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Opening Statement of Chairman Bill Johnson, Subcommittee on Oversight and Investigations

Good afternoon. I would like to welcome everyone to today’s hearing titled: “Purchasing Perspective: VA’s Prosthetics Paradox”.

Section 8123 of Title 38, “Procurement of Prosthetic Appliances,” states the following: The Secretary may procure prosthetic appliances and necessary services required in the fitting, supplying, and training and use of prosthetic appliances by purchase, manufacture, contract, or in such other manner as the Secretary may determine to be proper, without regard to any other provision of law.

Section 8123 originated in 1958, over fifteen years before Federal Acquisition Regulations were codified in law, and has been slightly amended a handful of times since then.  In March of this year, I sent a letter to the Secretary regarding the VA’s procurement of biologics over the open market instead of from Veteran-owned small businesses already on the Federal Supply Schedule.  One specific example I brought to the Secretary’s attention involved a company that supplied biologics.  In the timely response I received from Deputy Secretary Gould, I was informed that the VA considered biologics to fall under its lengthy and broad definition of prosthetics, and therefore it could acquire biologics through Section 8123, as it clearly had been doing.  Those last words- “without regard to any other provision of law”-  mean, at least to the VA, that it does not have to follow Federal Acquisition Regulations (FAR), VA Acquisition Regulations (VAAR), or the Competition in Contracting Act.  This interpretation was made clear in the Deputy Secretary’s letter.

In addition to informing the Oversight and Investigations Subcommittee that the VA considered biologics as prosthetics, other answers throughout the Deputy Secretary’s letter prompted several important follow-up questions, which were relayed to the VA on March 28th.  One part of the letter, immediately following the interpretation that purchases made under Section 8123 were not subject to acquisition regulations, stated that the VA would work on “guidance to ensure that prosthetics purchasing agents and logisticians conform with VAAR…to the maximum extent practicable.”  I have to wonder why the VA explicitly and publicly ignores acquisition regulations when making these Section 8123 purchases, but now will attempt to comply with them.

Among my follow-up questions was a request for a copy of the VA’s guidance in how it would ensure purchasing agents followed the VAAR.  Just yesterday, a response to that and the other questions was provided.  It is interesting that only now is the VA working to ensure that purchasers using Section 8123 are documented and in line with the FAR and VAAR.  After all, the VA has had nearly three decades to work on this.  Failing to document purchases under 8123, as acknowledged in the answers I received yesterday, is a reckless use of taxpayer dollars.  To us on this Committee, it appears as though the VA operates as it sees fit until attention is called to its operation. 

What the Deputy Secretary’s letter did not address is the VA’s use of a VHA directive, “Prosthetics Simplified Acquisition Procedures Training,” that was issued July 16, 2003, and expired July 31, 2008.  An updated directive would probably have been useful over the last four years as the VA increased its prosthetics spending by 80 percent.  However, we have seen no such update, and have even learned from those in the field that the VA’s Central Office has instructed VISNs to continue following it. 

That expired directive contains important language stating that Section 8123 was only to be used as a last resort, reinforcing the importance of compliance with Federal Acquisition Regulations.  However, this subcommittee has found substantial evidence of VA purchasing agents using Section 8123 as a first resort.  Given the broad language it contains, one can see why this easier approach could be so tempting, and it’s certainly not the first time we have seen VA purchasers opting for the easy route. 

While there are over 100 definitions for prosthetics throughout the federal government, the definition used by the VA is a full paragraph in length.  As we will hear today, some of the items falling under this broad definition do not sound like a prosthetic to anyone except the VA.  The VHA handbook’s definition of prosthetic appliance is as follows:

All aids, devices, parts or accessories which patients require to replace, support, or substitute for impaired or missing anatomical parts of the body. The items include artificial limbs, terminal devices, stump socks, braces, hearing aids and batteries, cosmetic facial or body restorations, optical devices, manual or motorized wheelchairs, orthopedic shoes, and similar items.

Perhaps this overly broad definition is a contributing factor to the VA’s inability to effectively manage its prosthetics inventories.   As one of the members of the first panel will note, the definition is confusing, and I am concerned that confusion is widespread inside the VA as well as outside of it.  Recent audits from the VA’s Office of Inspector General have substantiated that the Department does not effectively manage its prosthetic supply, nor does it have adequate control over its payments when procuring prosthetics.  Given what we already know, and what we will hear today, these findings are not surprising. 

A tailored definition of prosthetics is just one way the VA can better track and manage its prosthetics acquisition.  For instance, the broad inclusion of durable medical equipment under its “prosthetics” definition could encourage the misuse of the Section 8123 authority.  In addition, as the IG noted about the VA’s overpayments, excess inventories, and failure to receive the best value: “Strengthening controls over these actions should not compromise the quality of the prosthetic limbs provided to veterans.”  In short, the VA can be a better steward of taxpayer dollars while still providing veterans timely access to care, including in the area of prosthetics. 

Another way the VA can better manage the billions spent in prosthetics every year is to actually enforce the acquisition regulations that apply to Section 8123.  In the response I received yesterday, the VA still fails to acknowledge the abuse of Section 8123 and the blatant circumvention of the FAR and the VAAR by VA employees.  We know the problem exists; now is the time to fix it.  If employees in the past have failed to follow internal guidance, then perhaps a legislative clarification is necessary to ensure best value for taxpayer dollars. 

Lastly, before simply reorganizing employee structures and moving chess pieces around on the board, I am requesting here today that the VA present to this Committee, in detail, its plan to improve its acquisition of prosthetics and the specific reasons for the changes before putting the plan in place.  This effort at transparency will help both veterans and Congress see that meaningful reform is taking place.

With that, I now recognize the Ranking Member for his opening statement.