced-use leases to be proposed by 
the Under Secretary for Benefits and the Under Secretary for 
Memorial Affairs. This provision would also clarify that the 
services which could be provided as in-kind consideration for 
an enhanced-use lease would not be limited to those provided on 
the leased property.
    Two separate notifications to Congress are currently 
required by law prior to the Department entering into an 
enhanced-use lease. The Committee bill would combine the two 
notices into one notification. This report consolidation would 
streamline the Department's notification process and increase 
the Department's ability to take advantage of opportunities in 
private-sector markets.
    Also, any disposal of property subject to an enhanced-use 
lease currently requires an additional procedural step, 
consultation with the Administrator of General Services. The 
Committee bill would remove this requirement and enable the 
Secretary to determine that such dispositions are in the best 
interests of the Department.
    Current law requires proceeds received by the Department 
from an enhanced-use lease (and remaining after deduction of 
appropriate expenses) be deposited into the Health Services 
Improvement Fund, and any proceeds from a disposal of property 
subject to an enhanced-use lease be deposited into the Nursing 
Home Revolving Fund. The Committee bill would allow each of the 
three major administrations to be credited proceeds received 
from projects under its jurisdiction (after reimbursement of 
expenses), and would make these proceeds available for use by 
that administration. The provision would also clarify the 
Department's ability to use proceeds from an enhanced-use 
project to reimburse the account from which funds would be 
expended in the development of that project.

   HEALTH CARE FOR FILIPINO COMMONWEALTH ARMY AND NEW SCOUT VETERANS

    The Filipino soldiers of World War II served side-by-side 
with forces from the United States, exhibiting great courage at 
the epic battles of Bataan and Corregidor and contributing to 
the successful outcome of the war. After the Philippines became 
independent, Congress passed the Rescission Act of 1946, 
reducing or eliminating many of the veterans' benefits Filipino 
veterans had been eligible for based on service in the 
Commonwealth Army. Today, almost 60 years later, 60,000 World 
War II Filipino veterans are alive and continue to seek 
restoration of these benefits.
    The Committee bill would provide a significant health care 
benefit to Commonwealth Army veterans and New Scouts of the 
Philippines who are permanent and legal residents of the United 
States, giving them equal status with their American veteran 
peers. Approximately 14,000 Filipino veterans in the United 
States would be eligible for this health care benefit. The 
Department would not offer these veterans access unless the 
Secretary of Veterans Affairs certified and provided public 
notice in the Federal Register that it had the resources to do 
so. The Administration provided testimony in support of this 
provision and estimated that the proposal would cost $52.6 
million over 5 years.

            DENTAL BENEFITS FOR ALL FORMER PRISONERS OF WAR

    Chapter 17 of title 38, United States Code, authorizes 
dental care and services for any dental condition to former 
prisoners of war (POWs) who were interned or incarcerated for 
90 days or more by an enemy of the United States in wartime. 
The Committee bill would authorize the Department to provide 
outpatient dental care to former POWs, regardless of the length 
of their detention or internment. The Committee bill would 
ensure that former POWs receive all needed care for dental 
conditions that may be attributable to the privations 
experienced during their service to the Nation while held 
prisoner.

  HEIGHTENED ACCOUNTABILITY FOR VA RESEARCH AND EDUCATION CORPORATIONS

    In 1988, Congress enacted Public Law 100-322, the Veterans' 
Benefits and Services Act, which included a provision that gave 
the VA the authority to establish nonprofit research 
corporations. The Act provided a flexible funding mechanism for 
the conduct of approved research at medical centers. The 
impetus for establishing the research corporations in law was 
to provide a conduit for research funds and an accounting 
mechanism whereby the VA would submit to Congress an annual 
report on the number and location of corporations established 
and the amount of contributions made to each such corporation. 
Unfortunately, these reports provide Congress insufficient 
information about the activities of the corporations to enable 
Congress to provide proper oversight of their functions.
    The Department's Assistant Inspector General for Auditing 
has testified before the Committee that the VA IG had published 
three reports from 1994-97 on concerns about insufficient 
information relating to the functions of these corporations. 
These reports identified the need for stricter accountability 
and oversight with regard to the administration of funds.
    The Committee bill would amend section 7366 of title 38, 
United States Code, to require each VA research corporation to 
submit to the Secretary not later than March 1 of each year a 
detailed statement of corporate operations, activities and 
accomplishments during the preceding year. The statement would 
include the amount of funds received along with the source of 
funding and an itemized accounting for all disbursements. Under 
the Committee bill, those corporations with funding in excess 
of $300,000 would continue to be required to obtain an audit of 
the corporation for that year, and corporations with funding 
totaling less than $300,000 would obtain an audit every three 
years. These audits would continue to be conducted by 
independent auditors and performed in accordance with generally 
accepted government auditing standards.
    Under the Committee bill, the VA IG would be required to 
randomly review audits to determine whether they were carried 
out in accordance with the auditing standards specified by the 
bill. The Committee bill would also extend the authority for 
the corporations until December 31, 2006.

   AUTHORIZE THE DEPARTMENT OF DEFENSE TO PURCHASE MEDICAL ITEMS AND 
              SERVICES THROUGH VA'S REVOLVING SUPPLY FUND

    The Veterans Millennium Health Care and Benefits Act, 
Public Law 106-117, requires the Secretaries of DOD and VA to 
jointly report on cooperation in procuring pharmaceuticals and 
medical supplies and equipment. Joint VA-DOD procurement is one 
of the President's management objectives, and VA recently 
adopted the recommendations of its procurement reform task 
force that endorsed joint procurement actions as a method to 
obtain better prices. However, achievement of these goals is 
difficult because the enabling language of the VA's revolving 
supply fund does not permit direct support of DOD's medical 
supply needs.
    The Committee bill would grant direct authority to enable 
the Secretary of Veterans Affairs to permit the Secretary of 
Defense to use VA's supply fund, and would require the 
Secretary of Defense to reimburse the supply fund for such 
purchases.

NAMING OF VA COMMUNITY BASED OUTPATIENT CLINIC, NEW LONDON, CONNECTICUT

    The Committee bill would honor the late John J. McGuirk for 
his service as a devoted World War II veteran and patriotic 
American by affixing his name to the Department's outpatient 
clinic in New London, Connecticut.
    During World War II, Mr. McGuirk, a New London native, 
joined the Navy as a salvage diver and served honorably in the 
South Pacific. During his service, he was awarded the World War 
II Victory Medal, Asiatic Pacific Theatre Medal, and the 
Philippine Liberation Medal.
    Mr. McGuirk's commitment to his Nation and fellow veterans 
was prominent throughout his life. He was an advocate for the 
opening of a VA clinic in southeastern Connecticut. His 
leadership led the VA to establish a Veterans Outreach Clinic 
in New London, on the grounds of the Coast Guard Academy.
    The Connecticut Congressional delegation is unanimous in 
its support for renaming this facility after Mr. McGuirk, as 
are the Disabled Veterans of America, Veterans of Foreign Wars, 
Paralyzed Veterans of America, The American Legion, AMVETS, and 
the Coast Guard Academy. The naming of this clinic in memory of 
Mr. McGuirk is in compliance with the policy of the Committee 
for naming Department of Veterans Affairs facilities.

                      Section-By Section Analysis

    Section 1(a) of the bill would provide that this Act may be 
cited as the ``Veterans Health Care and Procurement Improvement 
Act of 2002.''

    Section 1(b) of the bill sets forth the table of contents.

    Section 2 of the bill explains that citations made 
throughout this Act are understood to be amending, repealing or 
referencing sections of title 38 of the United States Code, 
unless otherwise stated.

    Section 3(a) would limit use of local contracts for VA 
procurement of health care items by amending section 8125 of 
title 38, United States Code.

    Section 8125 would require purchase of health care items 
either on a Federal Supply Schedule (FSS) contract or a 
national contract.

    Section 8125(b)(1) would provide for five exceptions to the 
required use of FSS or national contracts.

    Section 8125(b)(1)(A) would except a current or near-term 
medical emergency at a medical center.

    Section 8125(b)(1)(B) would except a legitimate clinical 
need for a health care item that is not available on a FSS 
contract or part of a national contract.

    Section 8125(b)(1)(C) would except the special needs of an 
individual patient if specified conditions are present and the 
patient's special needs are consistent with those special needs 
identified in section 1706(b), title 38, United States Code.

    Section 8125(b)(1)(D) would except items that are 
fundamental to a sharing agreement between VA and the 
Department of Defense (DOD), if a comparative cost savings is 
achieved.

    Section 8125(b)(1)(E) would except purchases made through a 
set-aside for small, disadvantaged, minority or veteran-owned 
businesses, with specific conditions.

    Section 8125(b)(2) would establish an approval process for 
procuring items that are not part of a FSS or national contract 
and would establish lines of authority within VA for obtaining 
advance approval of such exemptions, which would be required to 
be in writing.

    Section 8125(c) would establish a standard of ``reasonably 
foreseeable need'' for the quantity of an item that could be 
purchased using an emergency procurement exemption.

    Section 8125(d) would establish the requirements for 
contracts under this subsection and impose limitations on 
participation by distributors who do not manufacture the 
product that would be procured.

    Sections 8125(d)(1)(A) and (B) would require such contracts 
to contain ``pre- and post-award audit clauses'' and a ``price 
reduction clause''.

    Section 8125(d)(2) would require that any contract made 
with a vendor that is a distributor would be for distribution 
services only unless the manufacturer of the product can 
clearly demonstrate that at least 60 percent of its sales of 
the item through that vendor would be to commercial customers 
with negotiated product prices and that the vendor actually 
stocks and distributes the product.

    Section 8125(e)(1) would require the Secretary to establish 
procedures to assure compliance by each VA medical facility 
with the provisions of this section and applicable Federal and 
VA procurement regulations.

    Section 8125(e)(2) would require that new compliance 
procedures be designed to maximize both variety of items 
available and standard use of the FSS.

    Section 8125(e)(3) would require the Secretary to establish 
and enforce procedures limiting the standardization of items to 
be purchased at the local, regional or national level to 
provide patients with special needs, as identified in section 
1706(b), title 38, United States Code, the range and type of 
health care items required to meet their individual clinical 
and quality-of-life needs.

    Section 8125(e)(4) would require the Advisory Committee on 
Prosthetics and Special-Disabilities Programs to review VA's 
procurement procedures and actual performance as they relate to 
special-need patient populations and to advise the Secretary 
when those procedures are not effectively enforced by the VA.

    Section 8125(f)(1) would require the Secretary to establish 
annual performance goals maximizing purchases of health care 
items from FSS and national contracts.

    Section 8125(f)(2) would require the Secretary to establish 
performance goals for procurements from small, disadvantaged, 
minority or veteran-owned businesses qualifying for a 
procurement preference program under the Small Business Act (15 
U.S.C. 637, 644), and would require that such goals be no less 
than the national goal for each such procurement preference 
program.

    Section 8125(f)(3) would require that achievement of the 
goals established under this subsection would be an element in 
performance standards for VA employees with the authority and 
responsibility for achieving those goals.

    Section 8125(g) would provide that any portion of another 
provision of law dealing with the procurement of health care 
items that is inconsistent with provisions of this Act would 
not apply to VA procurement of a health care item.

    Section 8125(h)(1) would require specific annual reports 
from the VA detailing its procurement of health care items and 
implementation of provisions of this Act; the reports would be 
due to the Committees on Veterans' Affairs of the Senate and 
House of Representatives by December 31 of each year and cover 
the preceding fiscal year.

    Sections 8125(h)(1)(A) through (D) would require such 
annual reports to include: the total dollar amount of all items 
listed in Federal Supply Classification Group 65 or 66 and the 
total dollar value by medical facility of the exceptions to the 
required use of FSS or national contracts; a detailed 
explanation for such exceptions, including the rationale for 
use of emergency procurement, approval of requests for unlisted 
items and the exceptions for special health care needs of 
veterans with disabilities; analysis of sharing agreements 
between VA and DOD; and the stated goal under each procurement 
preference program and an assessment of performance in 
achieving that goal.

    Section 8125(h)(2) would require the VA Advisory Committee 
on Prosthetics and Special Disabilities to submit comments on 
each such report under paragraph (1) and would require the 
Secretary to include those comments in the report.

    Sections 8125(i)(1) through (5) would for purposes of this 
subsection would define the terms ``health care item,'' 
``national contract,'' ``valid clinical need,'' ``Federal 
Supply Schedule contract,'' and ``emergency procurement.''

    Section 3(b) of the bill would provide an effective date of 
September 30, 2003, for the amendment made by subsection (a); 
the amendment would apply to VA procurements after that date.

    Section 4(a) of the bill would expand the VA's enhanced-use 
lease authority by amending section 8162 of title 38, United 
States Code.

    Section 4(a)(1) of the bill would amend section 
8162(a)(2)(B) to include under enhanced-use leasing authority 
each of the VA's Under Secretaries, rather than only the Under 
Secretary for Health.

    Section 4(a)(2) of the bill would amend section 
8162(a)(2)(B) by expanding enhanced-use leasing authority from 
provision of medical care and services to all programs and 
activities of the VA.

    Section 4(b)(1)(A) and (B) of the bill would amend section 
8163(a) by changing the requirement for a public hearing from 
prior to when the Secretary proposes to designate a property to 
be leased to when the Secretary proposes to enter into an 
enhanced-use lease for a property.

    Section 4(b)(2) of the bill would amend section 8163(b) to 
specify that notice must be given to the Committees on 
Veterans' Affairs of the House and Senate and to the public 
before the required public hearing on the proposed lease.

    Sections 4(b)(3)(A) and (B) of the bill would amend section 
8163(c)(1) and (2) by changing the requirement for notification 
to the Committees on Veterans' Affairs of the House and Senate 
from the time of the Secretary's intent to designate the 
property involved for an enhance-use lease, to the time of the 
Secretary's intent to enter into an enhanced-use lease of the 
property involved, and by reducing the period the Secretary 
must wait before entering into such a lease from 90 days to 45 
days.

    Section 4(b)(3)(C) of the bill would amend section 
8163(c)(3) by requiring a description of the provisions of the 
proposed lease, rather than a general description of the 
proposed lease, and by requiring a summary of a cost-benefit 
analysis.

    Section 4(b)(3)(D) of the bill would strike the requirement 
of section 8163(c)(4) that the Secretary report to the 
Committees on Veterans' Affairs of the House and Senate not 
less than 30 days before entering into an enhanced-use lease.

    Section 4(c)(1) through (3) of the bill would amend section 
8164(a) by eliminating the request of the Secretary to the 
Administrator of the General Services Administration regarding 
disposal of the property, and the requirement of notice to the 
Committees on Veterans' Affairs of the House and Senate 
regarding disposition of property would be reduced from 90 days 
to 45 days.

    Section 4(d) of the bill would amend section 8165(a) and 
(b) to allow funds received under an enhanced-use lease, after 
deduction of expenses, to be credited to applicable 
appropriations of the administration; and to allow the 
Department to use proceeds from an enhanced-use project to 
reimburse the appropriations of the Department for expenses 
incurred in developing additional enhanced-use leases.

    Section 4(e) of the bill would make clerical amendments to 
section 8163.

    Section 5(a) of the bill would amend section 1734 of title 
38, United States Code, to authorize the Secretary to furnish 
hospital and nursing home care and medical services to any 
individual who is a Commonwealth Army veteran or Philippines 
New Scout who is residing in the United States and who is a 
citizen of the United States or who is an alien lawfully 
admitted to the United States for permanent residence. Such 
care and services would be subject to the same terms and 
conditions as they apply to individuals who are veterans as 
defined in section 101(2) of title 38, United States Code. 
Service-connected disabilities for purposes of this subchapter 
(as provided for under section 1735(2) of title 38, United 
States Code), would be considered to be a service-connected 
disability for purposes of furnishing such care and services.

    Section 5(b) of the bill would place a limitation on the 
provision of such care and services by requiring the Secretary 
to submit to the Committees on Veterans' Affairs of the Senate 
and House of Representatives and publish in the Federal 
Register a certification that sufficient resources are 
available for the fiscal year during which the certification is 
submitted and at those facilities where the majority of these 
veterans would receive their care and services.

    Section 6 of the bill would amend section 1712(a)(1)(F) of 
title 38, United States Code, to authorize outpatient dental 
care for all former prisoners of war without regard to the 
length of their internment or detention.

    Section 7(a) of the bill would amend section 7366(b)(1) of 
title 38, United States Code to require that each research 
corporation at a VA medical center submit a report to the 
Secretary concerning the preceding calendar by not later than 
March 1 of each year. The report would be required to include a 
detailed description of the corporation's operations, 
activities, and accomplishments during the preceding calendar 
year; a description of each funded research project; a 
statement of the total funding controlled by the corporation; 
an itemized accounting of all disbursements made during the 
year; the most recent audit of corporation; and such other 
information as necessary to assist Secretary with the report 
required under section 7367 of title 38, United States Code.

    Section 7366(b)(2) would require that corporations with 
funds in excess of $300,000 during a calendar year obtain an 
audit for that calendar year. Corporations with funding levels 
of less than $300,000 would be required to obtain an 
independent audit at least once every three years. The report 
would be required to include any payment or travel provided to 
members of the board of directors of the corporation and the 
amount of any such payment or travel.

    Section 7366(b)(3) would require that any audit be 
performed in accordance with generally accepted government 
auditing standards and in accordance with Office of Management 
and Budget Circular A-133.

    Section 7366(b)(4) would require that the Inspector General 
of the Department review at least 10 percent of all 
corporations with funds in excess of $300,000 each year and 10 
percent of all corporations with funds below $300,000 at least 
once every three years. As part of any such review, the VA's 
Inspector General would be required to determine if the audits 
were carried out in accordance with generally accepted 
government auditing standards.

    Section 7(b) of the bill would amend Subchapter IV of 
chapter 73 of title 38, United States Code, by adding a new 
section 7367 with the title, ``Annual report to congressional 
committees''.

    Section 7367 would require that annual reports submitted by 
research corporations to the Secretary be submitted to Congress 
not later than May 1 of the year following the year covered by 
such reports.

    Section 7(c) of the bill would amend section 7368 of title 
38, United States Code, to extend authority to establish 
research corporations from December 31, 2003 until December 31, 
2006.

    Section 8(a) of the bill would amend section 8121 of title 
38, United States Code, by adding a new subsection to allow the 
Secretary to authorize the Department of Defense to make 
purchases through the VA revolving supply fund in the same 
manner as activities of the VA, for services, equipment, or 
supplies furnished to the Secretary of Defense through the 
fund. The reimbursement would be made from Department of 
Defense appropriations and the fund could be credited with 
advances from appropriations made available to the Department 
of Defense.

    Section 8(b) of the bill would provide that the amendment 
made by section 8(a) would only apply to Department of Defense 
funds appropriated for a fiscal year after fiscal year 2002.

    Section 9 of the bill would name the Department of Veterans 
Affairs' outpatient clinic in New London, Connecticut, the 
``John J. McGuirk Department of Veterans Affairs Outpatient 
Clinic.''

                    Performance Goals and Objectives

    The provisions of the reported bill that are covered by the 
Government Performance and Results Act would affect VA 
procurement and enhanced-use leasing activities, auditing and 
reporting requirements for research and education corporations 
at VA facilities, and health and dental care eligibility for 
certain veterans. The VA's program performance goals and 
objectives are established in annual performance plans and are 
subject to the Committee's regular oversight.

              Statement of the Views of the Administration

    From the statement of Mr. Mark Catlett, Principal Deputy 
Assistant Secretary for Management, Department of Veterans 
Affairs, before the Subcommittee on Health, Committee on 
Veterans' Affairs, June 26, 2002:

          We fully endorse the objective reflected in H.R. 3645 
        of leveraging the purchasing power of VA and other 
        Government agencies. . . . We recognize that H.R. 3645 
        supports the objective of leveraging the purchasing 
        power of VA and other Government agencies. We believe 
        that volume-leveraged purchasing in VA is essential. 
        Our vast purchasing power must not be fragmented and 
        the Department must employ contracting practices that 
        achieve the best possible terms and prices in our 
        acquisitions of health care items. . . . However, after 
        careful consideration of the bill, VA does not believe 
        that legislation mandating any particular procurement 
        method in the acquisition of health care items is 
        desirable. As acquisition methods and trends continue 
        to evolve, this legislation may not allow the 
        Department the necessary flexibility to take advantage 
        of those improvements. The Department should not be 
        compelled to seek legislative changes in order to take 
        advantage of improved procurement practices.

    From the statement of the Honorable Anthony J. Principi, 
Secretary, Department of Veterans Affairs, before the 
Subcommittee on Health, Committee on Veterans' Affairs, June 
13, 2002:

          Specifically with regard to health care, prior to 
        October 27, 2000, the law authorized VA to provide care 
        in the Manila Outpatient Clinic only for the service-
        connected conditions of U.S. veterans. The term `U.S. 
        veterans' includes members of the Old Philippine 
        Scouts. With enactment of Public Law 106-377 in October 
        of 2000, Congress authorized VA to begin providing care 
        in the clinic for the non-service-connected conditions 
        of those same U.S. veterans. Filipino veterans, 
        however, including Commonwealth Army veterans and New 
        Philippine Scouts, are not eligible for VA health care 
        in the Philippines. The Philippine Government provides 
        health care to eligible Filipino veterans. The law 
        regarding care of Filipino veterans residing in the 
        United States also changed. Prior to the enactment of 
        Public Law 106-377, VA was authorized to provide care 
        in the United States only for the service-connected 
        conditions of Commonwealth Army veterans, members of 
        recognized guerilla groups, and New Philippine Scouts. 
        Public Law 106-377 authorized VA to begin providing 
        hospital care, nursing home care, and medical services 
        to veterans of the Commonwealth Army and recognized 
        guerilla forces that have service-connected 
        disabilities on the same basis as U.S. veterans. In 
        short the change allowed these veterans to seek care 
        for their non-service-connected conditions. The change 
        in law did not expand eligibility for New Philippine 
        Scout veterans. They continue to be eligible for care 
        in the United States only on a discretionary basis 
        (within the limits of VA resources) and only for 
        service-connected disabilities. Mr. Chairman, 
        legislation currently pending before the House and the 
        Senate would further expand benefit eligibility for 
        Filipino veterans and their survivors. In that regard, 
        I am pleased to inform the Committee that, in our April 
        25 letter, addressed to Chairman Rockefeller of the 
        Senate Committee on Veterans' Affairs, on S. 1042, the 
        Department expressed the Administration's support for 
        the following enhancements in benefits to Filipino 
        veterans and their survivors:

          . . .

             Lproviding comprehensive care on the same 
        basis as for U.S. veterans for veterans of the 
        Commonwealth Army, recognized guerilla forces and New 
        Philippine Scouts who are residing in the United States 
        and are either citizens of, or aliens lawfully admitted 
        for permanent residence in the United States, 
        regardless of whether they have service-connected 
        disabilities.

          . . . Mr. Chairman, VA continues to work with the 
        White House to explore opportunities to enhance our 
        assistance to Filipino veterans. Section 1731 of Title 
        38 authorizes the President to assist the Republic of 
        the Philippines in fulfilling its responsibilities in 
        providing medical care and treatment for Commonwealth 
        Army veterans and new Philippine Scouts. I am working 
        to utilize this authority to provide grants of 
        equipment, as well as assistance in installation and 
        maintenance of the equipment, to the Philippine 
        government to improve care at the Veterans Memorial 
        Medical Center in Manila. I anticipate the equipment 
        grants would be for $500,000 per year.

                            Roll Call Votes

    During Committee consideration of H.R. 3645, there was a 
recorded vote on an amendment offered by Mr. Filner to extend 
compensation benefits to certain Filipino veterans. The 
amendment was rejected on a roll vote of 14-15.

Date:         Tuesday, July 16, 2002
Call to Order: 9:35 a.m.
Adjourn:      11:10 a.m.
Subject:      Filner amendment to H.R. 3645 (as amended)


----------------------------------------------------------------------------------------------------------------
                 NAME                            YEA                      NAY                   NOT VOTING
----------------------------------------------------------------------------------------------------------------
Chris Smith, NJ, Chairman............   ......................  x......................
Bob Stump, AZ........................   ......................   ......................  x
Michael Bilirakis, FL, Vice Chairman.   ......................  x......................
Terry Everett, AL....................   ......................  x......................
Steve Buyer, IN......................   ......................  x......................
Jack Quinn, NY.......................   ......................  x......................
Cliff Stearns, FL....................   ......................  x......................
Jerry Moran, KS......................   ......................  x......................
Howard (Buck) McKeon, CA.............   ......................  x......................
Jim Gibbons, NV......................   ......................  x......................
Mike Simpson, ID.....................   ......................  x......................
Richard Baker, LA....................   ......................  x......................
Rob Simmons, CT......................   ......................  x......................
Ander Crenshaw, FL...................   ......................  x......................
Henry Brown, SC......................   ......................   ......................  x
Jeff Miller, FL......................   ......................  x......................
John Boozman, AR.....................   ......................  x......................

Lane Evans, IL, Ranking..............  x......................   ......................
Bob Filner, CA.......................  x......................   ......................
Luis Gutierrez, IL...................  x......................   ......................
Corrine Brown, FL....................  x......................   ......................
Julia Carson, IN.....................  x......................   ......................
Silvestre Reyes, TX..................  x......................   ......................
Vic Snyder, AR.......................  x......................   ......................
Ciro Rodriguez, TX...................  x......................   ......................
Ronnie Shows, MS.....................  x......................   ......................
Stephen Lynch, MA....................  x......................   ......................
Shelley Berkley, NV..................  x......................   ......................
Baron P. Hill, IN....................  x......................   ......................
Tom Udall, NM........................  x......................   ......................
Susan Davis, CA......................  x......................   ......................

          TOTAL......................  14.....................  15.....................  2
----------------------------------------------------------------------------------------------------------------


               Congressional Budget Office Cost Estimate

    The following letter was received from the Congressional 
Budget Office concerning the cost of the reported bill:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 19, 2002.
Hon. Christopher H. Smith
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC.

    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3645, the Veterans 
Health Care and Procurement Reform and Improvement Act of 2002.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sam 
Papenfuss, who can be reached at 226-2840.

            Sincerely,
                                            Dan L. Crippen,
                                                          Director.

    Enclosure.
                              ----------                              


               Congressional Budget Office Cost Estimate

  H.R. 3645, VETERANS HEALTH CARE AND PROCUREMENT IMPROVEMENT ACT OF 
 2002, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON VETERANS' AFFAIRS 
                            ON JULY 16, 2002

Summary

    H.R. 3645 would change how the Department of Veterans 
Affairs (VA) procures its health care items. The bill would 
require that all health care items be purchased through the use 
of the federal supply schedule (FSS) or national contracts, 
except for defined exceptions and emergencies approved by the 
Secretary of Veterans Affairs. H.R. 3645 also would expand VA's 
enhanced-use lease authority. In addition, the bill would 
expand health care benefits for certain Filipino veterans, and 
provide dental benefits for certain former prisoners of war. 
H.R. 3645 would institute new auditing and accountability 
standards for research corporations established at VA medical 
centers. Finally, H.R. 3645 would name an outpatient clinic in 
New London, Connecticut, as the ``John J. McGuirk Department of 
Veterans Affairs Outpatient Clinic.''
    The expanded authority for entering into enhanced-use 
leases would likely generate new federal collections (shown in 
this estimate as an offset to direct spending), but spending of 
such additional collections would be subject to appropriation 
action. CBO estimates that enacting the bill would not affect 
direct spending in 2003, but would reduce direct spending by 
about $2 million over the 2003-2007 period, and by about $4 
million over the 2003-2012 period. Because the bill would 
affect direct spending, pay-as-you-go procedures would apply.
    In addition, H.R. 3645 would modify provisions governing 
discretionary spending for veterans' health care programs, 
which CBO estimates would result in outlays of $8 million in 
2003 and $65 million over the 2003-2007 period, assuming 
appropriation of the estimated amounts.
    H.R. 3645 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.

Estimated Cost to the Federal Government

    The estimated budgetary impact of H.R. 3645 is shown in the 
following table. The costs of this legislation fall within 
budget function 700 (veterans benefits and services).


----------------------------------------------------------------------------------------------------------------
                                                                 By Fiscal Year, in Millions of Dollars
                                                     -----------------------------------------------------------
                                                        2002      2003      2004      2005      2006      2007
----------------------------------------------------------------------------------------------------------------

                                      CHANGES IN DIRECT SPENDING

Estimated Budget Authority..........................         0         0         a        -1        -1        -1
  Estimated Outlays.................................         0         0         a        -1        -1        -1

                                   SPENDING SUBJECT TO APPROPRIATION

Baseline Spending Under Current Law for Veterans'
 Medical Care
  Estimated Authorization Level b...................    22,178    22,884    23,684    24,700    25,262    26,094
  Estimated Outlays.................................    22,202    22,865    23,485    24,189    24,978    25,801
Proposed Changes
  Estimated Authorization Level.....................         0         9        16        15        14        13
  Estimated Outlays.................................         0         8        15        15        14        13
Spending Under H.R. 3645 for Veterans' Medical Care
  Authorization Level b.............................    22,178    22,893    23,700    24,715    25,276    26,107
  Estimated Outlays.................................    22,202    22,873    23,500    24,204    24,992    25,814
----------------------------------------------------------------------------------------------------------------
a Less than $500,000.
b The 2002 level is the estimated net amount appropriated for that year. The current law amounts for the 2003-
  2007 period are CBO baseline projections that assume appropriations remain at the 2002 level, with adjustments
  for inflation.


Basis of Estimate

    For this estimate CBO assumes that the bill will be enacted 
near the beginning of fiscal year 2003, and that estimated 
amounts will be appropriated each year.

                            DIRECT SPENDING

    H.R. 3645 would expand VA's current authority to enter into 
enhanced-use leases and to dispose of certain property. An 
enhanced-use lease is one where VA leases out its property on 
the condition that at least part of the property is used in a 
manner that contributes to VA's mission or improves services 
provided to veterans in the region where the lease occurs. 
Under current law, only the Veterans Health Administration 
(VHA) within VA has the authority to enter into enhanced-use 
leases. The lease payments to VHA are deposited into the Health 
Services Improvement Fund.
    Under current law, amounts deposited into the Health 
Services Improvement Fund are considered offsets to direct 
spending, but VA may spend amounts in the fund without 
appropriation action. Thus, any such collections are spent, 
resulting in no net impact on direct spending. In addition, VA 
has the authority to sell property it leases to other parties 
at any time during the lease period and up to 30 days after the 
lease has expired. Proceeds from those sales are deposited into 
the Nursing Home Revolving Fund. Amounts deposited into the 
Nursing Home Revolving Fund are considered offsets to direct 
spending and spending from the fund is subject to appropriation 
action.

    Veterans Health Administration Leases of Property. CBO 
expects that VHA would find it easier to enter into enhanced-
use leases under H.R. 3645 because the bill would shorten the 
time period between when VHA notifies the Congress and the 
public of its intent to lease out a property and when that 
lease can be signed from 90 days to 45 days. CBO estimates that 
under this provision VHA would increase its receipts by less 
than $500,000 a year because the shorter notification period 
would not be a significant change from current practice. (The 
VHA currently receives about $1 million in annual receipts from 
enhanced-use leases.) Because VHA can spend these collections 
without appropriation action, CBO estimates that the net impact 
of this provision on the budget would be negligible for each 
year.

    Veterans Health Administration Sales of Property. CBO also 
expects that VHA would be able to sell its leased property more 
easily under the bill since it also would shorten the time 
period between when VHA notifies the Congress and the public of 
its intent to sell a property and when the sale can be 
completed from 90 days to 45 days. Under current law, the VHA 
must notify the General Services Administration (GSA) about 
proposed sales and the two agencies must jointly agree on the 
terms of the sale. Under the bill, VHA would be able to sell 
its leased property on its own without having to notify or work 
with GSA. However, proceeds from the sale of leased property 
would no longer be deposited into the Nursing Home Revolving 
Fund under the bill, but would be deposited to the General Fund 
of the Treasury. While future sales could produce offsetting 
receipts, CBO believes that VHA would not dispose of any 
property under this bill because it would not be able to spend 
the proceeds.

    Veterans Benefit Administration and National Cemetery 
Administration Leases of Property. H.R. 3645 also would allow 
both the Veterans Benefit Administration and the National 
Cemetery Administration to enter into enhanced-use leases. 
Proceeds from these leases would be credited to each 
organization's appropriation account, but spending from the 
fund would be subject to annual appropriation action.
    Because the increased collections would stem from the 
authority granted in H.R. 3645 (and would not be subject to 
appropriation action), we show them as a reduction in direct 
spending in this cost estimate. Based on the current level of 
collections received by the VHA, CBO estimates that enacting 
this provision would have no budgetary impact in 2003, but 
would increase collections by less than $500,000 in 2004 and by 
just over $500,000 every year thereafter. Thus, CBO estimates 
the bill would reduce direct spending by about $2 million over 
the 2003-2007 period, and by about $4 million over the 2003-
2012 period.

    Veterans Benefit Administration and National Cemetery 
Administration Sales of Property. As with VHA, the Veterans 
Benefit Administration and the National Cemetery Administration 
would also be allowed to dispose of leased or recently leased 
property with the proceeds reverting to the General Fund of the 
Treasury. As discussed above, CBO does not expect that either 
of these two organizations would actually dispose of any 
property because the proceeds would be deposited into the U.S. 
Treasury.

                   SPENDING SUBJECT TO APPROPRIATION

    Three provisions in H.R. 3645 could affect spending subject 
to appropriation. The bulk of CBO's estimated impact on 
discretionary spending, however, is for a provision that would 
make certain Filipino veterans newly eligible for VA health 
care benefits.

    Filipino Veterans. Under current law, only certain Filipino 
veterans who served during World War II are eligible for health 
care benefits from VA. Under H.R. 3645, any individual who is a 
Commonwealth Army veteran or New Philippine Scout living 
legally in the United States would be eligible for VA health 
care benefits. Using information from VA, CBO estimates that in 
2003 about 11,000 Filipino veterans would qualify for this new 
benefit. CBO estimates that about 2,000 of these veterans would 
use VA health care benefits in 2003 at an estimated cost of 
$4,200 per person. After adjusting for mortality, CBO expects 
that the number of eligible Filipino veterans using VA health 
care benefits would grow to 2,700 by 2007 as more of these 
veterans become aware of the benefit. Accordingly, CBO 
estimates that providing health care benefits to these Filipino 
veterans would cost $8 million in 2003 and $65 million over the 
2003-2007 period, assuming appropriation of the necessary 
amounts. Costs could be significantly higher--if a much greater 
percentage of the eligible Filipino veterans apply for the 
health benefits.

    Health Care Procurement. H.R. 3645 would change how the VA 
procures its health care items. The bill would require that all 
health care items be purchased through the use of the FSS or 
national contracts, except for narrowly defined exceptions and 
emergencies approved by the Secretary of Veterans Affairs. CBO 
believes that implementing the bill might generate some small 
savings, assuming appropriations are reduced accordingly, but 
we cannot provide a specific estimate.
    VA currently spends about $4.5 billion annually from 
appropriated funds buying health care items, and many of those 
items are already purchased through the use of FSS or national 
contracts. That is especially true for pharmaceuticals, which 
account for more than $2.5 billion of VA's health care 
purchases. Restructuring VA's procedures for buying health care 
products under H.R. 3645 might generate some small savings, but 
we cannot estimate the amount. Available data from VA is 
primarily anecdotal, and while some VA facilities purchase 
items locally and pay more than they might under a national 
contract, other VA facilities purchase health care items at 
prices lower than FSS or national contract rates. Based on this 
information and a recent study by the General Accounting Office 
of purchasing groups for hospitals, CBO does not believe that 
using FSS or national contracts uniformly would lower costs for 
all VA facilities. Thus, any savings would be offset to some 
extent by increased costs at some hospitals. Without more 
specific data, CBO cannot estimate the extent of the net 
savings that might occur from implementing H.R. 3645.

    Dental Care for Prisoners of War. Under current law, former 
prisoners of war are eligible for dental benefits provided by 
VA if they were prisoners of war for more than 90 days. Under 
H.R. 3645, all former prisoners of war would be eligible for 
dental benefits regardless of how long they were held as 
prisoners. Using information from VA, CBO estimates that this 
provision would cost less than $500,000 a year.

Pay-as-you-go Considerations

    The Balanced Budget and Emergency Deficit Control Act sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts. The net changes in outlays that are 
subject to pay-as-you-go procedures are shown in the following 
table. For the purposes of enforcing pay-as-you-go procedures, 
only the effects through fiscal year 2006 are counted.



----------------------------------------------------------------------------------------------------------------
                                                         By Fiscal Year, in Millions of Dollars
                                    ----------------------------------------------------------------------------
                                      2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012
----------------------------------------------------------------------------------------------------------------
Changes in outlays.................      0      0      a     -1     -1     -1     -1     -1     -1     -1     -1
Changes in receipts................                                 Not Applicable
----------------------------------------------------------------------------------------------------------------
a Less than $500,000.

      
Intergovernmental and Private-Sector Impact

    H.R. 3645 contains no intergovernmental or private-sector 
mandates as defined in UMRA and would not affect the budgets of 
state, local, or tribal governments.

Previous CBO Estimate

    On June 26, 2002, CBO transmitted a cost estimate for H.R. 
3645, the Veterans Health Care Items Procurement Reform and 
Improvement Act of 2002, as introduced on January 29, 2002. 
Both versions of the bill would change the way VA procures its 
health care items, though H.R. 3645, as ordered reported, would 
establish somewhat less stringent restrictions on VA's 
procurement practices than the introduced bill. CBO believes 
that changing VA's procurement practices as specified in either 
version of the bill might produce some small savings in 
discretionary spending, but we cannot estimate the amount of 
those savings.
    In addition, H.R. 3645, as ordered reported, contains 
several provisions that are not in the introduced bill, 
including the provision of health care to certain Filipino 
veterans, expansion of VA's enhanced-use lease authority, and 
the provision of dental care to certain veterans. Differences 
in the other estimated costs reflect these differences in the 
bills.

Estimate prepared by:

  Federal Costs: Sam Papenfuss
  Impact on State, Local, and Tribal Governments: Greg Waring
  Impact on the Private Sector: Sally S. Maxwell

Estimate approved by:

  Peter H. Fontaine
  Deputy Assistant Director for Budget Analysis

                     Statement of Federal Mandates

    The preceding Congressional Budget Office cost estimate 
states that the bill contains no intergovernmental or private 
sector mandates as defined in the Unfunded Mandates Reform Act.

                  Applicability To Legislative Branch

    The reported bill would not be applicable to the 
legislative branch under the Congressional Accountability Act, 
Public Law 104-1, because the bill would only affect certain 
Department of Veterans Affairs health care programs.

                 Statement of Constitutional Authority

    Pursuant to Article I, section 8 of the United States 
Constitution, the reported bill is authorized by Congress' 
power to ``provide for the common Defense and general Welfare 
of the United States.''

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

TITLE 38, UNITED STATES CODE

           *       *       *       *       *       *       *


PART II--GENERAL BENEFITS

           *       *       *       *       *       *       *


CHAPTER 17--HOSPITAL, NURSING HOME, DOMICILIARY, AND MEDICAL CARE

           *       *       *       *       *       *       *


 SUBCHAPTER II--HOSPITAL, NURSING HOME OR DOMICILIARY CARE AND MEDICAL 
TREATMENT

           *       *       *       *       *       *       *


Sec. 1712. Dental care; drugs and medicines for certain 
                    disabled veterans; vaccines

  (a)(1) Outpatient dental services and treatment, and related 
dental appliances, shall be furnished under this section only 
for a dental condition or disability--
          (A) * * *

           *       *       *       *       *       *       *

          (F) from which a veteran who is a former prisoner of 
        war [and who was detained or interned for a period of 
        not less than 90 days] is suffering;

           *       *       *       *       *       *       *


SUBCHAPTER IV--HOSPITAL CARE AND MEDICAL TREATMENT FOR VETERANS IN THE 
REPUBLIC OF THE PHILIPPINES

           *       *       *       *       *       *       *


Sec. 1734. Hospital and nursing home care and medical services in the 
                    United States

  [(a) The Secretary, within the limits of Department 
facilities, may furnish hospital and nursing home care and 
medical services to Commonwealth Army veterans and new 
Philippine Scouts for the treatment of the service-connected 
disabilities of such veterans and scouts.
  [(b) An individual who is in receipt of benefits under 
subchapter II or IV of chapter 11 of this title paid by reason 
of service described in section 107(a) of this title who is 
residing in the United States and who is a citizen of, or an 
alien lawfully admitted for permanent residence in, the United 
States shall be eligible for hospital and nursing home care and 
medical services in the same manner as a veteran, and the 
disease or disability for which such benefits are paid shall be 
considered to be a service-connected disability for purposes of 
this chapter.]
  (a) The Secretary shall furnish hospital and nursing home 
care and medical services to any individual described in 
subsection (b) in the same manner, and subject to the same 
terms and conditions, as apply to the furnishing of such care 
and services to individuals who are veterans as defined in 
section 101(2) of this title. Any disability of an individual 
described in subsection (b) that is a service-connected 
disability for purposes of this subchapter (as provided for 
under section 1735(2) of this title) shall be considered to be 
a service-connected disability for purposes of furnishing care 
and services under the preceding sentence.
  (b) Subsection (a) applies to any individual who is a 
Commonwealth Army veteran or new Philippine Scout and who--
          (1) is residing in the United States; and
          (2) is a citizen of the United States or an alien 
        lawfully admitted to the United States for permanent 
        residence.

           *       *       *       *       *       *       *


PART V--BOARDS, ADMINISTRATIONS, AND SERVICES

           *       *       *       *       *       *       *


CHAPTER 73--VETERANS HEALTH ADMINISTRATION--ORGANIZATION AND FUNCTIONS

           *       *       *       *       *       *       *


                  subchapter iv--research corporations

7361.    Authority to establish; status.
     * * * * * * *
7367.    Annual report to congressional committees.

           *       *       *       *       *       *       *


SUBCHAPTER IV--RESEARCH CORPORATIONS

           *       *       *       *       *       *       *


Sec. 7366. Accountability and oversight

  (a) * * *
  [(b) Each such corporation shall submit to the Secretary an 
annual report providing a detailed statement of its operations, 
activities, and accomplishments during that year. A corporation 
with revenues in excess of $300,000 for any year shall obtain 
an audit of the corporation for that year. A corporation with 
annual revenues between $10,000 and $300,000 shall obtain an 
independent audit of the corporation at least once every three 
years. Any audit under the preceding sentences shall be 
performed by an independent auditor. The corporation shall 
include the most recent such audit in the corporation's report 
to the Secretary for that year.]
  (b)(1) Not later than March 1 each year, each such 
corporation shall submit to the Secretary a report concerning 
the preceding calendar year. Each such annual report shall 
include the following:
          (A) A detailed statement of the corporation's 
        operations, activities, and accomplishments during the 
        preceding calendar year.
          (B) A description of each research project or 
        activity for which funds were provided by the 
        corporation during that year or for which funds were 
        provided by the corporation during a preceding year and 
        that is ongoing during the year covered by the report, 
        including, for each such project or activity, the title 
        of the project or activity and a description of the 
        purpose of the project or activity.
          (C) A statement of the amount of funds controlled by 
        the corporation as of the first day, and as of the last 
        day, of the year covered by the report and a statement 
        of the amount of funds received, shown by source, 
        during the year.
          (D) An itemized accounting of all disbursements made 
        during the year.
          (E) The most recent audit of the corporation under 
        paragraph (2).
          (F) Such other information as may be necessary to 
        enable the Secretary to prepare the annual report to 
        congressional committees required under section 7367 of 
        this title.
  (2) A corporation with a balance of funds under its control 
in excess of $300,000 at any time during a calendar year shall 
obtain an audit of the corporation for that year. Any other 
corporation shall obtain an independent audit of the 
corporation at least once every three years. The report on any 
such audit shall specifically state whether the corporation 
audited made any payment, or provided any travel, during the 
period covered by the audit to a member of the board of 
directors of the corporation and, if so, the amount and 
recipient of any such payment or travel.
  (3) Any audit under paragraph (2) shall be performed by an 
independent auditor and shall be performed in accordance with 
generally accepted Government auditing standards and in 
accordance with Office of Management and Budget Circular A-133.
  (4) The Inspector General of the Department shall each year 
review the most recent audit under paragraph (2) of not less 
than 10 percent of the corporations described in the first 
sentence of paragraph (2) and not less than 10 percent of the 
corporations described in the second sentence of that 
paragraph. As part of such review, the Inspector General shall 
determine whether the audit was carried out in accordance with 
generally accepted Government auditing standards, as required 
by paragraph (3).

           *       *       *       *       *       *       *


Sec. 7367. Annual report to congressional committees

  [(d)] (a) The Secretary shall submit to the Committees on 
Veterans' Affairs of the Senate and House of Representatives an 
annual report on the corporations established under this 
subchapter. Each such report shall be based on the annual 
reports submitted by the corporations to the Secretary under 
section 7366(b) of this title and shall be submitted not later 
than May 1 of the year following the year covered by such 
reports. [The report shall]
  (b) Each such report shall set forth the following 
information:
          (1) * * *

           *       *       *       *       *       *       *


Sec. 7368. Expiration of authority

  No corporation may be established under this subchapter after 
December 31, [2003] 2006.

           *       *       *       *       *       *       *


PART VI--ACQUISITION AND DISPOSITION OF PROPERTY

           *       *       *       *       *       *       *


   CHAPTER 81--ACQUISITION AND OPERATION OF HOSPITAL AND DOMICILIARY 
    FACILITIES; PROCUREMENT AND SUPPLY; ENHANCED-USE LEASES OF REAL 
PROPERTY

           *       *       *       *       *       *       *


           subchapter v--enhanced-use leases of real property

8161.    Definitions.
8162.    Enhanced-use leases.
[8163.    Designation of property to be leased.]
8163.    Hearing and notice requirements regarding proposed leases.

           *       *       *       *       *       *       *


                 SUBCHAPTER II--PROCUREMENT AND SUPPLY

Sec. 8121. Revolving supply fund

  (a) * * *
  (b) The Secretary may authorize the Secretary of Defense to 
make purchases through the fund in the same manner as 
activities of the Department. When services, equipment, or 
supplies are furnished to the Secretary of Defense through the 
fund, the reimbursement required by paragraph (2) of subsection 
(a) shall be made from appropriations made to the Department of 
Defense, and when services or supplies are to be furnished to 
the Department of Defense, the fund may be credited, as 
provided in paragraph (3) of subsection (a), with advances from 
appropriations available to the Department of Defense.
  (c) At the end of each fiscal year, there shall be covered 
into the Treasury of the United States as miscellaneous 
receipts such amounts as the Secretary determines to be in 
excess of the requirements necessary for the maintenance of 
adequate inventory levels and for the effective financial 
management of the revolving supply fund.
  [(b)] (d) An adequate system of accounts for the fund shall 
be maintained on the accrual method, and financial reports 
prepared on the basis of such accounts. An annual business type 
budget shall be prepared for operations under the fund.
  [(c)] (e) The Secretary is authorized to capitalize, at fair 
and reasonable values as determined by the Secretary, all 
supplies and materials and depot stocks of equipment on hand or 
on order.

           *       *       *       *       *       *       *


[Sec. 8125. Procurement of health-care items

  [(a) Except as provided in subsections (b) and (c) of this 
section, the Secretary may not procure health-care items under 
local contracts.
  [(b)(1) A health-care item for use by the Department may be 
procured under a local contract if--
          [(A) the procurement is within the limits prescribed 
        in paragraph (3) of this subsection; and
          [(B)(i) the item is not otherwise available to the 
        Department medical center concerned,
          [(ii) procurement of the item by a local contract is 
        necessary for the effective furnishing of health-care 
        services or the conduct of a research or education 
        program at a Department medical center, as determined 
        by the director of the center in accordance with 
        regulations which the Under Secretary for Health shall 
        prescribe, or
          [(iii) procurement under a local contract is 
        demonstrably more cost-effective for the item.
  [(2) In the case of the need for an emergency procurement of 
a health-care item, such item may be procured under a local 
contract, but no greater quantity of such item may be procured 
by a local contract than is reasonably necessary to meet the 
emergency need and the reasonably foreseeable need for the item 
at the medical center concerned until resupply can be achieved 
through procurement actions other than emergency procurement.
  [(3)(A) Except as provided in subparagraphs (C) and (D) of 
this paragraph, not more than 20 percent of the total of all 
health-care items procured by the Department in any fiscal year 
(measured as a percent of the total cost of all such health-
care items procured by the Department in that fiscal year) may 
be procured under local contracts.
  [(B) Local contracts for the procurement of health-care items 
shall, to the maximum extent feasible, be awarded to regular 
dealers or manufacturers engaged in the wholesale supply of 
such items.
  [(C) The Secretary may increase for a fiscal year the 
percentage specified in subparagraph (A) of this section to a 
percentage not greater than 30 percent if the Secretary, based 
on the experience of the Department during the two fiscal years 
preceding such fiscal year, determines that the increase and 
the amount of the increase are necessary in the interest of the 
effective furnishing of health-care services by the Department. 
The authority to increase such percentage may not be delegated.
  [(D) Items procured through an emergency procurement shall 
not be counted for the purpose of this paragraph.
  [(c) A provision of law that is inconsistent with subsection 
(a) or (b) of this section shall not apply, to the extent of 
the inconsistency, to the procurement of a health-care item for 
use by the Department.
  [(d)(1) Not later than December 1 of each year, the director 
of each Department medical center shall transmit to the 
Secretary a report containing a list indicating the quantity of 
each health-care item procured at that medical center under a 
local contract during the preceding fiscal year and the total 
amount paid for such item during such fiscal year.
  [(2) No later than February 1 of each year, the Secretary 
shall submit to the Committees on Veterans' Affairs of the 
Senate and the House of Representatives a report on the 
experience in carrying out this section during the preceding 
fiscal year.
  [(e) For the purposes of this section:
          [(1) The term ``health-care item'' includes any item 
        listed in, or (as determined by the Secretary) of the 
        same nature as an item listed in, Federal Supply 
        Classification (FSC) Group 65 or 66. Effective December 
        1, 1992, such term also includes any item listed in, or 
        (as determined by the Secretary) of the same nature as 
        an item listed in, Federal Supply Classification (FSC) 
        Group 73. Such term does not include perishable items.
          [(2) The term ``local contract'' means a contract 
        entered into by a Department medical center for 
        procurement of an item for use by that medical center.
          [(3) The term ``emergency procurement'' means a 
        procurement necessary to meet an emergency need, 
        affecting the health or safety of a person being 
        furnished health-care services by the Department, for 
        an item.]

Sec. 8125. Procurement of health-care items

  (a) Except as provided in subsection (b), any procurement of 
a health-care item by the Department shall be made through the 
use of a Federal Supply Schedule contract, or a national 
contract, that meets the requirements of subsection (d).
  (b)(1) Subsection (a) does not apply to a procurement of a 
health-care item in any of the following cases:
          (A) A procurement that is necessary to meet a current 
        or near-term medical emergency at a medical center.
          (B) A procurement that is for a health-care item that 
        is not listed in the Federal Supply Schedule or as part 
        of a national contract and for which there is a valid 
        clinical need.
          (C) A procurement that is for a specialized health-
        care item not listed in the Federal Supply Schedule or 
        as part of a national contract and that is to meet the 
        special needs of an individual patient who has one of 
        the special needs identified in section 1706(b) of this 
        title and who has a valid clinical need for the item.
          (D) A procurement that is part of an approved sharing 
        agreement between the Department of Defense and the 
        Department of Veterans Affairs with demonstrable cost-
        per-item savings for a health-care item listed on the 
        Federal Supply Schedule or a national contract.
          (E) A procurement that supports a prime contract or a 
        subcontract with a small business concern qualifying 
        for a procurement preference program under section 8 or 
        15 of the Small Business Act (15 U.S.C. 637, 644), if 
        the cost of the item to be procured is no more than the 
        cost (taking price and value into consideration) of the 
        comparable item on the Federal Supply Schedule or 
        national contract and if the item meets the 
        requirements of subsections (d)(1)(A) and (d)(2).
  (2) A procurement may be made as authorized under 
subparagraph (B) of paragraph (1) only if the procurement is 
specifically authorized in advance in writing by the Secretary. 
The authority of the Secretary under the preceding sentence may 
only be delegated to the Deputy Secretary or to an official of 
the Veterans Health Administration not below the level of a 
Deputy Under Secretary (or equivalent) acting jointly with a 
procurement executive of the Department not below the level of 
an Associate Deputy Assistant Secretary.
  (c) In the case of an emergency procurement of a health-care 
item as authorized by subsection (b)(1)(A), the quantity of the 
item procured may not exceed the quantity of that item that is 
the reasonably foreseeable need for the item at the medical 
center concerned until resupply can be achieved through 
procurement actions other than emergency procurement.
  (d) A contract meets the requirements of this subsection if--
          (1) the contract includes--
                  (A) provisions referred to as ``preaward and 
                postaward audit clauses''; and
                  (B) a provision referred to as a ``price 
                reduction clause''; and
          (2) in the case of a contract to be made with a 
        vendor that is a distributor, the contract will be for 
        distribution services only unless the manufacturer of 
        the product can clearly demonstrate that at least 60 
        percent of its sales of the item through that vendor is 
        to commercial customers with negotiated product prices 
        and that the vendor actually stocks and distributes the 
        product.
  (e)(1) The Secretary shall establish procedures to assure 
compliance by each Department medical facility with the 
provisions of this section and with applicable Federal and 
Department procurement regulations.
  (2) The procedures established by the Secretary under 
paragraph (1) shall be designed to maximize health-care item 
variety and the use of the Federal Supply Schedule.
  (3) The Secretary shall establish and enforce procedures 
limiting the standardization of items at the local, regional, 
or national level to provide special patient populations (as 
identified in section 1706(b) of this title) with the range and 
types of health-care items required to meet their clinical and 
quality-of-life needs.
  (4) The Advisory Committee on Prosthetics and Special-
Disabilities Programs established under section 543 of this 
title shall review the procedures established under paragraph 
(3), including the implementation of those procedures, and 
shall advise the Secretary when those procedures are not 
effectively enforced by the Department.
  (f)(1) The Secretary shall establish annual goals for 
Department medical centers for the purchase of health-care 
items from Federal Supply Schedule and national contracts 
meeting the requirements of subsection (d). Such goals shall be 
designed to maximize the percentage of such purchases that are 
made through such contracts.
  (2) The Secretary shall establish goals for the Department 
for procurements from small business concerns qualifying for a 
procurement preference program under section 8 or 15 of the 
Small Business Act (15 U.S.C. 637, 644). Such goals shall be no 
less than the national goal for each such procurement 
preference program under either of those sections.
  (3) Achievement of the goals established under this 
subsection shall be an element in the performance standards for 
employees of the Department who have the authority and 
responsibility for achieving those goals.
  (g) A provision of law that is inconsistent with any 
provision of this section shall not apply, to the extent of the 
inconsistency, to the procurement of a health-care item for the 
Department.
  (h)(1) Not later than December 31 each year, the Secretary 
shall submit to the Committees on Veterans' Affairs of the 
Senate and House of Representatives a report on the procurement 
of health-care items during the preceding fiscal year. Each 
such report shall include, for the year covered by the report, 
the following:
          (A) The total dollar amount of all items listed in 
        Federal Supply Classification (FSC) Group 65 or 66 and 
        the total dollar value of the exceptions to subsection 
        (a) under each of subparagraphs (A), (B), (C), (D), and 
        (E) of subsection (b)(1), shown by medical facility.
          (B) A detailed explanation for exceptions to 
        subsection (a), including--
                  (i) the rationale for use of emergency 
                procurement at Department medical facilities;
                  (ii) the rationale for approval of requests 
                under subsection (b)(1)(B) for procurement of 
                items not listed on the Federal Supply Schedule 
                or on national contracts; and
                  (iii) exceptions granted for special health-
                care needs of veterans with disabilities 
                described in section 1706(b) of this title.
          (C) Analysis of sharing agreements between the 
        Department and the Department of Defense to indicate 
        the basic written sharing initiative and the division 
        of financial responsibility between the two 
        Departments.
          (D) The stated goal under each procurement preference 
        program, together with an assessment of the performance 
        of the Department toward achievement of that goal, 
        especially with respect to the goal for contracting 
        with businesses that are owned by veterans with 
        service-connected disabilities.
  (2) The Advisory Committee on Prosthetics and Special- 
Disabilities Programs of the Department shall submit comments 
on each report under paragraph (1) before the report is 
submitted under that paragraph, and the Secretary shall include 
those comments in the report as submitted.
  (i) For the purposes of this subsection:
          (1) The term ``health-care item'' includes any item 
        listed in, or (as determined by the Secretary) of the 
        same nature as an item listed in, Federal Supply 
        Classification (FSC) Group 65 or 66.
          (2) The term ``national contract'' means a contract 
        for procurement of an item that is entered into by the 
        National Acquisition Center of the Department or 
        another Department procurement activity, as authorized 
        by the Secretary, that is available for use by all 
        Department medical facilities.
          (3) The term ``valid clinical need'' means in the 
        professional judgment of an appropriate clinician. Such 
        term applies to health care items, prosthetic 
        appliances, sensory or mobility aids and supplies that 
        are prescribed by a physician for special patient 
        populations such as veterans with spinal cord 
        dysfunction, blindness, amputations, and other veterans 
        included in section 1706(b) of this title.
          (4) The term ``Federal Supply Schedule contract'' 
        means a contract that is awarded and administered by 
        the National Acquisition Center of the Department under 
        a delegation of authority from the Administrator of the 
        General Services Administration.''
          (5) The term ``emergency procurement'' means a 
        procurement necessary to meet an emergency need 
        affecting the health or safety of a person being 
        furnished health-care services by the Department.

           *       *       *       *       *       *       *


SUBCHAPTER V--ENHANCED-USE LEASES OF REAL PROPERTY

           *       *       *       *       *       *       *


Sec. 8162. Enhanced-use leases

  (a)(1) * * *
  (2) The Secretary may enter into an enhanced-use lease only 
if--
          (A) * * *
          (B) the Secretary determines that the implementation 
        of a business plan [proposed by the Under Secretary for 
        Health] proposed by one of the Under Secretaries for 
        applying the consideration under such a lease [to the 
        provision of medical care and services] to the programs 
        and activities of the Department would result in a 
        demonstrable improvement of services to eligible 
        veterans in the geographic service-delivery area within 
        which the property is located.

           *       *       *       *       *       *       *


[Sec. 8163. Designation of property to be leased]

Sec. 8163. Hearing and notice requirements regarding proposed leases

  (a) If the Secretary proposes to [designate a property to be 
leased under an enhanced-use lease] enter into an enhanced-use 
lease with respect to certain property, the Secretary shall 
conduct a public hearing [before making the designation] before 
entering into the lease. The hearing shall be conducted in the 
community in which the property is located. At the hearing, the 
Secretary shall receive the views of veterans service 
organizations and other interested parties regarding the 
proposed lease of the property and the possible effects of the 
uses to be made of the property under a lease of the general 
character then contemplated. The possible effects to be 
addressed at the hearing shall include effects on--
          (1) * * *

           *       *       *       *       *       *       *

  (b) Before conducting such a hearing, the Secretary shall 
provide reasonable notice [of the proposed designation] to the 
congressional veterans' affairs committees and to the public of 
the proposed lease and of the hearing. The notice shall include 
the following:
          (1) * * *

           *       *       *       *       *       *       *

  (c)(1) If after a hearing under subsection (a) the Secretary 
intends to [designate the property involved] enter into an 
enhanced-use lease of the property involved, the Secretary 
shall notify the congressional veterans' affairs committees of 
the Secretary's intention [to so designate the property] to 
enter into such lease and shall publish a notice of such 
intention in the Federal Register.
  (2) The Secretary may not enter into an enhanced use lease 
until the end of the [90-day period] 45-day period beginning on 
the date of the submission of notice under paragraph (1).
  (3) Each notice under paragraph (1) shall include the 
following:
          (A) * * *

           *       *       *       *       *       *       *

          (D) A [general] description of the provisions of the 
        proposed lease.

           *       *       *       *       *       *       *

          (G) A summary of a cost-benefit analysis of the 
        proposed lease.
  [(4) Not less than 30 days before entering into an enhanced-
use lease, the Secretary shall submit to the congressional 
veterans' affairs committees a report on the proposed lease. 
The report shall include--
          [(A) updated information with respect to the matters 
        described in paragraph (3);
          [(B) a summary of a cost-benefit analysis of the 
        proposed lease;
          [(C) a description of the provisions of the proposed 
        lease; and
          [(D) a notice of designation with respect to the 
        property.]

Sec. 8164. Authority for disposition of leased property

  (a) If, during the term of an enhanced-use lease or within 30 
days after the end of the term of the lease, the Secretary 
determines that the leased property is no longer needed by the 
Department, the Secretary may initiate action for the transfer 
to the lessee of all right, title, and interest of the United 
States in the property [by requesting the Administrator of 
General Services to dispose of the property pursuant to 
subsection (b)]. A disposition of property may not be made 
under this section unless the Secretary determines that the 
disposition under this section rather than under section 8122 
of this title is in the best interests of the Department. [The 
Administrator, upon request of the Secretary, shall take 
appropriate action under this section to dispose of property of 
the Department that is or has been subject to an enhanced-use 
lease.]
  (b) A disposition under this section may be made for such 
consideration as the [Secretary and the Administrator of 
General Services jointly determine] Secretary determines is in 
the best interest of the United States and upon such other 
terms and conditions as the [Secretary and the Administrator 
consider] Secretary considers appropriate.
  (c) Not less than [90 days] 45 days before a disposition of 
property is made under this section, the Secretary shall notify 
the congressional veterans' affairs committees of the 
Secretary's intent to dispose of the property and shall publish 
notice of the proposed disposition in the Federal Register. The 
notice shall describe the background of, rationale for, and 
economic factors in support of, the proposed disposition 
(including a cost-benefit analysis summary) and the method, 
terms, and conditions of the proposed disposition.

Sec. 8165. Use of proceeds

      (a)[(1)] Funds received by the Department under an 
enhanced-use lease and remaining after any deduction from those 
funds under subsection (b) shall be deposited in the Department 
of Veterans Affairs Health Services Improvement Fund 
established under section 1729B of this title, except that any 
funds received by the Department under an enhanced-use lease in 
support of the Veterans Benefits Administration or the National 
Cemetery Administration and remaining after any deduction from 
such funds under subsection (b) shall be credited to applicable 
appropriations of that Administration.
  [(2) Funds received by the Department from a disposal of 
leased property under section 8164 of this title and remaining 
after any deduction from such funds under the laws referred to 
in subsection (c) shall be deposited in the nursing home 
revolving fund.]
  (b) An amount sufficient to pay for any expenses incurred by 
the Secretary in any fiscal year in connection with an 
enhanced-use lease shall be deducted from the proceeds of the 
lease for that fiscal year and may be used by the Secretary to 
reimburse the account from which the funds were used to pay 
such expenses. The Secretary may use the proceeds from any 
enhanced-use lease to reimburse applicable appropriations of 
the Department for any expenses incurred in the development of 
additional enhanced-use leases.
  [(c) Subsection (a) does not affect the applicability of 
section 204 of the Federal Property and Administrative Services 
Act of 1949 (40 U.S.C. 485) or the Act of June 8, 1896 (40 
U.S.C. 485a), with respect to reimbursement of the 
Administrator of General Services for expenses arising from any 
disposal of property under section 8164 of this title.]

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