VA Vocational Rehabilitation and Employment: Service Contract	 
Management Is Improving, but Challenges Remain (23-APR-07,	 
GAO-07-568R).							 
                                                                 
The Department of Veterans Affairs' (VA) Vocational		 
Rehabilitation and Employment (VR&E) program provides services	 
such as vocational counseling and job training to assist veterans
with service-connected disabilities obtain and maintain suitable 
employment and achieve maximum independence in daily living. In  
fiscal year 2006, the VR&E program obligated about $702 million  
and served about 89,000 veterans. The Veterans Benefits 	 
Administration (VBA), which administers the VR&E program,	 
provides some services to veterans through two types of 	 
contracts--national contracts and local contracts. In fiscal year
2003, VA adopted the National Acquisition Strategy (NAS) to award
contracts at the national level to ensure that veterans have	 
access to the same quality and types of VR&E services across	 
regional offices. These national contracts, once awarded, are	 
implemented by VA's regional offices. Services available under	 
these national contracts include initial evaluations, case	 
management, and employment placement assistance. In fiscal year  
2006, VR&E spent about $15 million through national contracts.	 
There are 165 national contracts currently active in fiscal year 
2007. Regional offices also can negotiate and implement local	 
contracts for services that are not provided through national	 
contracts such as tutoring and computer skills evaluations. In	 
fiscal year 2006, VR&E spent about $12 million through local	 
contracts. VR&E contracting officers are responsible for	 
negotiating the terms of local contracts. Contracting officer's  
technical representatives, often VR&E counselors themselves,	 
assist in managing both national and local contracts. Recent	 
studies of the VR&E program have raised concerns about its	 
contracting practices. In March 2004, the VR&E Task Force	 
recommended that VA enhance VR&E contracting practices by taking 
several actions, including revising the scope of national	 
contracts and developing contracting training and hiring	 
contracting specialists to improve the contracting expertise of  
VR&E staff. According to the VR&E Task Force, VR&E's capacity to 
manage its contracts could be further improved by enhancing the  
usefulness of its case management data system. For example, the  
VR&E Task Force recommended that VA improve its case management  
data system so that purchased contract services could be tracked 
by the counselor who orders the services or by the veteran that  
receives the services. In February 2005, the VA Inspector General
recommended that existing national contracts be renegotiated to  
better reflect market rates for services because VA was at risk  
of paying excessive prices for VR&E services purchased through	 
its current national contracts. The report also noted that VA	 
should strengthen regional office oversight and management of	 
contracts. To address Congressional interest in VR&E contract	 
management, we conducted a study to determine how VA has improved
VR&E contract management practices and identify challenges VA	 
continues to face. Specifically, Congress asked us to answer the 
following questions: (1) What progress has VA made in		 
implementing selected recommendations on contracting for VR&E	 
services made by the VR&E Task Force and the VA Inspector	 
General? (2) What are VA's key challenges in improving its	 
management of VR&E service contracting? 			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-568R					        
    ACCNO:   A68624						        
  TITLE:     VA Vocational Rehabilitation and Employment: Service     
Contract Management Is Improving, but Challenges Remain 	 
     DATE:   04/23/2007 
  SUBJECT:   Contract administration				 
	     Contract oversight 				 
	     Contracting officers				 
	     Contracts						 
	     Employment assistance programs			 
	     Internal controls					 
	     Strategic planning 				 
	     Veterans benefits					 
	     Veterans employment programs			 
	     Vocational rehabilitation				 
	     VA Vocational Rehabilitation and			 
	     Employment Program 				 
                                                                 

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GAO-07-568R

April 23, 2007

The Honorable Stephanie Herseth
Chairwoman
The Honorable John Boozman
Ranking Minority Member
Subcommittee on Economic Opportunity
Committee on Veterans' Affairs
House of Representatives

Subject: VA Vocational Rehabilitation and Employment: Service Contract
Management Is Improving, but Challenges Remain

The Department of Veterans Affairs' (VA) Vocational Rehabilitation and
Employment (VR&E) program provides services such as vocational counseling
and job training to assist veterans with service-connected disabilities
obtain and maintain suitable employment and achieve maximum independence
in daily living. In fiscal year 2006, the VR&E program obligated about
$702 million and served about 89,000 veterans.

The Veterans Benefits Administration (VBA), which administers the VR&E
program, provides some services to veterans through two types of
contracts--national contracts and local contracts. In fiscal year 2003, VA
adopted the National Acquisition Strategy (NAS) to award contracts at the
national level to ensure that veterans have access to the same quality and
types of VR&E services across regional offices. These national contracts,
once awarded, are implemented by VA's regional offices. Services available
under these national contracts include initial evaluations, case
management, and employment placement assistance. In fiscal year 2006, VR&E
spent about $15 million through national contracts. There are 165 national
contracts currently active in fiscal year 2007. Regional offices also can
negotiate and implement local contracts for services that are not provided
through national contracts such as tutoring and computer skills
evaluations. In fiscal year 2006, VR&E spent about $12 million through
local contracts. VR&E contracting officers are responsible for negotiating
the terms of local contracts. Contracting officer's technical
representatives, often VR&E counselors themselves, assist in managing both
national and local contracts.

Recent studies of the VR&E program have raised concerns about its
contracting practices. In March 2004, the VR&E Task Force recommended that
VA enhance VR&E contracting practices by taking several actions, including
revising the scope of national contracts and developing contracting
training and hiring contracting specialists to improve the contracting
expertise of VR&E staff. According to the VR&E Task Force, VR&E's capacity
to manage its contracts could be further improved by enhancing the
usefulness of its case management data system. For example, the VR&E Task
Force recommended that VA improve its case management data system so that
purchased contract services could be tracked by the counselor who orders
the services or by the veteran that receives the services. In February
2005, the VA Inspector General recommended that existing national
contracts be renegotiated to better reflect market rates for services
because VA was at risk of paying excessive prices for VR&E services
purchased through its current national contracts. The report also noted
that VA should strengthen regional office oversight and management of
contracts.

To address your interest in VR&E contract management, we conducted a study
to determine how VA has improved VR&E contract management practices and
identify challenges VA continues to face. Specifically, you asked us to
answer the following questions: (1) What progress has VA made in
implementing selected recommendations on contracting for VR&E services
made by the VR&E Task Force and the VA Inspector General? (2) What are
VA's key challenges in improving its management of VR&E service
contracting?

On March 29, 2007, we briefed your staff on the results of our study of
VR&E service contract management (see app. I). This report formally
conveys the information provided during that briefing. In summary, we
found that:

           o VA reports progress in implementing contracting-related
           recommendations made by the VR&E Task Force and VA Inspector
           General. However, some key recommendations have not yet been
           implemented. Specifically:

                        o VA regional offices requested and obtained lower
                        prices under existing national contracts.
                        o VA has taken steps to increase regional office VR&E
                        staff contracting expertise.
                        o VA has taken steps to develop additional regional
                        office internal control policies and procedures for
                        contracting activities.
                        o VA's efforts to address issues with contracting
                        data are on hold.
                        o VA has not yet awarded new national contracts.

           o Key challenges remain to improving VA's management of VR&E
           service contracting. Specifically, we found that:

                        o Regional offices are not fully applying VA's
                        contracting guidance.
                        o Current training does not adequately prepare
                        contracting officers to manage contracts.
                        o Regional offices report delays in communication
                        with VA headquarters on contracting questions, but VA
                        is taking actions to address these concerns.
                        o VA's management of VR&E contracting is limited by
                        inadequate reporting capabilities.
                        o Inadequate internal controls over contracting data
                        raise reliability concerns.

To assess VA's progress in implementing contracting-related
recommendations made by the VR&E Task Force and the VA Inspector General
and identify the challenges VA has experienced in improving management of
VR&E service contracting, we (1) conducted site visits of four diverse
regional offices to interview VR&E officials and review contract files,
(2) conducted telephone interviews with officials from a fifth regional
office, (3) interviewed officials at VA headquarters knowledgeable about
contracting practices and policies, (4) analyzed VR&E contract-related
management data, and (5) reviewed contract files at VA's Office of
Acquisition and Materiel Management (OA&MM) to determine the maximum
prices allowed for services available from national contracts used by the
regional offices we visited. We assessed the reliability of VR&E
contracting data captured by VR&E's case management data system--Corporate
WINRS--through several methods, including comparing these data against
local data provided to us by the four regional offices we visited and by
reviewing existing evaluations of VR&E's case management data system.
While we identified accuracy limitations with the contracting data
captured by VR&E's case management data system--discussed in the slide
entitled "Objective 2: Management Data: Inadequate Internal Controls over
Contracting Data Raise Reliability Concerns" in appendix I (page 30)--we
found that generally VR&E's contracting data are sufficiently reliable for
the purposes of our study. We conducted our work from March 2006 to
February 2007 in accordance with generally accepted government auditing
standards. (See app. II for more details on our objectives, scope, and
methodology.)

Conclusions

Contracting is a valuable tool for the VR&E program. A well-managed
contracting system can help VA provide VR&E services to veterans in
several ways, such as by gathering the information needed to make
entitlement decisions. Several regional offices felt that prices were too
high for services available through national contracts and subsequently
requested and obtained lower prices. VA has positioned itself to be at
less risk of overpaying this time around, because VA has conducted market
research in preparation for issuing its new national contracts, something
it did not do last time. VA's oversight and communication with regional
offices are a work in progress, but in the absence of continued
improvement, regional offices may be putting VA at risk for overpaying
local contractors. Given their current level of training, regional VR&E
officials may continue to use noncompetitive contracts even when they are
not necessarily appropriate. While negotiating competitive contracts
requires greater contracting expertise, these contracts may also provide
better prices and outcomes. Gains from improved contract management will
be minimized without an information system to provide usable and reliable
data on contract use. VA plans to improve the reporting capabilities of
Corporate WINRS, but without improvements to internal controls and data
reliability, reports produced by the system will not be as fully useful as
they could be.

Recommendations for Executive Action

To address the key challenges we identified that VA faces in improving its
management of VR&E contracting, we recommend that the Secretary of
Veterans Affairs direct the Under Secretary for Benefits to take the
following actions:

           (1) Conduct a management review to assess how regional offices are
           implementing VA's contracting guidance and take necessary actions
           to make needed improvements. For example, VA could clarify to VR&E
           employees how existing VR&E guidance on contract file maintenance
           applies to local contracts.

           (2) Require regional offices to report on the efficacy of
           contracting training and take necessary actions to make needed
           improvements. For example, VA could develop VR&E-specific
           contracting training.

           (3) Improve VA management of VR&E contracting by improving
           Corporate WINRS reporting capabilities and its internal controls
           over contracting data.

Agency Comments

We provided a draft of this report to the Department of Veterans Affairs
for review and comment. On March 23, 2007, VA provided written comments
agreeing with our conclusions (See app. III). However, while VA concurred
with our recommendations, we have concerns about the actions it reported
it will take to respond to two of the recommendations.

In response to our first recommendation, VA said that it will continue to
assess regional office performance through its site visits to 12 regional
offices per year. VA also stated that it will reiterate that its file
maintenance guidance applies to both national and local contracts. While
these actions are useful in helping to ensure that regional offices are
following contracting guidance, in our view they are insufficient. We
believe that a systematic, one-time review of all regional office
practices is needed. This review would allow VA to identify the full
extent of compliance with contracting guidance and determine the needs for
additional or clarified guidance.

VA also said that it will continue to provide specific annual VR&E
contract training as well as conduct specialized VR&E contract training to
VR&E regional office staff responsible for managing contracts. However,
our second recommendation was for VA to require regional offices to report
on the efficacy of VA's training and take necessary actions to make needed
improvements. We maintain that contracting training could benefit from a
systematic effort to obtain information from regional VR&E staff on the
efficacy of existing training.

In response to our third recommendation, VA said that it will modify the
VR&E case management system to incorporate additional internal controls
and reporting capabilities. VA stated that this would be done in an
upgrade to Corporate WINRS, scheduled for fiscal year 2008. VA reported
that the upgrade project is currently in VA's internal project
prioritization process.

In addition, VA provided technical comments, which are incorporated as
appropriate.

After our briefing of your staff, we made further technical corrections to
the slides based on the comments we received from VA on a draft of the
information (concerning price reductions requested and obtained by VA
regional offices) we sent to you on April 11, 2007. The pricing
information was requested by your staff during the March briefing.

We are sending copies of this report to the Secretary of Veterans Affairs,
relevant congressional committees, and other interested parities and will
make copies available to others upon request. In addition, this report
will be available at no charge on GAO's Web site at www.gao.gov . If
you or your staff have any questions about this report, please contact me
on 202-512-7215 or [email protected] . Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. Brett S. Fallavollita (Assistant Director), Greg Whitney
(Analyst-in-Charge), Irene J. Barnett (Senior Analyst), Avrum Ashery,
Jessica Botsford, Irene Chu, Jennifer Lutzy McDonald, Walter Vance, and
Charles Willson also made significant contributions to this report.

Sincerely yours,

Denise M. Fantone
Acting Director, Education, Workforce,
  and Income Security Issues

Appendix I: Briefing Slides

Appendix II: Objectives, Scope, and Methodology

We examined (1) the progress VA has made in implementing selected
recommendations on contracting for VR&E services made by the VR&E Task
Force and VA Inspector General reports, and (2) the key challenges in
improving its management of VR&E service contracting. To address these
issues, we identified contracting-related recommendations from the 2004
VR&E Task Force and 2005 VA Inspector General reports, interviewed
officials from VA headquarters, conducted case studies of four VA regional
offices, analyzed VR&E contract-related management data, and reviewed
contract files at VA's Office of Acquisition and Materiel Management
(OA&MM). We conducted our work from March 2006 to February 2007 in
accordance with generally accepted government auditing standards.

To identify contract-related recommendations from the 2004 VR&E Task Force
and 2005 VA Inspector General reports, we examined all recommendations
from both reports, selecting recommendations related to (1) national
contracting, (2) human capital issues related to contracting activities,
(3) internal controls over contracting activities at the regional office
level, and (4) data on contracting. Overall, we identified 10
recommendations to include in our review (table 1). To obtain information
on the status of contract-related recommendations and to determine the
changes VA has made to its VR&E contracting policies and procedures in
response to these recommendations,  we interviewed VA officials, including
officials from the VR&E Service. Additionally, we obtained updated status
reports on VR&E Task Force and VA Inspector General recommendations from
VA headquarters.

Table 1. VR&E Task Force and VA Inspector General Contracting-Related
Recommendations

Area of focus      VR&E Task Force          VA OIG recommendations         
                      recommendations                                         
National contracts Revise the scope of      Revise the scope of and        
                      current national         compete new contracts.         
                      contracts.                                              
Human capital      (1) Create and staff a   Provide contracting staff with 
issues             new position for         appropriate training and       
                      contract specialists at  contract warrant authority.    
                      regional offices and                                    
                      implement a training                                    
                      program for these staff.                                
                                                                              
                      (2) Develop a contract                                  
                      training program for all                                
                      VR&E staff with direct                                  
                      responsibility for                                      
                      contract oversight.                                     
Regional office    Enhance VA's capacity to (1) Require that regional      
internal controls  manage contracts.        offices maintain documentation 
over contracting                            related to the following:      
activities                                  contracts used by the office,  
                                               instances when one contractor  
                                               is used instead of another     
                                               despite the fact that a higher 
                                               price is being paid for        
                                               services, and instances when   
                                               actions are taken to address   
                                               identified quality assurance   
                                               review deficiencies.           
                                                                              
                                               (2) Implement adequate         
                                               contract payment internal      
                                               controls.                      
Contracting data   (1) Enhance the                                         
                      usability of Corporate                                  
                      WINRS for internal                                      
                      control and financial                                   
                      management purposes and                                 
                      to manage and monitor                                   
                      all contractor services.                                
                                                                              
                      (2) Elevate funding                                     
                      priority of Corporate                                   
                      WINRS and accelerate the                                
                      development and adoption                                
                      of financial and process                                
                      enhancements.                                           

Source: GAO analysis.

To evaluate VA's progress in implementing the recommendations made by the
VR&E Task Force and the VA Inspector General and to identify key
challenges in doing so, we visited four regional offices representing each
of VBA's geographic areas. Our case study sites were Boston, Denver, St.
Petersburg, and Houston. In addition to geographic diversity, sites were
selected that used different types of contracts (national and/or local)
and that represented a range of regional office size and contracting
expenditures among VA's 57 regional offices (table 2). We also contacted
VBA's Waco regional office. Waco, like Houston, piloted VA's strategy for
purchasing VR&E services through national contracts, although neither
regional office had any national contracts available to it for use during
the time of our review.

Table 2. Case Study Site Selection Criteria, Fiscal Year 2006

Case study VBA area Number of   Payments for Number of  Payments Number of 
site                 veterans       national  national for local     local 
                          served      contracts contracts contracts contracts 
Boston     Eastern      1,011       $148,349         3   $17,198        18 
Denver     Western      2,825       $592,253         8  $504,115        21 
St.        Southern     4,977     $1,394,212         7  $128,290       114 
Petersburg                                                                 
Houston    Central      4,921              a         a  $626,731        64 

Source: Corporate WINRS and data provided by regional offices.

a No national contracts were available to the Houston VA regional office.

At each of the case study sites, we interviewed VR&E officials involved in
the management and oversight of contracted services, discussing the use of
national and local contracts, implementation of VA's contracting policies
and procedures, and challenges they experienced. We also obtained regional
office data on the number of contracts used and payments made for
contracted services during fiscal year 2006. We assessed the
implementation of VA's guidance on contracting by reviewing national and
local contract files for contracts that were still being used after
January 2006, in order to allow regional offices adequate time to
implement VA's policy guidance that went into effect in September 2005. To
determine the number of available national contracts at each case study
site using national contracts in fiscal year 2006, we reviewed data from
VA's OA&MM and interviewed OA&MM officials. To determine the maximum
allowable price for services, we reviewed contract files for national
contracts available to the Boston, Denver, and St. Petersburg regional
offices at VA's OA&MM.

Review of VA's Management Data on Contracting

To determine the types of services purchased through VR&E contracts and
the amount spent on contracted services nationwide, we analyzed fiscal
year 2006 data on contracted services from VA's Corporate WINRS case
management data system. The information we reviewed included data on
national and local contract usage, services provided through contracts,
and payments for contracted services.

To assess the reliability of Corporate WINRS contracting data, we
interviewed knowledgeable VA officials and compared contract-related data
contained in Corporate WINRS to local data we collected from the four case
study sites. We also reviewed existing documentation for the data system,
including (1) the Corporate WINRS Users Manual, (2) the VR&E Task Force
and VA Inspector General reports, and (3) an internal evaluation of the
data system conducted by VA's Office of Business Oversight, Systems
Quality Assurance Service. While we identified accuracy limitations with
Corporate WINRS contracting data--discussed in the slide entitled
"Objective 2: Management Data - Inadequate Internal Controls Over
Contracting Data Raise Reliability Concerns" in appendix I (page 30)--we
found that generally VA's Corporate WINRS data on contracting were
sufficiently reliable for the purposes of our study. We determined during
our reliability assessment of the data that the data were reliable enough
to use to report on national trends.

Appendix III: Comments from the Department of Veterans Affairs

Related GAO Products

Contract Management: Further Action Needed to Improve Veterans Affairs
Acquisition Function. [3]GAO-06-144 . Washington, D.C.: October 19, 2005.

Framework for Assessing the Acquisition Function at Federal Agencies.
[4]GAO-05-218G . Washington, D.C.: September 2005.

Vocational Rehabilitation: VA Has Opportunities to Improve Services, but
Faces Significant Challenges. [5]GAO-05-572T . Washington, D.C.: April 20,
2005.

Vocational Rehabilitation: More VA and DOD Collaboration Needed to
Expedite Services for Seriously Injured Servicemembers. [6]GAO-05-167 .
Washington, D.C.: January 14, 2005.

VA Vocational Rehabilitation and Employment Program: GAO Comments on Key
Task Force Findings and Recommendations. [7]GAO-04-853 . Washington, D.C.:
June 15, 2004.

(130562)

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References

Visible links
3. http://www.gao.gov/cgi-bin/getrpt?GAO-06-144
4. http://www.gao.gov/cgi-bin/getrpt?GAO-05-218G
5. http://www.gao.gov/cgi-bin/getrpt?GAO-05-572T
6. http://www.gao.gov/cgi-bin/getrpt?GAO-05-167
7. http://www.gao.gov/cgi-bin/getrpt?GAO-04-853
*** End of document. ***