The Coalition for Government Procurement
Washington, DC.
September 20, 2010

The Honorable Michael H. Michaud
Chairman, House Veterans Affairs Subcommittee on Health
338 Cannon House Office Building
Washington, D.C. 20515

Re:  Hearing on "VHA Contracting and Procurement Practices" before the Subcommittee on Health of the U.S. House of Representatives Committee on Veterans' Affairs

Dear Chairman Michaud:

On behalf of the Coalition for Government Procurement (Coalition), I am writing to thank you for your offer to submit for the record the Coalition's views on contracting with the Department of Veterans Affairs (VA). We submit our remarks for the hearing on "VHA Contracting and Procurement Practices" before the Subcommittee on Health of the U.S. House of Representatives Committee on Veterans' Affairs on September 23, 2010.

The Coalition for Government Procurement (CGP) is a multi-industry association representing over 330 member companies that sell commercial products and services to the Federal government, including pharmaceutical and medical device manufacturers that sell commercial products to the federal government primarily through the Federal Supply Schedules administered by the V A under a delegation of authority from the General Services Administration (GSA).

We are writing today based on our members' experiences with the V A National Acquisition Center (NAC). Three years ago we reached out to the VA NAC with concerns about the timeliness of contract actions and the significant delays our members were experiencing. At that time, we were told by VA officials that they had just gone through personnel changes and to please give them time to adjust. We agreed to give NAC officials time to reorganize and bring new hires up to speed.

Our members have been patient and since then have experienced reorganization at the VA NAC designed to improve efficiency. Today, however, the VA NAC remains among the slowest contracting centers in government acquisition. The length of time needed to negotiate Federal Supply Schedule (FSS) contracts and contract modifications has worsened not improved, and is particularly slow when compared to FSS contract actions at the General Services Administration.

The Coalition has enjoyed strong relationships with VA officials at the VA NAC and here in Washington, DC, and has discussed with them our concerns. However, VA officials in Washington have been reluctant to meet with us, despite our members accounting for a significant amount of the business that runs through the VA NAC. By comparison, the Coalition regularly meets with officials from GSA concerning the Schedules program that GSA administers.

Last year, the VA NAC reorganized in an effort to resolve problems with the length of time it takes to process contract actions, including awards and modifications. In order to streamline the process and prevent backlogs, the VA changed the system of assigning contracting officers from one in which contracting officers were assigned to contractors for the life of the contract, commencing with pre-award negotiations. Under the reorganization, the contracting officer assigned to negotiate the contract has no responsibility for administering the contract. Post-award, the contracting officer processing a modification request or answering a question is the next available one, not the same one, much like a call-in center, and thus there is no familiarity with the contractor or continuity of service.

Survey Results

The Coalition surveyed all of our healthcare members doing business with the VA regarding their experience with the VA NAC since the reorganization. All ratings were made in comparison to members' contracting experience prior to the reorganization. Over 40 members responded. These companies account for well over half of the total sales made through NAC FSS contracts. As such, we believe that these results show that the NAC currently cannot keep pace with innovations and new products that could have a significant impact on the care provided to veterans. Based on the survey results, there is no question in our members' minds the V A NAC is broken.

A summary of the survey results are below:

• 85 percent said the VA NAC was more efficient before the reorganization
• Over 75 percent said the timeliness of VA NAC Contracting Officers in responding to their questions regarding the administration of their contract was below average or poor
• 74 percent said the timeliness of VA NAC Contracting Officers in responding to their needs was below average or poor
• 75 percent said their experience in adding products or services to their contract was below average or poor
• 66 percent said their experience with the VA NAC concerning contract modifications was below average or poor
• 46 percent said the original award process took over one year
• 48 percent said it took over 6 months for their last modification request to be processed
• Over 50 percent said the knowledge level of the Contracting Officers assisting them was below average or poor
• 59 percent said their experience in adjusting prices on their contract was below average or poor
• Over 78 percent ranked their overall experience with the VA NAC as below average or poor

Reform

Clearly, there are opportunities for procurement reforn1 at the VA NAC. First, we would encourage the Subcommittee to look at management of the NAC. Our members did not experience the contracting issues expressed in the survey results previously. It is worth noting that at least one prior NAC Executive Director was a phaIl11acist at the VHA, came up through the FSS program ranks, and understood how the program worked. After the prior Executive Director left, there was a two year long search tor his replacement. The problems began in the past three to four years since his departure and have been exacerbated by the reorganization.

In fairness to the NAC, in our view, one of the primary reasons the procurement system at the NAC is broken is the inappropriate insertion of the VA Office of Inspector General (OIG) into the contracting process. We believe the OIG has an important and necessary role to play in preventing fraud and abuse and assisting the Contracting Officers' determination of fair and reasonable prices. That role does not include serving as a defacto program manager looking over the shoulders of Contracting Officers and second guessing their decisions to award contracts. Particularly with respect to pre-award audits, the OIG should be in a supportive role and not assume primary price negotiation and decision-making responsibility. In short, the OIG should not have operational responsibility, but that is what the case is here.

The Coalition is very familiar with the role of the GSA OIG and regularly interfaces with that office. In our experience, the GSA OIG acts within the customary role of an IG. As a result, contracting officers at GSA are more willing to work with contractors and are far more flexible regarding the supporting documentation necessary for them to establish fair and reasonable prices. We believe it is the VA's requirement for pre-award audits on most FSS contracts and contract modifications, and the usurpation by the VA OIG of the contracting officer's role as the determinator of fair and reasonable prices that is the cause of the sustained delays in contract actions at the NAC.

Our survey results are clear on this issue. When asked "In your negotiations with the VA, what did your CO rely on?", many members said the VA OlG Pre-Award Audit. We hear frequently from our members that after receiving and accepting an offer from a Contracting Officer, the 01G will step in and make the Contracting Officer withdraw the offer. There will never be true reform unless the V A OIG understands its role and operates appropriately.

A final issue of concern is the grade of V A Contracting Officers. Our understanding is that VA CO's are one grade below the level of their colleagues in other agencies. This makes it difficult for the V A to retain experienced, senior level contracting officials. The V A should give serious consideration to increasing the grade of its Contracting Officers in order to attract and retain high caliber personnel.

Recommendations

1. The VA should reconsider the reorganization of the NAC
2. The V A 01G Must Operate appropriately, and not as a defacto program manager
3. The V A should increase the grade of its Contracting Officers

The Coalition appreciates the opportunity to provide input on this important topic.

Sincerely,

Larry Allen
President