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Opening Statement of Hon. Michael H. Michaud, Democratic Member, Committee on Veterans' Affairs

Thank you, Mr. Chairman.  

We have before us today some of the most senior level managers within the Department of Veterans Affairs-- managers entrusted by the public to run the second largest agency in the federal government efficiently and effectively.  We are here because VA has once again demonstrated an inability to perform at the level expected in managing procurement processes.  

In testimony provided to the Committee, VA readily admits that violations took place.  However, they are quick to assure us that changes have been implemented to fix the deficiencies at hand.  Frankly, Mr. Chairman, I have heard it all before.  

Today I have just three questions.  

First, to quote a phrase made famous during the Watergate scandal-- What did VA officials know, and when did they know it?  

According to VA testimony, VA “did not follow all applicable law and regulation” for approximately $1.2 billion in what are called “open market” pharmaceutical purchases since 2004.”  The VA also states that “once these deficiencies were elevated to senior managers in 2011, VA worked to develop a solution.”

In December 2010, the VA decided to cease open market purchases in the future Pharmaceutical Prime Vendor (PPV) contract.  What was the impetus behind this decision?  

Was there an awareness in 2010 that there were serious problems with VA open market purchases, problems so severe that a decision was made not to include an open market clause in the new contract?  

Yet nearly a year elapsed before VA took decisive action.  At no time during the course of this period is there any indication that anyone in VA leadership simply insisted that open market purchases conform to VA policies, regulations and law.  How much money was wasted?  

Have these $1.2 billion in purchases that were not in accordance with applicable laws and regulations been ratified by the VA?  

Are there assurances that only warranted contract officers will be responsible for purchases above $3,000 going forward?

After the VA Inspector General in 2009 found a litany of problems with improper open market purchases for medical equipment and supplies, VA management and leadership should have been put on notice that problems might exist in other prime vendor programs.  The VA IG recommended that VA needed to revise its FSS waiver process, but VA responded that the waiver process in VA Handbook 7408.1 “provided sufficient controls and appropriate approval levels for open market purchases.”  There is no evidence that VA paid any attention to the waiver process for buying drugs and pharmaceuticals in the open market.  

I find it hard to believe that, as the VA states, “the process that was in place since 2004 had become routine.”  I have to ask you, what is routine about the abject failure to follow established policies and procedures?  

38 USC Section 8125 requires VA to submit a report every year to the Committee on the health care procurement experience.  I look forward to receiving those reports from VA dating back to 2004.

My second question is who should be held accountable for this failure?  

Time and time again, the VA comes to Capitol Hill and testifies that it has wonderful policies and procedures in place.  Unfortunately, no one ever seems to follow these policies and procedures, and there seems to be no consequences for these failures.  Time and time again, the VA OIG and GAO testify concerning serious problems with VA management and controls, and time and time again VA ignores these findings and fails to take pro-active action.

VA testimony includes an “illustrative example” of a GS-5 Pharmacy Specialist “confronted with the choice of ordering an open market item or doing without.”  Let me offer a better example, how about the manager responsible for overseeing the GS-5 making sure the pharmacy specialist knew what VA policies and procedures were required and then ensuring they were followed?   

However, what seems to be the actual case is that there was no management and no accountability all the way up the line and procedures and policies were not followed in purchasing $1.2 billion worth of drugs and pharmaceuticals.

Third, how is this going to be fixed and how will these fixes improve the care we provide to our veterans?  

I want to know how the absence of an open market clause in the new contract will affect veterans.  I want to know if the VA is still making open market purchases of drugs and pharmaceuticals, either through the PPV or through other suppliers, and how can we be sure that proper processes are in place and, more importantly, being actively supervised by management.  I want to be assured that VA open market purchases are from reliable suppliers and that all purchased drugs and pharmaceuticals meet all safety requirements.

The VA, in last year’s budget submission, claims $355 million in savings in 2012 and 2013 due to “acquisition improvements.”  But if the VA cannot follow its own policies and procedures, how much faith can we have in claims of acquisition savings?  

I would like to see detailed documentation that VA has achieved savings and efficiencies while improving the procurement and acquisition process, a process that seems, in light of the serious breakdowns we are looking into today, to need much in the way of reform.

There is a saying that ignorance of the law is no excuse.  

I hope that VA can help us understand today what accountability we should expect from failures that seem to arise not from ignorance, but from willful neglect of VA policies, procedures, and existing laws and regulations, and how this will change moving forward.