Mr. Chairman, Ranking Member Roe, and Members of the Subcommittee, thank you for the opportunity to appear before you today to discuss and update you on acquisition operations at the Department of Veterans Affairs (VA).  As VA’s acting chief acquisition officer, I believe there is much good news to report.  It is a privilege for me to represent the many dedicated and hard-working acquisition and logistics professionals throughout the Department who provide mission-critical support everyday to ensure quality care and benefit delivery for our Nation’s most special citizens -- Veterans.  I am accompanied here today by Mr. Jan Frye, VA’s Deputy Assistant Secretary for Acquisition and Logistics, who also serves as VA’s senior procurement executive; Mr. Ed Murray, Deputy Assistant Secretary for Finance, Office of Management;  Mr. Craig Robinson, Executive Director, VA National Acquisition Center; Mr. Frederick Downs, Jr., Chief Procurement and Logistics Officer for the Veterans Health Administration (VHA); and Mr. David Canada, Senior Procurement Analyst, Center for Small Business Utilization, Office of Small and Disadvantaged Business Utilization (OSDBU).

I will start today by providing a brief update on VA’s accomplishments under the American Recovery and Reinvestment Act (ARRA) of 2009.  Transparency is the hallmark of VA’s Recovery spending; all acquisition opportunities are advertised in the Federal Business Opportunities System.  Through November 30, 2009, VA obligated approximately 32 percent of its non recurring maintenance stimulus funds for facilities projects and is on track to have 50 percent obligated by March 31, 2010.  Over 95 percent of these contract awards were accomplished competitively, and over 70 percent of VA’s Recovery contract dollars have been spent with Veteran-owned small businesses.  VA’s acquisition professionals have negotiated better prices than estimated, allowing VA to reallocate remaining funds to other needed projects.  Using the Department’s enterprise contract writing system for all contracting actions associated with facilities projects has given VA valuable insight on ways to improve measurement and quality control systems.  Improvements affect cycle cost, data integrity, and automated tools used to track progress.

VA continues to transform and improve its acquisition operations.  Recommendations from a 2008 PricewaterhouseCoopers study of the VA acquisition program resulted in implementation this year of a new acquisition business model increasing centralized decision making and decentralized execution.  As a result of this study, VHA has realigned its acquisition staff under a centralized structure with four regional offices focused on the internal business process of running an acquisition organization, to include a focused approach to training and oversight.  Further, this structure allows each Veterans Integrated Service Network (VISN) Contract Manager to drive organizational standardization, individual performance, and allows for direct responsibility and accountability through a professional certified workforce.  A follow-on study will be completed in February 2010 and is likely to result in further enhancements to the acquisition business model.

Mindful of the innovation of private industry and as part of VA’s transformation to a 21st century organization, VA recently established an innovative Supplier Transformation Relationship Initiative; for the first time ever, VA’s supplier community is being treated as a critical component to VA’s success.  This initiative improves VA’s acquisition process by establishing better and more transparent communications with vendors, which increases VA’s access to industry’s best practices and innovation.  Dialogue began in August 2009 with a subset of VA’s industry partners at a VA-hosted forum to support this initiative, attended by 140 individuals from more than 90 companies representing every material, service, and socioeconomic area of VA’s contracting expenditures.  Critical feedback was provided on the VA acquisition process and this initiative is further developing to expand the dialogue to include more than 15,000 of VA’s industry partners.

VA made great strides in the last year to recruit and retain a professional acquisition workforce.  The VA Acquisition Academy, the only Federal civilian agency acquisition academy, was established and represents a significant investment in growing, training and retaining the VA acquisition workforce.  The academy comprises three schools:  the Intern School, the Contracting Professional School, and the Program Management School.  The academy has received extensive favorable press as well as Congressional and other Federal agency interest.  The Office of Management and Budget’s (OMB) Chief Acquisition Officer Council awarded the academy the 2009 Team Excellence Award for VA’s efforts to recapitalize its acquisition workforce.  Additionally, the Federal Acquisition Certification for Contracting rate for VA contracting officers has increased from 65 percent to over 93 percent, and use of the Acquisition Career Management System has increased from 30 percent to nearly 94 percent.

In Fiscal Year 2010, VA will begin an “Acquisition Corps Development Program.”  This program will develop transformational leaders in order to leverage best practices and executive leadership skills to develop business solutions optimizing VA’s mission results.  The goal of the Acquisition Corps Development Program is threefold:

•  first, to develop a professional cadre of VA acquisition experts to focus on the visible, highly complex and enterprise-wide programs;
• second, to increase the bench strength to support succession planning for critical and senior-level positions; and
• third, to enhance retention of high performers by feeding their desire to excel.

We continue to grow VA’s acquisition workforce to meet our ever-increasing contracting workload.  The GS-1102 contract specialist occupational series has increased by 45 percent since Fiscal Year (FY) 2003, from 766 to 1,405 full time employees.  Additionally, VA recognizes having trained program managers is critical to the overall acquisition life cycle, formulating an acquisition strategy, and taking responsibility for ensuring contract results in terms of cost, schedule, and performance.  To this end, the VA Acquisition Academy’s Program Management School developed a “Boot Camp” Program Management Course to train up to 10,000 individuals involved in managing the department’s programs.  Upon successful completion of the course, these individuals will be certified as FAC-P/PM level one program managers.

Additional workforce increases associated with establishment of the VA Technology Acquisition Center (TAC) will further enhance our ability to support VA’s transformation.  The TAC, located in Eatontown, New Jersey, was established to provide exclusive contracting support to the Office of Information and Technology (OI&T).  The TAC, a departmental strategic asset, will dramatically improve the operational effectiveness of VA’s procurement.  VA moved swiftly and creatively to capitalize on the opportunity presented by the closure of the Fort Monmouth Army Post, recruiting the highly-skilled and experienced cadre of acquisition professionals from one of the Army’s premier contracting activities.

To support our acquisition professionals, VA deployed a fully operational electronic contract writing system.  We also established a new program management office reporting directly to the Deputy Assistant Secretary for Acquisition and Logistics to support this system and other enterprise-wide acquisition systems to ensure VA exploits technology at every opportunity to support our acquisition operations.

VA is conducting more competitive acquisitions.  Our competition rate increased in one year from 49 percent to 72 percent, bringing VA in line with most of the Federal community.

VA’s OI&T instituted a Performance Management Accountability System (PMAS) that enhances the acquisition process.  This system ensures deliverables on information technology contracts are received and reviewed incrementally, thereby forcing adherence to delivery and performance schedules.  The contracting community is in lockstep with OI&T and has developed an acquisition model that fully supports the PMAS objectives.

We have introduced a procurement governance process, establishing the VA Senior Procurement Council.  This council will build on best practices across VA, leverage resources, and ensure consistency of service and response to needs.  The council will share information and develop a common understanding of VA’s strategic procurement needs, OMB regulations and actions to meet these needs and regulations, thereby synchronizing procurement to develop departmental solutions for improved acquisitions.  The ultimate goal of the council is to remove procurement roadblocks so products and services can reach Veterans faster and with greater quality.

As part of VA’s acquisition transformation, VA instituted other positive steps to improve the effectiveness of its acquisition operations.  

In 2009, VA began conducting acquisition assessments under OMB Circular A-123.  These assessments will provide VA’s senior acquisition leadership insight and information about the operation contracting activities and business processes.  Assessment results will provide early opportunities to correct identified deficiencies, processes and policies before they become unmanageable.  The A-123 process also ensures compliance by monitoring findings and following-up on corrective actions.

Also in 2009, VA established a requirement for the use of Integrated Product Teams (IPTs) for all acquisitions with estimated values of $5 million or greater.  IPTs consist of subject matter experts from program offices, procurement, legal counsel and the Office of Small and Disadvantaged Business Utilization.  These cross-functional teams work collaboratively to develop strategies and approaches to meet particular objectives and have been successful in streamlining the acquisition process.

Contract Review Boards (CRBs) are now required for all acquisitions of $5 million or greater.  CRBs minimize vulnerabilities leading to protests, disputes, claims and litigation against VA.  CRBs ensure compliance with federal and VA acquisition regulations, policies and procedures.  They provide senior-level advice on contracting actions to support the contracting officer, and provide consistency of procurements across VA.  CRBs also improve the knowledge of VA acquisition personnel as they embrace and implement good business practices.

I spoke a moment ago of how CRBs minimize protests and would like to add VA has impressive statistics for protests.  In Fiscal Year 2009, 154 protests were lodged with the Government Accountability Office (GAO).  All but three of these protests have been decided.  Of the 151 decided, only one protest was sustained by GAO.  GAO denied 15 and dismissed 106, and 29 were withdrawn.  A total of 21 agency-level protests were lodged with the Deputy Assistant Secretary for Acquisition and Logistics (VA’s Senior Procurement Executive).  Eight were denied, 10 dismissed and 3 withdrawn.  Forty-five protests were lodged at the contracting officer level; 12 were denied, 31 dismissed and two withdrawn.  These numbers are especially impressive given VA conducted over 230,000 acquisition transactions in Fiscal Year 2009.

VA remains the Federal leader in contracting with Veteran-owned small businesses.  The final rule formally amending VA’s acquisition regulations to reflect VA’s implementation of the “Veterans First Contracting Program” back on June 20, 2007, was published in the Federal Register on Tuesday, December 8, 2009.  VA acquisition professionals continue to use the extraordinary and unprecedented contracting authorities granted VA under Public Law 109-461 extensively, setting records for spending with Veteran-owned small businesses.  Tentative data for FY 2009 show VA spent over $2.7 billion with all Veteran-owned small businesses, and nearly $2.3 billion of that amount was spent with service-disabled Veteran-owned small businesses.  This represents over 19 percent and 16 percent, respectively, of total VA dollars reported in the Federal Procurement Data System.  For FY 2008, the latest data officially certified by the Small Business Administration, VA awarded 11.76 percent of its contract dollars to service-disabled Veteran-owned small businesses, and 14.72 percent to all Veteran-owned small businesses.  These comfortably exceed VA’s goals for these programs, of 7 percent and 10 percent respectively.

VA has worked tirelessly to improve its acquisition operations.  At this time there are no major outstanding GAO issues and management agreements are in place addressing all Office of Inspector General issues.  But as proud as we are of the many improvements in VA’s acquisition operations, we recognize the need for continuous improvement and will continue to work diligently to improve upon them and set a standard worthy of emulation throughout the federal acquisition community and maintains the confidence of the American public and the Congress.

Lastly Mr. Chairman, I mentioned at the beginning of my testimony I serve as VA’s “acting” chief acquisition officer, having served in this capacity since October 2008.  VA has sought to establish an Assistant Secretary for Acquisition, Logistics, and Construction, but has been unsuccessful in this endeavor.  Establishment of this assistant secretary position is the cornerstone of our efforts to transform the acquisition culture at VA.  This assistant secretary would provide the laser-focused critical political leadership in this important area, and allow VA to designate a chief acquisition officer.  There are cogent and compelling reasons for establishing a new assistant secretary position.  Considering the VA spend has increased by over 300 percent since FY 2002, VA’s acquisition programs have become increasingly complex and highly visible, as evidenced by this very hearing.  Such action would embrace the spirit and intent of the Services Acquisition Reform Act of 2003, which requires the appointment of a non-career chief acquisition officer.  Your support in establishing this assistant secretary position is essential to the long-term success of transforming VA’s acquisition operations.

Mr. Chairman, we appreciate the opportunity to discuss VA’s acquisition operations with you.  My colleagues and I are available for your questions.